samvad4

Volume IV March 2012

ISSN 2249-1880Volume IV No. 1

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PatronsDr. S. B. Mujumdar Founder and President, Symbiosis and Chancellor, Symbiosis International University

Dr. Vidya YeravdekarPrincipal Director, Symbiosis Society

Dr. Bhushan PatwardhanVice Chancellor, Symbiosis International University

Editor-in-ChiefDr. Vivek Sane, Director, SIBM, Pune

EditorsDr. B. Vinod Cadambi, Professor, SIBM, PuneDr. Tarun Kushwaha, Associate Professor, SIBM, Pune

Editorial OfficeSymbiosis Institute of Business Management,Gram : Lavale, Tal. : MulshiDist. : Pune- 412115Tel : 020-39116000Fax : 020-39116060

The opinions expressed in SAMVAD are those of the authors and not of SIBM, Pune or the editors of SAMVAD.

Any IPR or Copyright violation in SAMVAD is the responsibility of the authors and not of SIBM, Pune or its Editors.

All articles in this Journal have undergone a review process by the editors.

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Volume IV No. 1

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SAMVAD“SAMVAD” is a peer-reviewed

research journal of SIBM, Pune. “SAMVAD” means dialogue

and SIBM, Pune invites all the management professionals, faculty and students to participate in this

dialogue which will contribute towards shaping management

thinking in the country.

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Editorial 06

(I) Research Papers

1. Dimensions Of Human Intelligence 07

2. Customer Relationship Management (CRM) : 14 A Technology Driven Tool

3. ERP Software Development For Pressure 26 Die-casting Industry

4. A Study of Sales-Orientation and Customer-Orientation of Front Line Sales Executives in Financial Services 43

5. Customer Experience Management : A Framework For Successfully Managing The Customer Experience 55

6. Glocalisation Strategies Being Employed in Indian Retail Sector during the times of Crisis 66

7. A Study of The Learners’ Perspective on ‘Entrepreneurship’ 71

8. Banking To The Poor: Different Models And Lessons for India 80

(II) Articles/View Points

1. Invoking The Organizational Consciousness : Insights from Bhagvad Gita 842. The Essentials of A Healthy Workplace 87

3. Rolling Rupee : An Economic Saga 93

4. Sarbanes & Oxley Act and COSO Guidelines : An Integrated Framework for Risk Management 100

Contents

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Editorial

SIBM is pleased to release Volume IV of Samvad, a bi-annual journal of the institute. Samvad serves as a medium for dissemination of research for the institute’s faculty and other academicians/ professionals. The faculty at SIBM comprises of a mix of academicians and industry professionals in various areas of management. Faculties are actively involved in teaching, research and industry interface and efforts are integrating the three activities for greater synergistic initiatives.

The current issue comprises of research papers and viewpoints to promote a blend of academic thrust and practical issues. Hence the journal could be of interest to both management educators, students of management and executives.

Regards,Editorial TeamSAMVADSIBM PUNE

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Dimensions Of Human Intelligence

Dr. Vivek SaneDirector, SIBM, PuneE-mail: [email protected]

Prof. Sapan ShrimalAssistant Professor, SIBM, PuneE-mail: [email protected]

Failure of Intelligence

“On October 6th, 2008,Karthik Rajaram killed his wife, three children and mother-in-law, before killing himself. In suicide note, he blamed his actions on financial hardships.”

Do you think this incident took place in a farmer’s house in some remote village of Andhra Pradesh or Uttar Pradesh, whose crops have been destroyed by bad monsoon and the moneylenders are making his life miserable?

Have a look at the profile of Karthik Rajaram 46 year old Karthik, B.Tech. from IIT Madras and MBA from University of California, Los Angeles, was former employee of PricewaterhouseCoopers (PWC) and Sony Pictures. He is said to have got a perfect score in GMAT. In 2001, Daily Telegraph of London mentionedhim as a ‘winner’ who made US$ 1.2 million from a venture fund, he co-founded.Karthik’s former colleagues and friends were shocked by the incident, as theyknew him as extremely bright person with keen business sense.

It is very intriguing to find a person, with such high academic intelligence, coupled with professional and financial success, taking the extreme step of committing suicide, besides killing own family members.

Yet there was another side to him. His close neighbours described him as “very high-strung, very intense man, very tightly wound”. His mentor in PWC described him as an emotionally unstable person, who had always been a bit flamboyant and reckless.He saidKarthik was fired in 2004 because of erratic behavior1.

What Lies Behind The Story

The above incident compels us to think, why ‘American odyssey ended in horror’ – as one of the newspapers described it – even when all the known ingredients for success were

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present, including intelligence and financial success. We all spend more than quarter of our life in developing academic and professional intelligence. Did this intelligence stop Karthik from taking a reckless step, which no sane person will ever approve? Was there a need for different kind of intelligence, which could have helped Karthik to remain stable and to take a thoughtful course of action?

What made Oprah Winfrey to become the iconic host on television shows, when she was fired from the job of television reporter, because she was ‘unfit for TV’?How did Steven Spielberg motivate himself to become one of the most successful movie directors, even when he was rejected from the University of Southern California School of Theater, Film and Television three times?

What was the secret behind Abraham Lincoln’s perseverance to become president of USA, despite several electoral defeats, business failures, nervous breakdown and death of beloved? How could Stephen Hawking become legendary physicist and cosmologist, when he was diagnosed with amyotrophic lateral sclerosis at the age of 21 (which left him almost completely paralysed) and was told that he would not survive for more than 2-3 years?2

Do We Know The Answers?

Question arises whether our known success factors are sufficient enough to deliver a prosperous, happy and peaceful life. It also casts doubt on our understanding about intelligence. Do we really understand the concept of intelligence or we are living in a belief enforced on us by decades of conditioning?

In spite of large number of examples around us, we still get astonished when we see an intellectually brilliant youth not able to cope up with challenges of life. At the same time, we express our disbelief when we find the so called ‘stupid, dumb, careless’ boy grows up to become a successful businessman or sportsperson or musician or sales person.

We all have been made to believe that success in life is determined by high intellectual intelligence. This belief has gone so deep down within us that very much apparent incidences around us also do not make us raise questions about it. Another reason behind this conditioning is that our educational and social system does not support recognition and development of other intelligences. Thus we all remain unaware or least aware about the concept and importance of intelligences beyond intellectual abilities.

Oxford Dictionary defines intelligence as (a) ‘the ability to acquire and apply knowledge and skills’, (b) ‘the collection of information of military or political value’. It can be noted that intelligence is not only about acquiring knowledge and skills, but also about its application, which requires a lot more than academic success.

Multiple Faces of Intelligence

Daniel Goleman comments in his famous book ‘Emotional Intelligence’ that “At best, IQ (Intelligence Quotient) contributes about 20% to the factors that determine life success,

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which leaves 80% to other forces.”3This brings us to explore the wider dimensions of human intelligence, which for a large majority is confined to the intellectual intelligence (includes knowledge, skills, cognition and learning capacity).

Dr. Howard Gardner, psychologist and professor at Harvard University, propounded the theory of multiple intelligence in 1983. He identified eight intelligences in human beings:

• Linguistic• Logic-mathematical• Musical• Spatial / Visual• Bodily/Kinesthetic• Interpersonal• Intrapersonal• Naturalistic

Dr Gardner is the strong supporter of the fact that intelligence is multi-dimensional and not confined to logic-mathematical-analytical abilities4.

Six Dimensions of Human Intelligence

Even Dr Gardner’s model is also based on cognitive science model and gives little coverage to the role of emotions in the overall intelligence of a person5.

Taking a holistic view, the human intelligence can be broadly divided into six categories:

a) Intellectual Intelligence : Consists of specialized knowledge, tacit knowledge & skills, cogni�ve complexity and learning capacity.

b) Emotional Intelligence : Means ability to understand emo�ons and to manage them effec�vely. High emo�onal intelligence is demonstrated in the form of high self-confidence, courage, risk taking ability, resilience, mo�va�on, etc.

c) Social Intelligence : It is ability to create a bond with other person and includes quali�es like trustworthiness, empathy, genuine care for others, ability to connect and an easy going personality. Person with high social intelligence has the ability to create a large and strong network of rela�onships.

d) Intrinsic Intelligence : It is strength of inner personality, as a combina�on of values, a�tude and belief system. It also includes interpersonal and intrapersonal communica�on. This intelligence is visible in the form of character, behavioural traits and language used in communica�on.

e) Health Intelligence : It is the ability to lead a healthy life-style and maintaining physical and mental strength and vitality.

f) Spiritual Intelligence : It is the ability of a person to connect with the deeper self as well as with the universe at large. This intelligence is demonstrated in the form of selfless acts and unperturbed personality, with high degree of resilience and posi�ve energy.

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Six Dimensions Exemplified

Let us take example of a student, to be called as Anand. He scores high grades in school and is termed intelligent and bright. It actually means high intellectual intelligence, generally expressed in terms of IQ. A few years later, Anand aspires to become an engineer, but fails to get admission in coveted Indian Institute of Technology. He is able to accept and learn from this failure, and takes the step forward without affecting his self-esteem and confidence. He has proved to be emotionally intelligent.

Anand completes his formal education and enters the hospitality industry. He develops a close bond with colleagues and is a trusted and reliable friend. This implies his high social intelligence. As he moves up on the responsibility ladder, he realizes that challenges thrown by life are getting bigger. He is able to maintain his integrity in all situations, while carrying the positive energy in every activity he performs. He is able to communicate effectively with people at different levels and is being respected for being a person with right attitude, values and humility. He has demonstrated high intrinsic intelligence.

As Anand grows in terms of age, he ensures a healthy diet, regular exercise and timely sleep and resting breaks. He listens to music and does gardening during free time, which relieve him from stress and revitalize him. He has high health intelligence.

With growth in all spheres of life, Anand also gets to understand himself better and deeper. As he is entering the fifth decade of his life, he realizes the higher purposes for his existence, which are beyond the circle of his individuality and family. He finds himself connected with the nature and overall universe. He introspects on the questions of life and death and feels a great sense of peace within. He is moving towards spiritual intelligence.

Importance of Non-Intellectual Intelligences

It is useful to understand different facets of intelligence, however, more important is to develop an appreciation about their contributions in our life. Further, as our belief system is still biased towards intellectual intelligence, it is very important to analyse the role of other intelligences as compared to intellectual abilities.

A study conducted on ninety-five Harvard students from the batch of 1940 revealed some startling facts. The study followed these students into their middle age to understand how well they are doing in life. To their surprise, the researchers found no correlation between their grades and the level of success (in terms of salary, productivity, status, life satisfaction, happiness and relationships).

A similar follow-up in middle age was conducted with 450 boys from less privileged background and again IQ had little relationship with how well they did at work or in life. But childhood abilities such as being able to handle frustrations, control emotions and get on with other people, made the greater difference6.

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It is not surprising to find people with several academic failures, attaining high success later in their lives, while the consistent class topper finds himself struggling with life, after the initial success. The difference is brought in by the level of emotional, social, intrinsic and spiritual intelligence.

Emotional intelligence enables a person to cope up with unpleasant surprises posed by dynamic life situations. It provides him the strength to take the failures in stride and not to get overwhelmed by the situations. The behavior of person with high emotional intelligence attracts more respect and appreciation. These factors contribute to his overall success at work and in personal life.

The importance of relationships and networking was never underestimated at any stage of civilization (though no efforts have been made to develop this intelligence). It has become even more relevant in today’s world, which is getting smaller with the advent of information technology and social networking. Building strong relationships is not only inherently satisfying, but also helps in personal and professional growth through increased opportunities, better team work and synergy.

While intrinsic intelligence integrates and strengthens the personality, spiritual intelligence elevates the personality to higher levels, where success comes naturally, along with joy and contentment.

Cost of Neglect

Whereas the holistic development of all intelligences brings success, happiness and peace, imbalanced development can prove to be very costly – financially, emotionally, physically or mentally. KarthikRajaram’s case demonstrates the extreme consequences of focusing on one intelligence at the cost of others. However, there is no dearth of examples at milder levels. In its primary stage, this neglect shows up in the form of low productivity, irritation, lack of bonding, stress and irrational behavior.

With the increased level of competitiveness, impact is quite visible among corporate executives - anxiety attack, nervous breakdown and few cases of heart attack. And most of these are all young executives under thirty five. When Jaslok hospital started neuropsychiatry services, within two years it was among the three busiest clinics, with a thousand consultations per year. Corporate India has not yet forgotten the death of Sanjay Huku, aged thirty one, who suffered a sudden heart attack in the bowling alley in Mumbai7.

Lack of emotional, intrinsic and spiritual intelligence can cause serious damage to the personality and behaviour, irrespective of very high intellectual intelligence. Dominique Strauss-Kahn, head of International Monetary Fund (IMF) and a potential candidate for French Presidency, was arrested for attempted rape in a New York hotel. Strauss-Kahn, who is married, acknowledged an inappropriate sexual encounter but insisted there was no violence. He resigned from the IMF8.

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The irrational emotional behavior of mob is not new to this country, which has faced a number of religious riots. However, in September, 2008, when Lalit Kishore Chaudhary, MD-cum-CEO of GrazianoTrasmissioni, was beaten to death by 200 workers in Noida, it became the worst instance of industrial violence in recent times. It also became the case for industrial psychology and emotional intelligence9.

Rising Awareness

While the cases like Sanjay Huku, KarthikRajaram and Lalit Kishore Chaudhary have sent alarms to the corporate houses and business schools, the increasing awareness about emotional, intrinsic and health intelligence have been making impacts in board rooms and HR policies. Though the developments are at early stage, professionals have started to understand and appreciate the importance of intelligences beyond IQ.

Engineers at Microsoft’s Global Technical Support Centre in Bangalore not judged on how fast they solved problems or how highthey were rated in customer satisfaction surveys. Rather, performance rating is linked to qualitative parameters such as readiness to askcolleagues for help, ability and willingness to learn from the problems, willingness to share knowledge and the doggedness and persistence in solving problems.

And Microsoft is not the only one to grab the change. Employees are increasingly being judged on their risk taking ability, quality of interactions, proclivity towards collaborative behaviour and knowledgesharing.

Need of the Hour

Though steps are being taken in the right direction, much is left to be completed, or rather to be started. The lack of awareness among parents and teachers is the biggest cause of one-dimensional approach towards intelligence. The belief, that high scores in board exams or IIT-JEE or CAT or GMAT are the guaranteed and only path to success, needs to change.

Further, there is need to bring development of emotional, social, intrinsic, health and spiritual intelligence within the ambit of mainstream education, at par with intellectual intelligence. It needs to be understood that these capabilities can be effectively developed only over a period of time, not just by one-two day workshops. Who will advocate teaching language or mathematics or sciences in a day or two or even in a week or a month?

There is no reason for giving a differential treatment to non-IQ intelligences, just because their effect is not immediately visible. A long sighted vision of providing holistic education to children will go a long way in creating balance among all facets of intelligence.

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References:

1. www.time.com/time/nation/article/0,8599,1848422,00.htmlandwww.timesofindia.indiatimes.com/world/Rajaram-was-fired-for-behavioural-problems/articleshow/3571706.cms

2. www.onlinecollege.org/2010/02/16/50-famously-successful-people-who-failed-at-first/

3. Daniel, G. (1995), Emotional Intelligence, Bantam Books, pp. 364. http://en.wikipedia.org/wiki/Howard_Gardner5. Daniel, G. (1995), Emotional Intelligence, Bantam Books, pp. 436. Ibid, pp. 377. http://articles.economictimes.indiatimes.com/2002-0805/news/27367032_1_

executives-bombay-hospital-cases8. The Economic Times and www.guardian.co.uk9. http://articles.timesofindia.indiatimes.com/2008-09-23/delhi/27930491_1_india-unit-

graziano-trasmissioni-commercial-production

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Customer Relationship Management (CRM):A Technology Driven Tool

Dr. Mallika SrivastavaAssistant Professor, SIBM, PuneE-mail : [email protected]

Introduction

Customer Relationship Management (CRM) is a management approach that seeks to create, develop and enhance relationships with carefully targeted customers in order to maximize customer value, corporate profitability and thus shareholders’ value. Managing relationship with the customers has been of importance since last many centuries, but with invent of information technology a new discipline in name of CRM has emerged. The CRM is primarily concerned with utilizing information technology to implement relationship marketing strategies. The emergence of CRM is a consequence of a number of trends like shift in business focus from transactional to relationship marketing, transition in structuring organizations on a strategic basis from functions to processes, and acceptance of the need for trade-off between delivering and extracting customer value. The greater utilization of technology in managing and maximizing value of information has also led to modern shape of CRM.

The aim of CRM is to acquire and retain customers by providing them with optimal value in whatever way they deem important. This includes the way businesses communicate with them, how they buy, and the service they receive - in addition, of course, getting the best through the more traditional channels of product, price, promotion and place of distribution. Essentially, CRM is a customer focused business strategy which brings together customer lifecycle management, business process and technology. The trend for companies to shift from a product focused view of the world to a customer focused one is the modern strategy of the business, as products become increasingly hard to differentiate in fiercely competitive markets. It stands to reason that the better one understands customers, the more successful the company will be in meeting their needs. But adopting a truly customer focused approach can be a resource intensive business. Many managers have questioned how far the investment is worth it. The answer to such questions lies in CRM which uses new technologies that can transform the technique of cultivating a loyal customer base.

Customer as Partner

In to-day’s world true relationship marketing practices require a fundamental shift in

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attitude towards viewing the customer as a partner and a business asset to be managed for long-term profitability. The sale should not be viewed either as a conquest or as the end of the marketing process; rather it should be constructed as the beginning of a relationship. The information technology, which includes the telecommunications, data storage and retrieval technologies, and the World Wide Web, have created a revolution that has shifted the business firm’s orientation from production efficiency back to the customers’ needs. IT could draw the customer closer to the company, build a relationship, and reduce the probability of customer defection.

With technology touching the way we live our lives, expectations of individuals is fast changing. Just like television and the PC’s have revolutionized our lives so is wireless communications, Internet and pervasive computing going to affect our daily pattern of lives. Some trends that have bearing on treating customers as partners can be seen as:

• More and more individuals will like to be treated as one single person rather than as one among the masses.

• People wish products and services round the clock• With abundance of product and service offerings, consumer’s loyalty can only

be commanded by providing better portfolio of services.• Speed of response and understanding each individual one of the major key

issues

Importance of Technology in Customer Relationship

IT is enabler and choosing right technology is managerial acumen. First one has to find out initiatives which need improvements through technology, Identifying these initiative is one of the key tasks of a manager. In the context of CRM, initiatives which need improvement and applicability of IT are shown in Exhibit 1.

Exhibit 1: Importance of Technology to initiative

Initiatives to improve Importance of Requirements of customer- IT to initiative relationship-management system

Targeting of profitable customers very high Introduce propensity modeling-for example, rule-based systems to improve capture of most important customer variables

Ability to deal with follow-up contacts High Create campaign library with history of offers made to targeted customers; make available on-line to call-center agents

Convenience of response High Enable response through convenient channels such as e-mail or, for mobile-phone users, Short Message Service (SMS)

Delivery of offer High Automate delivery of successive messages to customers who have not yet responded

Presentation of offer Low Introduce sales scripts for call-center agents; (sales pitch, material) employ support systems that help customize scripts by customer segment

Attractiveness of offer None N/A

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Success of CRM is dependent upon the choosing the activity that involves data handling, complex modelling and requires lesser subjectivity/human intervention.

Technological Tools

The application of technology is the most exciting, fastest growing, and changing the way customers get information about products and services. Technology includes all of the equipment, software, and communication links that organizations use to enable or improve their processes, including everything from simple overhead transparency projectors to laptop computers, from fax machines to email, from audiocassette and videocassette players to cellular phones and voice mail(Stowell,1997)1.The most widely used tools are :

1) Electronic Point of Sale (EPOS) : The main benefit of EPOS and retail scanner systems is the amount of timely and accurate information they deliver. Advances in the technology have significantly aided the scope for data analysis. IN addition to the original scanner-related data on sales rate, stock levels, stock turn, price and margin, retailers now have information about the demographics, socio-economic and lifestyle characteristics of consumers. They can, in addition, assess the impact of a whole host of variables-price, promotion, advertising, position in store, shelf position, number of facings, and so on. This information drives their choice of product mix, allocation of shelf space and promotional tactics. EPOS has certainly changed the relationship between buyer and seller (Shipley and Palmer, 1997)2.

2) Sales Force Automation : These systems help in automating and optimizing sales processes to shorten the sales cycle and increase sales productivity. They enable the company to track and manage all qualified leads, contacts, and opportunities throughout the sales cycle including customer support. They improve the effectiveness of marketing communications programs for generating quality leads as well as greater accuracy in sales forecasting. The Internet can be used by the company in imparting proper training to its sales force. In-depth product information, specialized databases solutions, sales force support queries, and a set of internal information on the Internet can improve the productivity of the sales force.

3) Customer Service Helpdesk :These applications help the company in automating the customer support processes, which enable it to deliver high quality service to their customers. Such software helps in logging the information about customers, enquiries, and suggestions, etc. It also helps in directing these queries to appropriate employees within the company. It maintains information regarding status of customer enquiries and stores all support calls and related communications to final resolution, continually updating the database accordingly. With an automated customer service, a company can reduce the costs of maintaining its customer service department while at the same time improving the level and quality of customer service. Customer service using the web provides more information and tools in the

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hands of customers, which enhances customer benefits by allowing them to learn more about the product and improving their skills in using the product.

4) Call Centers : Call centre helps in automating the operations of inbound and outbound calls generated between company and its customers. These solutions integrate the voice switch of automated telephone systems with agent host software allowing for automatic call routing to agents, auto display of relevant customer data, predictive dialling, self-service interactive Voice Response systems, etc. These systems are useful in high volume segments like banking, telecom and hospitality. Today, more innovative channels of interacting with customers are emerging as a result of new technology, such as global telephone based call centres and the Internet. Companies are now focusing to offer solutions that leverage the Internet in building comprehensive CRM systems allowing them to handle customer interactions in all forms.

Systems Integration

While CRM solutions are front office automation solutions, ERP is back office automation solution. An ERP helps in automating business functions of production, finance, inventory, order fulfillment and human resource giving an integrated view of business, whereas CRM automates the relationship with a customer covering contact and opportunity management, marketing and product knowledge, sales force management, sales forecasting, customer order processing and fulfillment, delivery, installation, pre-sale and post –sale services and complaint handling by providing an integrated view of the customer It is necessary that the two systems integrate with each other and compliment information as well as business workflow. Therefore, CRM and ERP are complementary. This integration of CRM with ERP helps companies to provide faster customer service through an enabled network, which can direct all customer queries, and issues through appropriate channels to the right place for speedy resolution. This facilitates the company in tracking and correcting the product problems reported by customers by feeding this information into the R&D operation via ERP.

CRM Process Framework

Technological advancements in the recent times have enabled business organizations to automate their processes. This has resulted in greater profits through cost reduction in costs cycle time and workforce. CRM technologies enable an organization to present a single point of contact to its customers. CRM is a broad term encompassing many strategies, processes and technologies all working in tandem to get as close to the customer as possible. In order to have healthy relationship with its customers the company needs to monitor its customer’s behaviors in each transaction and provide them what they want.

The Meta Group uses the CRM architectural framework to analyze where the different solutions fit in from holistic perspective. CRM process framework has three

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primary components operational or process Management technologies, analytical or performance management technologies required to achieve a balanced CRM approach.”(Source: SAS white paper)3 and collaborative.

1) Operational : CRM solutions involve integration of business processes involving customer touch points. These technologies reside in those parts of a company where moments of truth occur i.e. a customer makes direct contact with the employees of the company. Typical CRM solutions that fit into this category are customer sales and service, sales force automation, marketing automation and field services. The back office side of the operational CRM solutions should be able to plug into ERP systems and chain management software.

2) Analytical : CRM analysis the data created on the operational side of the CRM effort for the purpose of business performance management and improvement. Prediction of customer behavior, identifying relevant customer segments, identifying potential customers etc are some of the activities that could be performed from the knowledge arising out of analytic CRM efforts.

3) Collaborative : CRM involves the facilitation of collaborative services (such as email) to facilitate interactions between customers and employees. All this effort produces rich data that feeds the Analytical CRM technologies. It analyses the data using data mining and other technologies and in turn feeds the result (i.e. knowledge gained) back to the operational and collaborative CRM technologies

Exhibit 2: Interactions with CRM Technologies

Customer Relationship Management is a technology initiative that aims to strengthen the front-end operations and build a mutually valuable long-term relationship with the customers. A firm might enjoy competitive advantage of its customers for a long time by building mutually beneficial relationships that increase switching costs and thus cannot be easily replicated. Studies have also shown that it costs as much as five times to acquire a new customer than to retain one. All customers do not contribute equally to a firm’s profitability-some positively while others contribute negatively to the firm’s bottom line. It is the endeavor of a firm to nurture these profitable customers. CRM integrates all front-end operations of the firm so that a customer is presented with a single point of contact that remembers all as the past customer interactions.A typical CRM cycle consists of front-end operations that interact with the customer

Operational CRM Analytical CRM Collaborative CRM

Customer

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(like call centers, target marketing initiatives etc.) and obtain data about customer. This is typically consolidated from various contact points and fed into a data warehouse. The data warehouse consolidates not only transaction data but also data obtained from outside sources like census data and provides a fertile ground for analysis. Data analysis is done by data mining methods. The output is interpreted and new knowledge is transferred to a central customer repository where all employees of the firm might access it. This helps them to customize responses. Thus, data mining provides the intelligence behind the CRM initiative.

Database Marketing

The important aspect in database marketing is to understand the customer in a comprehensive manner, and for that the company should maintain a proper customer database. The customer database is an organized collection of comprehensive information about individual customers or prospects that is current, accessible and actionable for such marketing purposes as lead generation, lead qualification and sale of a product or service or maintenance of customer relationships. In short Database marketing is the technique of gathering all the information available about the customer, leads, and prospects into a central database and using that information to drive all the marketing efforts. The information is stored in a marketing database and can be used at both the strategic and tactical levels to drive targeted marketing efforts.

Robert Shaw of Arthur Andersen Consulting4 defines database marketing as an interactive approach to marketing communication, which uses addressable communications media (mail, telephone, fax, sales force etc) to extend help to its target audience, to stimulate their demand, and stay close to them by recording and keeping an electronic database memory of customer, prospect and all communication and commercial contacts, to help improve all future contacts.

The growth of database marketing has been facilitated by:• The powerful processing capability and the immense storage capacity of the

state of the art computers • The manner in which the telecommunication technology is harnessed to make

the customer and market data available to the wide variety of staff involved in the marketing and sales office.

Data Warehouse and Data Mining

The market savvy companies are all the more enthusiastic in capturing information from a customer, every time he comes into contact with any of its departments. The touch points include: the customer purchase, customer requested service call and online query or mail in rebate card.

A data warehouse is a subject-oriented, time varying, non-volatile collection of data that is primarily used in organizational decision making (Chaudhari and Dayal, 1997)5. Although physically not different from traditional databases, they are maintained

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primarily for the purpose of decision support. “Every data warehouse has architecture,” says Warren Thornthwaite, a partner with Menlo Park, CA-based Info Dynamics LLC. “It’s ad hoc or planned; implied or documented. Unfortunately, many warehouses are developed without an explicit architectural plan, which severely limits flexibility.” Without architecture, subject areas don’t fit together, connections lead to nowhere, and the whole warehouse is difficult to manage and change. In addition, although it might not seem important, the architecture of a data warehouse becomes the framework for product selection.

Laura Hadley6 describes data warehouse architecture as a description of the elements and services of the warehouse, with details showing how the components will fit together and how the system will grow over time. There is always architecture, either ad hoc or planned, but experience shows that planned architectures have a better chance of succeeding. Complete data warehouse architecture includes data and technical elements. Thornthwaite breaks down the architecture into three broad areas. The first, data architecture, is centered on business processes. The next area, infrastructure, includes hardware, networking, operating systems, and desktop machines. Finally, the technical area encompasses the decision-making technologies that will be needed by the users, as well as their supporting structures.

Data Architecture The data architecture portion of the overall data warehouse architecture is driven by business processes. For example, in a manufacturing environment the data model might include orders, shipping, and billing. Each area draws on a different set of dimensions. But where dimensions intersect in the data model the definitions have to be the same—the same customer who buys is the same that builds. So data items should have a common structure and content, and involve a single process to create and maintain.

Infrastructure Architecture With the required hardware platform and boxes, sometimes the data warehouse becomes its own IS shop. Indeed, there are lots of “boxes” in data warehousing, mostly used for data bases and application servers. The issues with hardware and DBMS choices are size, scalability, and flexibility. In about 80 percent of data warehousing projects this isn’t difficult; most businesses can get enough power to handle their needs. In terms of the network, check the data sources, the warehouse staging area, and everything in between to ensure there’s enough bandwidth to move data around. On the desktop, run the tools and actually get some data through them to determine if there’s enough power for retrieval. Sometimes the problem is simply with the machine, and the desktops must be powerful enough to run current-generation access tools. Also, don’t forget to implement a software distribution mechanism.

Technical Architecture The technical architecture is driven by the meta data catalogue. “Everything should be meta data-driven,” says Thornthwaite. “The services should draw the needed parameters from tables, rather than hard-coding them.” An important component of technical architecture is the data staging process, which covers five major areas:

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• Extract - data comes from multiple sources and is of multiple types. Data compression and encryption handling must be considered at this area, if it applies.

• Transform - data transformation includes surrogate key management, integration, de-normalization, cleansing, conversion, aggregation, and auditing.

• Load - loading is often done to multiple targets, with load optimization and support for the entire load cycle.

• Security - administrator access and data encryption policies.• Job control - this includes job definition, job scheduling (time and event), monitoring,

logging, exception handling, error handling, and notification.

Thus data warehouse aids in critical decision support by consolidating and integrating crucial customer information along with other information. Recent advances in data gathering and data storage technologies, along with the steep fall in prices have made it possible for companies to gather and store large amounts of data. Large companies are generating gigabytes of data daily through their daily transactions which require different data analysis approaches adopted earlier like artificial intelligence etc .This has given birth to the field of Knowledge Discovery in Databases (KDD) more popularly known as Data mining.

Data mining is an activity that provides intelligence to the CRM initiative .It is not just execution of exotic data extraction algorithms but a process (Brachman and Anand, 1996)7 that enables informed decisions to be taken by the employees at the customer contact point. Matheus et.al(1993)8 have described the challenges facing data mining in as, “The grand challenge of knowledge discovery in databases is to automatically process large quantities of raw data, identify the most significant and meaningful patterns, and present these as knowledge appropriate for achieving the users goals.”

The most commonly used techniques in data mining9 are: • Artificial neural networks: Non-linear predictive models that learn through

training and resemble biological neural networks in structure.• Decision trees: Tree-shaped structures that represent sets of decisions. These

decisions generate rules for the classification of a dataset. Specific decision tree methods include Classification and Regression Trees (CART) and Chi Square Automatic Interaction Detection (CHAID).

• Genetic algorithms: Optimization techniques that use process such as genetic combination, mutation, and natural selection in a design based on the concepts of evolution.

• Nearest neighbour method: A technique that classifies each record in a dataset based on a combination of the classes of the k record(s) most similar to it in a historical dataset (where k ³ 1). Sometimes called the k-nearest neighbor technique.

• Rule induction: The extraction of useful if-then rules from data based on statistical significance.

Many of these technologies have been in use for more than a decade in specialized analysis tools that work with relatively small volumes of data. These capabilities are now evolving to integrate directly with industry-standard data warehouse and OLAP platforms.

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Technical Architecture of CRM Systems

The rapid growth and expansion of CRM systems can be described in three dimensions - business process, industry and technology. First, CRM systems have broadened support and automation of business operations, from call center operation, workflow management, e-procurement, to sales force automation (SFA). Second, CRM systems have been deployed in a wide variety of industries from financial CRM, marketing CRM, and pharmaceutical CRM to automotive CRM. Finally, the CRM technology has evolved from traditional CRM, online or Web based CRM, Hosted CRM, and Mobile CRM to Wireless CRM.

A CRM system consists of three major components: • CRM Software - This is the backend of CRM systems which usually includes a

relational database for storing persistent information, a software applications for handling business logics.

• Client Hardware - It could be a PC or handheld devices for accessing enterprise information.

• Mobile Middleware - A middleware facilitates the interactions between CRM software and access devices or PCs. The Mobile middleware provides great benefits for mobile workers to access and share enterprise information across organizational lines and locations.

CRM Applications

Some of the functional and technical requirements for CRM solutions are;• Business Intelligence and Analytical Capabilities: CRM applications contain

vast amounts of information that pertain to an organization’s customers and prospects. This information needs to be leveraged and analyzed by decision makers so that they can make more informed and timely business decisions. This is possible only if CRM solutions have robust business intelligence and analytical capabilities. This is a major requirement primarily for marketing applications.

• Unified Channels of Customer Interaction: This involves not only integrating the functional components of CRM solution but also integrating these components across multiple channels so that the customer interaction can be seamless, consistent and efficient.

• Web-based Functionality Support: Web-based functionality is essential for applications such as web self-service and unassisted sales. Web is also a critical channel for e-business and is also important from an infrastructure perspective. Users of CRM applications require access to their applications, which is supported via standard web-browsers. Moreover business logic and data are maintained centrally, thus facilitating the deployment, maintenance, and upgrading of applications.

• Centralized Repository for Customer Information: CRM solutions should work from a centralized repository so that current customer information is available in real-time to all customer-facing employees.

• Integrated Workflow: CRM solutions should have a strong workflow engine

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to ensure that cross-functional tasks can be accomplished as dynamically and seamlessly as possible.

• Integrated with ERP applications: Integration must include low-level data synchronization as well as business process integration so that the integrity of business rules can be maintained across systems and workflow tasks can pass between the systems. CRM-to-ERP integration also ensures that organizations can perform business intelligence across systems.

• The CRM applications are a convergence of functional components, advanced technologies and channels. Functional components include campaign applications, sales applications, marketing automation, and customer service and support applications. Channels include the Web, call centers and phone, and mobile devices. information);

Emerging impact of e–commerce on CRM:

In a fast changing Internet world there are very clear trends that are emerging:• Speed: people expect service at internet speed.• Increase of globe market space: More and more people, communities across

the globe are able to build relationships.• Around the clock availability: Internet offers round the clock availability of

gods and services 24X7.• Expansion of partners: Internet offers exponential ability for the organization

and people alike to partner with suppliers and customers alike across the globe.

• Disappearance of Time Zones: The only time zone that is applicable is Internet time zone.

Similarly the new economy has opened up altogether different ways of conducting business as has never been witnesses ever since the industrial revolution. In a global market place the channels of marketing are already causing an impact on the buying behavior of individuals as well as organizations likes. Some of the emerging trends are:

• Vertical E-market Place: Industry specific market places such as being formed by Auto giants where organized buyers and sellers can meet, list, negotiate, order and track delivery.

• Buy sites and sell sites: Where consumers or organizations alike can buy and sell online through online shopping mart concept.

• Horizontal market place: Services that run across different vertical e-market places or business to customer (B2C) Buy and sell sites. Such sites could be delivery sites, insurance etc

• Use of Internet to optimize “Supply Chain Management”: While earlier organizations use to feel EDI “rather an expensive preposition” for limited number of partners organizations, organizations are in a position to use internet to optimize their SCM across partners.

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Recent Trends in CRM:

1) Analytical CRM:-Firms are now encouraging their analytical teams to work closer with their customers as it offers ample room for growth in profitability. They are endeavoring to see what sort of analysis actually matters to the customer through finding out what contributes to their highest satisfaction. The interest in this new functionality is easily one of the fastest growing trends in the industry.

2) CRM - Mobile and Social networking:-Another hot trend in the CRM industry is the “mobile” interest. CRM has currently gone mobile and is easily assessable almost anywhere. This new trend is fast gaining ground as the need for easy access is fundamental to any executive. Social networking sites are also being mined to garner the benefits of CRM.

3) Outsourcing CRM:-Outsourcing CRM is yet another new trend gaining ground. Sales force leads the pack in this area. Despite initial hesitation in this area, firms now realize that it is a good bet. The lure in this area is the lower costs involved, contributing to overall profitability.

4) CRM and Cloud Computing:-Cloud computing is a relatively new term referring to scalable, virtualized computing resources available on the Internet. There is now a growing demand for CRM cloud computing solutions and more vendors are jumping to satisfy this demand. Initially, it was a rent-versus-own argument. There are pros and cons to both approaches, but when it comes to rescuing small businesses from a recession-made dry spell, the cloud is almost always the rainmaker’s choice — and the cheaper price tag is not the top reason. “An often-missed aspect of the cloud is that it provides more than just elastic infrastructure with a shared-cost model,” said Miko Matsumura, vice president and chief strategist at Software AG. “Advances in social CRM and social BPM are leveraging the network in ways that impact the top line as well as the bottom line.”

According to Salsburg, cloud computing has three key benefits for small to medium-size businesses:

• Elasticity: Resources can be provisioned and de-provisioned in real time to meet workload demands.

• Utility: Resource usage is provided on a pay-as-you-go basis, as opposed to the traditional approach of incurring the upfront capital expenses and ongoing operational expenses, even if the resources are under-utilized.

• Ubiquity: Services from the cloud are available from the Web, enabling user interfaces that go beyond traditional workstations and include cell phones and other appliances.

Net Promoter system

A Net Promoter system is a way of doing business. It requires every level of the organization be rigorously, consistently focused on the quality of customer and employee relationships first. The link between customer loyalty and true, sustainable, organic growth is well established, and provides companies with powerful, measurable

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financial incentives to install a Net Promoter system. But unlike financial accounting rules that tempt companies to chase short-term profits at the expense of customer loyalty, a Net Promoter system requires—and inspires—an entire organization to do right by its customers and employees. It is the business equivalent of the Golden Rule: treat others as you yourself would want to be treated. A Net Promoter system requires that your organization and its senior management commit to:

1. sorting customers (and employees) into promoters, passives and detractors

2. creating short-cycle closed-loop feedback, learning, recovery and action processes

3. making it a top priority to earn the enthusiastic loyalty of customers

(and employees)

Conclusion:

Today, information technology- conscious society has increasing appetite for the skills of others; as a result the service industries are growing. Marketers have now realized that in the global and highly competitive market place and market space, success rests on the firm’s ability to attract, satisfy and retain its customers. This demands marketing efforts to be more informative, customer and service oriented. CRM is an innovative approach undertaken by the marketers in the process of developing lifetime customers and maximizing lifetime value of the customers. Companies no longer regard marketing, service and sales as separate entities. Instead they are more concerned with treating them with a holistic approach. From the above discussions it is clear that technology has been used effectively to enhance the utility and application of CRM. The need is to adapt ever changing technology to meet newer challenges before CRM. It is dynamic process and right mind-set of managers is key for the success.

References1. Stowell, Daniel M. (1997), “Sales and Marketing, and Continuous Improvement”,

Jossey-Bass Publishers, San Francisco, p.214.2. Shipley, D. and Palmer, R. (1997), “Selling to and Managing Key Accounts”, The CIM

Handbook of selling and Sales Strategy, ed. By David Jobber, Butterworth-Heinemann, p.111.

3. SAS White Paper, ‘The Role of e-Intelligence in Customer Relationship Management (CRM), www.sas.com

4. Excerpt from presentation by Robert Shaw of Arthur Andersen consulting in Montreux5. Chaudhari, S. and Dayal, U (1997), “An overview of data Warehousing and OLP

Technology”, CM SIGMOD RAECORD, March.6. Laura Hadely (2008), Developing a Data Warehouse Architecture, reviewed August

2008, www.users.qwest.net/lauramh/resume/thom.htm7. Gartner Group Advanced Technologies and Applications Research Note, 2/1/95.8. Mtheus, C.J., Chn,P.K. and Pitetsky-Shpiro, G. (1993) ,”Systems for knowledge

discovery in databases”, IEEE Transactions on Knowledge and Data Engineering, Vol. 5, no 6,

9. META Group Application Development Strategies: “Data Mining for Data Warehouses: Uncovering Hidden Patterns.” 7/13/95.

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ERP Software Development For Pressure Die-casting Industry

Mr. Rajendra Marulkar,EMBA, SIBM, PuneE-mail: [email protected]

Prof. Vijay Kumar DharmadhikariAssistant Professor, SIBM, PuneE-mail:[email protected]

Dr. B. V. CadambiProfessor, SIBM, PuneE-mail:[email protected]

AbstractThe paper highlights the potential for customized ERP solutions for the pressure die casting industry, which is in the Small and Medium Business (SMB) sector. The operating environment of the pressure die casting industry has been considered. Further, the potential market for ERP is discernable from well-known competitive strategy frameworks. However, customization is vital to capture the market and deter competition from reducing market share.

Key Words:-ERP (Enterprise Resource Planning), Cloud Computing, SMBs (Small and Medium Businesses), Pressure Die Casting Industry, Information Technology (IT).

Introduction

The Small and Medium Businesses (SMBs) have shown tremendous growth in the last few years in India. The SMBs are growing at a phenomenal pace. The SMBs have started adopting business process automation in the last couple of years as they have started realizing its benefits The Enterprise Resource Planning (ERP) systems too have gained acceptance. In today’s environment, automation offers scope and promise both for managing operations within the firm and also for networking with suppliers and customers. Different businesses have varied business processes and hence they need customized ERP solutions. This opens up many opportunities for the ERP solution providers. Effective ERP systems offer significant promise and this is already discernible in large scale industries.

This paper explores the use of some of the standard frameworks to perform an Industry

Research Papers 3

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and Competitive Analysis for developing and implementing ERP systems in the pressure Die Casting Industry. The experiences in developing and implementing ERP software for the pressure die casting industry and the expectations in the SMB sector provided important insights for the study. The paper is organized as follows: A brief overview of ERP is highlighted in the next section. Next the ERP market in India based on surveys conducted over the years is briefly discussed. Finally, the prospects and challenges for the pressure die casting industry and directions for ERP systems are discussed based on well-known frameworks for competitive strategy analysis.

ERP : An Overview

Information Technology is revolutionizing the way in which we live and work. It has changed all aspects of life and lifestyle. The digital revolution has given mankind the ability to treat information with mathematical precision, to transmit it with very high accuracy and to manipulate it for effective functioning.

To survive, thrive and beat the competition in today’s brutally competitive world one has to incorporate future perspectives. Managing the future necessitates powerful approaches to capture and use information. In order to do so, systems should be organized to automate data collection, dissemination, retrieval, collation and refinement data. This could better ensure that, high quality information is available to decision makers at the right time. Information Technology (IT) serves as a powerful means to do so.

IT ensures a seamless flow of information across different departments and develops and maintains an enterprise wide database. This enterprise wide data sharing has many benefits like automation of the procedures, availability of high quality information for better decision making, faster response times and so on.

Prior to industrial revolution, firms were small and almost entirely owner driven. But as companies grew business owners hired others to assist them. As number of people increased, the functional organization evolved over time. As departments became large, various functions were almost entirely independently handled. People within a department would just collect and pass information upward. Thus information was shared between departments only at the top level.

Although developments in IT helped alleviate the situation to some extent, systems developed for different functions did not promote integration of various functions. Thus IT implementations mainly automated existing applications but did not reengineer business processes. This happened because IT was not integrated into the corporate strategy. To reap the entire potential of a powerful technology, such as IT, organizations had to devise a system with a holistic view of the enterprise. Such a system has to work around the core activities of the organization, and should facilitate seamless flow of information across departmental barriers. Such system can optimally plan and manage all the resources of the organization and hence, they can be called as Enterprise Resource Planning[ERP] systems. [1]

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The power of ERP is likely to enhance with the advent of Cloud computing. Cloud Computing is a technology that uses the internet and central remote servers to maintain data and applications. Cloud computing offers consumers and businesses to use applications without installation and access their personal files at any computer with internet access. This technology allows for more efficient computing by centralizing storage, memory, processing and bandwidth.

The ERP (Enterprise Resource Management) is a huge domain and the ERP offerings can be classified based on various criteria.1) Industry Specific Software: Systems are developed to cater to the unique needs

of sectors such as aerospace &defense, automotive, banking, chemicals, and food & beverages.

2) Functionality: Software address various functions of an organization such as: manufacturing management, financial management, advanced planning and scheduling. Modules are also developed to address analytics and business intelligence to enhance the scope of data based decisions. In the manufacturing sector, systems cater to made to order, configure to order and engineer to order systems.

3) Other considerations are Saas or On-premises or a combination; number of users; budget incorporating complexity and finally time frame for implementation.

The various requirements of the different market segments vary. Software developers therefore need to develop an awareness of customer expectations and customize their offerings. It is extremely important to understand the target market based on the above criteria and offer solutions to SMB’s so that the customers get a product with “high value for their money”. Any de focus from the target market can result in the feature creep in which will ultimately result in higher product cost and less value for money. Failure to offer highly effective software could limit the potential benefits offered by ERP systems. Software developers could also lose to competitors.

ERP Market in India

Based on the market research conducted by Panorama consulting as detailed in Appendix I, It can be expected that the ERP market in India is close to more than INR 500 million. The preliminary analysis of various ERP players in the SMB market space is shown in the table 1 below.

Table 1: Market Share of various ERP Suppliers

Epicor Ramco Microsoft Other small/Mid players

No state of the art software

SAP

Market Share

2% 5% 5% 40% 30% 15%

Cost 12 to 60 lakh per year

> 20 lakh per year

> 10 lakhs > 2 lakhs N/A > 10 Lakhs

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The market share of the established players in SMB market (Turnover: 1 crore to 50 crore) is even less. The market space is dominated by small unorganized ERP service providers. There are many industries which are still not using any state of the art automation either due to not having the software solutions which are optimized for their businesses or because they haven’t yet seen the value of the ERP software. [2]

The Pressure Die Casting Industry-Scope and Challenges

The Pressure Die Casting Industry is a producer of die casts catering mainly to the automotive sector. The latter operates as a large scale manufacturer and is facing extensive competition. The sector however has a large and a growing market with export potential, ERP in that sector has already made significant inroads and refinements are constantly undertaken. Their vendors/ suppliers are certainly expected to adopt ERP. The pressure die casting industry, its business and business prospects/demands in India is untapped market. Today not much has been done. We believe that the pressure die cast industry is one such industry which has not reaped the benefits of the software automation. The pressure die cast industry uses the raw material which is costly and they want to keep track of their costly raw material in real time. They could benefit by the inventory management, customer relationship management, communication management as well as the financial dashboards.

ERP Software development for the pressure die casting industry

There are many companies in India who at present are looking for a combination of on-premises and cloud solution. The main reason behind that is the companies have now reasonably good internet connectivity and would like to share business transaction details with their partners (both vendors and customers). At the same time the internet connectivity is still not reliable and it’s not very fast. Hence they are looking for on-premises ERP solution. There are many companies who offer ERP solution with some restrictions like number of users or number of transactions. The suppliers also offer lots of features which these companies hardly use but the companies are indirectly paying for these unnecessary development cost. The big ERP companies also spend a lot on marketing and the SMB’s have to indirectly share the cost of those marketing efforts as well. The offering from small ERP vendors either doesn’t have all the important features due to lack of domain knowledge or due to lack of strategic planning-i.e. they are not looking at future perspectives. We believe that there is an opportunity for the new entrant if the new entrant can strategically concentrate on a couple of specific industries, build domain expertise and offer solutions to those industries. This focused approach shall ensure the SMB’s don’t have to pay for other unused features; they don’t have to pay for marketing overhead as well as other huge overheads. With that vision, we have been concentrating on the “pressure die cast industry” for last 3 years with extremely low overheads and with very focused solution. We were still able to build the framework generic enough in order to offer solutions to other mechanical engineering companies in future.

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ERP Design frameworks for the pressure die casting industry

An ERP system implementation will offer considerable promise only when implementation initiatives are integrated with a firm’s strategic and operations planning systems. This would be important owing to the large capital expenditure involved in ERP implementation.

The following frameworks have been adopted in order to verify the competitiveness of new ERP software for the Pressure Die casting industry

1. Porter’s Five Forces Model-Appendix B [6]2. Ansoff’s Matrix-Appendix C [5]3. GE Matrix- Appendix D [4]4. Farout Summary- Appendix E [9]5. TOWS Analysis- Appendix F 6. SWOT Analysis- Appendix G

While analyzing the frameworks, the first author’s experiences in developing software for the pressure die casting industry were used in drawing major assumptions about the industry.

Discussion

Porter’s Five Forces : The industry is neither particularly attractive nor unattractive due to the large number of available competitors in the industry. The buyers are in big numbers and the industry is set to grow. At present the barriers to entry is not high. Hence it is worth entering this industry with a quality ERP software introduction for Pressure Die Casting Industry.

SWOT Analysis : • Strengths include A mature ERP Product for the pressure die casting industry with

extensive features for the cost offered can be developed. A mature product with benefits of hosted ERP and On Premise ERP systems can be offered.

• Weaknesses are poor marketing strength and analysis. Small setup and inability to reach out to multiple clients are limitations.

• Opportunities are SMB in India still use old automation facilities. SMBs looking for mix of cloud computing and on site management solution.

• Threats:-Many smaller players offering custom solutions. Many big companies like Microsoft, TCS planning to capitalize the SMB market

TOWS Analysis :• The key SO strategies are to focus on SMBs in Maharashtra and Karnataka states.

Systematically market the “Hosted/On Premises” ERP Solution to SMBs.• The Key WO Strategies are Direct/ web based market analysis, customer meeting

in Maharashtra/Karnataka regions to understand the customer approach. Showcase the solution to customers in Maharashtra/Karnataka regions through Seminars and direct meetings.

• The key ST Strategies are Keep Differentiation with respect to product to preempt entry of small players. Offer customization which normally the larger service providers will not provide. Focus only on subset of industry and offer custom

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solution which big players can’t offer.• The Key WT Strategies are Focus only on pressure die casting industry.

Partnerships and innovative referral program with loyalty benefits.

Ansoff Matrix :• Market Penetration-Reaching out withERP Solutions for pressure Die casting

industry.• Diversification-ERP solution for trading community and for Mechanical Industries

in future.• Product Development:- ERP online interface to be used as “schedule

management” utility across multiple industries. Integrating the scheduled interface with other social and professional networking sites.

• Market Development:- ERP Solution for pressure die casting industry in USA and other developing countries. ERP solutions for trading community in other parts of the world.

GE Matrix : The following strategic technology units are of key importance over the next 3 years• On Demand access Technology• Communication Technology• Interface Technology• Reporting Technology• Next Generation reporting technology• Ease of use

FAROUT SummaryThe future orientation graph indicates that it is attractive to get into this technology from Future growth, Accuracy, Resource efficiency, Objectivity, Usefulness and Timeliness perspectives.

References :1. Leon A., Enterprise Resource Planning, Tata McGraw Hill Publishing Co Ltd2. Enterprisewide Resource Planning-Theory and Practice, Prentice Hall India

Learning Pvt Ltd3. Panorama Consulting- Report on ERP Market Share and Vendor Evaluation4. Majluf and Hax, A., Strategic Concept and Process- A Pragmatic Approach 5. Kotler. P, Marketing Management: Analysis, Planning, Implementation and Control6. Porter. M-Competitive Strategy:Techniques for Analyzing Industries and

Competitors7. www.quickmba.com

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Appendices:

I) Appendix A: Panorama Consulting Survey Report on ERP Market Share and Vendor Evaluation [3]

ERP Market Research Report: The report focuses on data collected on ERP implementations of Tier I, Tier II and Tier III solutions, as can be seen in the following table:

Salient features of the survey report are detailed below:

1. Analysis of Overall ERP Market Share:Annual surveys have been conducted and these reported the market share of several ERP vendors. Some vendors who were categorised as Tier I and Tier II vendors were found to be the dominant players in the past. Recently however other Tier III players have gained market share. These players are suppliers to SMBs.

2. Vendors’ Market Share by Client Revenue:The chart below shows the selection rate of major vendors of Tier I, Tier II and Tier III grouped by companies’ revenue size they implemented their ERP. According to the chart, both SAP and Oracle are active in all segments, but SAP obviously is the most selected software for companies with annual revenues $25 – $500 million while Microsoft Dynamics is least selected for companies with revenues from $50 million – $1+ billion. This ERP has the most success with companies < $50 million and between $100 – $500 million. Tier III vendors have great share in the market that less than $100 million and also continue increase their reach into big companies with more than $500 million annual revenue.

SAMPLE VENDORS

Tier I Tier II Tier III

SAP Epicor ABAS Oracle Sage Activant Solutions Inc. Oracle eBusiness Suite Infor Bann Oracle JD Edwards IFS Bowen and Groves Oracle Peoplesoft QAD Compiere Microsoft Dynamics Lawson Exact Ross Netsuite Visibility Blue Cherry Exact HansaWorld Intuitive Syspro

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50.0 %

45.0 %

40.0 %

35.0 %

30.0 %

25.0 %

20.0 %

15.0 %

10.0 %

5.0 %

0.0 %

MARKET SHARE BY CLIENT REVENUE

Sap

Oracale

Microsoft

Tier II

Tier III and other

26.6%

22.2%23.0%

16.3%

11.9%

24.5%

13.7%

15.7% 17.6%

28.4%

32.1%

16.7%

11.5%

16.7%

23.1%

31.3%

15.3% 16.8%16.8%

19.8%

33.3%31.3%

16.7%14.6%

4.2%

47.0%

31.8%

4.0%

8.6% 8.6%

< 25mil. 25mil.-50mil. 50mil.-100mil. 100mil.-500mil. 500mil.-1bil. > 1bil.

3. ERP Satisfaction by Major Vendor:By reviewing particular metrics, there are few indications that dissatisfaction of customers frequently comes from unrealistic expectations which it can be flamed by ERP vendors who promise the moon so that they can close a sale and also companies that do not sufficiently specify their business needs before starting on implementations.

The above figure shows that Tier III vendors need to upgrade their performance possibly by benchmarking with Tier I and Tier II vendors. This could be important to enter the SMB market who are likely to resist making investments when significant promises are uncertain.

45.0%

40.0%

35.0%

30.0%

25.0%

20.0%

15.0%

10.0%

5.0%

0.0%Very satisfied Satisfied Neutral Unsatified very unsatisfied

Tier I Tier II Tier II and other Overall

3.8%

14. 3%

6.3% 7.1%

38.5%

35.7%

25.0%

33.9%

26.9%28.6%

37.5%

30.4%

11.5%

7.1%

25.0%

14.3%

19.2%

14.3%

6.3%

14.3%

OVERALL ERP SOFTWARE SATISFACTION

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II) Appendix B:Industry Analysis using five forces Porter’s model1. Attractiveness of Rivalry among Competitors

This force indicates how difficult it is for a business to compete into this market. The high attractivenessindicates low competition.

*The weights that reflect the relative importance of the different criteria incorporated are based on the first author’s judgment from experience in the pressure die casting industry

The table above indicates the attractiveness of the industry based on rivalry among competitors. Based on various parameters, we may conclude that competition in this industry is very fierce and is likely to increase in future. This is owing to the entry of more players emerging from the growing market for the pressure die casting industry. Variations in product features are likely to occur. Some vendors could therefore explore the potential for developing ERP software tailored to the needs of pressure die casting industry.

Parameter Wt* Current/Future

HighlyUn-

attractive(1)

MildlyUn-

attractive(2)

Neutral

(3)

Mildly attractive

(4)

Highly attractive

(5)

Current Score

Future Score

No. of equally balanced competitors (Large -> Small)

0.25 C 1 0.25

F 1 0.25

Relative industry growth (slow -> fast)

0.25 C 5 1.25

F 5 1.25

Fixed Cost (Hi -> Lo)

0.05 C 5 0.25

F 5 0.25

Product features (commodity -> specialty )

0.25 C 4 1.0

F 3 0.75

Diversity of competitors (High -> Lo)

0.2 C 3 0.6

F 2 0.4

1.0 2.85 2.40

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2. Attractiveness of Barrier to Entry

The table above indicates how difficult it is for a new player to enter into this market. Based on various parameters, we can conclude that in future there is a potential market for the pressure die casting industry. However, the profitability of a firm in the industry would depend upon its ability to offer customized products incorporating technological advances. It is however important to market the potential of technological advances.

Parameter Wt Current/Future

HighlyUn- attractive

(1)

Mildly Un-attractive

(2)

Neutral

(3)

Mildly attractive

(4)

Highly attractive

(5)

Current Score

Future Score

Economies of scale (Small -> Large)

0.05 C 2 0.1

F 3 0.15Product Differentiation (Little -> Big)

0.20 C 3 0.6

F 4 0.8Brand Identification (Lo -> Hi)

0.05 C 1 0.05

F 3 0.15Switching cost (Low -> High)

0.05 C 1 0.05

F 3 0.15

Access to customers/distribution channels (Hi -> Lo)

0.20 C 3 0.6

F 3 0.6Capital Requirement (lo -> Hi)

0.05 C 1 0.05

F 1 0.05Domain Expertise Need (Lo -> Hi)

0.05 C 3 0.15

F 4 0.20Customer Awareness (Hi-> Lo)

0.15 C 2 0.30

F 1 0.15Customer Willingness (Hi-> Lo)

0.20 C 4 0.80

F 2 0.4

1.0 Max possible

5 2.7 2.55

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3. Attractiveness of Power of Buyers

The industry operates in an environment of perfect competition. There are numerous buyers and sellers. Hence, customer loyalty cannot be guaranteed. Customer service has to be accorded due priority.

4. Attractiveness of availability of Substitute

Clearly, substitutes do not pose a threat to the business


HighlyUn- attractive

(1)

Mildly Un- attractive

(2)

Neutral

(3)

Mildly attractive

(4)

Highly attractive

(5)

Current Score

Future Score

Number of important buyers (Few -> Many)

0.30 C 5 0.60

F 4 0.60

Availability of service providers for industry products (Many -> Few)

0.30 C 2 1.20

F 1 1.50Buyer switching cost (Lo -> Hi)

0.25 C 2 1.0

F 1 1.25Buyers Profitability ( Lo -> High)

0.10 C 4 0.10

F 5 0.20

Buyers Desire for Backward integration (High -> Low)

0.05 C 5 0.05

5 0.05

1.0 2.95 3.60


HighlyUn-

attractive(1)

Mildly Un-

attractive(2)

Neutral

(3)

Mildly attractive

(4)

Highly attractive

(5)

Current Score

Future Score

+ve Impact of close substitute on customer’s profitability (Hi -> Lo)

0.90 C 5 4.5

F 5 4.5Switching Cost (Lo -> Hi)

0.10 C 5 0.5

F 5 0.51.0 5.0 5.0

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5. Attractiveness of Power of suppliers

The bargaining power of suppliers does not pose a threat as vendors invariably use standard Microsoft tools and frameworks to develop the software.

The above information is integrated into the Porter’s five forces model using the framework shown below


HighlyUn-

attractive(1)

Mildly Un-

attractive(2)

Neutral

(3)

Mildly attractive

(4)

Highly attractive

(5)

Current Score

Future Score

Number of important suppliers (lo -> Hi)

0.05 C 3 0.15

F 3 0.15Availability of substitutes for the supplier’s products (Hi -> Lo)

0.05 C 2 0.1

F 3 0.15Switching cost of suppliers products (Hi -> Lo)

0.05 C 1 0.05

F 1 0.05Suppliers contribution to quality of service (High -> Low)

0.05 C 1 0.05

F 1 0.05Total industry cost contributed by supplier (large -> Small)

0.05 C 2 0.10

F 2 0.10Suppliers threats of forward integration or survival (Hi -> Lo)

0.75 5 3.75

5 3.751.0 4.2 4.25

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Thus we may conclude that the industry is neither attractive nor unattractive due to large number of available competitors in this industry. The buyers are in big number and the industry is going to grow. The barrier to entry is not very high right now. Hence there is scope for entry into this market with product differentiation.

III) Appendix C: Ansoff Matrix

Existing Product New Product

Existing Markets

Market Penetration1) ERP solution for Pressure Die

cast industry in India2) ERP solution for trading

community

Product Development1) ERP Online interface to

be used as “schedule management” utility across multiple industries

2) ERP Online interface to be integrated with other social/professional networking sites

New Markets

Market Development1) ERP solution for Pressure Die

cast industry in USA and the developing countries

2) ERP solution for trading community in other parts of the world

Diversification1) ERP solution for

mechanical industries

Attactiveness of Barrier to entry

2.7

Attractiveness of power of

suppliers

4.2

Attractiveness of power of

buyers

2.95

Attractiveness of rivalry among

competitors

2.85

Attractiveness of availability of substitutes

5.0

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IV) Appendix D: GE Matrix

Strategic Technology Units (STU) [Grey : Current Situation, Black : Future situation (2-3 years)]

1. On Demand Access Technology1. Accessibility without internet access (On Premises solution) 2. Cloud based solution for anywhere access3. Mobility (Handhelds, Netbooks) with high speed communication

2. Communication Technology1. SMS Alters2. E-mail Alters3. Basic transparency in business processes4. Advance transparency in business processes

3. Interface Technology1. Interface with standard accounting software2. Interface with standard ERP software used by customer’s customers3. Standard Interface technologies (.xls)

4. Reporting Technologies1. Query based transaction reporting (PO, Challan, GRN, QC, Production,

QC, Dispatch, Quotation, Invoice, Rework, Returns …)2. Vendor/Customer/In house detail stock reporting & stock movement

reporting3. Material conversion reporting

Technologystrength

High

Medium

Low

High Medium Low

Technology Attractiveness

1.1 1.2

2.1

2.2

1.12.1

3

3

4

6

4

6

1.3

5

1.3 5

2.2

1.2

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5. Next generation reporting technologies1. Business Analytics: Vendor Rating system, ABC analysis etc … 2. Business Intelligence: Prediction Technologies

6. Ease of use1. Stock Initialization2. Short Keys/Tabs3. Error Logs, Debug Logs

V) Appendix E: FAROUT Summary

1. Future Orientation• Past predictor of future? • Predictive & Inventive

2. Accuracy• One or multiple sources? Bias? • Cross validation against hard & soft information

3. Resource Efficiency• Data gathering low cost, quick to help decision making

4. Objectivity • No Prior hypothesis bias, Not to choose facts to provide support for

pre-ordained conclusions. 5. Usefulness

• Output must be “need to know” rather than “nice to know”. 6. Timeliness

• How long it takes to do analysis so that it doesn’t hamper company’s prospects.

What is more important? It really depends on type of analysis and what stage of the analysis you are in. Thus there is no attempt made to get the highest score in each of the above categories.

F

F(1+year)

A

A(1+year)

R

R(1+year)

O

O(1+year)

U

U(1+year)

T

T(1+year)

1 2 3 4 5

This represents FAROUT summary of the analysis carried as of now

This represents FAROUT summary of the analysis which will evolve after 1 year

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VI) Appendix F: TOWS analysis

Strength (S)1) A innovative and mature ERP product

which allows benefits of Hosted ERP & On Premise ERP systems for the pressure die cast industry

2) High value/cost with focused engineering and marketing resources.

Weakness (W)1) Small setup and lack of market analysis &

marketing efforts2) Lack of capital: Limited engineering &

Marketing Resources

Opportunities (O)1) SMB in India

who still use the old automation facilities

2) SMB’s looking for a mix of of Hosted ERP & On Premise ERP system solution

3) Custom business processes of many SMB’s.

4) Oversees market

SO – Strategies1.1) Focus on “Pressure Die Cast” SMB’s in

India and Karnataka region.1.2) Market the advantages of our

“Hosted/On premises” ERP solution to SMB’s

1.3) Offer customizations to SMB have to further strengthen revenue model.

1.4) Go after overseas market in Phase-2 of the plan.

2.1) Quantify value over the cost SMB’s shall incur

2.2) Innovative cost structure as per customer requirements (One Time Vs. Yearly subscriptions)

2.3) Offer customizations to pain areas of most of the customers to keep cost low.

2.4) Use services model to win customers and build expertise. Services are not to earn excessive profits.

WO – Strategies1.1) Direct/web based Market Analysis,

Customer meetings in Maharashtra/Karnataka region to understand customer’s existing approach.

1.2) Show case our product to customers in this region through seminars, direct meetings

1.3) Survey to understand customers second level pain areas and offer custom solutions.

1.4) Use digital market place to get service contracts

2.1) Use well known contacts to reach out SMB’s. Work with young MBA aspirants.

2.2) Work with a few selected SMB’s in partnership mode.

2.3) Use web based research techniques to understand overseas customer requirements. Raise the capital through services arm of the company.

Threats (T)1) Many smaller

players in the market offering custom solutions.

2) Many big companies like Microsoft, TCS planning to capitalize the SMB market

3) Many accounting software firms like Talley entering into the ERP market.

4) Excellent marketing channels of the well established players like Intuit and Talley

ST – Strategies1.1 Keeps differentiation w.r.t. product

offering to keep smaller players away.1.2 Offer customizations which relatively

big companies won’t do. 1.3 Focus only on a subset of industries

and offer custom solutions which big players can’t offer.

1.4 Spread the word through your users. Offer incentives.

2.1 Offer differentiation at an attractive price.

2.2 Consultant for bigger players selling their products to high end SMB’s.

2.3 Offer customization at an attractive price.

2.4 Offer young aspirant MBA students marketing opportunities and offer brightest candidates equity in the company.

WT – Strategies1.1) Focus only on one industry at a

time (Pressure Die Cast) and offer differentiation.

2.1) Partnerships and innovative referral programs, Loyalty benefits.

2.2) Dilute equity with strategic partnerships to grow further.

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VII) Appendix G:SWOT analysis

Strength1) A mature ERP product for the pressure die cast

industry with extensive features for the cost offered.

2) An innovative product strategy which allows benefits of Hosted ERP &On Premise ERP systems.

3) Lower cost overhead

Weakness1) Marketing strength2) Market Analysis 3) Small setup and inability to reach out to

multiple clients4) Resources5) Lack of capital (self, VC or partnership?)

Opportunities1) SMB in India who still use the old automation

facilities2) SMB’s looking for a mix of cloud computing and

on site management solution3) Cloud computing framework to be used across

many industries4) Customer awareness for ERP automation systems

and willing to adapt new solutions5) Oversees market

Threats1) Many smaller players in the market

offering custom solutions. 2) Many big companies like Microsoft, TCS

planning to capitalize the SMB market3) Many accounting software firms like

Talley entering into the ERP market. 4) Excellent marketing channels of the well

established players like Intuit and Talley

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A Study of Sales-Orientation and Customer-Orientation of Front Line Sales Executives

in Financial Services

Dr. Tarun KushwahaAssociate Professor, SIBM, PuneE-mail: [email protected]

Dr. Rishi DubeyProfessor and Director, Mahakal Institute of Management, UjjainE-mail: [email protected]

AbstractThe modern marketing-oriented concept is the outcome of different philosophies which prevailed, from time to time in the marketing management domain. In the present marketing-oriented stage, which ultimately results in customer-orientation, companies give importance to customers’needs and wants. However, there are still few firms who emphasise on selling products irrespective of the fact that whether they fulfil customer’s needs or not. With the opening up of financial services sector in India and tough market conditions the companies on one side have started feeling the pressure of sales targets and on the other side also started realising that they must fulfil the needs of the customers. This paradoxical situation has made the job of salespersons very difficult. The present study is an attempt to explore the sales behaviour of front line sales executives of financial services organisations regarding their sales-oriented and customer-oriented (SOCO) behaviour.

Keywords:Sales Orientation, Customer Orientation, Financial Services, Fair practices, Ethics

Introduction

The Financial Services Sector in India has witnessed atotal turnaround during the post liberalisation era. When this sector was thrownopen to private players it helped in developing market of financial products in India, however tough competition amongst the companies offering these financial products also intensified.The companies on one side started feeling the pressure of sales targets and on the other side also started realising that they must fulfil the needs of the customers.Thus, it became imperative

Research Papers 4

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to see that (DROP the) firms offering Financial Services are more Sales Oriented (SO) or more Customer Oriented (CO). It would be very interesting to understand the Sales Orientation-Customer Orientation (SOCO) behaviour of the employees, particularly front line sales executives, of these firms because their behaviour is the outcome of the policies practiced in the organisations.

The marketing theory has come into existence passing through successive stages of development of different orientations viz., production orientation, sales orientation and marketing orientation. Thus, the modern marketing-oriented concept could be considered as the outcome of integrating different philosophies which prevailed, from time to time. In the production-orientation stage the organisations were focusing only on increasing their outputs and assuming that customers would be interested in buying reasonably priced, well-made products. The Great Depression of 1920s changed the perception of many firms and the managers began to realise that to sell their products in an environment where consumers had limited resources and various options it require substantial postproduction efforts. Therefore, sales-oriented philosophy, characterised by high reliance on promotional activities to sell the products, started gaining importance. In it, advertising started consuming larger share of firm’s resources and sales executives started gaining respect and responsibilities from company management. Unfortunately, these sales pressures gave birth to aggressive selling-the ‘hard-sell’- and dishonest advertising tactics (Etzel et al, 2010). In this phase there was heavy reliance on promotional activities to sell the products the firm wanted to make (Stanton et al, 1994) without considering whether they fulfil customer needs or not (Zikmund and d’Amico, 1993).

In the marketing-oriented stage companies started giving importance to customer needs and wants and began customising their products and activities to satisfy those needs as efficiently and effectively as possible (Etzel et al, 2010). Marketing orientation includes the activities taken by a firm along with other organisational processes and functions to maximise the firm’s success in competitive market place (Kohli and Jawrski, 1990). In the views of Narver and Slater (1990) market orientation comprises of three main components: a) customer orientation, by which the firms understands their target customers; b) competitor orientation, by which firms try to assess what their competitors are doing; and c) interfunctional coordination, it includes developing an organisational culture in which employees of different departments could be oriented toward understanding the firm’s market in terms of both customers and competitors. According to Dev et al (2009) market orientation should not be restricted exclusively to the marketing department, but it must also include creating a culture in the organisation which ultimately help in synergising organisational strategy for understanding varying customer demand and competitive challenges and thus help in anticipating future market conditions.

Since successful market orientation mandates that the firm must position the customer at the centre for all strategic decisions and firm activities, thus Customer Orientation (CO) is the prime aspect of marketing-orientation concept (Zikmund and d’Amico, 1993). Firms which are high in customer orientation are generally referred as customer centric, since they have the customer at the centre of their business model (Johnston and Marshall, 2010). Customer orientation could be defined as the set of beliefs that

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says that needs and customer satisfaction should be the priority of an organisation. It mainly focuses on dynamic interactions between the organisation and customers. It could also be defined as the business seen from the point of view of its final result, that is, from the customer’s point of view (Drucker, 1994).

Literature Review

The recent trend in sales research mainly focuses on relationship between buyer-seller interactions. In-fact sales-orientation and customer-orientation (SOCO) are two extremes in dealing with customers. The salesmen of the present era are under stress owing to the trust on both these extremes. The organisation wants them to achieve their sales targets while emphasising on providing better services to customers. However, it is difficult for a conventional salesperson to adopt both the attitudes. Many researchers have tried to ascertain the empirical evidence of agreement between these two attitudes. Almost eighty six years ago Strong (1925) mentioned that personal selling strategies should focus on customer satisfaction as well as bring purchase orders. Levitt (1960) proposed that firms should not focus on selling products but rather on fulfilling customer needs. In the view of Ammer (1962), customer orientation not only increase sales but reduces selling costs also because close relations between a firm and a customer require less protracted discussions about price or quality issues in comparison to new prospects. In views of Saxe and Weitz (1982) selling orientation involve use of manipulative and unethical tactics which focus on activities that might produce short term sales but at the cost of customer satisfaction. On the other side customer-oriented salespeople would always keep the best interests of the customer in mind. They defined customer-oriented selling as the use of the marketing concept within the salesperson-customer relationship. Further, they developed the SOCO scale to measure the degree to which salespersons practice customer-oriented selling behaviours.

Many researchersexplored the nature of differences in the sales/customer orientation in different industries. Like Chee and Peng (1996) studied customer-orientation and buyer’s satisfaction for a high involvement product like house in Malaysia similarly Daniel and Darby (1997) carried out a study in health care sector to compare the service providers’ i.e. nurses, self-perception of customer orientation with customer perceptions, i.e. patients, of this dimension. The findings revealed significant differences between the nurses’ and patients’ mean scores for the customer orientation. Gillis et al (1998) investigated the applicability of the SOCO scale in The context of the pharmaceutical industry’s salesperson-general practitioner relationship. The results showed a significant difference between a salesperson’s perception of his orientation and the customer’s perception of his particular orientation. This paper relates to the financial sector. For the present study the research works done in the area of financial service sectors were only considered. Chonko and Burnett (1983) found financial services salespeople more stressed owing to conflicting role demands. According to them financial services salespeople face short-term pressure from management to meet sales quotas. Because of this, financial service salespeople might ignore the best interests of their customers and focus more on generating commissions for the firm in

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order to retain their jobs.A study by Crosby and Stephens (1987) in the life insurance industry revealed that clients’ satisfaction of contact personnel was a key predictor of overall satisfaction with the services of the firm.

Kelley (1990) examined customer orientation of the customer contact personals in four banks. He emphasised more on the relationships between employee motivation, satisfaction, and role clarity, and customer orientation. The findings indicated that motivation, satisfaction, and role clarity were all directly related to customer orientation. But when considered together, motivation and role clarity had the greatest impact on the customer orientation of employees. In the study tellers were found less satisfied and motivated than other customer contact personnel. Tam and Wong (2001) conducted a survey among the customers of insurance companies to examine the influence of behaviour and performance of salespersons on customers’ trust and satisfaction. The results showed that customer satisfaction, the salesperson’s self-disclosure and relation orientation influenced future business opportunities. Noor and Muhamad (2005) carried out a survey and collected data from life insurance agents in Malaysia. Their study examined the influence of three individual factors i.e. organisational commitment, self-monitoring and intrinsic motivation on salespeople’s customer-orientation behaviour. The results revealed positive association of organisational commitment and intrinsic motivation in the behaviour of salespeople to perform customer-orientated selling activities while self-monitoring was found to be unrelated to the adoption of customer-orientation behaviour.

Huang (2008) compared the selling orientation (SO) versus customer orientation (CO) selling behaviour of service employees in financial services selling and tried to examine the impacts of SO versus CO behaviour on customer relationship quality and their retention. Data were collected from customers of Taiwan in two financial services; insurance and banking. A conceptual framework was proposed which considered customer retention as an effect while service employees’ SOCO behaviour as a cause of, relationship quality. He found that the service employee with CO approach increases relationship quality while a SO approach decreases relationship quality with customers. The study suggested that employees must be trained with emphasis on CO so that it could add additional value to a company’s service offering and help in retention of the customers for such service firms. Rajaobelina and Bergeron (2009) tried to develop a model investigating the antecedents and the consequences of buyer-seller relationship quality in the financial services. They carried out the survey in Canada and the data collected were analysed using structural equation modelling (SEM). The results showed that, customer orientation affects buyer-seller relationship quality for both financial advisors and clients. They found a significant relation between relationship quality and both consequences (purchase intention and word-of-mouth) for the two samples of financial advisors and clients.

The financial services market is growing exponentially in India. The application of sales orientation-customer orientation (SOCO) behaviour on the front line sales executives of these financial services has not been researched extensively in India. Thus another study to bridge the gap was needed.

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Objectives of Study

The study was undertaken to measure the perception of the front line sales executives, of financial services, as what type of sales practices do they follow i.e. whether their orientation was more towards attaining the sales goal or more towards achieving the customer satisfaction by offering the products as per their needs. The following objectives were kept in focus:1) To study the effect of gender of the salespersons on their customer-oriented or

sales-oriented behaviour.2) To study the effect of the academic qualification of the salespersons on their

customer-oriented or sales-oriented behaviour.3) To study the effect of sales experience on salesperson’s customer-oriented or sales-

oriented behaviour.4) To study the interactive effect of gender, qualification and sales experience on the

salesperson’s customer-oriented or sales-oriented behaviour.

Methodology

In the present study, there were three independent variables: gender, qualification and sales experience. The variable gender was classified into male and female. The variable academic qualification also had two categories i.e. graduate or postgraduatewhile the variable sales experience was divided into three groups viz. sales experience between one to three years, sales experience between three to five years and the experience of more than five years. The effect of these independent variables was examined on the dependent variable i.e., sales orientation-customer orientation (SOCO) of front line sales executives.

Hypotheses

Following null-hypotheses were framed to study the sales orientation-customer orientation of sales executives in financial services:H01 Gender does not significantly affect salesperson’s customer-oriented or sales-

oriented behaviour.H02 Qualification of the salesperson has no significant effect on customer-oriented or

sales-oriented behaviour.H03 Sales experience of salesperson does not significantly affect customer-oriented or

sales-oriented behaviour.H04Interactive effects of gender, qualification and sales experience does not significantly

affect customer-oriented or sales-oriented behaviour. For H04 various sub-hypotheses were also constituted.

The Sample

The questionnaires were sent to 357 respondents (out) of which 268 filled questionnaires were received. On screening, 18 were discarded owing to improper entries. The effect of extraneous variables, such as performance appraisal policy, compensation schemes

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and tenure in the organisation were controlled by randomisation and elimination. Out of these 250 respondents 177 respondents were males while 73 respondents were females. When identified on the basis of qualification it was observed that 197 respondents were post graduate and 53 respondents were graduates. So far as sales experience was concerned out of 250 respondents 122 respondents had the sales experience between one to three years, 71 respondents were having the sales experience between three to five years and remaining 57 respondents had the sales experience of more than five years.

Tools for Data Collection

The primary data WERE was collected by a questionnaire that comprised of two parts A and B. In part A the information regarding independent demographic variables were collected. The Part B consist SOCO (Sales Orientation-Customer Orientation) scale developed by Saxe and Weitz (1982). The scale contains 24 statements related to specific actions a salesperson might took when interacting with buyer. Originally the statements were rated on 9 points scales ranging from “True for none of my customers-NEVER” and “True for all my customers-ALWAYS”. This original scale was reduced to a 5 point scale to overcome its complexity and make it fit for Indian context. Out of the 24 statements the scale contains 12 positively worded statements and 12 negatively worded statements. The positively worded statements were 1, 2, 5, 8, 9, 12, 13, 14, 15, 16, 21 and 23 while the negatively worded statements were 3, 4, 6, 7, 10, 11, 17, 18, 19, 20, 22 and 24. For these negatively quoted statements the scores were reversed while analysing the data.

Analysis and Interpretation

The internal consistency was validated by employing Cronbach’s α which came out to be 0.75 suggesting high internal consistency. SPSS 16 was used for data analyses. The data were analysed and grouped according to different criteria gender, qualification and sales experience. Very interesting results were obtained in terms of gender effect: the female sales executives with average of 3.56 were found to be marginally more customers oriented than their male counterparts who had an average of 3.53. The significant effect of gender (Z=0.5, p<0.05) on the salesperson’s customer-oriented or sales-oriented behaviour was not observed. Even the analysis of variance (ANOVA) results (F (1, 248) = 0.25, p<0.05) could not establish that the males and females differ significantly between themselves. In view of these findings the null H01stood accepted.

When the data were analysed on the parameter of qualification it was observed that the average of graduates (3.67) was more than the average of postgraduates (3.52). Qualification proved to have significant influence on the salesperson’s customer-oriented or sales-oriented behaviour (Z=2.52, p<0.05). The ANOVA results (F (1, 248) = 5.41, p<0.05) also confirmed that graduate and postgraduate sales executives differ significantly in their customer-oriented or sales-oriented behaviour in the study. In view of these findings H02was not accepted.

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In the present study three categories of sales experiences were constituted viz., 1-3 years, 3-5 years and 5 years and above.The executives who were having the sales experience of 1-3 years seems to be more customer oriented (Average 3.59) than the executives who had more sales experiences i.e. executives having experiences of 3-5 years (Average 3.56) and 5 years and more (Average 3.48). However, ANOVA results (F (2, 247) = 1.25, p<0.05) indicated that there might not be the significant impact of sales experience on salesperson’s customer-oriented or sales-oriented behaviour. Considering these results H03stood accepted.

See Table 1 (Appendix 1)

To examine the interactive effects of the independent variables two-way ANOVA was employed and following results were obtained:

1. There was no significant interactive effect of gender and qualification on sales executive’s behaviour (F (1, 246) = 1.676, p<0.05). Thus, H04.1stood accepted.

2. There exists an interactive effect of gender and sales experience on sales-orientation customer-orientation behaviour of sales executives (F (2, 244) = 3.95, p<0.05). In view of these findings H04.2was not accepted.

3. So far as interaction effect of qualification and sales experience was concerned no significant interactive effect for qualification and sales experience was observed (F (2, 244) = 1.608, p<0.05). Hence H04.3stood accepted

See Table 2 (Appendix 2)

Researchers have tried to understand the impact of variables like gender, educational qualification and sales experience on the behaviour of sales executives. Some researches (Pettijohn et al 1997, Flaherty et al 1999) assessed customer-oriented selling by examining the relationships between customer-oriented selling and salesperson job tenure, gender, job involvement, role conflict, role ambiguity, and supervisor/employee relationships. Gender could be an important demographic variable to understand the perceptual difference between the male and female respondents as the factors considered important by the males may be either not so important or sometimes irrelevant according to the females.Palmer and Bejou (1995) tried to study the effect of gender of front line staff in the development of on-going relationships with customers in financial services. They also analysed the role of gender in the development of buyer-seller relationships. They carried out a survey of customers of financial advisers and compared gender-defined buyer-seller groups. The results indicated that there exist significant differences in terms of buyers’ perceptions of some aspects of relationship quality. The buyers perceive female sellers showing more empathy and less selling orientation. Behaving ethically, keeping customer’s best interest in mind rather than pushing the sales could also be considered as an indicator of customer-oriented behaviour.

In their study Powell et al. (1985) found that women work more ethically. Betz et al. (1989) suggested that gender differences in the ethical behaviour might be due to two possible approaches- the structural approach and the gender socialisation approach. In their view structural approach suggest that early socialisation leads ethical differences while gender socialisation approach postulates that since males and females preach

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different value sets at the workplace they handle same situation differently. In the views of Lyons (1983) females perception towards issues related to ethics and fair practices could be mainly because of care or responsibility oriented framework, while on the contrary behaviour of males towards the same issues would be more influenced by justice or rights-oriented approach. There exist studies where female business students were found significantly different from male business students on ethical and fair work practices (Beltramini et al., 1984; Jones and Gautschi, 1988; Crow et al., 1991; Luthar et al., 1997). However, in the present study no such significant difference could be established between the male and female sales executives of financial services.

Studies by many researchers (Scheibelhut and Albaum 1973; Siguaw and Honeycutt 1995) found that gender and selling experience were positively associated with salespeople’s customer orientation. The results of the interactive effect of gender and sales experience in the present study also establish the significant effect. In many studies it was found that older and educated sales executives behave in more customer-oriented manner in comparison to those who were young and less educated (Browning and Zabriskie, 1983; Jones and Gautschi, 1988; Deshpande, 1997). In their study Dubinsky et al. (1992) found that age significantly impact salespersons’ ethical perception, while on the contrary educational qualification had no significant effect. In their study Roman and Munuera (2005) established that higher level of education may not have a direct impact on ethical behaviour of sales executive. In their results Levy and Sharma (1994) found that the educational process enhances critical thinking and the ability to judge situations from multiple perspectives. Many studies established a positive impact of educational qualification on moral judgment (Rest and Thoma, 1985).

In theviews of Singhapakdi et al. (1999) education broadens the view and thus might be linked to a person’s cognitive moral development. In the present study it was found that educational qualification does have a significant impact on sales executive’s sales oriented-customer oriented behaviour. Qualification could be directly connected with the respondents thinking and maturity level. In the present scenario companies employ those sales executives who are well educated as they can understand the policies of the organisation well and can provide better services to the customers. The reasons why graduate sales executives were found more customers oriented than the postgraduate sales executives could be many such as the graduate salespeople normally tend to achieve their targets by keeping their customers satisfied. In organisations the promotions depend upon qualification as well as many other factors including the customer satisfaction. On the front of qualification the graduate salespersons were behind the postgraduate executives with management degree thus their chances of getting promoted were less, so they were left with no other chance but to keep their customers happy and satisfied. This ensures the continuous business through customer reference because only satisfied customer would recommend the executives to their friends or relatives.

In some studies, researchers tried to understand the impact of age, work experience, and academic status of students on their ethical attitudes and judgments (Mellahi and Guermat, 2006). Borkowski and Ugras (1992) in their study on Master in Business Administration (MBA) students observed that the students with work experience were more practical on the issues related to ethical dilemmas. Sales experience has

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proportionately direct relation with the sales oriented-customer oriented behaviour of sales executives. When a sales executive joins an organisation he might have his own perception regarding how he would act professionally. If over a period of time his beliefs and values matches with those of organisational values then his professional attitude becomes firm and he start practicing those values. However if there emerges a mismatch between his opinions and beliefs with those of organisational values and beliefs than those sales executives have only two options: either to find another organisation or to mould his values to fit in the organisational culture. As per the results obtained in the present study it seems that as the executives gain more professional experience they start realizing that to grow professionally and economically achieving sales targets are very important. This could be obtained only through becoming more sales oriented rather than becoming more customers oriented. It may be assumed that the as the professional experience of an executive increases he becomes more target oriented than the customer oriented.

Conclusion

The present market is the buyer’s market. No firm can survive without understanding the requirements of customers. Hence the growth prospects of executives in a firm largely depend on their ability to become customer oriented rather than limiting themselves to remain sales oriented. Thus, the study could prove to be of great use to marketers in framing their sales management policies. The study was basically focused on financial services keeping few demographic variables into consideration, however further studies could be carried out in other areas such as organised retail outlets, hospitality, automobiles sectors etc. A comparative, cross cultural study covering different states and different countries, or of different sectors can also be carried out to understand the sales orientation-customer orientation of the sales executives working in different types of markets.

References

1. Ammer, D.S., (1962) ‘Realistic Reciprocity’, Harvard Business Review,Vol. 40, No.1, pp. 116–24.

2. Beltramini, R., Peterson, R. and Kozmetsky, G. (1984) ‘Concerns of college students regarding business ethics’, Journal of Business Ethics, Vol. 3, pp. 195-200.

3. Betz, M., O’Connell, L. and Shepard, J. (1989), ‘Gender differences in proclivity for unethical behaviour’, Journal of Business Ethics, Vol. 8, pp. 321-324.

4. Borkowski, S.C. and Ugras, Y.J. (1992), ‘The ethical attitudes of students as a function of age, sex and experience’, Journal of Business Ethics, Vol. 11, pp. 961-979.

5. Browning, J. and Zabriskie, N.B. (1983), ‘How ethical are industrial buyers?’ Industrial Marketing Management, Vol. 12, pp. 219-224.

6. Chee, L.K. and Peng, N.K. (1996) ‘Customer orientation and buyer satisfaction: The Malaysian housing market’, Asia Pacific Journal of Management,Vol. 13, No. 1, pp. 101-116.

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Appendix 1: Table 1

Summary Showing Means, Standard Deviations, Z-values at 5% significance level and Status of Hypotheses

Appendix 2: Table 2

Summary of Analysis of Variance and Status of Hypotheses

Variables Categories N Mean Score

Standard Deviation

Z-value

Status of Hypotheses

Gender

Male 177 3.53 0.45 - -

Female 73 3.56 0.42 - -

Male X Female - - - 0.5 H01 Accepted

Qualification

Graduate 53 3.67 0.37 - -

Postgraduate 197 3.52 0.43 - -

Graduate X Postgraduate

- - - 2.52 H02 NotAccepted

Sales Experience

Sales Experience

1-3 years (a)

122 3.59 0.43 - -

Sales Experience

3-5 years (b)

71 3.56 0.42 - -

Sales Experience

5 years and more (c)

57 3.48 0.37 - -

Sales Experience

a X b

- - - 0.45 -

Sales Experience

a X c

- - - 1.68 -

Sales Experience

b X c

- - - 1.09 H03 Accepted

Sources of Variance Sum of Square

Degrees of Freedom

Mean Square

F Ratio Status of Hypothesis

Gender 25.692 1 25.692 0.252 H01 Accepted

Qualification 539.891 1 539.891 5.415 H02 NotAccepted

Sales Experience 253.077 2 126.539 1.249 H03 Accepted

Gender*Qualification 167.254 1 167.254 1.676 H04.1 Accepted

Gender*Sales Experience 783.638 2 391.819 3.954 H04.2 NotAccepted

Qualification*Sales Experience

317.474 2 158.737 1.608 H04.3 Accepted

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Customer Experience Management : A Framework For Successfully Managing The

Customer Experience

Dr. Kaushik MukerjeeProfessor, SIBM, PuneE-mail: [email protected]

Abstract

Customer Experience Management has gained in importance in recent years. As companies are faced with the prospect of decreasing customer loyalty coupled with increasing costs of customer acquisition, it has become immensely important for companies to ensure a good experience for customers through every stage of customer interaction. This paper focuses on the various aspects that impact customer experience and offers a framework that incorporates these factors.

Introduction

The reduced scope of differentiation through product features and the increasing impetus on customer service have resulted in the growing importance of managing the customer experience. In fact, Forrester Research has created a report that explains how organizations can practice Experience Based Differentiation. A survey conducted by Forrester Research shows that only 28% of companies closely monitor the quality of customer experience. Therefore, managers need to focus more on managing customer experience in a proper manner. This paper aims at creating a framework for the better management of customer experience by broad-basing the concept of customer experience to cover all aspects of customer interactions.

Literature Review

Gupta and Vajic (1999) have mentioned that an experience occurs when the customer has any sensation or knowledge acquisition as a result of interactions with different elements that have been created by the marketer. In this regard, Gilmore and Pine (1998) has pointed out that the best relationships with customers are those that are emotional in nature. Therefore, the company needs to cultivate stronger bonds with customers to ensure pleasant customer experiences. Authors like Prahalad and Ramaswamy (2000) have also pointed out the increasing value co-creation being done through active participation of customers thereby enhancing the scope of and need of

Research Papers 5

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managing customer experiences. In fact, Cova (1996) goes a step further to state that consumers seek to become a part of the experience instead of merely encountering products and services and wish to have a more inclusive role. This has also been pointed out by Willmott and Nelson (2003) - the mindset of customers has changed whereby they seek experiences instead of being content with a mundane transactional relationship with the company.

The consumption experience has been defined by Holbrook and Hirschman (1982) as ‘a personal occurrence, often with important emotional significance, founded on the interaction with stimuli which are the products or services consumed’. The aspect of experience has become so important for consumers that Pine and Gilmore (1998) have mentioned that ‘we will increasingly pay companies to stage experiences for us just as we now pay companies for services we once delivered ourselves, goods we once made ourselves, and commodities we once extracted ourselves’.

Taking a cue from the importance ascribed to managing the customer experience, various researchers have conducted studies to highlight certain aspects of customer experience management. Pullman and Gross (2003) have pointed out the importance of various emotions in a specific service setting. Stuart-Menteth, Wilson, and Baker (2006) have highlighted the importance of managing the multi-channel experience properly while Jenkinson (2006) has drawn attention to the importance of information in managing the customer experience. Berry, Carbone and Haeckel (2002) have adopted a comprehensive approach in their research and pointed out the necessity of conducting an experience audit. The authors have mentioned the need for undertaking a holistic effort at managing customer experience instead of making improvements in certain ‘pockets’. However, researchers have not provided a framework that can serve as a guide for managing the customer experience in a holistic manner. This paper aims at creating such a framework based on the proposed aspects of customer experience and conducting an analysis that takes into account the experience management practices of various companies.

Methodology

This paper would analyse customer experiences across the following categories: • Impact on Senses• Impact of Processes• Impact of Communication • Impact of Expertise • Impact on Relationship

The analysis would be done under each of these categories considering the practices of various companies and result in the creation of a framework that can be used by managers for successfully managing the customer experience. These categories can also be used to create the ‘Customer Experience Pyramid’ that depicts the hierarchical level of the various categories of customer experiences. Companies need to work on the customer’s experience by focusing on the base of the pyramid first and then going

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up the hierarchical levels to reach the relationship experience management stage.I) Customer Experience - Impact on Senses At the most basic level, the sensory experience has to create the right impact. Schmitt (1999) has mentioned about ‘SENSE marketing’ which involves the use of suitable music, colour, sound effects etc. to create the right stimulus. According to Schmitt, the aspect of ‘FEEL marketing’ takes into account the feelings aroused in the customers as a result of the stimuli. The impact on senses can be categorized into visual impact, auditory impact, and olfactory impact.

1) Visual Impact: Essentially focusing on the visual aesthetics by ensuring a suitable décor and furnishings. The visual impact of the logo and the signage that is viewed by customers should be created in a manner that ensures a pleasant experience and puts the customer in the right mood. The visual impact should serve to initiate a bond with the customer and apart from the basic function of enabling differentiation from the competition; a kind of harmony should emerge between the customer and the organization. This is being initiated by a number of banks in India where the leading private banks like ICICI, HSBC, HDFC had taken the lead. Thereafter, public sector banks like Bank of Baroda, Union Bank of India etc. have also undertaken facelifts for ensuring proper visual impact. The aesthetics are also important in the case of products and not only for services. For example, the iPod has been a great success not only because of its storage capacity but also the look and feel of the product. It has been regarded as a ‘cool’ product to own and flaunt – especially among the young population. In the mobile phone segment, Motorola has been able to gain market share after the launch of visually appealing products like the MotoRAZR and the MotoPEBL.

2) Auditory And Olfactory Impact: Among the various aspects of sensory experiences, the impact on the auditory and olfactory senses assumes great importance especially in the case of services. The contact with customers is more prolonged as in the case of airlines, entertainment complexes, and shopping malls. At times, the impact can result in an unpleasant customer experience as is evident at the railway stations in India. On the other hand, airlines like Kingfisher Airlines have taken the effort of installing personal entertainment systems even for their economy class customers to ensure that the sensory experience is enjoyable. In fact, Kingfisher Airlines has also ensured that the visual appeal of the aircraft cabin results in a superior customer experience. Likewise, an airline like Jet Airways ensure that the cabin is pleasant smelling and the fragrance used is very distinctive wherein the customer can distinguish the interior of the airline from other airlines on the basis of the olfactory impact. Similarly, luxury hotels like the Taj Group ensure that soft music is audible inside the hotel lobby and the corridors while the use of suitable fragrances ensures a pleasant olfactory impact.

The importance of the sensory experience in the context of customer experience management can be understood by taking into account the example of Barista or Starbucks. Though coffee and the various fast food items these joints sell are available elsewhere at a fraction of the price, customers prefer paying a premium owing to the superior experience offered by them. The superior sensory experience is created

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through suitable visual, auditory and olfactory impact. The sensory experience is one of the components that help to create the total customer experience for the up market food joints like Barista and Starbucks. II) Impact of Processes on Customer ExperienceThe process followed during interactions that the customer undergoes in the course of purchase and usage of a product/service results in shaping the customer’s experience. Chase and Dasu (2001) have pointed out that the key elements in this regard are sequence and duration. Deighton (1992) has compared experience design to story-like time pattern that is similar to episodes in human life.

1) Method of Interaction: The processes that are followed for interfacing with the customer need a suitable design. The method of interaction should be convenient and easy for customers. Banks enable customers to access the services through multiple channels – websites, ATMs, retail counters, phone banking etc. The processes should suit the customer’s needs. Therefore, the tracking of customer behaviour and evaluation of processes from the point of view of the customer experience need to be done. Companies like Dell regularly track the time that customers are kept on hold after they have called the call centre with service requests. However, some banks using the IVR (Interactive Voice Response) method results in irritation for the customers owing to the complicated menu. Another important aspect that is important is to ensure that customers get a seamless view of the company. Generally, companies comprise of departments that tend to work as ‘silos’ wherein the customer needs to deal with multiple departments and sometimes these departments even work at cross purposes. These factors can result in unpleasantness in the customer’s experience and sometimes too much harassment can lead to frustration and disgust. The governmental departments in India are known for causing such situations. Seybold (2005) has pointed out the need for a proper organizational culture and structure that fosters the creation of a good customer experience. Apart from the facilitation, the author also draws attention to the aspect of accountability mechanisms that would ensure that the empowerment of personnel is used in the right manner for fostering a better customer experience.

2) Unified Customer View: A seamless organization would require sharing of data across departments. The integration of data from the various departments and divisions can help to create a unified view of the customer. This will ensure that there is no duplication of efforts and the same customer is not targeted improperly. The Standard Life Group in the UK comprised of four main companies – life assurance, general insurance, banking, and healthcare. However, the data on customers were maintained separately and this resulted in failure to identify marketing opportunities. The multiple systems followed within the same company became hurdles for sharing of data. But once the data sharing was initiated, it resulted in noteworthy benefits to employees across the organization. Goldsmith (1999) suggested that personalization should be incorporated as the eighth P in the services marketing mix. To enable personalization of offerings for customers, a unified customer view is very essential. Hewlett Packard (HP) has created newsletters for customers after taking into account how technology-savvy the individual customer is and also

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the interest of the customer for certain products. In this way, the personalization enables a more useful customer experience wherein the customer’s individual requirements are met better by the company. Amazon.com was able to offer a better customer experience compared with established book retailers like Barnes & Noble through ensuring a unified customer view and proper personalization. The customer was treated as an individual wherein her needs and interests were of foremost importance to Amazon and was manifested during the interactions with customers through the website.

3) Tools for Enabling Processes: The process experience can be improved with the use of modern tools. The use of IT for enabling better customer experience has received considerable attention. Dardan, Stylianou, and Kumar (2006) have conducted research on customer related IT investments and mention that they have considered the investments that were made with the intention of enhancing the customer experience by increasing customer satisfaction. Prahalad and Ramaswamy (2004) have highlighted the need of co-creating value through customer involvement. Dell had used this effectively to enable personalization of PCs wherein customers could configure their computers based on their individual requirements. The suitable tools for enabling the processes were key to the superior customer experience. In the case of Dell, the website dell.com served the purpose along with the call centres. Investments in the latest technology can help in ensuring that customers’ experience gets enhanced through superior value delivery. The mobile telephony service provider Airtel signed a $100 million deal with IBM for developing, operating and managing the service delivery platform. By investing in the proper tools, the service delivery and customer experience are enhanced. Likewise, entertainment and hospitality major Harrah’s invested in SAS datawarehousing solutions to understand customer behaviour better and create personalized offerings for loyal customers.

III) Impact of Communication on Customer ExperienceIn the modern age of multi-channel marketing, Schultz (2003) has pointed out that connectivity and interaction are the focus. In this regard, Frazier (2005) has mentioned that the direct communication of the marketer needs to be integrated properly with the communication that emanates from the distributors and the other channel partners. The aspect of properly managing the communication experience has a noteworthy impact on the customer experience. The relevant issues in this regard include:

1) Communication Formats: The formats followed by the personnel for communication becomes critical to shaping the customer experience. When the customer calls up for making inquiries, the exact format for replying to the query can be standardized and the manner in which the communication is structured needs to ensure a good experience for the customer. Therefore, the language used should be easily comprehended and also serve the purpose of addressing the query that has been raised by the customer. The aspects of courtesy, empathy need to be given due consideration while planning the communication. In case of machines being used for interaction (such as the ATMs used by banks), the communication format should take into account the background of the customer. In rural India the percentage of literate people is lesser and banks have decided to make use of pictorial depictions

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for enabling the local people to use the ATMs. Essentially, the communication must be made pro-customer. ABN AMRO Bank implemented a CRM solution that ensured a flexible customer experience by adopting rules-based approach that ensured the client’s acceptance. Likewise, companies using the website and the internet to communicate with customers need to adopt suitable communication methods. This is more important when companies using traditional channels begin to use the internet for customer interactions. LEGO began offering downloads of LEGO Digital Designer Software from its site legofactory.com which was a new initiative. Also, LEGO had planned to make the site a place where its customers could interact to create a community of like-minded people. It also launched a bi-monthly newsletter that went out to two million customers around the world. The customers belonging to diverse cultures and social backgrounds may require different approaches for managing the customer experience.

2) Consistency Across Multi-Channels: In today’s competitive environment, multi-channels have become the norm. The manner in which the communications are handled across the channels has termed ‘integrated marketing communications’. The process has been explained by Duncan and Moriarty (1994) as: ‘the process of strategically controlling or influencing all messages and encouraging purposeful dialogue to create and nourish profitable relationships with customers and other stakeholders’. In this respect, Stuart-Menteth, Wilson, and Baker (2006) have conducted research on channel experiences and mention that the quality of channel experience has a high correlation with customer relationship quality. The authors have cited the example of Lexus and the customer’s experience at the showroom, with the contact centre and the website. The customer’s experience would make an impact on the brand values of Lexus. A number of service industries like banking, mobile telephony etc. need to offer access through multiple channels to ensure customer convenience. The communication received by the customer through these channels should have consistency. For example, banks communicate with customers through the following channels:• Retail counters (face to face communication)• ATMs (machine to human communication)• Call centres (human to human but not face to face)• Website (automated software to human communication)

Understandably, the manner in which the communication would be undertaken for each of the four channels mentioned above would be different. However, to ensure a consistent customer experience, the communication needs to follow certain norms that would ensure the consistency.

IV) Impact of Expertise on Customer ExperienceAnother important component of the customer experience is the expertise experience. The level of expertise that is experienced by the customer results in shaping the customer experience. The aspect of expertise should not be thought of in the limited context of ‘manufacturing quality’ but should be broad-based to take into account the expertise of other departments like sales, accounts, repairs etc. The issues that should be given importance for ensuring proper expertise experience include the following:

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1) Excellent Product/Service Performance: The experience of the customer while using the product or service would result in enabling suitable expertise experience for the customer. The aspects like product design, product performance, and servicing expertise of the personnel become critical parameters for customers in judging the expertise experience. The success of products like Sony’s Handycam or Apple’s iPod can be also attributed to suitable expertise experience. Motorola has been developing cutting edge mobile phones like the MotoRAZR or the MotoPEBL with the same intent. The performance of services also requires expertise. Baristas at coffee shops like Starbucks enable a high expertise experience for the customer owing to their skill. Also, the Starbucks experience is savoured by customers for other reasons as well. Customers have mentioned that it is the ‘third place’ after the home and the office since it offers features like wi-fi internet facility, reading lounge etc. Therefore, the customer experience is constituted by the total value that is offered by the company and the product/service quality should conform to customer expectations. Likewise, the PC service technicians attending customer calls also need to possess the necessary skills to enable a proper expertise experience. Dell monitors the time taken for addressing customer problems. Companies have taken proactive steps to improve the customers’ experience. For example, Sun Microsystems offers tools like ‘predictive self-healing tool’ and ‘suninstall check tool’ that help customers to rectify problems in the software. In the service sector, the customer experience can be enhanced through proper information sharing and promptly updating customers on new developments. Air Deccan sends SMS on customer’s mobile phone to keep them informed of the exact departure time of their flights thereby enabling the customer to reach the airport at the right time. Likewise, banks have introduced the token system that enables customers to avail of the service without having to stand in the queue.

2) Modern Practices: The customer’s experience is determined by the company’s total value delivery. By adopting modern technology, state-of-the-art equipment, and the latest business practices, the expertise experience is enhanced. ICICI Bank invested in the latest CRM tools from Metadata to create a better customer experience. The banks have also used ATMs, phone banking etc. that require the use of modern tools and practices to be effectively deployed. Using business analytics, banks can also predict customer behaviour and thereby prepare for enabling a better experience. The expertise of the company is evident from the use of modern practices. The old single-screen theatres have failed to match the multiplexes since they use modern equipment and have invested in glitzy infrastructure to create a more alluring customer experience. Though the movies that are shown are the same, customers do not mind paying several times more to be at a multiplex instead of the single-screen theatres. The use of IT has enabled many companies to offer a better customer experience. Walt Disney World Resorts have used IT for ensuring that guests receive up-to-date information on their cell phones and reminders for the preset schedule. Also, using GPS and mobile internet technology, Walt Disney can run its fleet of buses in real-time customer demand to obviate the need for customers to wait in long queues. Apart from investing in IT tools, Walt Disney also trains its customer service personnel to speak multiple languages and have a pro-customer attitude.

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Rubis (1998) mentions that Disney spends months on training employees on relational methods to ensure that they connect emotionally with guests during interactions. All these practices result in a proper demonstration of expertise experience and serve to enhance the customers’ experience.

V) Impact on Relationship Owing to The Customer ExperiencePine and Gilmore (1998) mention that when companies succeed in not just satisfying customers but also make the interactions pleasurable, customers are inclined to stay loyal even when a mistake takes place. The issues that need to be managed for ensuring proper relationship experience include the following:

1) Treatment Offered to Loyal Customers: The loyal customers ought to receive preferential treatment which they would perceive through the experience. Essentially, distinction must be made between loyal customers and occasional customers. The experience offered to loyal customers needs to be created with due consideration. Harrah’s instituted the Total Rewards Program to track loyal customers and ensured that the moment they entered the casino they were given preferential treatment. Also, the rewards programme was made in a manner that enabled customers to accumulate rewards points across Harrah’s various properties. The distinctions (and rewards) are also done by categorizing the loyal customers. Shoppers’ Stop created the First Citizen Club to distinguish its loyal customers and categorizes them into various categories that include: Classic Moments, Silver Edge, and Golden Glow. The privileges offered to these categories vary and customers can upgrade to the higher category to avail of the privileges offered to the higher category. Similarly, credit card companies also use this method to categorize customers. Sometimes, the rewards can be offered in an innovative manner. The UK headquartered retailer Tesco offered its women customers a scheme called ‘Me Time’ which offered free sessions at leading health spas, gyms and beauty salons apart from discounts on designer clothes, perfumes and cosmetics.

2) Experience Across the Product Life Cycle: Generally, salespeople offer customers a very pleasant experience during the pre-purchase stage. However, the customer’s experience across the life cycle of the product should be taken into account to enable a judgement on the customer’s experience. Therefore, the post-purchase experience needs to be considered. Cult brands like Harley Davidson have been able to create the experience that Schmitt (1999) calls ‘RELATE’ which adds to relate experiences wherein the individual is able to relate with the ideal self, other people or other cultures. Apart from the exalting experiences offered by iconic brands, the objective of the experience management should be to ensure ‘least pain’ for the customers at the primary level. A multi-channel access for customers seeking attention helps in this regard. Airtel enables its customers to access the company through the website, email, call centre, and also the retail outlets. Also, the company should take the initiative to keep in touch with the customer. Newsletters are a common method used by various companies. Maruti sends a magazine called ‘Gateway’ to its customers for one year after the purchase of a vehicle. The manner in which the company meets its obligatory requirements also helps to shape the customer’s experience.

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Car manufacturers offer customers a few free services during the first year after purchase. The customer’s experience during these encounters also comprises the ‘experience across product life cycle’. In case any warranties or other benefits have been mentioned as part of the purchase, the manner in which the company fulfils these obligations also makes an impact on the customer’s experience. Therefore, the company needs to strategize in order to ensure the proper management of the customer’s experience during the product’s life cycle.

Based on the discussion presented above, the following framework has been created that attempts a holistic approach towards management of customer experience.

Impact of Customer Experience IssuesImpact on Senses • Visual impact

• Auditory & Olfactory impactImpact of Processes • Method of interactions

• Unified customer view• Tools for enabling processes

Impact of Communication • Communication formats• Consistency across multi-channels

Impact of Expertise • Excellent product /service performance• Modern practices

Impact on Relationship • Treatment offered to loyal customers• Experience across product life cycle

Figure 1: Customer Experience Management – A Framework

The hierarchy of the various issues can be depicted through the Customer Experience Management Pyramid presented in Figure 2.

Figure 2: The Customer Experience Management Pyramid

Impact On Relationship

Impact of expertise

Impact of communication

Impact of processes

Impact of senses

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Conclusion

Based on the analysis of the various issues of customer experience management, it is concluded that managers need to adopt a strategic approach towards managing the customer’s experience which would involve focusing on the various important aspects mentioned in the framework for customer experience management.

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7. Frazier, G. (2005), “Organizing and managing channels of distribution”, Journal of the Academy of Marketing Science, Vol. 27(2), pp. 226–240.

8. Goldsmith, Ronald E. (1999), “The Personalized Marketplace: Beyond the 4Ps”, Marketing Intelligence andPlanning,Vol. 17 (4), pp. 178-85

9. Gupta S., and Vajic M. (1999), “The contextual and dialectical nature of experiences”, in Fitzsimmons and Fitzsimmons (Eds.) New Service Development, Thousand Oaks, CA: Sage Publications Inc., pp35-51

10. Holbrook, M. & Hirschman, E. (1982), “The experiential aspects of consumption: consumer fantasies, feelings and fun”, Journal of Consumer Research, Vol. 9 September, pp. 132–140.

11. Jenkinson, A. (2006), ``Do organisations now understand the importance of information in providing excellent customer experience``, Journal of Database Marketing &Customer Strategy Management, Vol. 13 Issue 4, pp. 248-260

12. Pine, B. and Gilmore, J. (1998), “Welcome to the experience economy”, Harvard Business Review, Jul-Aug, pp. 97-105.

13. Prahalad, C. and Ramaswamy, V. (2004), “Co-creation experiences: the next practice in value creation”, Journal of Interactive Marketing, Vol. 18, Issue 3, pp. 5–14.

14. Pullman, M. E. and Gross, M. A. (2003), ``Welcome to Your Experience: Where You Can Check Out Anytime You’d Like, But You Can Never Leave``, Journal of Business & Management, Vol. 9 Issue 3, pp. 215-232

15. Rubis, L. (1998), “Show and Tell”, Human Resources Magazine, April, pp. 110-11716. Schmitt, B. H. (1999), “Experiential Marketing: How to Get Customers to Sense,

Feel, Think, Act, Relate”, Free Press

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17. Schultz, D. (2003), “The next generation of integrated marketing communication”, Interactive Marketing,Vol. 4(4), pp. 318–319.

18. Stuart-Menteth, H., Wilson, H. and Baker, S. (2006), `Èscaping the channel silo : Researching the new consumer``, International Journal of Market Research, Vol. 48 Issue 4, pp. 415-437

19. Willmott, W. and Nelson, W. (2003), Complicated Lives,Chichester: Wiley, pp. 31.

Websites:

1) Building a customer centric organization with customer experience and customer profitability by Sunil Gupta and Bernd H Schmitt (www.exgroup.com)

2) Moments of truth (http://www.forrester.com/Research/Document/Excerpt/0,7211,42321,00.html)

3) The Customer Experience Quality Framework by Megan Burns (www.forrestor.com)4) A Case Study of HP’s “Technology At Work” Email Marketing Program by

SharVanBoskirkwith Elana Anderson and TenleyMcHarg (www.hp.com)5) Managing the total customer experience by Patricia Seybold (www.apqc.org)6) IBM bags $100 million deal from BhartiAirtel (www.hindu.com/2006/08/04/stories/

2006080404162000.htm)7) Walt Disney World Resorts and CRM Strategy (http://www.eweek.com/article2/0,1895,1425045,00.asp)8) www.starbucks.com9) www.sun.com10) www.dell.com

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Glocalisation Strategies Being Employed in Indian Retail Sector during the times of Crisis

Prof. Neha LakhotiaAsst Professor, Prestige Institute of Management, Dewas

Prof. Varun SardaAsst Professor, Acropolis Faculty of Management & Research, Indore

AbstractDue to interlinkages of markets and countries something happening in one country affects all the other countries linked to it in one or the other manner. During testing times it becomes difficult for the company to reposition itself or gain back the faith of the customers. It is seen over a period of time that the products and services being offered see a world of change in their positioning during recessionary times. With the ever changing positioning strategies being employed by countries globally, local companies also have a makeover so as to increase their acceptability. This paper is an effort to understand the various strategies which can be employed by companies to combat the recession in the process of offering the products and services to the ultimate consumers. With the advent of rapid changes in technologies and global inter-linkages the customer’s periphery has also extended to include the global customers. In addition offerings have to be customized nowadays to suit the needs of customers specifically. During such times, efforts are made to incorporate the impact of recession on marketing decisions and the adjustments in marketing strategies and action.

Introduction

“Never give in.. never, never, never, never, in nothing great or small, large or petty, never give in except to convictions of honour and good sense. Never yield to force, never yield to the apparently overwhelming might of the enemy” - Winston Churchill

“Glocalization” is a recent concept which has emerged with the advent of the human beings ability to cross all sorts of conformance. The marketers in today’s taxing times play a very pertinent role in influencing the buying habits and preferences of consumers. Glocalization is a concept which has originated to answer this issue of satisfying the consumer who does not belong to your peripheral boundaries. Thus, it can be defined as a process of globalizing a product or offering to adapt itself to another locality or culture.

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The importance of customized offering cannot be ignored for any sector in a business set up. According to, Shelton Waggener, the CIO of the University of California at Berkeley, the importance of providing a framework for both global solutions and local customization cannot be ignored.

Glocalization involves winning in the diverse market scenario by maintaining the brand logo, the key message and the underlying philosophy. Also added to it should be localizing the brand elements to offer customers an authentic local feel. This sort of a model is increasingly becoming the preferred business model for global brands.

Evolution of the Concept The evolution of the term “Glocalization” can be traced from the Japanese culture where a word “dochakuka” means global localization. Within the Japanese business practices this concept refers to a way of adapting farming techniques to the local conditions. Since then this simple concept has evolved into an important marketing strategy. Businessmen from the same country adopted it initially. Later, in the 1990s it was used in the Global Change Exhibition in the German Chancellery in Bonn. Here, the concept was depicted as the interplay of local-regional-global interactions indicating the depth of the space presented and drawn.

The concept was later popularized by a number of sociologists. In the 1990s Roland Robertson, in the late 1990s Keith Hampton, Barry Wellman and Zygmunt Bauman have used the concept to refer to people who are actively involved in both local and global activities of friendship and commerce.

Literature Review

The study is rather exploratory in nature. Extensive literature review was undertaken to identify various facets of glocalization owing to its promise during turbulent business periods

(i) Localization is neglected as a Process:-Globalization, in contrast to localization, is often seemed to be an omnipresent. Localization is almost invariably ignored. But the effect of local forces at work cannot be ignored. They often hamper the development of global processes. These forces can be recognized to prevent or modify the plans for global corporate enterprises. Thomas L. Friedman in The World is Flat talks about how the transformation internet has made possible, like websites in native languages.

(ii) Reconsidering Frames of References:-The concept also stresses the need to understand that “local” and “global” are two sides of the coin and are important to understand the local and global research and management. In the year 2008, the Glocal Project created at SurreyArtGallery had contributions from the people around the Globe and local ones from Surrey community.

(iii) Marketers need to be Globalocal:-This is in line with the above concept. Marketers have to adopt an approach targeted at the entire World but with an impact on the local market or area. It is thinking on a global scale and acting on local. The diagram below highlights the various aspects covered in this process.

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(iv) Core Element – Knowing How Society Communicates:-The basic element during tough times emerges to be the intelligence of marketers to understand how to react. Marketers by far should be able to understand how the society reacts and thus should understand social media. The need to strategize has increased more heavily than ever. Companies increasingly need to incorporate the social media aspects into their offerings to enable effective business operations. Social Media Marketing should be put to use effectively because no matter what the grass root reality is the poor condition of the markets and economies as a whole. Efforts should be made to minimize on expenses and use innovative tactics to reduce the overall cost. It is not that using social media marketing like Twitter, Facebook or Youtube success can be achieved overnight but they at least help one in getting started during such miserable time of shrinking dollars.

(v) Explore New Dimensions:-During tough times rather than focusing attention on cutting costs marketers should try to put energies in exploring new techniques to re-evaluate the marketing done. Efforts should be made to cautiously find out what is working for the company and what is not. The approach should be more goal oriented in nature and from which good results can be expected. Good results are also linked to the product or service offered being more innovative in nature.

(vi) Be Cognitive About the Customers:-Another important strategic exercise is to take care of the customers always. We as marketers should make an effort to see to it that the minutest of the needs should be met with utmost sincerity. For example, while sending a vacation mail care should be taken to ensure that the mail should not leave the customer in a fix regarding the next course of action. Indeed the marketers should take care of the emotions of the customers. A proper mail mentioning politely the reason for being out of office and who will be taking care in your absence should be informed. Marketers should try to be aware of the customers even locally present to ensure that the offering can be customized.

(vii) Creating a Pricing Strategy that Works:-No doubt it is important to focus upon making the desired profits for the business; rather it is equally essential to put your energy into setting price suitable for your business. The mere concern of customers is not just money. Equal focus is laid upon quality, experience and service. These are all factors which are easily achievable. An exceptional service being given to customers is a way to keep them satisfied even with a little higher price. Quality and higher level of satisfaction for customers should be ensured always so that a localized approach can help in generating better revenues. Below mentioned is a diagram to cite the importance of Social Media Marketing.

Glocallza�on

Marke�ng Culture Ethnicity Language Poli�cs

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(viii) Internet Marketing:-Marketing through the use of Internet is another important tool during this era of technologies. This medium has immense power as compared to any other marketing vehicle. Where else will you be able to get all in one, the offering, feedback, test being applied and the change all in one day. This medium not just allows you to modify a campaign but also helps in targeting your customer ultimately.

(ix) Measure Marketing Efforts:-Along without performing the efforts it s also important to see to it that the efforts made for marketing are measured properly. Measuring efforts will enable marketers to know whether the investment done by them is in the right direction or not. Also, if it is not then what remedial measures can be taken to increase the Return on Investment? Talking about Glocalization it becomes all the more important to see to it that the marketing efforts are measured in terms of the local market and not just as a whole. Measuring revenues like this helps in generating the proper strategic move for effective positioning.

(x) Branding is very important on the part of the Marketers:- People before showing interest in your product or offering, are also interested in the way one has branded itself in the market. Even while offering products for the global or local customers care should be taken to ensure that the branding is done on a much localized ground so that greater connectivity is shown.

March 2009 “Social Media Playtime Is Over” Marketers To Increase Social Media Marketing Spending -Even During A Downturn

“Assuming that the economy is in recession in the next six months,how would you change your investment in social media overall?”

Base: 114 global social media marketers at companies with 250 employees or morewho have planned their 2009 budgets

Source: Q4 2008 Global Social Media Planning Online Surey

Decrease

5%

Increases

53%

Stays the same

42%

FORRESTEK

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Customer Elements within Glocalization

Presently creating a competitive environment beneficial to the customers is of paramount importance for long run competitive advantage or even survival. Marketers should try to create that distinct competitive advantage in their products to stand out amongst the entire clan. The customer elements which should be taken care of in businesses nowadays is to position in the mind of the customer in the long run effectively. Care should be taken to ensure that the customers are offered distinct competitive advantages required to sustain in the long run.

Focus Upon Core Values

An extra care can be taken to ensure that the marketers lay emphasis on the core values that the organization stands for. Core values anyways always provide an insight into what the organization stands for in the long run. It is very important to understand this from the point of view of the customers who are the ultimate users. This should be ensured that the core values upon which the organization is based should be highlighted in the marketing strategy used by the company. The reason behind this is the ever increasing stress upon the marketing of inferior and adulterated products which increases all the more during the times of a downturn.

Recent Reversal in Trends

There has been a reversal in the previous behavior of marketers. Anyhow, marketers no longer feel that there is no point spending money on marketing activities during recession. Traditionally, marketers reduced budgets during times of crisis. According to a recent survey, around 53% of the marketers focus upon increasing the social media budget during recession, whereas about 42% keep it same. A feather in the cap is a new concept of “social media marketing”. The reasons were being the inexpensive nature and use of word-of-mouth publicity both being easy in nature. Recently emphasis has also been laid on investing in soft costs like strategy, roles, education and process.

References

1. Thomas Friedman, “The World Is Flat: A Brief History of the Twenty-First Century”. Friedman and The World Is Flat – a webliography on Friedman and debate & critics

of the book. On Modkraft.dk/Tidsskriftcentret2. http://www.web-strategist.com/blog/2009/03/16/report-social-media-marketing-

up-during-recession/ (Date: 10th Feb 2011, time 2:24 p.m.)3. http://marketing.about.com/b/2009/03/09/social-media-marketing-put-it-to-work-

for-you.htm (Date: 15th March 2011, time 9:45 a.m.)4. http://www.venturerepublic.com/resources/Glocalization_global_marketing_branding

(Date 15th March 2011, time 9:36 a.m.)

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A Study of The Learners’ Perspective on ‘Entrepreneurship’

Prof. Vinod ShastriAssistant Professor, SIBM, PuneE-mail id: [email protected]

AbstractAn entrepreneurship educator could induct a learner into the learning process by ascertaining in advance, his perceptions of the subject matter. Myths if any need to be unlearnt, as the learner may otherwise reject knowledge contrary to his beliefs. This paper reports the findings of a pilot study on the perceptions of potential learners. This could enable educators to design course contents and teaching methodology so as to dispel possible myths in advance. Keywords:Entrepreneurship, Entrepreneurship education, Learner’s perspective

Introduction

The researcher has a personal experience of teaching entrepreneurship and is fast closing-in on a quarter century of Entrepreneurship education but every new batch of learners poses a fresh set of challenges apart from posing the same set of challenges afresh! Do they really wish to become entrepreneurs? Do they even believe that Entrepreneurship can actually be learnt in a classroom? Such questions just keep cropping-up and crowding the mind every time one starts with a fresh batch of learners. So the researcher’s feeling before starting a new batch of the ‘Entrepreneurship’ class a couple of months ago could aptly be described as déjà vu.

The author observed that experiential learning rather than conventional approaches to concept teaching could enhance the quality of assimilation in entrepreneurship education. This is consistent with the findings/views of other researchers. [Krueger and Brazeal (1994)1, Kourilsky and Walstad (1998)2, Gorman et al (1997)3]

So it was decided to do a quick informal study of learners’ perspectives on certain issues in Entrepreneurship, so as to suitably orient the teaching-learning process. It was felt that understanding their perspective would probably make teaching easier by addressing gaps in their perception of Entrepreneurship, if any. It was also believed that since they had ‘chosen’ the Entrepreneurship elective, they would certainly have some perspectives on the subject. And moreover, there is nothing cast in stone when it comes to entrepreneurship; there are as many opinions as there are entrepreneurs,

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researchers and…..well, educators like this researcher!

Objectives

The study was conceived and initiated with three objectives which are as follows:1. Understanding Respondents’ ranking of important issues related to

entrepreneurship2. Understanding Respondents’ opinions on various issues related to

entrepreneurship3. Understanding Respondents’ opinions on teaching-learning process for

EntrepreneurshipHowever, the scope was later restricted to the first objective for the purpose of this paper. The study was based on responses of thirty students obtained from a questionnaire. The study explored whether responses are correlated to the profile of respondents in respect of age, gender, educational background (specifically Engineer/ Non Engineer), Work Experience and Family Background. In respect of work experience, respondents were categorized as with/ without experience. Similarly, respondents who were already from family business were distinguished from others. Methodology

Primary Research:A structured questionnaire was administered to students who had opted for the ‘Entrepreneurship’ elective, a four credit course during their final (4th) semester of the MBA program at Symbiosis Institute of Business Management (SIBM) Pune.

Respondents were required to rank 11 variables chosen on the basis of researcher’s personal experience of entrepreneurship education as well as of entrepreneurship. The ranking was to be done in the order of perceived importance of each variable. The ranking scheme was ‘1’ for the highest ranking and ‘11’ for the lowest ranking.

Sample Size:The sample size was set at 30. Table 1 shows the classification of respondents on three parameters: education, work experience and family background. Since there was only one female respondent, data were not analysed on the basis of gender.

Table1Education

Engineers (20) Non-engineers (10) Total (30)Work Experience

Experienced (16) Fresher’s (14) Total (30)Family Background

Business (07) Non-business (23) Total (30)

Sampling Method:The sampling method used was Convenience sampling. Questionnaire was administered to the students present in the class on the given days. No special invitation was sent to

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all students neither was the questionnaires sent to all of them.

Results and Discussions

After obtaining responses, the data were duly tabulated so as to find out if there was variability in the responses. Since data collected were of the ordinal type, the nonparametric Friedman Test4 was considered appropriate, especially since the following three assumptions underlying the Test were being fulfilled:

1. The blocks/rows (Respondents) are independent.2. No interaction is present between blocks and treatments/columns (Variables).3. Observations within each block can be ranked (in fact, they were already

ranked).

Following hypotheses were formulated and tested:Ho: The variable populations are equal.

(Variable population is sum of all the ranks obtained by a variable)Ha: At least one variable population yields larger values than at least one other

variable population

Since number of blocks/respondents (30) in this case is greater than 15 and the number of treatments/variables (11) is greater than 4, the probability distribution can be approximated by that of a chi-square distribution5. α was set at .005. Since the study used 11 treatment levels (variables), df = 10 and the critical value X2

.005.10 = 25.1881. Table 2 shows SPSS output for the Friedman Test:

Because the observed chi-square X2r = 138.788 is greater than the critical value 25.1881 and

since p-value = .0001 is lesser than .005 the decision was to reject the null hypothesis.

Descriptive Statistics

N

Percentiles

25th 50th (Median) 75th

Idea 30 1.0000 1.0000 4.2500

Funds 30 2.0000 4.0000 4.0000

Execution 30 2.0000 4.0000 5.2500

Business Model 30 2.0000 3.0000 6.0000

BPlan 30 2.0000 4.0000 7.2500

Team 30 4.7500 6.0000 7.0000

Technical Knowledge 30 6.0000 7.0000 8.0000

Family Support 30 5.7500 8.5000 9.0000

Govt. Policies 30 7.0000 8.0000 9.2500

Luck 30 7.7500 10.0000 11.0000

Family Background 30 8.0000 10.0000 11.0000

Test Statisticsa

N 30

Chi-Square 138.788

df 10

Asymp. Sig. .000

a. Friedman Test

Table 2

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So collectively, respondents did perceive at least one variable significantly more important for entrepreneurship than at least one other variable. Since there was clear evidence of significant variability in the rankings for different variables amongst the respondents, it was possible and there was a temptation to run post-hoc tests and dig deeper to examine where the differences actually occur. But such finding probably would not serve any purpose from teaching perspective. Instead, it was decided to classify the respondents in three stages on three parameters: once on the basis of education, once on the basis of work experience and once on the basis of family background and then do a comparative analysis of their rankings as a group to check whether these factors were responsible for the variability in the rankings.

There was of course a curiosity to find out which variable had received a significantly higher overall ranking and which one had received a significantly lower overall ranking. To facilitate both the purposes, it was decided to find out weighted averages of the rankings. Frequencies for each rank for each variable were then used as weights. By assigning these weights to the ranks obtained, the weighted average rankings were computed for each of these 11 variables. For the sake of convenience and quicker assimilation of results, rows and columns have been interchanged in this table. So variables are in rows and respondent groups are in columns. Table 3 shows overall weighted average rankings for all respondents as well as for category-wise respondents:

Expected observations: ‘Idea’ as the top-ranked variable was very much as per expectations. Funds came a close second, again as per expectations. The ranks could have easily exchanged places a few years back when most aspiring entrepreneur believed that money was the toughest resource to mobilize. And there was truth in it as well.

The sequence of ‘Ideas’ followed by ‘Funds’ clearly shows the respondents’ belief that if you have a great idea, money will somehow follow. This is a good testimony to the changing entrepreneurial ecosystem where funds are actually chasing ideas; albeit, ideas backed by a strong team. In his blog entry titled ‘No Money? No Problem!’ Tim Berry6, Founder and President of Palo Alto Software and a renowned planning expert says, “You

Table 3 Final Combined Weighted Average Rankings

VariableAll

Respondents EngineersNon

Engineers

Students with Work Experience Freshers

Business Background

Non Business

BackgroundIdea 1 1 1 1 1 1 1Funds 2 3 2 2 3 5 2Execution 3 4 2 2 5 2 2Business Model 4 2 4 4 2 4 2B-plan 5 4 3 3 4 3 3Team 6 5 5 5 6 6 5Technical Knowledge 7 7 6 6 8 7 9Family Support 8 6 8 8 7 9 4Govt. Policies 9 8 7 7 9 8 6Luck 10 10 8 9 10 10 8Family Background 11 9 9 10 10 11 7

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don’t necessarily have to have the money and collateral yourself because for a good business, the idea is that you raise the money from other people who want to participate in the upside of the investment”.

Heartening observations: The most important and heartening observation was the lowest rankings for ‘Luck’ and ‘Family Background’. Traditionally, these were considered of utmost importance. When someone succeeded, it would be attributed to luck and when people did not aspire to become entrepreneurs or found it extremely tough, it was attributed to non-business background of the family.

Another heartening observation was the high rankings of 3 and 4 accorded to “Execution’ and ‘Business Model’ respectively. Especially business model was an entity either unknown or ignored just a couple of decades back. As Guy Kawasaki7, well known entrepreneur, venture capitalist and the former Chief Evangelist of Apple Computers says, “The greatest idea, technology, product or service is short-lived without a sustainable business model”.

Concerns: One concern could be the very low 8th rank for ‘Family Support’. Entrepreneurship is a high-stress career so family support becomes very critical. While teaching the subject, one could probably give a deliberate positive stress on this aspect and share relevant examples to underline the importance of family support in tiding over stressful situations.

A) Engineers V/S Non-engineers

The data were then segregated on the basis of education of the respondents only in terms of engineers and non-engineers and weighted average ranking were computed for both the groups to check whether there were significant differences in perception. (Refer Figure 1)

Expected observations: ‘Idea’ at the top and ‘Family Background’ and ‘Luck’ at the bottom were expected because of the overall rankings.

Figure 1

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Heartening observations: The most important and heartening observation was the high ranking of 2 accorded to ‘Business Model’ by engineers. Especially the fact that they have ranked it way ahead of ‘Technical Knowledge’ is a clear reflection of the changing times.

As mentioned earlier, it is not so much about the technology itself but how well you are able to monetize the technology is more important for a sustainable business. Irrespective of how stringent the laws of the land are, protecting intellectual property is always a tough act with imitators finding their own way out, so apart from continuously evolving technology, it actually boils down to a robust business model to keep you in business.

Concerns: There were no specific concerns especially for this classification apart from the ones observed and recorded in the overall rankings.

A) Experienced V/S Freshers

The data were then segregated on the basis of ‘Work Experience’ of the respondents and weighted average ranking were computed for both the groups (Experienced and Freshers) to check whether there were significant differences in their perception. (Refer Figure 2)

Expected observations: ‘Idea’ at the top and ‘Family Background’ and ‘Luck’ at the bottom were expected because of the overall rankings.

Figure 2

Heartening observations: The most important and heartening observation was the high ranking of 2 accorded to ‘Business Model’ by freshers just like engineers. They have ranked it ahead of even ‘Funds’, a clear reflection of the changing times again.

Concerns: The low ranking for ‘Execution’ by freshers as compared the experienced

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lot was of slight concern. It clearly shows that freshers do not realize the importance of execution as they are likely to have very romantic ideas about the ‘Idea’ itself. They probably believe that they would win half the battle with an apparently good idea. Ironically, every idea is only an ‘apparently’ good idea till it is executed well and taken to its logical potential by an efficient and effective team. In fact, it’s quite fashionable for the venture capitalist community to say that they would rather fund a B-grade idea backed by an A-grade team rather than backing an A-grade idea backed by a B-grade team.

B) Business V/S Non-business Background

The data were then segregated on the basis of ‘Family Background’ of the respondents and weighted average ranking were computed for both the groups (Business V/s Non-business) to check whether there were significant differences in their perception. (Refer Figure 3)

Expected observations: ‘Idea’ at the top was expected from both the groups in light of the overall rankings. It was also expected that business background respondents would give lower ranking to ‘Family Background’ and ‘Family Support’ as they would take it for granted while the non-business background respondents would give both a relatively higher ranking was also expected. That the business background respondents would give a lower ranking to ‘Funds’ while the non-business respondents would give it a higher ranking was expected for the same reasons as the above; business background respondents would take availability of funds for granted. They would either have funds or will have established access to funds.

Figure 3

Heartening observations: The most important and heartening observation was the same rankings accorded by both sets of respondents to ‘Idea’, ‘Execution” and ‘B-plan’. In fact, they came very close for the ranking of ‘Team’ as well. Again a testimony to the changing times; there is now a fair amount of awareness about entrepreneurship even

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amongst the non-business families. That said, immediate family support might still be a few decades away; whether financial or emotional.

Concerns: Quite surprisingly, there were no specific concerns observed in the comparative analysis between business and non-business background respondents.

C) Overall Comparative Analysis

Expected Observations: ‘Idea’ topping the rankings irrespective of education, experience and family background of the respondents was an expected observation.

Heartening Observation: ‘Family Background’ and ‘Luck’ being relegated to lower ranking across the board is a heartening observation.

Concern: While it is an expected observation, such obsession with ‘Idea’ as the most important variable in Entrepreneurship is probably misplaced. Over the years, researcher has had opportunities to speak to a large number of entrepreneurs and most of them seem to believe that it is the ability of the team to execute which is more critical than the idea itself. You may build a great business out of a simple idea but you may spoil a great idea with shoddy execution.

Conclusion and Implications for Teaching

Looking at the results in the light of the first objective with which the study was done, the rankings give a decent insight into the mindset of the learners. However, it would be naïve to base the entire content and methodology on this study. That said, one would certainly find at least a couple of points to ponder.

The most critical concern would obviously be about ‘Idea’, the vastly overrated variable. In fact, most ideas change along the way to execution and the final shape that a business takes might be completely different from the idea it started with. Examples like Nokia and MRF are aplenty. Nokia started by making Fishing Nets and ended up being one of the most successful mobile handset makers. MRF started by making balloons and ended up being one of the most successful automobile tyre- makers.

It would be appropriate to quote John Mullins and Randy Komisar8 at this point. They say, “New businesses are fraught with uncertainty. To succeed, you must change the plan in real time as the inevitable challenges arise. In fact, studies show that entrepreneurs who stick slavishly to their ‘Plan A’ stand a greater chance of failing- and that many successful businesses barely resemble their founders’ original idea.”

The other issue that an educator might like to ponder over is the relatively underrated ‘Family Support’. Young learners who have not had to financially support families or to face family resistance to entrepreneurial ambitions might not readily realize the importance of having the family not just on but by your side in times of sacrifices and stress. Findings of the study conducted by Kim Klyver9 (2007) show that family members are most strongly involved in the emergence phase when the final decision

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to start or not has to be made.

This needs to be clearly brought out and underlined so that the ones harbouring entrepreneurial aspirations start keeping their families in the know of their ambitions and plans since such support takes time coming across, especially in the Indian scenario. It would help to refer to stories of entrepreneurs who never forget to acknowledge the contribution of the family to their success.

Limitations

1. The study was conducted with the students of only one college.2. Being a pilot study, sample was restricted to only 30 respondents.3. Not all the questions in the questionnaire were statistically analyzed since the

scope of the paper was later restricted only to the first objective of the study.4. The variables were chosen based only on the researcher’s own experience.

References

1. Krueger N. F &Brazeal D. V. (1994), “Entrepreneurial potential and potential entrepreneurs”, Entrepreneurship: Theory & Practice, Vol. 18, pp. 91–104.

2. Kourilsky M. L. &Walstad W. B. (1998), “Entrepreneurship and female youth: knowledge, attitudes, gender differences, and educational practices”, Journal of Business Venturing, Vol. 13, pp. 77–88.

3. Gorman G., Hanlon D. & King W. (1997), “Some research perspectives on entrepreneurship education, enterprise education and education for small business management: a ten-year literature review”, International Small Business Journal, Vol. 15, pp. 56–77.

4. Black Ken (2009), Business Statistics; For Contemporary Decision Making, Wiley India, pp. 521-525

5. http://en.wikipedia.org/wiki/Friedman_test6. Berry T. (2009), “No Money? No Problem!”http://articles.bplans.com/financing-

a-business/no-money-no-problem/597. Kawasaki G. (2004), Art of the Start: The Time-Tested, Battle-Hardened Guide for

Anyone Starting Anything, Penguin8. Mullins J. &Komisar R. (2009), Getting to Plan B: Breaking through to a better

business model. Harvard Business Press9. Klyver K. (2007), “Shifting family involvement during the entrepreneurial process”,

International Journal of Entrepreneurial Behaviour& Research, Vol. 13, pp. 258-277

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Banking To The Poor: Different Models And Lessons for India

Dr. Rajesh PandaAssociate Professor, SIBM, PuneE-mail: [email protected]

Introduction

Micro Banking is an initiative for banking services to the poor and economically marginalized people who otherwise don’t have access to the banks. It is characterized by small size of loans and small saving mobilization among the low income groups. Micro finance is emerging globally as an effective and popular means in the struggle against poverty. It lies on the principles of client friendly procedures, highly disciplined clientele and workforce, service delivery and banking services at the client’s door step. It includes provision of financial services to microenterprises, but mainly to ‘low-income segments of the population’. This includes individuals and households as well as enterprises. Institutions providing micro banking services include formal and informal entities, and regulated and unregulated ones. The subject of micro banking has suddenly caught attention in both developing and developed countries. In developing economies, microfinance mainly in the form of micro banking offers more hope for the poor compared to the developed economies.Moreover, the term ‘Financial exclusion’ has been the main concern in many international forums that has drawn attention towards Micro banking. India being an agrarian economy where more than 58% people depend on agriculture and more than 70% people stay in villages with least access to banks, micro banking has to play a very critical role in poverty alleviation and livelihood creation.

Review of Literature

Different researchers have propounded different theories and models of Microfinance that can benefit the poor. Based on the definition of microbanking, the household, and not the individual or the microenterprise, is the most appropriate unit of analysis. Households may be both units of production and of consumption. The household-based microenterprise is the most numerous business entities and the greatest source of employment. Microbanking in developing countries can raise the productivity of households as producers as well as increasing the welfare of households as consumers (Conroy, 2002). Most of the microfinance models are based on groups for financial intermediation. There are two very different ways of using groups for financial intermediation. One is the Bangladesh Grameen Bank method, which is normally referred as theGrameensystem, and the other is the called Self Help Group, or SHG

Research Papers 8

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system. There are many variants of each system, and they are often referred to as the ‘solidarity group’( Harper, 2003). Both systems are dominated by female clients, but they differ in many other fundamental respects, which have important implications for their clients and for the institutions which offer them. The systems are also implemented in many different ways, depending on local circumstances.

Grameen Bank Model

Muhammad Yunus first conceptualised the Grameen Bank -originally Bank of the Poor - system in Bangladesh in 1976. Believing that credit is a human right, and disagreeing with conventional banking systems that exclude the poor from receiving this right on the assumption that they will not repay loans, he created a methodology and institution centred around the unique circumstances and needs of the poorest of the poor (PERSGA, 2007).The Grameen Bank model works on the concept of joint liability. Here Micro finance institutions (MFIs) organise borrowers into ‘Groups’ of five members which are in turn organised into ‘Centres’ of around five to seven such Groups. The members make regular savings with the MFI, according to a fixed compulsory schedule, and they also take regular loans. They each have individual savings and loan accounts with the MFI, and the main function of the Groups and Centres are to facilitate the financial intermediation process.

Banks for the Poor in the Arab Region

The Grameen Foundation has collaborated with the Abdul LatifJameel Group of Saudi Arabia, for microfinance opportunitiesin the Middle East and North Africa. TheGrameen-Jameel initiative provides assistance to other MFIs through capacity building, directfinancing, loan guarantees, technical support, translation of microfinance manuals andpublications into Arabic, and has sponsored many practitioners to receive training on bestpractices exhibited through the Grameen Bank example(PERSGA, 2007).

Micro Banking in Bolivia

The cooperative system of lending to small business has existed in Bolivia for long time. But the start of microfinance industry in Bolivia could be associated with the first twentyloans to four market women in La Paz made by PRODEM (the leading Microfinance NGO in Bolivia) in 1985 (Malamute, 2006). Microfinance in Bolivia originated with donor support to NGOs that later transformedinto formal financial institutions. In this process NGOs created spin off Microfinance Institutions. These MFIsaccessed commercial capital, mobilized localsavings, improved customer service, and expanded outreach. Today BancoSol, one of the best performing banks in Bolivia has added to the credibility to the notionthat microfinance NGOs could become part of the regulated financial landscape and reach the poor who didn’t have an access to finance.

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The SHG System in India

The Self Help Group (SHG) system is mainly found in India, where it is used by both MFIs and banks. The SHGmodel also exists in Indonesia, parts of South East Asia, Africa and elsewhere. The SHG system in India was initiated by NGOs, and is used for financial intermediation both by commercial banks and by MFIs.The average membership in each SHG is around fifteen to seventeen people.The total SHG members in India are well above the number of beneficiaries in any micro finance model including Grameen bank. The formation of SHGs for savings and credit, and their linkage to commercial banks, was initiated in India by MYRADA in the mid-1980s. NABARD management had around the same time had some exposure to similar experiences in Thailand and Indonesia, and they responded favourably to MYRADA’s suggestion that this could be a useful way to bring formal financial services to the rural poor. Since that time, SHG linkage has been vigorously promoted by NABARD. The Indian SHG system normally involves a bank and a NGO. NGOs do not play any financial role. They promote and train the groups, and assist them through the qualifying process of saving and internal lending. The groups are introduced to a bank to open a savings account, and later to take a loan. The NGO may remain heavily involved, assisting the members to manage their affairs, and possibly promoting higher level clusters and federations of SHGs, or it may withdraw and work with other groups( Harper, 2003). However some NGOs can transform themselves as MFIs and can directly act as financial intermediaries.

Lessons for India in Micro BankingIndia is a vast country with certain differences between Northern and Southern India, and the requirement of borrowing can be different in different states as per the income level, cropping pattern, occupation and culture of the place. At the same time we have to contemplate a model that is sustainable over a long period time. Though SHG system is deep rooted in the MFI structure in India, not necessarily we have to adapt or replicate the same structure throughout the country.

Conclusion

Commercial banking was mainly concentrated with industrial finance in earlier days, which took a shift towards retail banking in the last decade. The next buzzword in the banking industry has to be Micro banking. Here the loan size may be small, but the vast number of borrowers will make up for the volumes. Unlike the traditional banking, micro banking has a developmental objective in addition to the interest income by the banks. The SHG led Micro banking model has been successful in certain patches in India, but we can learn the different other forms of Micro banking from rest of the world, modify to our requirement and implement to benefit larger masses in India.

References

1. Conroy, J. (2002), APEC Economic Committee Symposium on Microbanking Development, Regulation and Supervision in the Asia-Pacific Region

2. Harper, M, (2003), Self-help groups and Grameen bank groups: What are the

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differences-http://media.microfinancelessons.com/resources/grameen_v_shg_harper

3. Malamute, G. (2006) Microfinance in Bolivia, Bangladesh and Brazil, Three complementary models-http://www.lulu.com/items/volume_28/441000/441527/1/print/441527

4. Morduch, J. (1999), “The Microfinance Promise”, Journal of Economic Literature, pp. 1569-1614

5. http://www.nyu.edu/projects/morduch/documents/microfinance/Microfinance_Promise

6. PERSGA-Concept Paper on the Bank of the Poor - Grameen Bank Microfinance System

7. http://www.megabanknepal.com/product.php?cms=micro_ banking&tm=8&mid=88) http://coachingtheglobalvillage.org/our-founder/a-thought-paper

9. http://www.megabanknepal.com/product.php?cms=micro_banking&tm=8&mid=8

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Invoking The Organizational Consciousness: Insights from Bhagvad Gita

Prof. Amrita VirdiAssistant Professor, SIBM, PuneE-mail: [email protected]

Introduction

The Bhagavad Gita has been in the news recently. This ancient text, understood by the Hindus as a treatise on how to live life meaningfully, was almost banned in Russia. They believed that it propagated the message of aggression and war and termed it as “extremist literature.” Readers of this sacred test, on the other hand, argued that the essence of the text is in its interpretation. A literal translation is too narrow and does not describe the extraordinary depth and wisdom contained in the book. In fact, an individual would interpret the Gita differently at different times in one’s lifetime depending upon the various life stages, experiences and circumstances that occur.

Lessons Drawn From Bhagvad Gita

The Bhagavad Gita imparts lessons to its readers on every aspect of life. Not surprisingly, a management student or professional can also apply these invaluable lessons to the study and practice of management in organizations. Some of the lessons which we can learn from the Gita are:

1. Mentorship: The Bhagavad Gita is the ultimate treatise on the criticality of effective mentorship. Lord Krishna, Arjuna’s Charioteer on the battleground of Kurukshetra, was his greatest asset, friend, philosopher and guide. It is Lord Krishna’s wisdom, guidance and support that ultimately won the war for the Pandava’s. Without being directly involved, Krishna encouraged Arjuna and gave him the strength to fight. An ideal mentor serves the same purpose in the organizational context. One example of a successful company that advocates the concept of mentorship is General Electric (GE). Jack Welsh, founder of GE, personified mentorship. A hard taskmaster, Welsh believed in leadership that aimed at grooming high potential individuals to take up positions of greater responsibility in the future. Succession planning is an intrinsic part of the work culture at GE.

A mentor plays a crucial role in providing the necessary inputs, guidance and encouragement to foster growth and development of individuals within

Articles/View Points 1

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organizations. Arjuna, the most skilled amongst the Pandavas was chosen by Krishna as his most able disciple. Arjuna, in turn, surrendered to Krishna with utmost devotion and trust. Similarly, high potential individuals are chosen as mentees in the organizational context. The essence for the success of the mentor – mentee relationship is the mentors’ belief in the mentee’s potential and the mentee’s trust in the mentors’ intentions. Both of them have no vested interests and only work towards the achievement of the ultimate organizational goals. In chapter 11, text 55, of Bhagavad Gita, Krishna says, “My dear Arjuna, he who engages in my pure devotional service, free from the contaminations of furtive activities and mental speculation, he who works for me, who makes me the supreme goal of his life, and who is friendly to every living being – he certainly comes to me.”

2. The importance of goals: Setting specific goals and displaying an unflinching commitment to the achievement of such goals was one of the most important lessons imparted by Krishna to bewildered Arjuna who was overwhelmed with the thought of killing his own kith and kin on the battlefield. As an answer to Arjuna’s dilemma, Krishna emphasized on the importance of performing one’s duty. The duty to work towards a predetermined goal without being overly concerned about the fruits of labor is the essence of this tenet. This is an important lesson for management students who seem to be caught up in the race for the best paying job. To choose a career /job based on one’s interest and ability is the first step to achieving success. The next step is a single minded effort towards the achievement of that goal. Patience and perseverance are the qualities of greatest significance in this context. It is seen that the rewards invariably follow. In today’s fast paced world, this lesson seems to have lost its relevance and needs to be understood all over again.

3. Steadfastness and courage: Our professional and personal lives are fraught with uncertainty. The fluctuating economic conditions, the change in the social order, technological and other advances, cause their shares of anxieties and worries. An individual who is ruled by emotions would forever be falling into the depths of despair or rising up to peaks of euphoria in these times. The key to achieving success in this context is to attempt to remain steadfast in the face of all calamities and victories. Detachment from the fruits of ones efforts is the key to reaching this state of mind. Often, certain corporate situations may seem daunting for a manager and the only way to resolve such situations is to keep a cool head and make informed rather than emotional decisions. In chapter 12, text 15, Krishna says to Arjuna,”he by whom no one is put in difficulty and who is not disturbed by anyone, who is equipoised in happiness and distress, fear and anxiety, is very dear to me.”

4. Ethical conduct: In today’s times, the issue of ethical conduct is a hot topic of discussion. The reason for the complete dissolution of large and well established corporate organizations like Arthur Anderson, Enron, Satyam and Lehman Brothers to name just a few, is the gross ethical misconduct on the part of the managements of these companies. Another ethical dilemma faced by many of us in our work lives is when we come across friends and colleagues engaging in wrongful acts. The question that arises is,” do we keep up the friendship or do we choose do what is right?” The Pandavas chose the path of righteousness. They had the almighty God as their most

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powerful ally. Their success over the corrupt Kauravas, was therefore, a foregone conclusion. The age old principle of “victory of good over evil” is emphasized time and again in this sacred ancient treatise. Texts 11 and 12 of chapter 16 state that unethical conduct stems from those who believe that the “gratification of the senses is the prime necessity of human civilization. Thus, till the end of life, their anxiety is immeasurable. Bound by a network of thousands of desires and absorbed in lust and anger, they secure money by illegal means for sense gratification.”

5. The futility of false ego, pride, anger, harshness and ignorance: Lord Krishna describes the said qualities as “demonic.” This is an important lesson for managers who may be tempted to wallow in these base emotions. Office gossip, slander and unhealthily excessive competition are some of the outcomes of these emotions. Chapter fourteen, text 7, states “from the mode of goodness, real knowledge develops, from the mode of passion, greed develops and from the mode of ignorance develop foolishness, madness and illusion.”

Conclusion

The Bhagavad Gita, a part of the Mahabharata and essentially a dialogue between Lord Krishna and his favorite disciple, Arjuna on the battlefield of Kurukshetra was written approximately 5000 years ago. It remains to this day, one of the finest and most insightful classics of world literature. It is seen as the main literary support for the great religious civilization of India, the oldest surviving culture in the world. Yet, the enduring wisdom, simplicity and practicality of its content are relevant now more than ever in the context of today’s corporate environment.

References

1. Bhagavad-Gita As It Is (2009), Second Ed. By A.C. Bhaktivedanta Swami Prabhupada,The Bhaktivedanta Book Trust, Mumbai

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The Essentials of A Healthy WorkplaceProf. Deepika PanditaAssistant Professor, SIBM, PuneE-mail: [email protected]

The place where we spend our time (work place,home) and our social contacts in those settings shape our health”

In order to address the strong relationship between work and health, it is necessary to consider all the components of a healthy work place that have an effect on the employee. Over the last 40 years, major changes have taken place in the work place. The growth in the use of information technology at work, the globalization of many industries, organizational restructuring, changes in work contracts and work time scheduling have radically transformed the nature of work in many organizations. The work for cei tse l f isal so diversifying with an increase in female participation and agrowing number of dual-earner couples1.

Organizations in countries hit by recession were downsizing or de-layering in an effort to survive. During the last decade, this trend for restructuring and downsizing has continued in many organizations, together with an increase in sub-contracting and outsourcing, in order to compete successfully in the increasingly competitive global market. Other changes include new patterns of working, such as teleworking, self-regulated work and teamwork, an increased reliance on computerized technology and a move towards a more flexible workforce, both in number of employees and in their skills and functions2.

As the work place has slowly transformed, the corporate sectors in European and North American countries have adapted smartly to the changes and productivity levels have gone up. The core issues that come up when discussing work place environment, stress, occupational health and employee well-being, revolve around four major areas i.e. job in security, work hours, control at work, and managerial style. This situation is a cause of concern in the west and in India, similar conditions are very much relevant to the IT sector.

Reasons of Building a Healthy Workplace

The booming of IT outsourcing centers in metros reveals the vulnerability of the above mentioned factors. Each of these issues has become a major concern as a result of the recent radical organizational changes. There are now fewer people at work, doing more and feeling less security and control in their jobs. Management in particular


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has increased pressures trying to keep pace and manage their workforce against a background of rapid change. This heightened pressure has brought an impact on their behaviour towards employees. In today’s market driven competitive world, a capable employee is the most important resource and a fundamental precondition of productive action.

Promotion of the employees’ -both women and men’s-working ability and functional capacity are based on the needs of the whole society. Building a healthy workforce as well more productive working conditions calls for organizational change processes, strategies/tactics, management of work environment issues, systematic management of safety and a capable and motivated personnel. Workplaces that foster employee health and well-being create an environment of improved employee productivity, attendance, retention and engagement3.

“There is no one single way to create a psychologically healthy work environment,” they comprise practices that fall into five categories4:• Employee involvement.• Health and safety.• Employee growth and development.• Work/life balance.• Employee recognition.

Ways of Creating A Healthy Workplace

Employee participation in decision-making; programs promoting healthy lifestyle and behavior choices; skills training and leadership development; flexible work arrangements; and marking individual and team milestones are among the practices that contribute to a psychologically healthy workplace5.

Creating a psychologically healthy workplace takes a firm commitment and recognizing the internal and external factors that affect the context in which those programs operate. Those factors include the employer’s values, mission and culture; its leadership; its processes; communication channels; the nature of its work; its geographic area; market environment, stakeholders and competitors; management practices; facilities and its readiness for change.

“There are some very healthy, very successful companies that had to … do a lot of very difficult things” during the recession. “The organizations that did things in a healthy way” and were mindful of all their stakeholders “will emerge positioned to move forward and be successful in the economic recovery.”A good assessment of employee needs is the place to start in building a psychologically healthy workplace. In addition, organizations need to:1. Tie healthy workplace practices to the company mission, values and goals.

Otherwise, these programs will be among the first cut when budgets tighten.2. Tailor programs to the organization and its employee demographics.3. Get senior management’s commitment and participation.

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4. Involve employees in building and evaluating programs that promote psychologically healthy workplaces.

5. Communicate the programs effectively to employees and evaluate those programs continually to find ways to make improvements.

Employee satisfaction and engagement are not the same, satisfied employees generally exhibit low absenteeism, low turnover and low substance abuse, but engaged employees go beyond those traits, Schneider said, likening them to focused mountain climbers. Engaged employees are more likely to be proactive and adaptable and to reach beyond their expected roles.Job design, trust and safety, and treating employees fairly are part of the framework that fosters and sustains engagement. Creating an atmosphere of fairness includes paying attention to the seemingly mundane aspects of work—keeping promises, treating people with respect and providing the resources, training and support that employees need to perform their work.

Models on the Healthy Workplace

The World Health Organization (WHO) has developed a model on Healthy Workplace to explain the parameters affecting the health of the organization.

Source:WHO Healthy Workplace Framework and Model: Background Document and Supporting Literature and Practices

This model speaks about the factors of healthy workplace broadly classified as Physical

Figure 1WHO Healthy WorkplaceModel: Avenues of Influence,

Process, and Core Principles Physical WorkEnvironment

PsychosocialWork

Environment

PersonalHealth

Resources

Enterprise CommunityInvolvement

Mobilize

Improve

Evaluate

DoPlan

Assemble

Assess

Priori�ze

LeadershipEngagement

ETHICS & VALUES

WorkerInvolvement

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Work Environment, Personal Health Resources, Enterprise Community Involvement and Psychosocial Work Environment. The values and ethics of the company play a very important role in building a healthy workplace. The leaders as well as the employees should be involved in the process of building a healthy workplace.

There are 3 factors which influence the health or wellness of the organization and its employees6.

1. Health & SafetyThe environment in which people work is a major influence on employee health.

Some aspects are:

Noise level Workplace designAir quality Safe liftingErgonomics Employee violenceToxic substances Physical demandsWork pace Safety guidelines

2. Culture & Social EnvironmentBasic human needs such as sense of belonging, purpose and mission, sense of

control and freedom from harassment.Related issues are:

Balance between work and family Staff involvement in decision making Flex time Peer communication Employee training and development

3. Lifestyle Practices of Employees :Workplaces that support health practices encourage healthy behaviors skills.

Smoking cessationHealthy weightHealthy eatingPhysical activityWomen’s health issues

Another Model on Healthy Workplace emphasizes on the drivers and the elements that drives a healthy workplace.

Employee satisfaction Positive supervisor communication and feedback Staff morale Employee recognition Social atmosphere

HygieneStress managementCoping with shift workHealthy pregnancyAlcohol and drug use

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DRIVERS ELEMENTS GOAL

Principles

Leadership

Planning and Programs

People Engagement

Process Management& Risk Assessment

Results

Physical Environment

and Occupa�onalHealth and Safety

Health andLifestyle Prac�ces

Workplace Culture and Suppor�ve

Environment

Healthy employees

making acontribu�on to

the organiza�on within ahealthy

workplaceenvironment

Source:Canadian Healthy Workplace Criteria

Developed in 1998 by the NQI in partnership with Health Canada and a team of key health professionals, the Canadian Healthy Workplace Criteria addresses a broad-based approach to health and wellness issues in the workplace. The criteria brings together environmental, physical, mental, safety and social issues into a strategic model that helps organizations set goals and manage their wellness programs. The Canadian Healthy Workplace Criteria is used to adjudicate the Healthy Workplace Category of the Canada Awards for Excellence.

These are certain facts in place of work occupancy which is already taken care off and put under its desired perspectives. Most often than not people inculcate these workplace ethics but in certain cases matter is lightly resolved because of a go free attitude. The maintenance could be a weekly or a monthly affair. But the spontaneity with respect to its due diligence metamorphoses giving way to duty indulgence. This is a light throwing awakener for streamlining daily habits into a shade of reality.

Conclusion

Each office must face the challenges of becoming and staying organized and efficient. Many times morale among staff suffers as everyday task seem monumental due to lack of organization. Chaos just seems to flow when there is not real organization or a place where things are supposed to get done. If your office does a lot of copying, create a copy space. Group printers, copiers and the needed supplies together so that staff is not running through the office looking for copy paper or toner. If your office needs large spaces for layout have tables and good lighting that allows for items to be laid out and collated quickly and most importantly correctly. If you have staff members whose jobs are interconnected place their offices or cubicles close together so that valuable time is

Figure 2

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not wasted while trying to track another person down. Take some time to absorb what are the vital functions of your office and see if grouping together or rearranging functions will improve organization and efficiency. And then once an area is established make sure that everyone knows it designated purpose. Insist that the employees keep areas clean and organized. Clutter and trash is distracting. A clear workplace makes for clear thinking.

Make sure to take full advantage of any applicable technology that will help you stay organized and get more accomplished. Virtual communications has probably become the biggest factor that has allowed so many people to increase their productivity and efficiency. There is also of course the whole World Wide Web, email, instant messages, virtual phones, cell phones, virtual fax, and video conferencing, and the list goes on and on.

Another major concern is mixing up official and private lives together. Most often all private lives of employees tend to start after they are out of the office limits. Organizations should not take cognizance of their workers doings once the stipulated working hours are complete. Employees should keep their private lives and personal activities as separate as possible from the workplace. All of us, as human beings need private lives and need to do personal activities. First, the office is a place where ideas are laid on the table, where there should be no limits, where creativity should not have any boundaries, with the exception of a few limitations, legally and morally speaking. These ideas are things that must be nurtured to build upon them. They can then provide answers to questions and solutions to problems. Meaning, some people are inspired by those that they are surrounded by and the activities they are involved in. However, employees can be inspired by these things while keeping these elements out of the office.

Hence companies should lay importance by showing our care for keeping our workstation spick and span and by steering clear of our personal life’s involvement within office limits will pave the way for a buildup of powerful ethical up gradation amongst all corporate. Ethics are free, but the absence of ethics can be extremely costly. Hence a company that finds a way to change the system can be influenced to act ethically and responsibly is far more likely to succeed. A healthy workplace creates a healthy environment.

References1. WHO Study of Healthy Worlpace in Corporate Sector 20082. Cox,Griffths,and Rial-Gonzalez,20003. The American Psychological Association (APA) inMarch 2010 conference in

Washington, D.C.4. Kathy Gurchiek, SHRM Study,Psychologically Healthy Workplaces5. APA American Psychological Associa�on6. Health Canada, 1992 & National Quality Institute, 1998

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Rolling Rupee : An Economic Saga

Prof. Mahima MishraAssistant Professor, SIBM, PuneE-mail: [email protected]

Dr. Sanjay BhaleProfessor, SIBM, PuneE-mail: [email protected]

Introduction

Before 2011, the rupee was hovering around the 44-46 band, but over the past one year there has been a continuous depreciation in its value. An approximate 18 % depreciation occurred in three months of time span. From 44-46 per Dollar ($) for almost 20 months, Indian rupee depreciated sharply to 51.8 by December 2011. The experts believe that there will be further depreciation in its value. This rupee depreciation combined with negative industrial productivity, rising inflation (in real terms) have created enough headache for the policy makers. Persistent inflation, high interest rates, low domestic business confidence, rising government and trade deficit and gloomy international economic outlook are turning out to be the biggest challenges for present government.

The present situation is the outcome of global turbulence which has created a condition of uncertainty in domestic market. Current global development has not been favorable for India. The debt crisis in Euro zone has led to flight of US $ from Indian market which has affected stock market adversely. In fact, all Asian markets are into trouble but the worst effected seems to be the Indian stock market. According to Morgan Stanley Barren data, Indian market performed worst with -14.18% downfalls as compared to other Asian markets like Brazil (-5.93%), China(-3.96%), Indonesia(10.27%), South Korea(8.07%), Malaysia(4.42%) and Russia(2.58%). These markets have performed better than India. India who was one of the best performers on the global equity front in 2010 is proving to be the worst Asian performer in 2011.This kind of situation has in fact bolstered the negative sentiments against Indian economy which can be bad for the economy in the long time period. Among all other Asian currencies the rupee has emerged as the most vulnerable currency. While other Asian currencies have depreciated in single digit (except Chinese Yuan), the rupee depreciated approximately 18% in 2011.


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On the domestic front also several problems are cropping up. GDP growth has dropped to 6.9% in September 2011 which is the slowest GDP reported in past two years. Thisachieved GDP growth in 2011-12 is a sharp downturn from 7.8% of earlier forecast in the beginning of the year.

Depreciation Vis A Vis Devaluation

In everyday use, devaluation and depreciation are often used interchangeably while, there is a distinct different between these two. The effects of these two things are similar but the factors behind them are entirely different.

Currency devaluation is a deliberate downward adjustment in the official exchange ratesestablished, or pegged, by a government against a specified standard, such as another currency or gold.Thus it’s an active decision of a government to reduce the value of its own currency against other currencies.Governments devalue their own currencies to make either their exports more attractive in foreign market or to discourage import, thus helping to reverse the balance of payments deficit.

While depreciation is purely according to the market forces i.e. supply and demand side factors of currency in which government has no role to play. Depreciation is market driven process in which there is no government intervention. It’s decrease in value of currency with respect to other currencies.As more and more of dollar flows out of India, dollar demand exceeds its supply resulting in rupee depreciation and dollar appreciation. At the same time it also leads to rising prices of imported commodities. This market driven system is known as ‘Free Floating Exchange Rate’ regime where market demand and supply of local and foreign currencies governs the value of currency. Thus according to the availability or shortage of currency in market it either depreciate or appreciate.While depreciation is reduction in value of currency, it can be advantageous as it makes exports in the depreciated currency less expensive and can be used for capturing more market overseas. Since in the present situation the exchange rates moves in accordance to the market we mostly get across with the situation of depreciation only. In day to day use, we mostly refer to depreciation and devaluation as the same, but technically there exists a great deal of differences between them.

Current Rupee Tumble

As discussed earlier, the rupee has depreciated from 44-46 band to 50 plus per dollar across three four months of time span. The graph given below also explains the same situation where between July 2011 to December 2011 rupee band has widened from 44 rupees to as high as 53 rupee per dollar level.Various internal and external factors seems to be responsible for this .Though there is the turbulence in the global financial markets but the strange sight of funds gravitating to the dollar despite the troubles in the U.S. economy is creating a very mysterious picture for the international investors. The current wave seems to be favoring the American economy while the tide is surely against India.

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Not only Spot market rates are rising there is a hike in Forward rates also. Even the forward rate for the rupee-dollar exchange rate for December is as high as 50 paise which is forcing the importers to hedge their position fearing free fall of currency which in turn is making the forward hedge even more expensive proposition. The one month forward premium on the dollar has also registered a substantial jump of 454 bps between August and October (Table1).

Impact Of Rupee Fluctuations On Indian Economy

1. Balance Of TradeAs a consequence of rupee depreciation import payments are continuously growing while export receipts are sliding down not only because of weak rupee but also due to lame global demand particularly from the euro zone. Thus sectors like petroleum and petroleum products, drugs and pharmaceuticals and engineering goods which have import inputs of as much as 77 percent, 19 percent and 21 percent, respectively – are suffering most due to rupee depreciation. They would have to pay more for the imported raw materials which would decrease their profit margins. At the same time Rupee depreciation makes Indian goods and services cheaper for overseas buyers, thus leading to increases in demand and higher revenue generation.So, it is good news for industries such as IT, textiles, hotels and tourism which generate income mainly from exporting their products or services.Rupee depreciation is generally bad for industries which rely mostly on imported inputs while depreciation of the rupee is welcome news for industries which are exporting a majority of their products and

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52

50

48

46

44 Jan/11 Apr/11 Jul/11 Oct/11 Jan/12

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52

50

48

46

44

USDINR EXCHANGE RATE

Month 1-month 3-month 6-monthaugustseptemberoctober

2.095.646.63

2.915.155.73

2.893.704.75

Table 1: inter-back forward premium on dollar (%)

Source:RBI

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services. Thus Indian IT industry which is a major contributor to current account under invisible export relies mostly onforeign clients, especially the United States, for more than 70 percent of its revenue can benefit greatly with current currency fluctuations.While earnings from invisibles have been quite robust this year (growth of 17% y-o-y), the trade account has deteriorated on unfavorable terms of trade (import more than export).The trade deficit has widened to $43.9 billion as compared to $37 billion during corresponding quarter last year, the RBI said1. Widening of this current account deficit could put even more pressure on Rupee.

As given in the graph also, there has been an alarming rise in current account deficit in Indian GDP.The Current Account in India was last reported at -3.2 percent of GDP. From 1980 until 2010, India’s average Current Account as percent of GDP was -1.24 percent reaching an historical high of 1.50 percent in December of 2003 and a record low of -3.20 percent in January of 20112. But since, traditionally India has been a current account deficit economy it is not a very big concern. Major concern comes from declining capital inflows.

2. Declining Capital InflowsForeign Institutional investments between January to June 2011 were 14,329 crore which was nearly half of 30,915 crore of year ago during 2010. Foreign Direct Investments also declined by 28% in 2010-11 to a four year low of 27.0 billion $ as against 37.76 billion $ in 2009-10.This escalates the problem for Indian stock market even more. In 2011, FIIs withdrew around Rs 3,800 crore from share market. In the recent episode of depreciation, a sharp fall in capital inflows led to adrying up of supply, while demand on account of the current account deficit continued unabated, leading tothe outcome we saw3. A country like India which mostly has deficit in their current account survives on surplus in their capital account. So in present situation when capital inflows are dwindling, current account drives the exchange rate and put further pressure on currency.

INDIA CURRENT ACCOUNT TO GDP

-1.8

-2

-2.2

-2.4

-2.6

-2.8

-3

-3.2

-3.4Jan/08 Jul/08 Jan/09 Jul/09 Jan/10 Jul/10 Jan/11 Jul/11

-1.8

-2

-2.2

-2.4

-2.6

-2.8

-3

-3.2

-3.4

-2

-2.8

-3.2

source: www.tradingeconmics.com

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3. InflationIndia being net importer country and crude being the primary item of import will see a rising cost of crude oil due to depreciating rupee. Inflation which has been haunting Indians for past 2 years will rise even if the price of crude falls in international markets. Hence inflation will be the key risk due to deprecation of rupee. As India imports around 70% of its crude oil requirements government now has to bear more burden of rising oil import bill. Since oil is subsidized by the government, higher import bills will lead to rise in fiscal deficit for the government and will push the inflation.The deputy governor of Reserve Bank of India, SubirGokaran said that the rupee depreciation is moving as per market dynamics and the fall in the value of the rupee will particularly impact India’s energy import bill. Mr.Gokaran said that any action taken by the RBI to arrest the fall of the rupee might have consequences in the near future. He said that the immediate impact of the fall in the value of the rupee will be on the inflation rate which has been hovering near the double - digit mark for several months. Indian corporate sector which import raw materials from abroad will also be hit hard as they have to pay more for imports and they may have to reconsider the prices of their goods and services.

The rupee’s depreciation is set to hit infrastructure sector projects also which are greatly dependent on international market borrowings and imported equipment in a big way. Experts apprehend that the over 18 per cent slide in the rupee since August would raise the cost of infrastructure projects substantially.Thus depreciating rupee may compound the macroeconomic problems as prices of imported goods will surge which worsen the current account deficit. India won’t be able to take advantage even if commodity prices ease due to global slowdown.

Outlook And Policy Measures

With all the analysis so far we have seen that Indian rupee has passed through

Exhibit 2:FII net investments in FY12 2000 1500 1000 500 0 -500 -1000 -1500 -2000-25000

Apr May June July Aug Sep Oct

Source:SEBIF II equity F II debt

US $

mn

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several stages where external and internal factors in combination use to affect its value. Considering the situation of Indian economy presently we wonder whether this depreciation is obvious and natural in relation to the domestic situation or just is flowing along with the wave. On the superficial level it seems to affect only import, export, foreign capital inflows etc. but the biggest threat is hidden behind these factors in the form of alarming rise in India’s external debt. India’s overall external debt outstanding as of June-2011 was $317 billion, an increase of 38 per cent in last two years. The short-term external debt increased at a much faster pace of 62 per cent (in absolute terms) during the same period and it now constitutes about 21.6 per cent of total external debt.2The biggest problem is that most of this external debt (43%) is maturing within one year of time. The present depreciated rupee can be hazardous for Indian economy. With the depreciating rupee Indian export of services should get greatly benefitted. But even Indian services export shows sluggish growth. So the dependency on invisible earnings neutralizing trade deficit is also not happening. The present situation needs to be carefully observed and analyzed and swift actions are needed to avoid serious repercussions on the economy. On one hand, RBI is trying hard to control inflation by various monetary tools; depreciation is proving to be another challenge for them. Though official foreign reserve kitty looks sufficient, but in reality, the actual foreign currency reserves with RBI are not sufficient enough so that it can intervene in market and rectify the situation. In future also India should learn to deal with currency fluctuations on its own rather than relying on central bank to intervene and control the situation.For this purpose government needs to magnify its policies to boost and encourage exports which actually are the real earning of economy. Inviting and attracting more foreign investment is another way to correct the situation but any kind of foreign money involves its own repercussions for the economy in the long run. Now I believe the time has come when we need to accept that turbulences in global economy will persist and as an economy we should develop ourselves in such a way so that there is least effect of these disturbances on India. Since any stable source of capital inflow is missing, the rupee seems to remain highly fluctuating currency in coming time.

Endnotes:1. Reserve Bank of India2. www.tradingeconomics.com3. An Assessment of Recent Macroeconomic Developments ,SubirGokarn, RBI Speech,

January 2012

References:1. www.businesstoday.intoday.in/story/rupee-fall-against-dollar/1/18929.html

2. www.businesstoday.intoday.in/story/rupees-plunge-rbi-action-reasons-behind fall/1/20888.html

3. www.businesstoday.intoday.in/story/rupee-us-dollar-exchange-rate/1/20422.html

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4. www.tradingeconomise.com

5. www.rbi.org.in6. Archer, D., and Holiday, J. (1998), “The rationale of holding foreign currency

reserves”, Reserve Bank of New Zealand, Vol. 61, No. 4, pp. 346-354

7. Baron, D.P. (1976), “Fluctuating exchange rates and the pricing of exports”, Economic Inquiry, Vol. 14, pp. 425-38

8. Dornbusch, R.(1987), “Exchange rates and prices”, American Economic Review, Vol. 77, pp. 93-106

9. Doðanlar, M. (2002), “Estimating the Impact of Exchange Rate Volatility on Exports: Evidence from Asian Countries”, Applied Economics Letters, Vol. 9, pp.859-63

10. Goldberg, P. K., and Knetter, M. (1997), “Goods prices and exchange rates: What have we learned?”, Journal of Economic Literature, Vol. 35, pp. 1243-72

11. Gupta, S. B. (2001), Monetary Economics: Institutions, Theory and Policy, S Chand & Company Limited, New Delhi

12. Joshi, V. and Little, IMD (1998), India’s Economic Reforms: 1991-2001, Oxford University Press,Delhi

13. Magee, S. (1973), “Currency contracts, pass-through and devaluation”, Brookings Papers on Economic Activity, Vol. 1, pp. 303-23.

14. Qian, Y. and Varangis, P. (1994), “Does exchange rate volatility hinder export growth? Additional evidence”, Journal Empirical Economics, Vol. 19, No. 3, pp. 371-96

15. Rangarajan, C. (1998), Indian Economy: Essays on Money and Finance, UBS Publishers

16. Solakoglu, M. (1998), “Exchange Rate Volatility and Real Exports: A Sensitivity Analysis”, Journal of Economic and Social Research,Vol. 7, No. 1,pp. 1-30.

17. Thursby, J.G. and Thursby, M.C. (1987), “Bilateral trade flows, the Linder hypothesis, and exchange risk”, The Review of Economics and Statistics, Vol. 69, pp. 488-95

18. Todani K.R. and Munyama, T.V. (2005), “Exchange Rate Volatility and Exports in South Africa”, Working Paper,Research Department, South African Reserve Bank.

19. Taneja, S .K.(1976), India and International Monetary Management, Sterling Publishers Private Limited, New Delhi

20. Viaene, J.M. and deVries, C.G. (1992), “International trade and exchange rate volatility”,European Economic Review, Vol. 36, pp. 1311-22

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Sarbanes & Oxley Act and COSO Guidelines: An Integrated Framework for Risk Management

Arvind ShendyeSenior Consultant,Protiviti, KuwaitE-mail: arvind shendye@protiviti global.com.kw

Prof. Utkarsh JainAssistant Professor, SIBM, PuneE-mail: [email protected]

Prof. Kaustubh MedhekarAssociate Professor, SIBM, PuneE-mail: [email protected]

Introduction

The major scandals in the US during the early 2000s lead to the emergence of the Sarbanes & Oxley Act (SOX), which tries improve corporate governance practices. It applies to all companies, whose shares are listed on the stock exchanges under the jurisdiction of the U.S. Securities and Exchange Commission (SEC). The goal of the SOX is to ensure the accuracy and reliability of published financial information, and therefore the main part of the said Act deals with the proper administrative routines, procedures and control Activities.

The purpose of the Act is to review the legislative audit requirements and to protect investors by ensuring the accuracy and adequacy of corporate disclosures. The Act covers issues such as establishing a public company accounting oversight board, auditor independence, and corporate responsibility and enhanced financial disclosures. It also significantly tightens accountability standards for directors,corporate executives ,auditors, securities analysts and legal counsel.

The simplest way to comply with the Sarbanes& Oxley (SOX) Act is to incorporate the Committee of Sponsoring Organizations (COSO) integrated Risk Management Framework. According to the Sarbanes& Oxley Act it is not mandatory for an entity to follow COSO Framework; however it is the easiest, effective and efficient way to comply the requirements of the Act. As the COSO Integrated Risk Management Framework is


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recommendatory, an organization may design its own risk management Framework to protect the organization from any kind of financial risk.

COSO, a nonprofit commission established in 1985 formalized the concept of internal control and proposed a Framework for evaluating its effectiveness. The Framework effectively integrates various types of risk that pose as threats to an organization. COSO developed a Risk management integrated Framework which covers all the aspects to protect an organization from any threat. The COSO Framework views internal controls as consisting of the following aspects:

I) First Aspect:

1) Control Environment- This aspect covers integrity and the ethical values of an organization, including its code of conduct, involving top management and Board of Directors. It seeks to set an internal environment which gives a robust ethical standard in order to conduct the business with integrity and transparency.

2) Risk Assessment- Risk management is a management process of identifying potential risks that could result in misstated financial statements and developing actions to address those risks. It also covers identification of the risk appetite in accordance with the nature of the business, geographical location, stakeholders’ requirement etc. Risks should be assessed on an inherent and a residual basis. The three major aspects of the risk which require emphasis here are Identification, Measurement and Prioritization of the risk. Management needs to design processes to identify potential risks arising business transactions develop mechanisms to address those risks. The process needs to set the magnitude of risk commensurate with factors such as the nature of the business, geographical location, and stakeholder’s expectations.

3) Control Activities- These Activities are usually thought of as “The Internal Controls.” They include segregation of duties, account reconciliations and information processing controls that are designed to safeguard the assets and enable an organization to timely prepare reliable financial statements. An organization must have the basic documents, policies and procedures as a part of the risk management system which should cover areas like segregation of duties, Specifications on authority, Delegation of authority/responsibility etc.

4) Information And Communication- Internal and external reporting process include an assessment of the technological environment. All relevant information should be identified, captured and communicated in a specified format and within an acceptable time frame to enable employees to execute their responsibilities.

5) Monitoring- Assessing the quality of an organization’s internal control over a long period of time and taking actions, when required, to ensure that potential risks for the organization are continuously monitored.

II) Second Aspect

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1) Operations- This aspect deals with effective mechanisms to deploy appropriate resources to achieve intended objectives.

2) Financial Reporting- This aspect focuses on how transparent the financial reports are and the extent to which one can rely on information given in the financial statements.

3) Compliance- The particular aspects emphasizes on the compliance with the applicable legislations and regulatory Framework

III) Third Aspect

1) Units And Activities- This aspect requires the entities following the COSO Framework to apply the risk management Framework to various subunits and business Activities on an individual level, rather than the entire business unit as a whole. The risk assessment and monitoring is required to be done at subunit level of business.

2) Risk Assessment Approach- Two separate approaches have been developed for risk assessment under the COSO Framework; which are “Bottom Up” & “Top Down” Approach.

3) Bottom Up Approach- Bottom Up is considered as a traditional approach to risk assessment. The Primary emphasis is given on the controls and rather than identification and assessment of risk which are inherent in the business processes. Appropriate controls are integrated within the business processes to identify and mitigate the risk.

4) Top Down Approach- Top Down Approach first tries to ascertain potential risk in the processes and sub-processes. Once the potential risks have been identified, then the emphasis is placed on structuring a control system to mitigate the potential risk. Top Down Approach is considered a better approach to risk assessment and mitigation as it requires to focus on the risks first and then on the design of the controls for risk mitigation. Top Down approach is accepted by SEC (Security Exchange Commission of US) and approved by PCAOB (Public Company Accounting Oversight Board). Also according to Auditing Standard 5 issued by PCAOB (An Audit of Internal Control over Financial Reporting that is integrated with an Audit of Financial Statements) this approach is accepted and approved. According to Section 404 of the Sarbanes & Oxley Act 2002; assessment of the internal controls should be performed using top down risk assessment approach. Thus the Top Down Approach has been explicitly accepted by Auditing standards and various other statutory guidelines as a more superior method for risk identification and mitigation.

The other major concept that requires some discussion here is Enterprise Risk Management (ERM) to completely comprehend the COSO Framework. The concept of ERM was introduced by COSO in the late nineties. According to the Trade way commission definition of ERM, “Enterprise Risk Management is a process, effected by entity’s board of directors, management and other personal, applied in strategy

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setting and across the enterprise, designed to identify potential events that may affect the entity, and manage the risk to be within its risk appetite, to provide reasonable assurance regarding the achievements of entity’s objective.”

Accordingly the COSO report on Enterprises Risk Management encapsulates,

1) Aligning risk appetite and strategy- Management considers the entity’s risk appetite in evaluating strategic alternatives, setting related objectives and developing mechanism to manage related risk.

2) Enhancing risk response decision-Enterprises Risk Management provides the rigor to identify and select among alternative risk responses: risk avoidance, reduction, sharing and acceptance.

3) Reducing operational surprises and losses- Entities gain enhanced capability to identify potential events and establish responses, reducing surprises and associated costs or losses.

4) Identifying multiple and cross enterprise risk- Every enterprise faces a myriad of risk affecting different parts of the organization, and enterprise risk management facilitates effective risk response to the interrelated impacts, and integrated responses to multiple risks.

5) Seizing opportunities- By considering a full range of potential events management is positioned to identify and proactively realize opportunities.

6) Improving deployment of capital- Obtaining robust risk information allows management to effectively assess overall capital needs and enhance capital allocation.

In the last few years, COSO Framework has gained acceptance for Sarbanes & Oxley Act compliance. Since a number of companies to whom Sarbanes & Oxley Act is applicable operate in India, all the big four consulting firms have set up separate consulting domains to enable companies to comply with Sarbanes & Oxley Act by implementing and adopting COSO Framework of risk management. With the ever increasing complexity of business structures, it will be exciting to see how and where the COSO Framework leads us.

References1. www.COSO.org

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Writer’s Manuscript Check list

1. The Manuscript should be prepared on Computer using preferably Windows/MS Word and be submitted in CD with one hard copy on A4 size paper (Times New Roman-12 font size).

2. The copy should be double spaced, including tables, footnotes, endnotes, references and bibliographies with 3 cm. margins on sides of page.

3. Number of text page should appear in upper right hand corner.

4. Proper acknowledgement should be made in case of cited material. Permission should be obtained for any copyrighted material quoted in the text or used in preparing tables or graphs.

5. Footnotes or endnotes and expanded list of abbreviations used in the text should be typed on a sheet separate from the text.

6. Each table or graph should be placed on a separate page and their suggested placement within the text should be highlighted by a text reference.

7. The manuscript should be well wrapped and be sent by a Express Courier service/ Speed post with a backup copy to be retained at your end.

8. The papers received for publications (other than PH. D. abstracts) will be sent to Panel of Referees (subject experts) for their remarks. Their remarks in turn (Involving corrections, resubmission etc) will be communicated to the contributor. The Paper will be accepted for publication only after it gets duly refereed. The papers rejected by referees will be returned to the authors within the reasonable time.

Invitation to Authors

The articles and papers based either on empirical research experience or on a high level of conceptualization are invited from faculty and students. They should preferably relate to different facets of Economy, Management, Organization of Commerce System, Business Practices, Technology Management etc. The abstract of theses submitted for PH.D. may also be considered for publication (Along with Name of Research Supervisor as co.author).

The Corporate Professionals are also requested to write their account of experiences, reflexes in the form of Case Studies for favor of publication in the Journal.

All views and opinions expressed in the Journal will be treated as the sole responsibility of the author(s). Neither the Publishers nor the Editor in any way are responsible for them.

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Symbiosis Institute of Business Management, Pune

List of Faculty Members

Dr. Vivek SaneDirector

B.Com, M.L.S. (Specialization HR), M.Com, M.Phil (Commerce & Management),

Ph.D in Management

Dr. Rajesh PandaDy. Director

MA (Economics), PGDABM-IIM, Ahmedabad, Ph.D

Dr. Sanjay BhaleM.Sc., MBA, Ph.D.

Dr. Kaushik MukerjeePh.D. (Marketing Management),

MMS (Marketing)and B.E. (E&TC).

Dr. B. Vinod CadambiB. Sc, M. Stat, Ph.D

Mr. Kaustubh MedhekarB.Com, MBA (Finance)

Dr. Shibashish ChakrabortyPh.D (Jadavpur University, Kolkata), MBA (SIBM, Pune),

MSc (Indian Institute Of Technology, Bombay)

Dr. Tarun KushwahaPh.D, MBA, B.Com

Mr. Anil KshatriyaM.Com, ICWA

Mr. Vinod ShastriMBA, M. Com, UGC-NET

Mrs. Deepika PanditaBMS, DHRM, MMS (HR), MCOM (Management), UGC NET (HR)

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Mr. Vijay Kumar DharmadhikariB.E. (Mechanical), MBA (USA)

Mr. Utkarsh JainB.Com, ACA, CFA (US)

Mr. Sapan ShrimalMBA (Finance from SIBM Pune),

Company Secretary, B.Com

Mr. Kunal KhairnarB.Com, MBA (from Indian Institute of Foreign Trade), ICWA

Mrs. Mahima MishraPursuing Ph.D in Management, PGDBM(Marketing),

M.A.(Economics), B.Ed. UGC-NET

Ms. Amrita Virdi

B.COM, MPM

Dr. Mallika SrivastavaPh.D., MMS, B. Sc.

Mrs. Supriya ChouthoyMBA (Finance)

Adjunct/Associate FacultyMr. A.K. Kalyanaraman

B.E., PGDSQCOR

Mrs. Anjali AbhyankarDIE (BTE, Mumbai), PGDCA, MCM, ADSE

Mr. Vishwas Mahajan

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Contents

Editorial

(I) Research Papers

1. Dimensions Of Human Intelligence

2. Customer Relationship Management (CRM):A Technology Driven Tool

3. ERP Software Development For Pressure Die-casting Industry

4. A Study of Sales-Orientation and Customer-Orientation of Front Line Sales Executives in Financial Services

5. Customer Experience Management: A Framework For Successfully Managing The Customer Experience

6. Glocalisation Strategies Being Employed in Indian Retail Sector during the times of Crisis

7. A Study of The Learners’ Perspective on ‘Entrepreneurship’

8. Banking To The Poor: Different Models And Lessons for India

(II) Articles/View Points

1. Invoking The Organizational Consciousness: Insights from Bhagvad Gita

2. The Essentials of A Healthy Workplace

3. Rolling Rupee: An Economic Saga

4. Sarbanes & Oxley Act and COSO Guidelines: An Integrated Framework for Risk Management

Symbiosis Institute of Business Management,Constituent of Symbiosis International UniversityAccredited by NAAC with À` GradeGram : Lavale, Tal. : MulshiDist. : Pune- 412115, Tel : 020-39116000, Fax : 020-39116060

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