Tuesday, 25 September 2012

Case Study


Case Study

SUMIT Morro watched as his advisor Arun Kar loaded a cassette into the VCR. Arun was the consultant the Morro Group had hired to audit the performance of Galaxy, Sumit's six-month-old superstore in Mumbai. Arun clicked the button on the remote and said: "Okay, watch this." The video clip showed a young man walk into Galaxy. He heads straight for the toys section, does not browse much, finds the action figures shelf, picks out a Spiderman web shooter, briefly glances at the adjoining carton - 'Spiderman gear' - gives it a miss, and leaves the section. "That was six minutes," said Arun, as the man walked towards the cash counter. But, on the way, he pauses at the hair care section, browses awhile, ("That was nine minutes," said Arun) looks around, ("He is looking for sales assistance, but can't find any") then again makes his way towards the cash counter. He pauses, turns into the men's section, spends 22 minutes and buys four shirts. "So, by now, he has been in the store some 45 minutes and his bill so far is Rs 4,800,"said Arun. The shirt section opened into the stationery department from where the man buys a few computer supplies, before he finally hits the cash counter. "Now notice," said Arun, "each time he is stuffing the invoice into his pocket."
At the cash counter, the man stood in the queue for seven minutes, paid and left. The video camera followed him as he walked into the car park. It showed him fumbling in his pockets for the car keys and out came a piece of paper. The man turned quickly back to the store. Sumit watched as the man went up to the cash counter; he had forgotten to hand in his stationery bill and was now requesting the lady to accept the payment. But she shook her head and asked him to join the queue. The man shrugged, crumpled the unpaid bill and left the store.
"This is your real shopper. He came to buy a toy and bought 6-8 times as much, just by walking past sections that spoke to him. Good layout? Yes. But your sales staff could not spot him and increase that 8 to 10; for example, he may have bought that Spiderman gear had there been an alert attendant watching. No one was tracking his purchases to make sure he was including all of them in the final billing. No one remembered him when he returned to pay and collect for the missed bill."
"But these are ordinary shopping hazards," said Sumit. "How can we help a shopper remember what he is buying?"
"I will tell you a story," said Arun. "Yesterday, my wife and I were at Arnarsons on Breach Candy. Alka wanted to buy small gifts to take with her to the US. When we entered, our intention  was not pasted on our faces. But see what happened. The small gift items are at the counter that you see as soon as you enter the shop. Alka picked eight pieces. Then she moved to the stationery section and bought some stuff. 1\\70 minutes later, I realised I had not picked up my bill from there. Suddenly this man comes up to me and says: 'Don't worry. I have your bills. You see what you want to buy. ram taking care.' What struck me was that he had homed in on the fact that 'this is my real shopper' and 'this shopper has multiple needs'. He gleaned that by sheer experience. We bought stuff from seven departments and this man did not come in our way and remained as unobtrusive as ever. At the cash counter, he submitted all our bills; I paid and then he matched my bills with my bags!
"This is one shop that has evolved gracefully over time. Alka says they have not changed their best practices with time or success. These are the little things that ensure success or failure. And these are the events that build the store's equity in a consumer's mind. It does not happen by chance, but by design and determination. This is what customer service is."
SUMIT nodded. In his mannerisms, Arun saw traces of his father, Vittal Morro. But the similarities painfully extended to mindsets too. Group chairman Vittal Morro had contributed to India's development with his infrastructure businesses in steel and fertilisers. The Morro Group had entered retail a year ago with a huge store, Galaxy. But for all its gloss, Arun realised that the old manufacturing mindset prevailed. At 32, Sumit, the younger and academically-accomplished Morro, had told Arun about his plans to expand the Galaxy chain into other metros. But Arun said he must wait for a year and invest this time in fine-tuning his understanding of retailing.
"This business cannot wait for a week!" said Sumit. "Others are moving at a faster pace!" Arun said: '~d bypass developing the most critical ingredient, the mindset? You have money, property and people, but not the mindset. Today, when I interviewed some of your key managers for performance information, what do I hear? 'Inventory is x%, sales is y%, costs z%.' They showed me reams of data that calculated asset bases, profits before tax, pending order status, even absenteeism. If you didn't tell me Galaxy is a huge store, after looking at their data, I would think they were talking about Morro Steel Works!
“All this data is helpful. But none of this reveals whether Galaxy is meeting the consumer's needs and the value he seeks from a store! Let me take you through some of the notes I made on Friday. One, the inventory with Galaxy is 25 days' stock which is equal to service goals stated in the manual. That's data. The information you need is, where is this stock? Is it available to consumers? Is it in the godown? How does this stock level help you if it is not accessible for consumption at the point of purchase decision when a visitor can convert to a buyer?
"Two, the number of buyers last Friday was 375. That's data. The information we need is, did they buy only what they came for or more? Again, how many walked into the store that day? Answers to that were approximations between 600 and 1,000. Let's say 600. So 225 left without buying. We need information on how many of these came looking for something, did not find it, or did not find sales help and left? We need to know this number, and whether the sales attendant engaged them adequately in the sales process, or did he lack product knowledge?
"I am saying how much do you 'know' that cannot be measured by numbers? Simply put, do you know how many people walked into your store today between 10 a.m. and 2 p.m.? But you are here, getting non-stop data flows on average bill value, total invoices cut so far, even comparison against last week and a rival store. Your data management is skewed to profitability by department, by category, by day, by week, but you have no idea about the fundamental data on which everything else depends, such as how many people walked into your store.
"I asked your floor manager Nakul Vaidya how many of those who walked in bought anything and he said: 'Nearly all.' Does that mean anything? Galaxy needs to convert every walk-in into a buyer. There is. to use your old manufacturing language, an investment that has gone in, which is why there were visitors to start with. But do you know if that investment paid off or returned something? You have a marketing plan. advertising plan. radio promotion plan - all this is very good but the conversion of visitors into buyers is the job of your merchandise and your store sales staffl What is the point then of measuring asset base and reorder levels?
"Forget that. Those are good for huge lead time operations like manufacturing. But retailing is from minute to minute. It depends on your shop assistants and merchandise. Did those work? What you make with what you have in the store is your conversion rate. It is both 'visitor converted into buyer' and 'buyer of Spiderman web shooter converted into buyer of Spiderman gear' also. What's the point of paying attention to reorder levels when the real operations are happening in the store? It's like a one-day cricket match; you look at the run rate per over, per ball, and not the batsman's past series performance!"
What pained Arun was this manufacturing hangover that old manufacturing companies held on to after entering the service sector. Manufacturing was one business where performance indicators were contained and measured in the backrooms - stores, god owns, cash boxes and general ledgers. But retailing was a business where performance was contained in the four walls of the store. In the hearts and attitudes of the staff, in the merchandise and how it was displayed. He said: “Among all that they gave me, there was no data of time spent by shoppers in a department. Studying the length of shopping time is critical. Browsers spend less time than those who have an intention of buying. In the early stages, you need to watch for these patterns and behaviours. That is what I am auditing, but your staff does not appear to believe these are critical.
"There is a correlation between time spent by a shopper in a store and the value of purchases. And a lot of the conversion will depend on the interaction between the shopper and the sales staff. That time must be increased - but to know by how much, I first need to know how much time a shopper usually spends. Else, how will you know if shoppers were disappointed or were unable to decide or unable to find what they wanted?
"Sumit, your employees in Galaxy were 'not working' for you. Or for the shopper. Selling is not about cutting invoices. It is about identifying a shopper, then converting desire into need and then into want. And finally into purchases."
Sumit locked very confused. His staff consisted of 'professionals', he said, some even lured from other well-established stores. "Forgive me, if this sounds abrupt," said Arun, "before you worry about your staff, you need to change your mindset. Reformat your approach and thinking on this business. Get out of the manufacturing orientation. From the way you observe performance while sitting in your office to the reports you ask for and commend, you are a manufacturer at heart. A steel magnate. To think retail is to think individual. Yes, Galaxy is running, people are walking in and most people are enjoying it. It's six months now and it is time to do a check on your mindset.
"First of all, this is Galaxy, not Morro Steel. You have to consciously delink and tune in to retailing with a completely different mindset. Earlier in your fertiliser or steel business, your buyers consisted of 40-50 dealers or distributors. In Galaxy, it is 1,000 or 4,000 people. Your revenue is not happening on Dalal Street, but with the consumer. In a way, you can say your revenue is sitting in the shopper's pocket and you have to get your merchandise and staff to work at getting him to part with it.
"The consumer is visiting your store to acquire a certain value. It means a lot of things. It may not mean actual purchase. It could well be an investment of his or her time to establish I whether he wants to come to your store again. That means the 'value' he is looking for is 'available'. That 'value' lies in your merchandise, your layout, your attitude and your employees. So every item in your store must come packaged in value for that will determine the shopper's buying experience and the 'value' he takes back with him.

"Manufacturing is a quantifiable business. You look at production, lead times, inventory - all measurable numbers. But these softer issues in service are not quantifiable - they are experiential. For example, if a customer walks past a shirts section, when it is right next to the trousers section where he bought something, how do you measure why he did not enter the shirts section? Your retail consultant may have the answer, but you did not create systems for plotting such information or interpreting it. Maybe you don't even see this as a parameter worth tracking! Tracking behaviour is a fundamental part of the service industry, but it is an intangible! Critically speaking, it is not even 'rewarding'. Say, for example, the lighting in a department needs to be taken care of because it is casting shadows and, hence, not attracting customers. So you do the needful. People start coming in, but you do not know if that is because the lighting is better or because the sales lady has also changed.
"But a well-heeled retailer like Ram Chander Kishan Chander Sariwala will know. That in the Banarasi section he needs yellow light, come what may. Because he has 'developed' his feel and the store from scratch, watching and building on customer reactions, no matter how trivial. But when a manufacturing business enters retailing right at the top, without going through the experiential learning curve, consultants tell him: 'These are best practices; these are proven; these are your operating manuals;...' Then we do the audit and find performance is just 10% of expectations. Why? Because he simply does not appreciate that the 90% he has neglected consists of the softer intangibles which, ultimately, make the difference.
FOR example, the first thing these manuals demand that you measure is loyalty: how many people walked into the store, how many bought, what is the average transaction value. Measuring it is not simple. When a family of three walks in, is it one footfall or three footfalls? The manual explains this. Today, at the end of six months, I ask about footfall and they say: 'Some hundred people come in everyday.' Do you know the variations that could have occurred over weekends? No. For them, 100 during the week is the same as 400 over the weekend! But had you gone by the manual, wouldn't you have known that over the weekend, you need to carry higher stocks? Do you know there could be possibilities to add on new products or ideas?
"Then again, in manufacturing, you can and did say 'no' to many customers, be it on payment, or early delivery or discounts. But in retailing, 'no' is a bad word. Even if you do not give discounts, you don't say 'no'; you say: 'It depends from season to season.' Now that could make a difference to five customers and not to 75. But this is a game of multiples. You are dealing with all kinds of people and many people. The multiplier effect is tremendous. But you go to a store and the manager simply shakes his head and says: 'Sorry we don't have dungarees.' It does not ring a bell that a consumer came expecting to find dungarees. All because the manager is busy looking at his sales figures, at his inventory. He1s correlating his performance with what he thinks is required. But experienced stores are working on what we call 'dwell time' or how long a shopper stays in the store. A person has four hours a week to spare. Either he spends it shopping, or seeing a movie or eating. Now I ! want to grab his time. So once he comes here, I won't let him go. Increase his dwell time. The longer a customer stays in a store, the more he buys. And it is the Ram Chander Kishan Chander kind of stores that have honed these skills."Sumit knew it was going to be a long haul. He asked: "How can we develop this fine- tuning? We are in direct selling, which is so people-oriented. It is a demand-pull business, where even if the consumer is not king, the seller can never be king. So what is the mindset that is required? Delight the customer?"
"It requires a humble mindset," said Arun, much to Sumit's astonishment. "Forget jargon like 'delight-the consumer'; it has a nice ring to it, I agree. But the ring can be actually heard when you put it into every detail of your service, where you say: 'I want you to be happy shopping here, after you leave this store, and even when you are unpacking your shopping bag. Even the price labels will peel off.' Labels? Do you know, the simplest way to peel it off is to run a warm hair dryer over the label? The one man who takes the pain to tell you this is Suvarna in Chennai. A huge Rs 200-crore per annum retailer, he tells you something as small as this. Because he realises that a stainless steel buyer does not want a single scratch on it. He thought about it, right?
"Thinking of the detail on behalf of a consumer is humility. But how do we transmute this humility to your staff? The biggest issue with India is social conditioning. Will Sumit sit behind a cash counter? Investing time in a consumer is critical. Being able to see life from his viewpoint is important. Being able to hear his complaints and feel his joy is also essential. Knowing that if your consumer does not walk into your store, you don't sell. And if you sell, then you owe it to him for having walked in and chosen your merchandise. That is humility.
LET me explain. A business house started retailing home accessories. A lady bought a steel toothbrush holder. Within two weeks, it developed rust. The next time she was at the store, she told the store manager. His response: "Aisa to ho hi nahi sakta! We have never received any such complaints." The lady who had just shopped worth Rs 6,700, put all her purchases on the table and left without paying. The consumer is evolving, but customer service is not.
"We always tell our clients: 'Think for a second before you respond to a consumer.' Now, we can put that into our manuals, but this is one experiential issue which you don't appreciate unless you do not internalise. The retailing God lies in the details. This is a very exacting business. It is a completely different ballgame when compared to manufacturing. And to know the detail, you have to be in it - out there where the detail is acting out every moment among shoppers and browsers!
"I am saying this is all owner-driven. You need to redefine your performance indicators and control areas for the retail business. Initially, every business grows. It's when you try to replicate the success into a ripple, that the true test of the internalisation of the issues faces you. Are you prepared for that? And if you have not done all those in the first few weeks, if you haven't monitored the critical attitude of watching patterns, you start on a wrong foot, creating a ripple for further erroneous conclusions that are based on poor understanding.
"It's not one product that you are manufacturing like before. It's not one product you are selling. You are selling goods you did not manufacture, you are selling to thousands of individuals, each with distinct buying behaviours, likes and dislikes. And there is no promise to come back for more. It's so dynamic! That is a mindset which comes only from experience and that experience will be valuable if you have put a discipline in place, a discipline that comes from wanting to understand every nuance of this business, from admitting that every moment is going to be a learning process, from admitting that you won't know anything about this business until you study every transaction for all these parameters. From admitting that you are new in this field and will be ready to watch as you learn, learn as you watch, because the next buyer is going to be different. You will have to zero-base your approach for every consumer. It's only much later that patterns will emerge and speak to you and from those patterns, you can draw some conclusions. It all depends on the leadership you are willing to show. You are no longer the steel magnate on whom half the country depended. You are no longer the big employer on whom employees depended for their daily bread. You are now dependant on the consumer and, this is important, on your employees. Your staff will earn your bread for you, by their customer care, by customer management. That is why WalMart says, our associates make all the difference. The coronation of the consumer has to start with the leader and from him, his associates will learn. If you do not alter your mindset, your associates and employees will not learn customer management and if that does not happen, your associates will not make any difference."
How do companies like Morro make that big shift from manufacturing to a service orientation? .

Case Study


dancing with strangers
by rekha krishnan
this case was published in the jan-mar 2002, Q102 issue of The Smart Manager.
the case
Reading the latest cover story on the Anthrax scare brought an irked look on Dr Anjan Mehta's pleasant face. Of late, newspapers and business magazines had intensified the debate on patents and pharmaceutical companies. The World Trade Organization's (WTO) approaching deadline on product patents in 2005 was overshadowed by the threat of global biological warfare. The Anthrax attacks in cities as far flung as Washington and Nagpur were but the beginning of a new world order.

For years, India-based Nimax Laboratories had been waiting for the opening up of the $30 billion world generics market when nearly 60 blockbuster drugs would go off patent. The world wide biological attacks had shaken the concept of patent protection among government officials, especially in the US after the destruction of the World Trade Centre (WTC). As Anjan flipped through the cover story in India's top management magazine, the 50 year old CEO of India's leading pharmaceutical company chuckled as his eyes fell on his gleaming face in print. Anjan was used to reading business journalists debate about Nimax's post-WTO and post-WTC strategy and on how Nimax could take advantage of the lucrative generics market, a decision he had been postponing for the past few months.

the opportunity
Nimax is an ambitious Indian multinational that aspires to be a research based world class global pharmaceutical company. It aims to move up to the highest - and most profitable - level of the pharmaceutical value curve through the discovery of new drugs. By 2001, Nimax was making some headway by venturing into novel drug delivery systems (NDDS). Anjan recalled how Nimax first broke into the international market place by producing and selling the bulk substances and intermediates that defined the bottom end of the curve. This segment still brings in the major chunk of Nimax's revenues, accounting for nearly 35% of its sales. He glanced at his Swatch, it was already 5 p.m. Drinking his espresso, he reached for his receiver to call Sunil Desai and Rakesh Sharma. "Let's discuss the generics issue. We can't delay much more."

Rakesh Sharma (39), Vice President R&D, and Sunil Desai (40), Vice President International Relations have been Anjan's close associates for many years, often coming up with brilliant and sustainable solutions when faced with difficult situations. "I am happy that the generics opportunity has finally sunk into you," remarked Sunil as they walked in through the wide open door of Anjan's office. "Anyway, don't get too worked up about it," Rakesh added, pulling up his chair.
Anjan loosened his tie as he began, "It's true that the WTO regime - aided by the Anthrax scare - will throw open the entire generics market, but I'm sure it's going to be highly competitive and competition will come from several countries. Besides, for an ambitious company like Nimax, stepping into the US generics market means going back down the value curve. That actually worries me." As he finished, Anjan's mind quickly rewound to the past. He recalled his company's difficult climb from commodity generics to conventional dosage forms and their hopes that their investments in the new research facility would soon deliver a new molecule. Would an American foray lead Nimax back to square one or would it open up new horizons?

Sunil broke the short silence. "Hey, you sound like Hamlet to me," he smiled. "How wise can it be for us to let go this golden opportunity? The $29 billion generics market is expected to grow at double digits over the next 5 years. Compare that to India's sluggish 5.5%. Once we have a US operation, we'll get to know about opportunities which we wouldn't even get to hear about in India. Look at our South East Asia subsidiary. The very fact that we set our foot abroad gives us a clear competitive edge over others. Since early birds in the generics market with some international experience are likely to gain in the long term, it's time we take a concrete decision". Rakesh nodded in agreement.

"The generics market is a high volume one with low margins…as low as 3- 4%. Are we efficient enough?" Anjan turned to Rakesh. Rakesh's response was prompt, "More than many others. With the kind of capabilities we have built up over the years, I believe we have a bright future there. We have the process development skills, the cost efficiency and our recent product introductions have been well received," he expanded, tapping his Parker pen on the desk to emphasize each point. "These, I'm sure will take us places".

There was silence on Anjan's side and years of experience in dealing with him had taught Rakesh how to interpret it. Anjan simply needed more explanation. "Well," began Rakesh, "We are leaders in India and our experience in process development should ensure a relatively smooth sail in the US generics sector. Not many of our competitors enjoy as low a manufacturing cost base as we do. And we've learnt how to identify and control costs. US companies are not as lean as us. On the issue of entry strategies, we have already established one company overseas albeit in an emerging market. More importantly, our reputation of being able to work with international companies will help. These experiences can be used effectively to gain entrance into the generics market and eventually tighten our hold there. Most of this generics activity is going to be in the US. In fact, with sales of nearly $19 billion, the US accounts for 65% of the world generics market! Aren't these good enough reasons to enter the generics market?" Rakesh eagerly pulled his chair forward shifting glances at the duo, gauging their reactions.
alliance as surrender
Anjan smiled, seemingly with approval. All three were proud of Nimax's hard won achievements. But Anjan wasn't sure about the degree to which Nimax should get involved in the international generics market: should Nimax be aggressive or moderate? "Why don't we take up offers from MNCs abroad for contract manufacturing?" he asked in a low tone. Rakesh was clearly unhappy with the suggestion, exclaiming, "Hey, that would be a low profile, risk adverse strategy for a forward looking company like Nimax. This would never fit our overall strategy of achieving global leadership. At the least, we should go for something that matches our vision!" Anjan expected that from Rakesh. He looked at Rakesh, silently inviting an alternative option.

Rakesh got the message and immediately burst into speech. "Why don't we capitalize on our experience in the US and go it alone? We can start a wholly owned subsidiary abroad." "Hold on, hold on," Sunil interrupted him. "Are you really serious? We are going it alone? Do you know the size of investments needed to set up the distribution and marketing infrastructure? Besides, we would be competing with global leaders in a lesser known terrain! With due respect to all our capabilities, I doubt whether we could handle that option." Sunil's opposition to Rakesh's proposal allowed Anjan to breathe easier. The idea was too radical, especially compared to the low profile strategy he had proposed.
"Do you have something in your arsenal?" Rakesh probingly asked Sunil. Sunil cleared his throat as he began. "Why don't we work with others? I'm pretty sure this is a workable and realistic option." Both Anjan and Rakesh appeared confused. Sunil explained, "I propose we enter the generics market abroad through an alliance with a local pharma company there. One which has good local market knowledge and contacts. The tie-up would give us access to a large and growing market yet at the same time would reduce our risk of going it alone. We would get the best of both worlds."

Rakesh had doubts and he didn't hesitate to raise them. "Alliances are dicey. Don't forget that we may be tying up with the same kind of MNCs we see here in India. Initially, as the business gets into its groove, the going is smooth for both partners. Once things are settled and the MNC gets to know his way around the country, he starts thinking of the Indian side as a liability. One day he will walk into the boardroom with his laptop and make a solemn presentation that the company desperately needs to grow. Fresh funds need to be pumped in. The Indian side usually cannot pay up, greenbacks are brought to the table and then you know what happens. They easily gobble the Indian share up! Now your point, Sunil, would make absolute sense if we could replicate the strategy of the foreign MNCs in India but on their home turf. In fact that would allow us to attain true global leadership. Don't also forget that we too have had frictions with the foreign partner in a couple of alliances in India."

Sunil was unperturbed. "Listen Rakesh alliances fail - as we've discovered to our cost! - due to a poor strategic fit between the partners. The financial muscle, the aggressive growth strategy of the foreign MNC and their superior learning abilities becomes too much for the Indian company to handle. Today, we could actually try to turn the tables - we could be the MNC, use the same strategies on a US company. To be precise, we need a partner who doesn't want to - or can't - make large investment, has good local market knowledge and a slow learning capacity."

The argument seemed convincing to Rakesh. But Anjan had a question, "Does such a partner, one who is prepared to aid us in our pursuit of global leadership, exist?" Sunil continued rocking his chair while responding, "Luckily for us, there are financially weak companies in the US with the required local knowledge and contacts, and who are looking out for partners with the kind of capabilities that Nimax has." "Why don't you name a few?" that was Rakesh. "Well," said Sunil, "I'll have to do my homework here. I have a couple of companies in mind. Give me another 14 hours and I'm sure to hit upon the right target. Tomorrow I should be able to present the strategic reasons for choosing that partner too."

Anjan heaved a sigh of relief. "In that case, I'll set up a management review meeting first thing in the morning tomorrow. Sunil, you can then introduce the potential alliance partner and present the strategic rationale for choosing the company too," said Anjan as he hurriedly clicked shut his IBM think pad. Sunil and Rakesh nodded approvingly. It was already 7 p.m. and Sunil knew he had an important task before him. "Relax, I'm sure you'll come up with something interesting tomorrow," Anjan patted Sunil as he got into his new C-class.
dancing with strangers
The day dawned for Sunil and he was still narrowing down his choices. An hour before the 10 a.m. review, he was carefully arranging a bunch of papers. On time as usual on time, he spotted Anjan and Rakesh among the many eyes eagerly awaiting his presentation. He was relaxed, confident that he had come up with the right choice.
He kick started his presentation with a brief introduction on the need for the day's meeting. "As all of us know, the post-WTO and post-WTC situation has opened up an estimated $30 billion generics market. And before one more business magazine starts digging into our potential strategy, maybe we should have one of our own. All of us in the room today having been thinking about our options. Yesterday Anjan, Rakesh and I discussed the possibility of entering the generics market through a strategic alliance with a company located in the US. This, we think is a viable solution. I had promised to come up with a target company whose strategic interests would match that of ours and at the same time would help us gain global leadership. I'm here before you to present the same."

He stopped for a second to have a sip of water and continued, "Our target is Prima Pharmaceuticals based in Ohio. Prima is a drug discovery and development company whose lead product for prostate cancer is in clinical trials now. They have a well-established distribution network. Since they don't deal with generics, our partnership with them would be complementary. Also our products wouldn't have to fight for shelf space. Additionally Nimax can learn from their drug discovery and development skills. It's an ideal fit, I would say as there's likely to be better strategic compatibility."
"Now coming to financials. For the 6 months ended 30 June 2001, Prima's sales fell 70% to a record low of $5.7 million. Compare this to Nimax's sales figures of $358 million. Prima is a much smaller company than we are, and weaker. This means that they are would like to keep investments low and yet are driven by the need to grow. Prima's market capitalization is $193 million which is very low compared to our market cap of over a billion dollars. This gives us a clear edge in the price while fixing the deal. Their brand name isn't all that impressive. So we can either co-brand our products or sell it under our own brand name. I favor the latter. Their poor results reflect the unsatisfactory performance of the company's corporate collaborations."

"I got to know from trusted sources that Prima is looking for a collaboration partner with a good brand image, complementary products and a fairly good financial position. All their earlier collaborations were with partners who operated in their same market segments. They perfectly fit our bill. Prima is the kind of partner we are looking for in order to achieve our dreams of global leadership. I leave the rest to your discretion", Sunil wiped his forehead as he awaited responses from the group. Anjan and Rakesh seemed to favor his choice.

Even before Sunil could relax, approval came from Monica Shah, Nimax's young and dynamic Marketing Manager, "It would be great to gain access to a readily available distribution and marketing infrastructure. We could penetrate the American heartland soon". "We could capitalize on our brand image too. I favor Sunil's suggestion about selling the products under the Nimax brand name," quipped Deven Shenoy, the Advertising Manager. Ashok Gupta, the Operations Manager too seemed to approve of Sunil's choice and strategy, "I'm sure we can capitalize on our cost efficiency and excellent process development skills which are indeed the need of the hour". "Prima seems to be a small company with not much financial strength. This alliance could act as a prelude to an acquisition," exclaimed Monica. Everybody seemed excited.

Just as Sunil was beginning to enjoy the kudos, he was cut off. "Don't get too excited. Have you all thought of the kind of competition we'll be facing from global leaders in the US? We'll just be too insignificant even to take off," warned R Shanmugam, Nimax's fiery manager from the business co-ordination section. "And what about stable income lost from the contract manufacturing option? Aren't you guys aware that Prima's net loss totaled $24.8 million, up from $4.5 million last year? What if this alliance fails? There won't be any use crying over spilt milk," added Nimax's risk averse Finance Manager. Adding to these objections was the Human Resource head, Anupam Seth, "We'll have to sort out the cultural problems too. Don't overlook the fact that we would be dancing with strangers, which may not be a pleasant experience".
The managers seemed to be divided over the issue of forming an alliance, while the issue of whether Nimax should enter the world generic market and specifically the American one was once again on the backburner. The trio looked at each other in sheer dismay. It seemed as if they were back to square one. Conflicting views echoed within the plush interiors of Nimax's conference room. They were disrupted as one of the doors slammed shut. It was Shanmugam walking out of the meeting.


Case Study Assignment

case study
Storm in a coffee cup
Does the socio-economic mindset of the marketing manager drive the brand's image? Do trendy brands need trendy mindsets?
Meera Seth






Subhash Nayyar had never expected this. Farzana Mistry, marketing head of the Cuppa Café (CC) business, was suggesting that she would resign. Startled and confused, he told her to hang on while he sat in his huge room and thought. At 52, he had settled in a comfort zone with his ideas and ideology. But the CC business under Farzana Mistry had suddenly whipped up a whole new set of arguments which Minot's traditional tea and coffee business could never have. The CC chain of cafes were doing great under her, and he was not about to upset that. No doubt, last evening's meeting had challenged her ideologies, but Subhash didn't think he was going to replace her.
Four months ago, his marketing director, Arun Adlaka, had begun to shake this comfort zone a bit. "CC is yet ordinary. It has to now take off to the 'wow' stage," he had said. "It looks different in every locality, but take Barista and McDonalds, which look the same everywhere. That sameness has a quality of reassurance. You need to work on the CC brand more closely. Right now it means many things in different areas... I cannot sell tea or coffee like that in a nation where the chaiwala also stands for something tangible!"
Three years ago, Minot India had spotted opportunity in setting up coffee houses. It tied up with small Udipi-style coffee shops (only the one on Breach Candy was a shoe shop in the old avatar), and assisted them in decor and management. Thus, they now had 10 Cuppa Coffee cafes in Mumbai, each with a history of its own and, hence, each with varying expectations. But all that changed with the standardised new décor, management, processes, etc.
All this thanks to Farzana. It was amazing for Minot that the business had gained acceptance in 14 months, for Minot had no experience in retailing. Nor did Farzana, who had slid into her new role from beverage sales management. Farzana rose up in life the hard way, went to B-school, and was a very keen people's person. This is what qualified her for the job - her uncanny ability to connect with people and instantly knows their needs. Add to that the fact that she had been in the beverages business long enough and was great on insights and market pulse; she knew what sold and what did not.
Yet her appearance belied her competence. Dressed in non-descript salwar kameez, slightly plump with a hard-core Mumbai accent, she laughed easily and a lot and usually engaged people with great ease. At work, she was very friendly, easy with the staff, slapped backs and urged performance. At home, she had a practising chartered accountant husband and two kids whose 'Tuesday/Thursdays ice candy at Five Gardens' and 'Saturdays at Mc Donald's' schedule was known to all at Minot.
Minot's senior management found her honest, sincere and hard working, with no ulterior motives, smart with the market, high on morals and values - in short, a solid, dependable, on-the-go manager. Farzana derived a lot of her cues on coffee house marketing from her own needs, most being functional and some rational.
Farzana, a careful spender, sought value and saw her target audience in the same way: intelligent, value seekers who step in and out of cafes to refresh and chat. In her opinion, most people were hard-working souls who took occasional breaks; "Yes, that's what Bombay is about," she had said, and she was the archetypal Bombay gal, not one of those who idled away time at mom's expense and indulged in tiramisu for no reason in the middle of the day. Nor was she a frump; she was a mix of the old and the new, and that was what made her so credible. For example, she loved cars and told her audience once with uncanny frankness that the coolest thing about driving was having a Coke on the dashboard.
Thus she picked up cues from the smart ones, loved these little acts of perceived style and applied the affordable formula to look trendy. She was aware that her reality bordered on the boring, so a Coke on the dashboard brought her cheer.
The more he thought about it, the more it seemed to Subhash that Farzana's success with the business lay in her ability to separate herself from it, see the business as a means of serving needs, no matter that those needs did not really exist in her orbit. The franchises trusted her and felt comfortable raising issues with her. The overall tone and pace she seemed to have set for the cafes did not make the man on a scooter feel alienated; she had often pointed out that other coffee houses which the common man could afford to stop by for a refreshing breath appeared inhibiting, even overwhelming. He would stand outside the glass walls but never manage to come in. So, the entry barriers at CC were low.

Yet, for all this, what Arun had seen was disharmony. "If one café differs from the other significantly, then there is no branding to bind the two," he had said. "The cafes vacillate between mass image and premium image. In Dadar they are mass, in Breach Candy and at the malls they are premium, and the Café in Andheri swings between the two! I attribute these differences to the fact that most of these were erstwhile small lunch homes and Udipis have a small exposure to retailing refreshments but are far removed from café habits. They are a mixed bag; therefore, you have to have a brand manager (BM) to pull up the dissonance and deliver uniformity."
Arun felt Minot needed to groom itself in modern services, as it was distanced through its main commodity business. Yes, Minot did brand its tea and coffee, but retailing was different. "My take is," he said, "it's time for us to hire a BM who can give CC the necessary facelift: emotionally, rationally and functionally. Right now we are all over the place. Besides, we have only Barista and Coffee Day to go by. There is some Starbucks experience to study too, but then, this is India. The Starbucks model may not be right for our mixed bag of cultures and SECs. For example, do we even know if our cafes should be premium only in demeanour, or can they have a mix depending on locality? And if so, how do we do this without eroding brand equity? We must encourage Farzana to hire a BM."
Arun, in fact, had another subtle doubt. A doubt he was unable to vocalise sensibly. He told Subhash: "Without any offence to Farzana, we need a young street runner kind of BM, someone more with the young segment who understands bars and cafes and recreation habits from their youthful perspective. Face it, we appreciate youth but we are unable to forecast its drives. It's a fact, Subhash, that our perspective is limited by our core business. We need a BM to drive the image to an extent, a BM who is young and 'with it'." Farzana was delighted. Of course, she said. CC was old enough to have a BM.
And that was how Tanya Vazir was hired. Tanya, a 28-year old account planner, understood value as much as the premium end of the market. She was very friendly, she had seen coffee houses globally, knew her brew, was a caffeine addict (black, no sugar), wore business suits with natural make-up and was dating her ex-creative director - a fact she expressed candidly. In her 'get to know me' chat with the CEO and Farzana, she mentioned her fitness regime which included an hour at the gym 'to burn the calories gained on lager'. A very matter-of-fact lady, she had a distinct way with words. Her English was some odd accent, not easy to place, and had oodles of confidence - an attribute Farzana felt Minot needed urgently for the café business.
In the course of their chats, Farzana learnt that Tanya was brought up in a middle-class convent, grew up with a single mom and a brother who joined the army later. Their aunt in the US had paid for their education while mom went back to nursing college. Both aunt and mom instilled in her confidence and self esteem. Her mother was a nurse in Dubai and Tanya lived with and looked after her brother, who had been incapacitated in a war.
Farzana looked at Tanya, this confident, business-suit wearing, lager drinking 28-year old. Only eight years her junior. She party-hopped on weekends, was seen on Page 3 thanks entirely to her savvy boyfriend, and was better known for her work with street children. Tanya, with this incomprehensible mix, waved away her Page 3 appearances with: "It's a great opportunity to see the other side of India. I have only used it as a wand to change the make-up of my brand management!"
Within the first few weeks as Tanya was finding her feet, a promo that Farzana was proposing ran into trouble with the franchisees. Farzana had proposed that a 'chess game' contest be launched at outlets to increase consumer engagement and enhance positioning of an 'open, intelligent and fun' image of CC. But franchisees saw it as a waste of time. The tables would be covered for too long and only a coffee would sell per person in two hours of table cover - 40 minutes gone and all they give the winner is a 20 per cent off on chocolate cake, and that means no margin there as well.
Tanya was silent through the interactions, watching and assimilating as Farzana explained painstakingly: "Look at Barista, since that's where you want to get! They have Sudoko challenges that help attract 18-25, college goers with high disposable incomes. The younger the crowd, the more the buzz, the higher the sale of snacks, and older people will be magnetised as well. Isn't that what we need to do with this chess promo?" But the franchisees didn't see that, arguing it was too much time investment and low sales.
Tanya was startled. If Farzana was so democratic, the promo was never going to take off, she knew. Sixteen months into the business and the franchisees were non-starters. Yes, she realised that they were ex-small restaurant owners... they never had to promote their business in the past. People just came, ate, burped and left. To have promos to sell just coffee was not making sense to them. 'What has been done so far to upgrade their business sense, their market sense and their feel for target audiences?' she wondered.
Three weeks later, the CEO called Tanya to assess her feelings on the brand and to allow for brand management to work independently. "I have to be candid and please do not take offence," said Tanya. "One, I do not get any sense of brand ownership by the franchisees. Two, our own vision for the brand is low. I didn't think we wanted to be like Barista! I came with the vision that CC had to be a class by itself!
Farzana smiled and said: "I agree Tanya, but they are small businessmen and it will take them time to assimilate all this. Their heritage does not let them dream big or aspire for the higher; hence, they are tight-fisted and laid back." Tanya swung around to face the CEO: "In this business, there is no time for mercy or teaching. Others are swinging and we are still cajoling and pleading. This does not make sense. Let's admit we picked up franchisees who were convenient for business but inconvenient for strategy. And anyway, 'small beginnings' is no excuse. Shedding an old mindset is not impossible! This is a business where you spend recklessly to achieve the optimum result. This is not a food and drinks business, but an indulgence business. The stakes are different and so are the ploys. The franchisee has to promote indulgence. Indulgence is the consumer trigger! How can you sell indulgence to a consumer if you don't believe in it yourself?
"This business is not about sales and top line. This business is first about building a name and a desire in the consumer's head. He must see your neon lights and walk in as if mesmerised. He does not have to want a coffee at that point, you see? A coffee shop is not there to serve a need, dammit, it is there to create a desire! You beckon, you attract, and the consumer should walk in and throw himself at your feet."
Farzana cleared her throat and said "Tanya, that will take time...," but before she could say more, Tanya slapped the table and said: "The market does not wait! The youth do not wait! You are thinking of a business that caters to pontification and planning. Coffee shops are impulse, darling! It's for adventure, reckless indulgence! That's why we throw in a Black Forest and not bean sprouts! Cuppa Café has to celebrate coffee drinking like a ritual!"
Farzana was now a tad bit annoyed. Shaking her head, she said: "Let's get this right, Tanya. Cuppa Café is a stop between shopping, walking, working, eating, living. It is that!" The CEO began to say something, but Arun gestured for him to listen to their arguments. Presently, Tanya said: "Tell me Farzana, when you were in college and got bored, what did you do?" Farzana smiled easily and said: "Oh I read a book or went for a walk..."
There you are!" said Tanya dramatically. "When today's young get bored, they do neither. They play video games like Counter Strike or go mall hopping, eat, or browse like wild on the Net. Or they stand together and stare at life because life is unfolding slower than their mind imagines! Today's young are far too different Farzana. Those who don't understand their drives fall by the wayside. The cafes you have in mind are for the tired in body, whereas these young are tired in the mind, tired of the pace!"
"Isn't that a very restricted view of the business?" asked Farzana. "Yes, the young have money and time and want some fun, but that is not the only segment we are catering to."
Tanya felt they were getting lost in the debate. Promos had their place in the marketing arsenal, but not before putting in place a strategy, she felt. The debate carried on:
Tanya: I'd rather make the place fun with guitars and sudoko sheets anyway.
Farzana: That costs money and I can't see that the franchises will pay for it.
Tanya: Then we must take a price increase on the coffee. For the young, fun is drinking a latte and eating a Black Forest, strumming an odd guitar.
Farzana: A collegian will spend Rs 40 on a coffee and Rs 35 on a piece of cake for a little pointless fun?
Tanya: But shouldn't fun be pointless? You may think it's pointless, but for him to sit there with his gal and sip coffee, talking about music albums, is heaven! Besides, most people go to coffee bars to be around cool people. The fact that some of that 'cool' is rubbing off is a big high at any age, not just at 20! It gives them a sense of achievement through association.
Farzana: But the Rs 40 is not making any sense. The franchisees will not be convinced.
Tanya: Farzana, you have to be convinced before you can convince others. Just go beyond the price to what the product is. Cuppa Coffee is more than coffee at Rs 40. It's not at all about the price line; that's the point you miss. It's about an image of fun. Coffee bars are great cults. Starbucks have their own music label and they play their music again and again; and consumers buy it because they buy into the piece of information that says music is cool! The coffee is the smallest part of an experience called Starbucks. It is the experience of bonding, of coolness, of indulgence, of luxury, even defiance. Now, what if we create a Cuppa Coffee band and enroll cool youngsters to cut music, which we will play again and again at all our cafes?
Farzana: Tanya, you are already packaging the brand without developing it... we are only 16 months old.
Tanya: And I am saying we are sixteen months old and we have not yet got an image! OK, let us look at what a coffee bar does for the consumer. It is association with cool, bonding with peers, a place to sit, relax, indulge - as Starbucks put it, the third place outside of home and office. It is, in short, one of the forms of new luxury... paying a super premium for a conventional commodity, for the experience factor. People are willing to pay this amount for the Cuppa Coffee experience. And that is why Starbucks costs $4! And that is why I would pay more to shop from a Target vs a Wal-Mart. That is why a Coke tastes better at Rs 30 from PVR. Farzana, this is the new lifestyle and a price increase is not a sin!
"Neither am I positioning CC for only the young. I may be 25 and I may love rock, but that does not mean that whenever I stop for a coffee I want to be reminded that the marketer knows I am 25 and love rock! There is a lot more to me than being 25 and a rock fan. I have my needs for quiet moments where I like to see my coffee, hear the sugar cube drop in and look at spaces around me that are tidy and orderly. I don't want to walk into a place that is overcrowded - and don't expect me to like it because I am 25! I don't want to walk into a restaurant where chairs are overflowing with jackets and shopping bags and people shouting... why do marketers think that, at 25, I have no bone that wants elegance and quiet?
Farzana: Then you should go to a 5-star hotel and use their coffee shop, maybe?
Tanya: Now you are making music! Very good. But at 25 I also do not want to pay Rs 275 for a cup of coffee and sit in an environment that is dreary and reminds you of silent zones. I am talking of a coffee shop that has the serenity of a 5-star coffee shop with the price levels of a Barista with a plus for the difference they make!
Subhash could see that both women came from completely different worlds. The worlds had similar objects, but both envisioned and experienced them differently. In the world of Farzana, for instance, objects were used only if they had a context in one's life. In the world of Tanya, all objects had to be experienced, known and felt - then choices were made. Farzana chose based on perceived knowledge, while Tanya made choices based on experiential knowledge. Why, even the process of converting data into information depended on assumption and secondary knowledge in one and primary knowledge in the other.
When the two ladies left the room, Arun sighed. The CEO looked at him from under his eyes and said: "I don't know about you, but I think I just got a whiff of a segment I didn't know existed!" And Arun said: "Today we are talking positioning, competition, etc. CC needs a different mover and shaker... and that person cannot be Farzana. She has to go not because she is ineffective or incompetent; she has to go because the brand just changed!"
Subhash was quick to thunder, "No! We are going to see more of these times. They have to learn to coexist; it's their lot. For example, take Lifebuoy. It is a lovely brand, plain speaking. It does not promise more than it can deliver and has a nice homely jingle. Farzana would do wonders with that brand - imagine the kind of solid values she would infuse the brand with like honesty, integrity and responsibility. Give that to Tanya and she will drive all the integrity out from it. She will try to create a lifestyle brand out of Lifebuoy. She may create an extension called Lifebuoy Luxury and give it an image like Lux! Equally, a brand like Louis Vitton will be wrecked in the hands of Farzana, as long as she does not learn to walk the world of luxury brands. But the point is, a Lifebuoy will coexist with a Louis Vitton, and so will Farzana and Tanya. Both skills are very critical, but the question remains: how can both find common ground?"
But Arun was worried: "Will the two of them work well together? Imagine, you and I are eight years apart in age and so are they... so why do their differences rankle?" Subhash grinned and said: "Because you and I both belong to a world where our socio-economic mindsets are not in conflict. Both of us come from a period of scarcity to one of inadequacy, that's the only difference we have known. But between Farzana and Tanya, even eight years is heaven and earth. Let's say it's the difference between caution and economic freedom that's really the genesis. The whole mindset is different Arun...
"The young live the present moment more fully, without anxiety for the future. For them, the future depends on experiencing the present completely. Therefore, Tanya's lot know their kind. She is comfortable dealing with them; she knows them as people. Therefore, she knows how to target them. Farzana's lot does not know them, or perhaps she thinks she knows them. It's secondary data. Brand management is 99 per cent what you are and 1 per cent of secondary data, no?"

Monday, 23 May 2011

Update for project


Objective: To develop insight into the given topic and get a managerial perspective of the impact on other departments (their efficiency, productivity and where applicable, the creativity)
-       Study on creation of luxury brand for male footwear- SOHRAB ANSARI
-       Strategies used to build successful Internet based customer services- AANCHAL JAIN
-       Innovative communication techniques for five recent product launches-MRINAL KUMAR
-       Changing trends in FMCG industry in India- SHUBHANGI SOOD
-       Promotion strategies followed in retail sector- GURVEEN CHADHA
-       Study on changing consumer preference towards organized retailing from un-organized retailing- NANCY JAIN
-       Study on "impact of advertising in B2B marketing for electronic gadgets-KANCHAN GARG
-       Distribution network & general insurance industry- KUSHAL KAUSHIK
-       Study on strategies for promoting retailers' brands- POOJA DHAWAN
-       Merchandising key account management in apparel-PRATIBHA SUMAN
-       Marketing in FMCG sector with reference to five recently launched FMCG products (past one week effective today i.e.16May 2011)-SHASHI JYOTI
-       E-marketing of financial services: Relationship approach- SHIPRA GUPTA
-       Managing of luxury brands in watches- SUMIT SINGH
-       Role of emotional satisfaction in service encounters - retail sector-SHAMA BANSAL
-       Study on factors influencing adaptability & usability of consumer electronics- PRIYANKA KAPOOR
-       Future of consumer durables pertaining to standard brands & private labels (next, bigbazar)-VISHAL NAGPAL
-       Study of consumer behavior related to different soap brands in a location-SHWETA MALHOTRA
-       Influence of branding on consumer purchasing behavior-RENU DAHIYA
-       Analysis of sales promotions ability to promote brand awareness-PARVESH KR SHARMA
-       Study on "impact of web 2.0 technologies on B2B marketing"-
-       Analysis of the role of outdoor advertising and establishing strategies for managing space media
-       Marketing of Ayurveda product range and its effectiveness- NISHANT DANG
-       Study the success of the regional political parties at the recent assembly elections-NAVEEN DAHIYA
-       Financial impact of tie up of Nano with big bazaar-RAVI CHAUDHARY
-       Effectiveness of channels ( online/ internet ) in service delivery- SHAILENDER VERMA
-       Study on effectiveness of employee’s role in service delivery-GAURI SHANKAR
-       Study of purchase influencing factors for services-SHIV SHANKAR
-       Measurement of brand awareness for service sector-AARTI KUMARI
-       Marketing Japan as a paradise Post Tsunami- BHAWNA GUPTA
-       Impact of Tsunami on marketing  automobiles- RICHA MISHRA
-      Customer Vs consumer behavior for services in organized sector for
       a. couriers
       b. Hotels- Shalu
       c. Banks- Aditya  Dubey
       d- Airlines-
       e. Tour Operators- Saumya

One student from the Second Semester Class will pick a topic and submit the topic to the Faculty by 12:30 AM tomorrow.
The Final Assignment (soft copy) would be submitted by 29th May midnight electronically

For any clarifications/feedback contact by 5PM today
Each project should ESSENTIALLY cover the following
1.     About the Global Industry of the topic chosen
2.     About the industry in India
3.     PESTEL
4.     SWOT for No 1,2,3 player as per volume of sales
5.     All competitors analysed
6.     All Ps as applicable
7.     Consumer behavior
8.     Price Margins
9.     Steps taken to protect margins
10.   Problems faced
11.   How they overcame the problem
12.   Bibliography and references other than search engine like google