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Shri Ram Murti Smarak

College of Engineering & Technology,

Comprehensive Case Studies

Session 2019-20
Odd Semester (MBA Ist Year)
Activity Coordinator: Mr. Abhishek Gupta




Case No 1-ME

Case Problem: Pricing Education

Due to resource crunch, the public funding of educational Institutions was gradually falling. The Principal of a
college, reputed for his business and economics courses, believed that a number of career searching young
persons, both employed and unemployed would have interest in some part-time management courses. After a
detailed discussion a report was prepared with suggested that:

1. Since the college is not statutorily allowed to run an MBA course, it can run part-time post graduate
diploma in Management. For all practical purpose the job market would treat this diploma as equivalent
to MBA if the curriculum and faculty is at least as competent as in any of the good business schools.
2. Though the faculty of the college is highly competent, they would need to be paid for taking classes in
the evening when the unused classroom space is available in the college.
3. Looking at the fee structure elsewhere for business courses, it is believed that the college should charge
Rs. 20,000 per annum at which about 50 students would enroll themselves. After paying Rs. 3, 00,000, to
the participating faculty, the college could be left with Rs. 2,00, 000 as other direct costs like payments
for water, electricity, space, etc. would be small enough to ignore.
4. The principal was convinced and recommended this program to the board of governors of the college.
The chairman of the board sent it back saying that the proposal is not viable.
5. Principal comments: Since this program is going to use college facilities throughout the year, its
contribution must be matched to the likely contribution from alternative uses of these facilities. If other
program gives us less than Rs. 2, 00, 000, we must go ahead with this program. We need not bother about
fixed overheads as these are incurred irrespective of whether this program is run or not.
6. Chairman’s response: to Principal’s letter. If we ignore fixed overhead and such other costs, we would
not be meeting our fixed costs. Now, if we allow one program on this basis many other program will be
proposed to be run on the basis of incremental cost. When majority of the program are run at less than
full cost, then how will we recover the fixed overheads?

If you are asked to give the final judgment after listening to both the principal and chairman, how
will you argue?

Case No 2
Case Problem: Pricing Education


Due to resource crunch, the public funding of educational Institutions was gradually falling. The Principal of a
college, reputed for his business and economics courses, believed that a number of career searching young
persons, both employed and unemployed would have interest in some part-time management courses. After a
detailed discussion a report was prepared with suggested that:
1. Since the college is not statutorily allowed to run an MBA course, it can run part-time post graduate
diploma in Management. For all practical purpose the job market would treat this diploma as equivalent
to MBA if the curriculum and faculty is at least as competent as in any of the good business schools.
2. Though the faculty of the college is highly competent, they would need to be paid for taking classes in
the evening when the unused classroom space is available in the college.
3. Looking at the fee structure elsewhere for business courses, it is believed that the college should charge
Rs. 20,000 per annum at which about 50 students would enroll themselves. After paying Rs. 3, 00,000, to
the participating faculty, the college could be left with Rs. 2,00, 000 as other direct costs like payments
for water, electricity, space, etc. would be small enough to ignore.
4. The principal was convinced and recommended this program to the board of governors of the college.
The chairman of the board sent it back saying that the proposal is not viable.
5. Principal comments: Since this program is going to use college facilities throughout the year, its
contribution must be matched to the likely contribution from alternative uses of these facilities. If other
program gives us less than Rs. 2, 00, 000, we must go ahead with this program. We need not bother about
fixed overheads as these are incurred irrespective of whether this program is run or not.
6. Chairman’s response: to Principal’s letter. If we ignore fixed overhead and such other costs, we would
not be meeting our fixed costs. Now, if we allow one program on this basis many other program will be
proposed to be run on the basis of incremental cost. When majority of the program are run at less than
full cost, then how will we recover the fixed overheads?
If you are asked to give the final judgment after listening to both the principal and chairman, how will
you argue?

Case No 3

Imalda worked in an electrical company. While working in the evening shift in the summer of 1992, she suffered
a severe electric shock, which was expected t o keep her away from work for three years. Besides the pain and
suffering, she is expected to spend on medical treatment Rs. 13, 000 during the first year, Rs. 10,000 during the
second year and Rs. 7,000 during the third year. At the time of accident Imelda was employed at the salary of Rs.
90,000 per year. Given by the trend, her salary would have gone up at the rate of 20 per cent per annum. Her total
economic loss includes the medical expenses and the loss of income due to inability work. Imalad’s attorney files
a suit for compensation to the tune of Rs. 5, 00,000 claiming that she be compensated Rs. 3, 00,000 for economic
loss and Rs. 2, 00,000 for the physical and mental agony as well as shock. The attorney of the company objects to
such a high demand for compensation.
Using economic logic will you agree with Imelda’s attorney or the company’s attorney? Give reasons. If the
market rate of interest is 10 per cent and Imelda is to provide full yearly salary and medical expenses during the
year, how much money would compensate her for total economic loss?

Questions and Problems

Case No 4



Ratan Sethi opened petrol –pump cum retail store on Delhi-Agra Highway, about two-hour drive from Delhi. His
store sells typical items needed by highway travelers like fast foods, cold drink, chocolates, hot coffee, children’s
toys, etc. He changes higher price compared to the sellers in Delhi, yet he is able to maintain brisk sale-
particularly of “Yours’ Special Pack” (YSP) consisting of soft drink in a disposable plastic bottle and a packet of
light snacks. The Highway travelers prefer to stop at his store because, while their cars wait for petrol-filling, they
in the meantime can enjoy Your’s Special Pack (and, in some cases would help themselves with some other items
in the store). Each year he could substantially enhance his sales by providing special summer Price on YSP which
is almost half of its regular price.

Last year while returning from Delhi, Ratan From that new, big and modern grocery shop has come up 15 kms
form Delhi on the National Highway. It has affected his sales but only marginally. But last month another large
convenience store has opened just 5 km. away from his store. He knows that the challenge has come to his
doorsteps and he expects to be adversely affected by the existence of these two stores. He needs to meet
challenge and decides to use the pricing strategy which he has been using quite effectively till recently. He now
permanently reduces the price of YSP to half of its existing price. But at the end of the year Ratan finds that his
sales in general and of YSP in particular had declined by 20 per cent.

Where has Ratan Sethi gone wrong? If he was a managerial economist, how do you think he would have handled
the situation?


Case- 1

Ques 1:- Give Accounting Equation for the following transactions of Hitesh for the year 2018
(i) Started business with cash Rs.18, 000.
(ii) Paid rent in advance Rs.400.


(iii) Purchased goods for cash Rs.5, 000 and on credit Rs. 2,000.
(iv) Sold goods for cash Rs. 4,000 (costing Rs.2, 400).
(v) Rent paid Rs.1, 000 and rent outstanding Rs.200.
(vi) Bought motor-cycle for personal use Rs.8000.
(vii) Purchased equipments for cash Rs.500.
(viii) Paid to creditors Rs.600.
(ix) Depreciation on equipment Rs.25.
(x) Business expenses Rs.400.
Ques 2:- Prove that the Accounting Equation is satisfied in all the following transactions of Suresh.
(i) Commenced business with cash Rs.60, 000.
(ii) Paid rent in advance Rs.500.
(iii) Purchased goods for cash Rs.30, 000 and on credit for Rs.20, 000.
(iv) Sold goods for cash Rs.30, 000, costing Rs.20, 000.
(v) Paid salary Rs.500 and salary outstanding Rs.100.
(vi) Bought motor-cycle for personal use for Rs.15, 000 for cash.
Ques 3:- Give Accounting Equation for the following transactions of Mr X.
(i) On April 1, X starts business and invests Rs.50, 000 as his capital.
(ii) On April 1, the firm purchases furniture (fixed assets) for Rs.12, 000, for cash.
(iii) On April 2, the firm purchases merchandise (goods) costing Rs.24, 000, for cash.
(iv) On April 5, the firm purchases merchandise costing Rs.40, 000, on credit from Shripat.
(v) On April 5, the firm sells merchandise for Rs.10, 400, on credit to Shyamlal, costing Rs.7, 280.
(vi) On April 10, the customer (Shyamlal) pays Rs.4, 800 on his account.
(vii) On April12, the firm sells merchandise for Rs.5, 200 for cash, costing Rs.3, 640.
(viii) On April 20, the firm pays to its creditor, Sripat, Rs.12, 000 on account.
(ix) On April 24, Mr. X withdraws Rs.500 for his personal use.
(x) On April 25, Mr. X brings further capital of Rs.10, 000 in the business.
(xi) On April 25, the firm pays Rs.16, 000 on account to its creditor, Sripat.
(xii) On April 26, miscellaneous expenses amounting to Rs.250 are paid.
(xiii) On April 30, rent amounting to Rs.520 has become due but has not been paid.
(xiv) On April 30, an assistant employed by Mr. X is paid his monthly salary of Rs.1, 200.
(xv) On April 30, the firm charges depreciation of Rs.100 on furniture.
Ques 4:-A Business man purchased furniture of Rs.5, 200 on Jan 1, 2014. At the time of purchasing it was
estimated that the expected life of asset is 10 years & scrap value of asset is Rs.200.Prepare the furniture A/c for
3 years by straight line Method.
Ques 5:- ABC Ltd. Purchased on 1st April, 2010 a small plant for Rs.45, 000. On 1st October in the same year
additional plant was purchased costing Rs.22, 500. On 1st October, 2011, plant purchased on 1st April, 2010
having become obsolete, was sold for Rs.18, 000. On 1st October, 2012 fresh plant was purchased for Rs.54, 000
and the plant on 1st October, 2010 was sold for Rs.18, 900. Depreciation is provided at 10% p.a. on straight line
method for every year on 31st March. Show Machinery Account up to 31st March, 2013.

Case- 2

Ques 1:-Name the two accounts involved in the following transactions:

(i) Commenced business with a capital of Rs.40, 000.
(ii) Purchased goods from Ratan Lal Rs.5, 000.
(iii) Purchased goods for cash From Ram Lal Rs.10,000.
(iv) Sold goods worth Rs.6, 000 to Babu Ram on credit.
(v) Sold goods to Ganesh for Cash Rs.8, 000.


(vi) Paid to Rana by cheque Rs.5, 000.

Ques 2:- Prepare journal entry for the following transactions:

(i) Started business with cash Rs. 8, 00,000 and furniture Rs.10, 000.
(ii) Purchased machine for Rs.10, 00,000 by paying 60% in cash immediately.
(iii) Deposited cash in to bank Rs.50, 000.
(iv) Salary payable Rs.60, 000 however only 40% has been paid during the year.
(v) Sold goods costing Rs.50, 000 for Rs.80, 000.

Ques 3:- Ram & Co’s Statement of affairs on 1st April 2018 is as under:-
Cash Rs.1500, Bank Rs.1400, Stock Rs.4000, Debtors Rs.2700, Creditors Rs.5000
You are required to bring the above balances into Journal.

Ques 4:-Data Ram started business with Rs.10, 000 and stock of Rs.5, 000, his transaction for April are as
follows: -
April Rs.
1 Cash goods purchased 4,000
3 Furniture purchased from Gupta & Co. 5,00
5 Goods sold to Amarnath 3,500
8 Cash Sale 2,000
10 Stationary Purchased 1,00
14 Payment made to Gupta & Co.& Discount Received 4,955
15 Goods purchased from Surendra at 2.5%trade discount 8,00
20 Cash received from Amarnath 2,500
22 Paid to Surendra 7,70
25 Purchased cycle for business use 3,00
28 Received an order from Mr. Manoj Kumar to supply the goods 2,600
30 Paid for: Salary, Wages, Rent and Office Expenses - Rs. 2, 00, Rs.50, Rs.150 and
Rs. 100 respectively.

Case- 3
Ques 1:-From the following list of balances prepare a Trial Balance as on 30/06/2018.

Rs. Rs.
Opening Stock 18,000 Plant & Machinery 7,500
Wages 10,000 Loose Tools 1,800
Sales 1,20,000 Lighting 2,300


Bank Loan 4,400 Creditors 8,000
Coal 3,000 Capital 40,000
Purchases 75,000 Misc. Receipts 6,00
Repairs 2,000 Office Salaries 2,500
Carriage 1,500 Office Furniture 6,00
Income Tax 1,500 Patents 1,000
Debtors 20,000 Goodwill 15,000
Leasehold Premises 6,000 Cash at Bank 5,100
Cash in Hand 2,00 Closing Stock 6,000

Ques 2:- The following balances were extracted from the books of Mr.Avtar Singh on March
31, 2018:
Rs. Rs.
Capital 73,000 Creditors 20,000
Drawings 12,000 Bad Debts 1,900
Gen.Expenses 4,000 Sales 80,000
Buildings 30,000 Purchases 50,000
Machinery 15,000 Scooter 8,000
Stock (April 1,2012) 20,000 Commission Received 2,000
Power 3,000 Bills Payable 5,000
Taxes and Insurance 2,700 Cash in hand 4,000
Wages 10,000 Bank Overdraft 6,000
Debtors 25,000 Packing Expenses 400

Stock on hand on March 31, 2013 was of value of Rs.30, 000.

You are required to prepare the Trading and Profit and Loss Account for the year ending March 31, 2013, and
also the Balance Sheet as on that date.

Case- 4

Ques 1:- Following is the Revenue Statement of Hind Traders Limited for the year ended 31st March,

Particulars Rs.
Sales 5,00,000
Less: Cost of Goods Sold 3,00,000


Gross Profit 2,00,000
Less: Operating Expenses 1,20,000
Operating Profit 80,000
Add: Non-operating Income 12,000
Less: Non-operating Expenses 4,000
Net Profit 88,000
Less: Tax 50% 44,000
Net Profit after Tax 44,000
Calculate: (i) Gross Profit Ratio,(ii) Operating Ratio,(iii) Operating Profit Ratio, and (iv) Net Profit Ratio.

Ques 2:- Following figures are available of XYZ Company for the year ended 31st March, 2018.

Net profit before interest and tax Rs.2,75,000

Net profit after tax Rs.2,20,000
Net profit after interest and tax Rs.1,10,000
Preference Dividend Rs.35,000
Capital employed Rs.11,00,000
Total Assets Rs.12,65,000
Net worth or equity shareholders’ fund Rs.7,50,000
Calculate: (i) Return on Capital Employed (ii) Return on Total Assets (iii) Return on Equity Shareholders’ Fund.

Ques 3:- A company has following Capital:

7 % Preference Share of Rs.100 each Rs.6,00,000

Equity Share of Rs.10 each Rs.16,00,000
The additional information available relating to its financial year ending 31-03-2016 is :
Profit after taxation @ 50% Rs.5,42,000
Equity Dividend 20%
Depreciation Rs.1,20,000
Market price of Equity Shares Rs.40
Capital commitment Rs.2,40,000

You are required to calculate (a) The dividend yield in the equity shares. (b) The cover for the preference and
equity dividends. (c ) The earning yield (d) The price earnings ratio (e) the net cash flow and (f) The reason for
the comparison of net cash flow with capital commitment.

Ques 4:- Following Balance Sheet is given of XYZ Ltd. For the year ended 31st March, 2018:

Liabilities Rs. Assets Rs.

Issued Capital-2,000 Equity 2,00,000 Land and 1,50,000
Shares of Rs.100 each Buildings
Reserves 90,000 Plant and 80,000


Profit & Loss Account 60,000 Stock in Trade 1,49,000
Bills Payable 40,000 Sundry Debtors 41,000
Other Current Liabilities 90,000 Cash and Bank 30,000
Bills Receivable 30,000
4,80,000 4,80,000
Calculate (i) Sales to Capital Employed (ii) Sales to Fixed Assets (iii) Sales to Working Capital (iv) Sales to Total
Assets (v)Stock Turnover Ratio (vi) Receivable Turnover Ratio and (vii) Creditors Turnover Ratio with reference
to the following additional information.
(a) Sales (Credit) Rs.8,50,000 (b) Cost of Goods Sold Rs.5,10,000 (c) Average Inventory Rs.1,24,250 (d)
Average Accounts Receivables Rs.85,000 (e) Average Accounts Payables Rs.80,000 , and (f) Credit
Purchases Rs.5,45,250.


Business Statistics and Analytics (KMB104)
Worksheet 1
Q1. Find arithmetic mean and standard deviation from the following data. Also find coefficient of variation:
Age (Less than) 10, 20, 30, 40, 50, 60, 70, 80
No. of Persons 15 30 50 75 100 110 115 125

Q2.What are the properties of Arithmetic Mean?

Worksheet 2
Q1. Fit a straight line trend by least squares method to the data given below and estimate trend for 2008:
Year 2002 2003 2004 2005 2006 2007
(in ‘000 Rs.) 10 12 15 16 18 19

Q2. What are the components of time-series?

Worksheet 3
Q1. Find Karl Pearson’s Coefficient of Correlation between sales and expenses of the following 10 firms given in
thousands of rupees:-
Firm 1 2 3 4 5 6 7 8 9 10
Sales 50 50 55 60 65 65 60 60 65 50
Expenses 11 13 14 16 16 15 14 13 15 13

Q2. Explain the difference between regression & correlation

Worksheet 4
Q1. An aptitude test was conducted on 900 employees of the Metro Types Limited in which the mean score was
found to be 50 units and standard deviation was 20. On the basis of this information, you are required to
answer the following questions:
i.What was the number of employees whose mean score was less than 30?
ii.What was the number of employees whose mean score exceeded 70?
iii.What was the number of employees whose mean score were between 30 and 70 ?


Q2. Explain the addition theorem of probability.

Worksheet 5

Q1. Suppose a grocer is faced with a problem of how many cases of milk to stock to meet tomorrow’s
demand. All the cases of milk left at the end of the day are worthless. Each case of milk is sold for ` 8/-
and its purchased for ` 5/-. Hence each case sold brings a profit of ` 3/- but if it is not sold at the end of
the day it must be resulting in a loss of ` 5/-. The historical record of the no. of cases of milk demanded is
as follows:-

No. of cases of milk demanded No. of times demanded Probability of each event
0-12 0 .00
13 5 .05
14 10 .10
15 20 .20
16 30 .30
17 25 .25
18 10 .10
Over 18 0 .00
TOTAL 100 1.00
What should be the optimal solution for decision of the grocer? Concerning the no. of cases of milk to

Q2. Explain concept of business analytics and application.


Case 1
Difficult Transitions

Tony Stark had just finished his first week at Reece Enterprises and decided to drive upstate to a small lakefront
lodge for some fishing and relaxation. Tony had worked for the previous ten years for the O’Grady Company,
but O’Grady had been through some hard times of late and had recently shut down several of its operating
groups, including Tony’s, to cut costs. Fortunately, Tony’s experience and recommendations had made finding


another position fairly easy. As he drove the interstate, he reflected on the past ten years and the apparent
situation at Reece.
At O’Grady, things had been great. Tony had been part of the team from day one. The job had met his personal
goals and expectations perfectly, and Tony believed he had grown greatly as a person. His work was appreciated
and recognized; he had received three promotions and many more pay increases.
Tony had also liked the company itself. The firm was decentralized, allowing its managers considerable
autonomy and freedom. The corporate Culture was easygoing. Communication was open. It seemed that
everyone knew what was going on at all times, and if you didn’t know about something, it was easy to find out.

The people had been another plus. Tony and three other managers went to lunch often and played golf every
Saturday. They got along well both personally and professionally and truly worked together as a team. Their
boss had been very supportive, giving them the help, they needed but also staying out of the way and letting
them work. When word about the shutdown came down, Tony was devastated. He was sure that nothing could
replace O’Grady. After the final closing was announced, he spent only a few weeks looking around before he
found a comparable position at Reece Enterprises.

As Tony drove, he reflected that "comparable" probably was the wrong word. Indeed, Reece and O’Grady were
about as different as you could get. Top managers at Reece apparently didn’t worry too much about who did a
good job and who didn’t. They seemed to promote and reward people based on how long they had been there
and how well they played the never-ending political games. Maybe this stemmed from the organization itself,
Tony pondered. Reece was a bigger organization than O’Grady and was structured much more bureaucratically.
It seemed that no one was allowed to make any sort of decision without getting three signatures from higher
up. Those signatures, though, were hard to get. All the top managers usually were too busy to see anyone, and
interoffice memos apparently had very low priority.

Tony also had had some problems fitting in. His peers treated him with polite indifference. He sensed that a
couple of them resented that he, an outsider, had been brought right in at their level after they had had to work
themselves up the ladder. On Tuesday he had asked two colleagues about playing golf. They had politely
declined, saying that they did not play often. But later in the week, he had overheard them making
arrangements to play that very Saturday.It was at that point that Tony had decided to go fishing. As he steered
his car off the interstate to get gas, he wondered if perhaps he had made a mistake in accepting the Reece offer
without finding out more about what he was getting into.
Case Questions
Q1) Identify several concepts and characteristics from the field of organizational behavior that this case

Q2) What advice can you give Tony? How would this advice be supported or tempered by behavioral concepts
and processes?

Q3) Is it possible to find an "ideal" place to work? Explain.

Differing Perceptions at Clarkston Industries


Susan Harrington continued to drum her fingers on her desk. She had a real problem and wasn’t sure what to do
next. She had a lot of confidence in Jack Reed, but she suspected she was about the last person in the office
who did. Perhaps if she ran through the entire story again in her mind she would see the solution.Susan had
been distribution manager for Clarkston Industries for almost twenty years. An early brush with the law and a
short stay in prison had made her realize the importance of honesty and hard work. Henry Clarkston had given
her a chance despite her record, and Susan had made the most of it. She now was one of the most respected
managers in the company. Few people knew her background.

Susan had hired Jack Reed fresh out of prison six months ago. Susan understood how Jack felt when Jack tried
to explain his past and asked for another chance. Susan decided to give him that chance just as Henry Clarkston
had given her one. Jack eagerly accepted a job on the loading docks and could soon load a truck as fast as
anyone in the crew.Things had gone well at first. Everyone seemed to like Jack, and he made several new
friends. Susan had been vaguely disturbed about two months ago, however, when another dock worker
reported his wallet missing. She confronted Jack about this and was reassured when Jack understood her
concern and earnestly but calmly asserted his innocence. Susan was especially relieved when the wallet was
found a few days later.

The events of last week, however, had caused serious trouble. First, a new personnel clerk had come across
records about Jack’s past while updating employee files. Assuming that the information was common
knowledge, the clerk had mentioned to several employees what a good thing it was to give ex-convicts like Jack
a chance. The next day, someone in bookkeeping discovered some money missing from petty cash. Another
worker claimed to have seen Jack in the area around the office strongbox, which was open during working
hours, earlier that same day. Most people assumed Jack was the thief. Even the worker whose wallet had been
misplaced suggested that perhaps Jack had indeed stolen it but had returned it when questioned. Several
employees had approached Susan and requested that Jack be fired. Meanwhile, when Susan had discussed the
problem with Jack, Jack had been defensive and sullen and said little about the petty-cash situation other than
to deny stealing the money.

To her dismay, Susan found that rethinking the story did little to solve his problem. Should she fire Jack? The
evidence, of course, was purely circumstantial, yet everybody else seemed to see things quite clearly. Susan
feared that if she did not fire Jack, she would lose everyone’s trust and that some people might even begin to
question her own motives.

Case Questions

Q1) Explain the events in this case in terms of perception and attitudes. Does personality play a role?
Q2) What should Susan do? Should she fire Jack or give him another chance?


A Difficult Task Force


José has been appointed chair of a steering task force to design the primary product line for a new joint venture
between companies from Japan, the United States, and South America. The new joint venture company will
make, sell, and service pet caskets (coffins) for the burial of beloved pets, mostly dogs and cats. One month
earlier, each company had assigned personnel to the task force:

 From the Japanese company, Furuay Masahiko from Yokohama, assistant to the president of the
Japanese company; Hamada Isao from Tokyo, director of marketing from its technology group; and
Noto Takeshi from Tokyo, assistant director of its financial management department.

 From the United States company, Thomas Boone from Chicago, the top purchasing manager from its
lumber and forest lands group; Richard Maret from Buffalo, the codirector of the company’s
information systems group; and Billy Bob "Tex" Johnson from Arizona, the former CEO, now retired and
a consultant for the company.

 From the South American company, Mariana Preus from Argentina, the head of product design for that
company’s specialty animal products group; Hector Bonilla from their Mexico City division, an expert in
automated systems design for wood products; and Mauricio Gomes, in charge of design and
construction for the plant, which will be located in southern Chile to take advantage of the vast forest

These members were chosen for their expertise in various areas and were taking valuable time away from their
normal assignments to participate in the joint venture.
As chair of the task force, José had scheduled an initial meeting for 10:00 A.M. José started the meeting by
reviewing the history of the development of the joint venture and how the three company presidents had
decided to create it. Then, José reviewed the market for the new high-end, designer pet coffins, stressing that
this task force was to develop the initial design parameters for the new product to meet increasing demand
around the world. He then opened the meeting for comments and suggestions.

Mariana Preus spoke first: "In my opinion, the current designs that we have in production in our Argentina plant
are just fine. They are topnotch designs, using the latest technology for processing. They use the best woods
available and they should sell great. I don’t see why we have to design a whole new product line." Noto Takeshi
agreed and urged the committee to recommend that the current designs were good enough and should be
immediately incorporated into the plans for the new manufacturing plant. José interrupted the discussion:
"Look, the council of presidents put this joint venture together to completely revolutionize the product and its
manufacture based on solid evidence and industry data. We are to redesign the product and its manufacturing
systems. That is our job, so let’s get started." José knew that the presidents had considered using existing
designs but had rejected the idea because the designs were too old and not easily manufacturable at costs low
enough to make a significant impact on the market. He told the group this and reminded them that the purpose
of the committee was to design a new product.

The members then began discussing possible new design elements, but the discussion always returned to the
benefits of using the existing designs. Finally, Tex spoke up: "I think we ought to do what Mariana suggested
earlier. It makes no sense to me to design new caskets when the existing designs are good enough to do the
job." The others nodded their heads in agreement. José again reminded them of the task force’s purpose and
said such a recommendation would not be well received by the council of presidents. Nevertheless, the group
insisted that José write a memo to the council of presidents with the recommendation to use existing designs
and to begin immediately to design the plant and the manufacturing system. The meeting adjourned and the


members headed to the golf course at 10:45 A.M.
José returned to his computer and started to write the memo, but he knew it would anger the presidents. He
hoped he would not be held responsible for the actions of the task force, even though he was its chair. He
wondered what had gone wrong and what he could have done to prevent it.

Case Questions

Q1) Which characteristics of group behavior discussed in the chapter can you identify in this case?

Q2) How did the diverse nature of the group affect the committee’s actions?
Q3) If you were in Jose’s position, what would you have done differently? What would you do now?

Right Boss, Wrong Company

Betty Kesmer was continuously on top of things. In school, she had always been at the top of her class. When
she went to work for her uncle’s shoe business, Fancy Footwear, she had been singled out as the most
productive employee and the one with the best attendance. The company was so impressed with her that it
sent her to get an M.B.A. to groom her for a top management position. In school again, and with three years of
practical experience to draw on, Kesmer had gobbled up every idea put in front of her, relating many of them to
her work at Fancy Footwear. When Kesmer graduated at the top of her class, she returned to Fancy Footwear.
To no one’s surprise, when the head of the company’s largest division took advantage of the firm’s early
retirement plan, Kesmer was given his position.

Kesmer knew the pitfalls of being suddenly catapulted to a leadership position, and she was determined to
avoid them. In business school, she had read cases about family businesses that fell apart when a young family
member took over with an iron fist, barking out orders, cutting personnel, and destroying morale. Kesmer knew
a lot about participative management, and she was not going to be labeled an arrogant know-it-all. Kesmer’s
predecessor, Max Worthy, had run the division from an office at the top of the building, far above the factory
floor. Two or three times a day, Worthy would summon a messenger or a secretary from the offices on the
second floor and send a memo out to one or another group of workers. But as Kesmer saw it, Worthy was
mostly an absentee autocrat, making all the decisions from above and spending most of his time at extended
lunches with his friends from the Elks Club.

Kesmer’s first move was to change all that. She set up her office on the second floor. From her always-open
doorway she could see down onto the factory floor, and as she sat behind her desk she could spot anyone
walking by in the hall. She never ate lunch herself but spent the time from 11 to 2 down on the floor, walking
around, talking, and organizing groups. The workers, many of whom had twenty years of seniority at the plant,
seemed surprised by this new policy and reluctant to volunteer for any groups. But in fairly short order, Kesmer
established a worker productivity group, a "Suggestion of the Week" committee, an environmental group, a
worker award group, and a management relations group. Each group held two meetings a week, one without
and one with Kesmer. She encouraged each group to set up goals in its particular focus area and develop plans
for reaching those goals. She promised any support that was within her power to give.


The group work was agonizingly slow at first. But Kesmer had been well trained as a facilitator, and she soon
took on that role in their meetings, writing down ideas on a big board, organizing them, and later
communicating them in notices to other employees. She got everyone to call her "Betty" and set herself the
task of learning all their names. By the end of the first month, Fancy Footwear was stirred up.
But as it turned out, that was the last thing most employees wanted. The truthfinally hit Kesmer when the
entire management relations committee resigned at the start of their fourth meeting. "I’m sorry, Ms. Kesmer,"
one of them said. "We’re good at making shoes, but not at this management stuff. A lot of us are heading
toward retirement. We don’t want to be supervisors."

Astonished, Kesmer went to talk to the workers with whom she believed she had built good relations. Yes, they
reluctantly told her, all these changes did make them uneasy. They liked her, and they didn’t want to complain.
But given the choice, they would rather go back to the way Mr. Worthy had run things. They never saw Mr.
Worthy much, but he never got in their hair. He did his work, whatever that was, and they did theirs. "After
you’ve been in a place doing one thing for so long," one worker concluded, "the last thing you want to do is
learn a new way of doing it."

Case Questions

Q1) What factors should have alerted Kesmer to the problems that eventually came up at Fancy Footwear?
Q2) Could Kesmer have instituted her changes without eliciting a negative reaction from the workers? If so,

Spooked by Computers
The New England Arts Project had its headquarters above an Italian restaurant in Portsmouth, New Hampshire.
The project had five full-time employees, and during busy times of the year, particularly the month before
Christmas, it hired as many as six part-time workers to type, address envelopes, and send out mailings.
Although each of the five full-timers had a title and a formal job description, an observer would have had
trouble telling their positions apart. Suzanne Clammer, for instance, was the executive director, the head of the
office, but she could be found typing or licking envelopes just as often as Martin Welk, who had been working
for less than a year as office coordinator, the lowest position in the project’s hierarchy.
Despite a constant sense of being a month behind, the office ran relatively smoothly. No outsider would have
had a prayer of finding a mailing list or a budget in the office, but project employees knew where almost
everything was, and after a quiet fall they did not mind having their small space packed with workers in
November. But a number of the federal funding agencies on which the project relied began to grumble about
the cost of the part-time workers, the amount of time the project spent handling routine paperwork, and the
chaotic condition of its financial records. The pressure to make a radical change was on. Finally Martin Welk said
it: "Maybe we should get a computer."

To Welk, fresh out of college, where he had written his papers on a word processor, computers were just
another tool to make a job easier. But his belief was not shared by the others in the office, the youngest of
whom had fifteen years more seniority than he. A computer would eat the project’s mailing list, they said,
destroying any chance of raising funds for the year. It would send the wrong things to the wrong people,
insulting them and convincing them that the project had become another faceless organization that did not


care. They swapped horror stories about computers that had charged them thousands of dollars for purchases
they had never made or had assigned the same airplane seat to five people.

"We’ll lose all control," Suzanne Clammer complained. She saw some kind of office automation as inevitable,
yet she kept thinking she would probably quit before it came about. She liked hand-addressing mailings to arts
patrons whom she had met, and she felt sure that the recipients contributed more because they recognized her
neat blue printing. She remembered the agonies of typing class in high school and believed she was too old to
take on something new and bound to be much more confusing. Two other employees, with whom she had
worked for a decade, called her after work to ask if the prospect of a computer in the office meant they should
be looking for other jobs. "I have enough trouble with English grammar," one of them wailed. "I’ll never be able
to learn computer language."

One morning Clammer called Martin Welk into her office, shut the door, and asked him if he could recommend
any computer consultants. She had read an article that explained how a company could waste thousands of
dollars by adopting integrated office automation in the wrong way, and she figured the project would have to
hire somebody for at least six months to get the new machines working and to teach the staff how to use them.
Welk was pleased because Clammer evidently had accepted the idea of a computer in the office. But he also
realized that as the resident authority on computers, he had a lot of work to do before they went shopping for

Case Questions

Q1) Is organization development appropriate in this situation? Why or why not?

Q2) What kinds of resistance to change have the employees of the project displayed?
Q3) What can Martin Welk do to overcome the resistance?


The Coke Pepsi Rivalry: Pepsi Vs. Coke
Our real competition is water, tea, nimbupani and Pepsi... in that order."

- Coke sources in 1996.

"When you're No 2 and you're struggling, you have to be more innovative, work better, and be more

resilient. If we became No 1, we would redefine the market so we became No 2! The fact is that our

competition with the Coca-Cola company is the single most important reason we've accomplished what we

have. And if they were honest, they would say the same thing."

- Pepsi sources in 1998.

"Both companies did not really concentrate on the fundamentals of marketing like building strong brand

equity in the market, and thus had to resort to such tactics to garner market shares."

- Business India in 1998.

The cola wars had become a part of global folklore - something all of us took for granted. However, for
the companies involved, it was a matter of 'fight or succumb.' Both print and electronic media served as
battlefields, with the most bitter of the cola wars often seen in form of the comparative advertisements.


In the early 1970s, the US soft-drinks market was on the verge of maturity, and as the major players,
Coke and Pepsi offered products that 'looked the same and tasted the same,' substantial market share
growth seemed unlikely. However, Coke and Pepsi kept rejuvenating the market through product
modifications and pricing/promotion/distribution tactics. As the competition was intense, the companies
had to frequently implement strategic changes in order to gain competitive advantage. The only way to
do this, apart from introducing cosmetic product innovations, was to fight it out in the marketplace. This
modus operandi was followed in the Indian markets as well with Coke and Pepsi resorting to more
innovative tactics to generate consumer interest.

In essence, the companies were trying to increase the whole market pie, as the market-shares war
seemed to get nowhere. This was because both the companies came out with contradictory market share
figures as per surveys conducted by their respective agencies - ORG (Coke) and IMRB (Pepsi). For
instance, in August 2000, Pepsi claimed to have increased its market share for the first five months of
calendar year 2000 to 49% from 47.3%, while Coke claimed to have increased its share in the market to
57%, in the same period, from 55%.

Media reports claimed that the rivalry between Coke and Pepsi had ceased to generate sustained public
interest, as it used to in the initial years of the cola brawls worldwide. They added that it was all just a
lot of noise to hardsell a product that had no inherent merit.

Coke had entered the Indian soft drinks market way back in the 1970s. The company was the market
leader till 1977, when it had to exit the country following policy changes regarding MNCs operating in
India. Over the next few years, a host of local brands emerged such as Campa Cola, Thumps Up, Gold
Spot and Limca etc. However, with the entry of Pepsi and Coke in the 1990s, almost the entire market
went under their control.

Making billions from selling carbonated/colored/sweetened water for over 100 years, Coke and Pepsi
had emerged as truly global brands. Coke was born 11 years before Pepsi in 1887 and, a century later it
still maintained its lead in the global cola market. Pepsi, having always been number two, kept trying
harder and harder to beat Coke at its own game. In this never-ending duel, there was always a new
battlefront opening up somewhere. In India the battle was more intense, as India was one of the very
few areas where Pepsi was the leader in the cola segment. Coke re-entered India in 1993 and soon
entered into a deal with Parle, which had a 60% market share in the soft drinks segment with its brands
Limca, Thums Up and Gold Spot.

Following this, Coke turned into the absolute market leader overnight. The company also acquired
Cadbury Schweppes' soft drink brands Crush, Canada Dry and Sport Cola in early 1999.

Coke was mainly a franchisee-driven operation with the company supplying its soft drink concentrate to
its bottlers around the world. Pepsi took the more capital-intensive route of owning and running its own
bottling factories alongside those of its franchisees. Over half of Pepsi's sales were made by its own
bottling units.

Though Pepsi had a lead over Coke, having come in before the era of economic liberalization in India, it
had to spend the early years fighting the bureaucracy and Parle's Ramesh Chuahan every step of the
way. Pepsi targeted the youth and seemed to have struck a right chord with the market. Its performance
was praiseworthy, while Coke had to struggle to a certain extent to get its act right. In a span of 7 years


of its operations in the county, Coke changed its CEO four times. Media reports about the troubles faced
by Coke and the corrective measures it adopted were aplenty.

I – BOTTLING Bottling was the biggest area of conflict between Pepsi and Coke. This was because,
bottling operations held the key to distribution, an extremely important feature for soft-drink marketing.
As the wars intensified, both companies took pains to maintain good relationships with bottlers, in order
to avoid defections to the other camp.

A major stumbling block for Coke was the conflict with its strategic bottling partner, Ramesh Chauhan
of the Parle group of companies. Coke alleged that Chauhan had secretly manufactured Coke's
concentrate. Chauhan, in turn, accused coke of backtracking on commitments to grant him bottling
rights in Pune and Bangalore and threatened legal action. The matter almost reached the courts and the
strategic alliance showed signs of coming apart. Industry observers commented that for a company like
Coke that was so heavily franchisee driven, antagonizing its chief bottler was suicidal.

While all this was going on, Pepsi wasted no time in moving in for the kill. It made huge inroads in the
north, particularly in Delhi where Chauhan had the franchise and also snapped up the opportunity to buy
up Coke's bottler Pinakin Shah in Gujarat. Ironically, the Gujarat Bottling Company owned by Shah,
also belonged in part to Chauhan for whom the sell-out was a strategic counter-move in his battle with
Coke. Coke moved court and obtained an order enforcing its bottler's agreement with the Gujarat
company, effectively freezing Pepsi's right to use the acquired capacity for a year. Later, Coke made a
settlement of $10 million in exchange for Chauhan foregoing bottling rights in Pune and Bangalore.
Towards the end of 1997, bottling agreements between Coke and many of its bottlers were expiring.
Coke began pressurizing its bottlers to sell out and threatened them that their bottling agreements would
not be renewed. Media reports claimed that Coke's bottlers were not averse to joining hands with Pepsi.
They said they would rather offer their services to Pepsi than selling out to Coke and discontinuing a
profitable business. In November 1997, Pepsi made a bid to gain from the feud between Coke and its
franchised bottlers. It declared that it was ready to join hands with 'any disgruntled Coke bottler,
provided the latter's operations enhanced Pepsi's market in areas where Coke was dominant.' Pepsi was
even willing to shift to a franchisee-owned bottling system from its usual practice of focusing on
company-owned bottling systems supplemented by a few franchisee-owned bottling companies,
provided it found bottlers who would enhance both the quantity and quality, especially in areas where
Coke had a substantial marketshare. Pepsi won over Goa Bottling Company, Coke's bottler in Goa and
became the market leader in that city.

II-ADVERTISING When Coke re-entered India, it found Pepsi had already established itself in the
soft drinks market. The global advertisement wars between the cola giants quickly spread to India as
well. Internationally, Pepsi had always been seen as the more aggressive and offensive of the two, and
its advertisements the world over were believed to be more popular than Coke's. It was rumored that at
any given point of time, both the companies had their spies in the other camp. The advertising agencies
of both the companies (Chaitra Leo Burnett for Coke and HTA for Pepsi) were also reported to have
insiders in each other's offices who reported to their respective heads on a daily basis. Based on these
inputs, the rival agency formulated its own plans. These hostilities kept the rivalry alive and healthy.
However, the tussle took a serious turn at times with complaints to Advertising Standards Council of
India, and threats of lawsuits.

While Pepsi always relied on advertisements featuring films stars, pop stars and cricket players, Coke
had initially decided to focus on Indian culture and jingles based on Indian classical music. These were
also supported by coke advertisements that were popular in the West.


Somehow, Coke's advertisements missed the Indian pulse by a wide margin. Pepsi soon came to be seen
as a 'defender' who had humiliated the 'invader' with its superior creative strengths. When Coke bagged
the official sponsorship rights to the 1997 Cricket World Cup, Pepsi created media history by
unleashing one of the country's most successful advertisement campaigns - the 'Nothing Official About
It' campaign . Pepsi took on Coke, even when the latter sponsored the replays of the matches, through
the campaign, 'Uncork a Cola.' Media coverage of the war even hinted that the exclusion of Rahul
Dravid (Pepsi's model) from the Indian team had something to do with the war. However, Coke had its
revenge when it bagged the television sponsorship rights for the 1997 Pepsi Asia Cup. Consequently,
Pepsi, in spite of having branded the event was not able to sponsor it.

The severe damage caused by the 'Nothing Official About It' campaign prompted Coke to shift its
advertising account from McCann Erickson to Chaitra Leo Burnett in 1997. The 'Eat-Sleep-Drink' series
of ads was born soon after. Pepsi responded with ads where cricket stars 'ate a bat' and 'slept on a batting
pad' and 'drank only Pepsi.' To counter this, Coke released a print advertisement in March 1998, in
which cricketers declared, 'Chalo Kha Liya!' Another Thums Up ad showed two apes copying Pepsi's
Azhar and Ajay Jadeja, with the line, 'Don't be a bunder (monkey), Taste the thunder.' For once, it was
Pepsi's turn to be at receiving end. A Pepsi official commented, "We're used to competitive advertising,
but we don't make fun of the cricketers, just the ad." Though Pepsi decided against suing Coke, the ad
vanished soon after the dissent was made public. Commenting on this, a Pepsi official said, "Pepsi is
basically fun. It is irreverent and whacky. Our rival is serious and has a 'don't mess with me' attitude.
We tend to get away with fun but they have not taken it nicely. They don't find it funny."

Coke then launched one of its first offensive ads, ridiculing Pepsi's ads featuring a monkey. 'Oye! Don't
be a bunder! Taste the Thunder', the ad for Thums Up, went with the line, 'issued in the interest of the
present generation by Thums Up.'

The 1998 Football World Cup was another event the cola majors fought over. Pepsi organized local or
'para' football matches in Calcutta and roped in Indian football celebrity Bhaichung Bhutia to endorse
Pepsi. Pepsi claimed it was the first to start and popularize 'para' football at the local level. However,
Coke claimed that it was the first and not Pepsi, to arrange such local games, which Coke referred to as
While Pepsi advertisements claimed, 'More football, More Pepsi,' Coke utilized the line, 'Eat football,
Sleep football, Drink only Coca-Cola,' later replaced by 'Live football, dream football and drink only
Coca-Cola.' Media reports termed Pepsi's promos as a 'me-too' effort to cash in on the World Cup craze,
while Coke's activities were deemed to be in line with its commitment and long-term association with
the game.

Coke's first offering in the lemon segment (not counting the acquired market leader brand Limca) came
in the form of Sprite launched in early 1999. From the very beginning, Sprite went on the offensive with
its tongue-in-cheek advertisements. The line 'Baki Sab Bakwas' (All the rest is nonsense) was clearly
targeted at Pepsi's claims in its ads. The advertisement made fun of almost all the Pepsi and Mirinda
advertisements launched during 1998. Pepsi termed this as Coke's folly, claiming it was giving Sprite a
'wrong positioning,' and that it was a case of an ant trying to fight a tiger.

Sprite received an encouraging response in the market, aided by the high-decibel promotions and pop
music concerts held across the country. But Pepsi was confident that 7 Up would hold its own and its
ads featuring film stars would work wonders for Mirinda Lemon in the lemon segment.

When Pepsi launched an advertisement featuring Sachin Tendulkar with a modified Hindi movie song,
'Sachin Ala Re,' Coke responded with an advertisement with the song, 'Coke Ala Re.' Following this,


Pepsi moved the Advertising Standards Council of India and the Advertising Agencies Association of
India, alleging plagarisation of its 'Sachin Ala Re' creation by Coke's advertising agency, Chaitra Leo
Burnett, in its 'Coke Ala Re' commercial. The rivals were always engaged in the race to sign the most
popular Bollywood and cricket celebrities for their advertisements. More often than not, the companies
pitched arch-rivals in their respective fields against each other in the cola wars as well. (Refer Table I)

Table I
Celebrity Endorsers *
Indian film industry Cricket players
Karisma Kapoor, Hrithik Roshan, Twinkle
Coke Khanna, Rambha, Daler Mehndi, Aamir Khan, Robin Singh, Anil Kumble, Javgal Srinath.
Aishwarya Rai. **
Aamir Khan, Aishwarya Rai**, Akshay Kumar,
Shahrukh Khan, Rani Mukherjee, Manisha Azharuddin, Sachin Tendulkar, Rahul Dravid,
Koirala, Kajol, Mahima Chaudhary, Madhavan, Sourav Ganguly.
Amrish Puri, Govinda, Amitabh Bachchan.

* The list is not exhaustive.**Aamir and Aishwarya had switched from Pepsi to Coke.

In October 2000, following Coke's 'Jo Chaaho Ho Jaaye' campaign, the brand's 'branded cut-through
mark, ' reached an all-time high of 69.5% as against Pepsi's 26.2%. In terms of stochastic share, Coke
had a 3% lead over Pepsi with a 25.5% share. Pepsi retaliated with a campaign making fun of Coke's
advertisements. The advertisement had a mixed response amongst the masses with fans of both the
celebrities defending their idols. In May 2000, Coke threatened to sue Pepsi over the advertisements
that ridiculed its own commercials. Amidst wide media coverage, Pepsi eventually stopped airing the
controversial advertisement. In February 2001, Coke went on the offensive with the 'Grow up to the
Thums Up Challenge' campaign. Pepsi immediately issued a legal notice on Coke for using the 'Yeh Dil
Maange More' phrase used in the commercial. Coke officials, however, declined to comment on the
issue and the advertisement continued to be aired.

III - PRODUCT LAUNCHES Pepsi beat Coke in the Diet-Cola segment, as it managed to launch Diet
Pepsi much before Coke could launch Diet Coke. After the Government gave clearance to the use of
Aspertame and Acesulfame-K (potassium) in combination (ASK), for use in low-calorie soft drinks,
Pepsi officials lost no time in rolling out Diet Pepsi at its Roha plant and sending it to retail outlets in
Mumbai. Advertisements and press releases followed in quick succession. It was a major victory for
Pepsi, as in certain parts of the world, Coke's Diet Coke sold more than Pepsi Cola itself. Brand
visibility and taste being extremely important in the soft drink market, Pepsi was glad to have become
the first-mover once again. Coke claimed that Pepsi's one-upmanship was nothing to worry about as
Coke already had a brand advantage. Diet Coke was readily available in the market through import


channels, while Diet Pepsi was rarely seen.
Hence, Diet Coke has a brand advantage. Coke came up later with a high-profile launch of Diet Coke.
However, as expected, diet drinks, as a percentage of the total cola demand, did not emerge as a major
area of focus in the years to come. Though the price of the cans was reduced from Rs 18 to Rs 15 in
July 2000, it failed to catch the fancy of the buyers. In September 2000, both the companies again
slashed the price of their diet cans by over 33% per cent to Rs 10. Both the companies were losing Rs 5-
6 per can by selling it at Rs 10, but expected the other products to absorb these losses. A Pepsi official
said that the diet cola constituted only about 0.4% of the total market, hence its contribution to revenue
was considered insignificant. However, both companies viewed this segment as having immense
potential and the price-cuts were part of a long-term strategy. Coke claimed that it was passing on the
benefit of the 5% cut in excise duty to the consumer. Industry experts, however, believed that the price
cut had more to do with piling up inventories. Diet drinks in cans had a rather short shelf life (about two
months) and the cola majors were simply clearing stocks through this price cut. However, by 2001, the
diet-cola war had almost died out with the segment posting extremely low growth rates.

IV – POACHING Pepsi and Coke fought the war on a new turf in the late 1990s. In May 1998, Pepsi
filed a petition against Coke alleging that Coke had 'entered into a conspiracy' to disrupt its business
operations. Coke was accused of luring away three of Pepsi's key sales personnel from Kanpur, going as
far as to offer Rs 10 lakh a year in pay and perks to one of them, almost five times what Pepsi was
paying him. Sales personnel who were earning Rs 48,000 per annum were offered Rs 1.86 lakh a year.
Many truck drivers in the Goa bottling plant who were getting Rs 2,500 a month moved to Coke who
gave them Rs 10,000 a month. While new recruits in the soft drinks industry averaged a pay hike of
between 40-60% Coke had offered 300-400%. Coke, in its reply filed with the Delhi High Court,
strongly denied the allegations and also asked for the charges to be dropped since Pepsi had not
quantified any damages. Pepsi claimed that this was causing immense damage as those employees who
had switched over were carrying with them sensitive trade-related information. After some intense
bickering, the issue died a natural death with Coke emerging the winner in another round of the battle.
Pepsi also claimed that its celebrity endorsers were lured into breaking their contracts with Pepsi, and
Coke had tried to pressure the Board of Control for Cricket in India (BCCI) to break a sponsorship deal
it had signed for the Pepsi Triangular Series. According to Pepsi's deal with BCCI, Pepsi had the first
right of refusal to sponsor all cricket matches played in India where up to three teams participated. The
BCCI, however, was reported to have tried to break this contract in favor of Coke. Pepsi went to court
protesting against this and won. Pepsi also alleged that Coke's Marketing Director Sanjiv Gupta was to
join Pepsi in 1997. But within days of his getting the appointment letter, Coke made a counter offer and
successfully lured Gupta away.

V – OTHER FRONTS Coke also turned its attention to Pepsi's stronghold - the retail outlets. Between
1996-98, Coke doubled its reach to a reported 5 lakh outlets, when Pepsi was present at only 3.5 lakh
outlets. To reach out to smaller markets, interceptor units in the form of mobile vans were also launched
by Coke in 1998 in Andhra Pradesh, Tamil Nadu and West Bengal. However, in its rush to beat Pepsi at
the retail game, Coke seemed to have faltered on the service front. For instance, many shops in Uttar
Pradesh frequently ran out of stock and there was no servicing for Coke's coolers. Though Coke began
servicing retail outlets on a daily basis like Pepsi, it had to wait for a while before it was able to match
Pepsi's retailing strengths. One of Coke's victories on the retail front was in the form of its tie up with
Indian Oil to set up dispensing units at its petrol pumps. Pepsi responded by striking a deal with Bharat
Petroleum, whose network was far smaller than Indian Oil's. Of the estimated 2,50,000 retail outlets in
the country that sold soft drinks, Pepsi was stocked only at 2,00,000.

In the late 1990s, Pepsi and Coke kept trying to outdo each other in sponsoring music concerts by
leading artists in order to reach out to youth. Pepsi also tied up with MTV to hold a series of pop


concerts across the country. Coke on the other hand, tied-up with MTV's rival Channel V for a similar
venture. There were frequent skirmishes regarding movie sponsorships and vending rights at leading
cinema halls. In May 1999, the companies were involved in a 'freebies war' - promotional schemes
designed to help grow the overall cola market besides the usual market share enhancement. Coke was
running as many as 12 volume-building, national-level consumer promotions, while Pepsi had 8
schemes for its brands. Coke's schemes ranged from crown exchanges to under the crown prizes, which
included toys, cars, free travel, consumer durables etc. Pepsi had crown exchanges and under the crown
prizes as well, it also offered free gifts like cards and tattoos. A huge outlay was involved in promoting
these schemes, with frequent media splashes.

Is The Rivalry Healthy?

In a market where the product and tastes remained virtually indistinguishable and fairly constant, brand
recognition was a crucial factor for the cola companies. The quest for better brand recognition was the
guiding force for Coke and Pepsi to a large extent. Colorful images, lively words, beautiful people and
places, interesting storylines, innovative/attractive packaging and catchy jingles have made sure that the
cola wars, though often scoffed at, rarely go unnoticed. And that's what it has all been about till now.
The management of both the companies had to constantly adapt to the changing attitudes and demands
of their consumers or lose market share.
The wars seemed to have settled down into a pattern. Pepsi typically won a market, sustained itself for a
few years, and then lost to a very determined Coke. In the earlier years, Coke was content with
advertising its product to build a strategic positioning for its product. With Pepsi's offensive moves
getting stronger and stronger, Coke had no option but to opt for the same modus operandi. Though the
market share debates would not have any conclusions, it would be safe to infer that the cola wars were a
major factor in keeping customer interest alive in the segment so far. However, in the late 1990s,
questions were raised about the necessity and more importantly, about the efficacy of these wars.
Answers for this would be too difficult to ascertain and too shaky to confirm.

Kellogg's Indian Experience: A Failed Launch

"Our only rivals are traditional Indian foods like idlis and vadas."

- Denis Avronsart, Managing Director, Kellogg India.

In April 1995, Kellogg India Ltd. (Kellogg) received unsettling reports of a gradual drop in sales
from its distributors in Mumbai. There was a 25% decline in countrywide sales since March1995,
the month Kellogg products had been made available nationally.

Kellogg was the wholly-owned Indian subsidiary of the Kellogg Company based in Battle Creek,
Michigan. Kellogg Company was the world's leading producer of cereals and convenience foods,
including cookies, crackers, cereal bars, frozen waffles, meat alternatives, piecrusts, and ice cream
cones. Founded in 1906, Kellogg Company had manufacturing facilities in 19 countries and
marketed its products in more than 160 countries. The company's turnover in 1999-00 was $ 7
billion. Kellogg Company had set up its 30th manufacturing facility in India, with a total investment
of $ 30 million. The Indian market held great significance for the Kellogg Company because its US
sales were stagnating and only regular price increases had helped boost the revenues in the

Launched in September 1994, Kellogg's initial offerings in India included cornflakes, wheat flakes
and Basmati rice flakes. Despite offering good quality products and being supported by the
technical, managerial and financial resources of its parent, Kellogg's products failed in the Indian
market. Even a high-profile launch backed by hectic media activity failed to make an impact in the
marketplace. Meanwhile, negative media coverage regarding the products increased, as more and
more consumers were reportedly rejecting the taste. There were complaints that the products


were not available in many cities. According to analysts, out of every 100 packets sold, only two
were being bought by regular customers; with the rest 98 being first-time buyers. Converting
these experimenters into regular buyers had become a major problem for the company.

By September, 1995, sales had virtually stagnated. Marketing experts pointed out various
mistakes that Kellogg had committed and it was being increasingly felt that the company would
find it extremely difficult to sustain itself in the Indian market.

The Mistakes
Kellogg realized that it was going to be tough to get the Indian consumers to accept its products.
Kellogg banked heavily on the quality of its crispy flakes. But pouring hot milk on the flakes made
them soggy. Indians always boiled their milk unlike in the West and consumed it warm or

They also liked to add sugar to their milk. or lukewarm. They also liked to add sugar to their milk.
When Kellogg flakes were put in hot milk, they became soggy and did not taste good. If one tried
having it with cold milk, it was not sweet enough because the sugar did not dissolve easily in cold
milk. The rice and wheat versions did not do well. In fact, some consumers even referred to the
rice flakes as rice corn flakes.

In early 1996, defending the company's products, Managing Director Avronsart said, "True, some
people will not like the way it tastes in hot milk. And not all consumers will want to have it with
cold milk. But over a period of time, we expect consumer habits to change. Kellogg is a past
master at the art, having fought - and won - against croissant-and-coffee in France, biscuits in
Italy and noodles in Korea.

" A typical, average middle-class Indian family did not have breakfast on a regular basis like their
Western counterparts. Those who did have breakfast, consumed milk, biscuits, bread, butter, jam
or local food preparations like idlis, parathas etc. According to analysts, a major reason for
Kellogg's failure was the fact that the taste of its products did not suit Indian breakfast habits.
Kellogg sources were however quick to assert that the company was not trying to change these
habits; the idea was only to launch its products on the health platform and make consumers see
the benefit of this healthier alternative. Avronsart remarked, "Kellogg India is not here to change
breakfast eating habits. What the company proposes is to offer consumers around the world a
healthy, nutritious, convenient and easy-to-prepare alternative in the breakfast eating habit. It
was not just a question of providing a better alternative to traditional breakfast eating habits but
also developing a taste for grain based foods in the morning."

Another mistake Kellogg committed was on the positioning front. The company's advertisements
and promotions initially focussed only on the health aspects of the product. In doing this, Kellogg
had moved away from its successful ‘fun-and-taste' positioning adopted in the US. Analysts
commented that this positioning had given the brand a ‘health product' image, instead of the
fun/health plank that the product stood on in other markets. (In the US for instance, Kellogg
offered toys and other branded merchandise for children and had a Kellogg's fan club as well.)
Another reason for the low demand was deemed to be the premium pricing adopted by the

At an average cost of Rs 21 per 100 gm, Kellogg products were clearly priced way above the
product of its main competitor, Mohun's Cornflakes (Rs 16.50 for 100 gm). Vinay Mohan, Managing
Director, Mohan Rocky Springwater & Breweries, the makers of Mohan's cornflakes said, "Kellogg
is able to cater only to the A-Class towns or the more affluent consumers whereas Mohun's caters
to the mass market." Another small-time brand, Champion was selling at prices almost half of that
of Kellogg. This gave the brand a premium image, making it seem unattainable for the average
Indian consumer. According to one analyst, "When Kellogg tried a dollar-to-rupee pricing for its
products, the company lost out on getting to the mass consumer." Even the customers at the
higher end of the market failed to perceive any extra benefits in Kellogg's products. A Business
Today report said that like other MNCs, Kellogg had fallen into a price trap, by assuming that there


was a substantial latent niche market in India for premium products.

In most Third World countries pricing is believed to play a dominant role in the demand for any
product. But Kellogg did not share this view. Avronsart said, "Research demonstrates that to be
well accepted by consumers even the most nutritious product must taste good. Most consumers
view quality as they view taste, but with a very high standard. We approach pricing on a case-to-
case basis, always consistent with the total value delivered by each product." He also said, "Local
brands are selling only on the price platform. We believe that we're demanding the right price for
the value we offer. If the consumer wants quality, we believe he can afford the price." Thus, it was
not surprising that the company went ahead with its plans of increasing the price of its products by
an average of 28% during 1995-98. Before the product was made available nationally in March
1995, the demand from Mumbai had been very encouraging. Within a year of its launch in
Mumbai, Kellogg had acquired a 53% market share. Following this, the company accelerated its
national expansion plans and launched the product in 60 cities in a 15-month period. However,
Kellogg was surprised to see the overall demand tapering off considerably. A Mumbai based
Kellogg distributor explained, "Why should somebody sitting in Delhi be deprived of the product?
So there was considerable movement from Mumbai to other parts of the country." As the product
was officially launched countrywide, the company realized that the tremendous response from the
Mumbai market was nothing but the ‘disguised demand' from other places being routed through

Kellogg had also decided to focus only on the premium and middle-level retail stores. This was
because the company believed that it could not maintain uniform quality of service if it offered its
products at a larger number of shops. What Kellogg seemed to have overlooked was the fact that
this decision put large sections of the Indian population out of its reach.

Disappointed with the poor performance, Kellogg decided to launch two of its highly successful
brands - Chocos (September 1996) and Frosties (April 1997) in India. The company hoped to
repeat the global success of these brands in the Indian market. Chocos were wheat scoops coated
with chocolate, while Frosties had sugar frosting on individual flakes.

The success of these variants took even Kellogg by surprise and sales picked up significantly. (It
was even reported that Indian consumers were consuming the products as snacks.) This was
followed by the launch of Chocos Breakfast Cereal Biscuits. The success of Chocos and Frosties
also led to Kellogg's decision to focus on totally indianising its flavors in the future. This resulted in
the launch of the Mazza series in August 1998 - a crunchy, almond-shaped corn breakfast cereal in
three local flavors - ‘Mango Elaichi,' ‘Coconut Kesar' and ‘Rose.' Developed after a one-year
extensive research to study consumer patterns in India, Mazaa was positioned as a tasty,
nutritional breakfast cereal for families. Kellogg was careful not to repeat its earlier mistakes.

It did not position Mazza in the premium segment. The glossy cardboard packaging was replaced
by pouches, which helped in bringing down the price substantially.

The decision to reduce prices seemed to be a step in the right direction. However, analysts
remained skeptical about the success of the product in the Indian market. They pointed out that
Kellogg did not have retail packs of different sizes to cater to the needs of different consumer
groups. To counter this criticism, the company introduced packs of suitable sizes to suit Indian
consumption patterns and purchasing power. Kellogg introduced the 500gm family pack, which
brought down the price per kg by 20%. Also, Mazza was introduced in 60gm pouches, priced at Rs

Kellogg's advertising had not been very impressive in the initial years. Apart from ‘Jago jaise bhi,
lo Kellogg's hi,' the brand had no long-term baseline lines. Later, Kellogg attempted to indianise its
campaigns instead of simply copying its international promotions. The rooster that was associated
with the Kellogg brand the world over was missing from its advertisements in India. One of its
campaigns depicted a cross section of individuals ranging from a yoga instructor to a kathakali


dancer attributing their morning energy and fitness to Kellogg. The advertisement suggested that
cornflakes could be taken with curds, honey, and banana.

In April 1997, Kellogg launched ‘The Kellogg Breakfast Week,' a community-oriented initiative to
generate awareness about the importance of breakfast. The program focussed on prevention of
anemia and conducted a series of nutrition workshops activities for both individuals and families.
The program was launched in Chennai, Delhi and Mumbai. The company tied up with the Indian
Dietetic Association (IDA) to launch a nation-wide public-service initiative to raise awareness about
iron deficiency problems. Nutritionists and dieticians from the country participated in a day-long
symposium in Calcutta to deliberate on the causes and impact of anemia caused by iron deficiency.
This program was in line with the company's global marketing strategy, which included nutrition
promotion initiatives such as symposiums, educative programs and sponsorship of research.

Emphasizing Kellogg's commitment to nutrition education, Avronsart remarked, "Product

modification, particularly the addition of iron fortification in breakfast cereals is how Kellogg
responds to the nutritional needs of the consumers. In this spirit, Kellogg India is taking a major
step to improve the nutritional status of consumers in the country, the specific opportunity being
iron fortification for which we have undertaken major initiatives to promote the awareness of the
importance of iron in the diet."

Kellogg also increased its focus on promotions that sought to induce people to try their product
and targeted schools across the country for this. By mid-1995, the company had covered 60
schools in the metros. In March 1996, the company offered specially designed 50 gm packs free to
shoppers at select retail stores in Delhi. This was followed by a house-to-house sampling exercise
offering one-serving sachets to housewives in the city. The company also offered free pencil-
boxes, water bottles, and lunch boxes with every pack. Plastic dispensers offering the product at
discounted rates were also put up in petrol pumps, super markets, airports etc.

Kellogg identified distribution as another major area to address in order to increase its penetration
in the market. In 1995, Kellogg had 30,000 outlets, which was increased to around 40,000 outlets
by 1998. Avronsart said, "We have increased our reach only slightly, but we are now enlarging our
coverage." Considering that it had just one plant in Taloja in Maharashtra, the company was
considering plans to set up more manufacturing units.

Kellogg's also began working towards a better positioning plank for its products. The company's
research showed that the average Indian consumer did not give much importance to the level of
iron and vitamin intake, and looked at the quantity, rather than the quality, of the food consumed.
Avronsart commented, "The Kellogg mandate is to develop awareness about nutrition. There is a
lot of confusion between nourishment and nutrition. That is something that we have to handle."
Kellogg thus worked towards changing the positioning of Chocos and Frosties - which were not
positioned on the health platform but, instead, were projected as ‘fun-filled' brands.

Kellogg then launched the Chocos biscuits, claiming that cereals being a ‘narrow category,' the
foray into biscuits would create wider awareness for the Kellogg brand. Biscuits being a mass
market product requiring an intensive distribution network, Kellogg's decision to venture into this
competitive and crowded market with stalwarts like Britannia, Parle and Bakeman, was seen as a
bold move not only in India, but also globally. Avronsart said, "We are ready to develop any food
based on grain and nutrition that will satisfy consumer needs."

The Results
In 1995, Kellogg had a 53% share of the Rs 150 million breakfast cereal market, which had been
growing at 4-5% per annum till then. By 2000, the market size was Rs 600 million, and Kellogg's
share had increased to 65%. Analysts claimed that Kellogg' entry was responsible for this growth.
The company's improved prospects were clearly attributed to the shift in positioning, increased
consumer promotions and an enhanced media budget. The effort to develop products specifically
for the Indian market helped Kellogg make significant inroads into the Indian market.


However, Kellogg continued to have the image of a premium brand and its consumption was
limited to a few well-off sections of the Indian market. The company had to face the fact that it
would be really very difficult to change the eating habits of Indians. In 2000, Kellogg launched
many new brands including Crispix Banana, Crispix Chocos, Froot Loops, Cocoa Frosties, Honey
Crunch, All Bran and All Raisin. Kellogg also launched ‘Krispies Treat,' an instant snack targeted at
children. Priced on the lower side at Rs 3 and Rs 5, the product was positioned to compete against
the products in the ‘impulse snacks' category. According to some analysts, the introduction of new
cereals and the launch of biscuits and snacks could be attributed to the fact that the company had
been forced to look at alternate product categories to make up for the below-expectation
performance of the breakfast cereal brands.

Kellogg sources however revealed that the company was in India with long-term plans and was not
focusing on profits in the initial stages. In Mexico the company had to wait for two decades, and in
France nine years, before it could significantly influence local palates. With just one rival in the
organized sector (Mohan Meakins) and its changed tactics in place, what remained to be seen was
how long it would take Kellogg to crack the Indian market.

Pizza Wars: Introduction

"We are not really competing with Domino's - we're not in the same category. Domino's is more
delivery and take-aways, while we offer a complete dining experience in addition to delivery and
take-away options."

- Pankaj Batra, Marketing Director, Tricon Restaurants, India.

"One has to take risks to reach economies of scale. Domino's also shook up competition when it
reached a target of 100 outlets."

- Hari Bhartia, Co-Chairman, Domino's Pizza India.

Until 1996, Pizza in India was synonymous only a bready dough base slathered with some ketchup.
Since 1996, there was a proliferation of 'high-priced branded' pizzas in the market, with the entry of
international pizza chains.

Domino's and Pizza Hut, the two big US fast food chains entered India in 1996. Each claimed it had the
original recipe as the Italians first wrote it and was trying desperately to create brand loyalty. Domino's
and Pizza Hut - tried to grab as large a slice of the pizza pie as possible. (Refer Table I and II for market

While Pizza Hut relied on its USP of "dining experience", Domino's USP was a 30-minute delivery
frame. To penetrate the market, both the players redefined their recipes to suit the Indian tastes.
Domino's went a step ahead by differentiating regions and applying the taste-factor accordingly.
Domino's also made ordering simpler through a single toll-free number through out the country.
Domino's and Pizza Hut expanded their market ever since they entered India. Domino's had grown from
one outlet in 1996, to 101 outlets in April 2001. Pizza Hut too, which began with just a single outlet in
1996 had 19 outlets in 2001.

Domino's entered India in 1996 through a franchise agreement with Vam Bhartia Corp.3 The first outlet
was opened in Delhi. With the overwhelming success of the first outlet, the company opened another
outlet in Delhi. By 2000, Domino's had a presence in all the major cities and towns in India. Pizza Hut
entered India in June 1996 with its first outlet in Delhi.


Initially, the company operated company-owned outlets. However, keeping in line with its worldwide
policy where Pizza Hut was gradually making a shift from company-owned restaurants to franchisee
owned restaurants, Pizza Hut made the shift in India too. Pizza Hut had four company-owned
franchisees - Universal Restaurants Pvt. Ltd. (Delhi, Uttar Pradesh and Rajasthan), Specialty
Restaurants Pvt. Ltd. (Punjab), Dolsel Corporation (Gujarat, Karnataka and Andhra Pradesh), Pizzeria
Fast Food Pvt. Ltd. (Pune and Tamilnadu) and Wybridge Holdings (Mumbai). Initially, the company
operated company-owned outlets. However, keeping in line with its worldwide policy where Pizza Hut
was gradually making a shift from company-owned restaurants to franchisee owned restaurants, Pizza
Hut made the shift in India too. Pizza Hut had four company-owned franchisees - Universal Restaurants
Pvt. Ltd. (Delhi, Uttar Pradesh and Rajasthan), Specialty Restaurants Pvt. Ltd. (Punjab), Dolsel
Corporation (Gujarat, Karnataka and Andhra Pradesh), Pizzeria Fast Food Pvt. Ltd. (Pune and
Tamilnadu) and Wybridge Holdings (Mumbai).
Positioning Wars
When Domino's entered the Indian market, the concept of home delivery was still in its nascent stages.
It existed only in some major cities and was restricted to delivery by the friendly neighborhood fast food
outlets. Eating out at 'branded' restaurants was more prevalent. To penetrate the Indian market,
Domino's introduced an integrated home delivery system from a network of company outlets within 30
minutes of the order being placed.

However, Domino's was not the trendsetter so far as home delivery was concerned. Delhi based fast
food chain, Nirula's was the first to start free home delivery in 1994. But where Domino's stole the
market was its efficient delivery record. Goutham Advani (Advani), Chief of Marketing, Domino's
Pizza India, said, "What really worked its way into the Indian mind set was the promised thirty minute
delivery." Domino's also offered compensation: Rs.30/- off the price tag, if there was a delay in
delivery.4For the first 4 years in India, Domino's concentrated on its 'Delivery' act.

For its delivery promise to work, Domino's followed a 11-minute schedule: one minute for taking down
the order, one minute for Pizza-making, six minutes oven-time, and three minutes for packing, sealing
and exit. Pizza Hut, on the other hand, laid more emphasis on its "restaurant dining experience." It
positioned itself as a family restaurant and also concentrated on wooing kids. Its delivery service was
not time-bound.

A company official said, "The Pizza making process takes about 20 minutes and since we don't usually
deliver to places which are beyond the reachable-in-half-an-hour distance, customers can expect home
delivery within 45 minutes." Moreover, analysts felt that Pizza was something that just was not meant to
be delivered. Said Vivek Sure, Projects Manager, Pizza PizzaExpress, "If you don't eat pizza fresh, it
turns cold and soggy." However, Domino's seemed to have overcome this problem through its delivery
pack called 'Domino's Heatwave.

Localizing the Menu

Since its entry into India, Domino's introduced nine new toppings for Pizzas to cater to the local
tastes.6 Different flavors were introduced in different parts of India. Advani said, "The Indian palate is
very definitive - people are extremely finicky and choosy, not too willing to experiment. Food tastes
vary from region to region.

To capture the market, we had to localize flavors." Thus, Deluxe Chicken with Mustard Sauce' and
Sardines were confined to the East, Mutton Ghongura and Chicken Chettinad to the South and Chicken
Pudina to Mumbai. Butter chicken, Makhani Paneer and the Chatpata Chana Masala were confined to
the North. Very soon, Pizza Hut followed Domino's and offered customized Spicy Paneer and Chicken
Tikka toppings. Apart from this, it also opened a 100% vegetarian restaurant at Ahmedabad, a one-of-


its-kind worldwide. The restaurant also offered a special Jain7 menu, which did not have a single root-
based ingredient to fit in with the food habits of Jains. Another city-specific adaptation of its menu by
Pizza Hut was the restaurant in Hyderabad, (Andhra Pradesh) which offered Halal meat and chicken
only with no beef and pork products in the menu.

Pricing and Promotional Wars

Domino's sold a 12" Pizza for Rs 265. (Refer Table III for price range). Commented Pankaj Batra
(Batra), Manager (Marketing), Tricon International said, "Indians are value-, not price-sensitive. We
need to offer comeback value to our customer." The high price was attributed to the high quality of
ingredients used. For instance, Domino's sourced its Peperoni and Jalapeno needs from Australia and
Spain respectively.

However, with competition increasing from Pizza Hut, Domino's introduced price cuts, discounts and
freebies to attract the customers. In 1998, Domino's introduced the Pizza Mania scheme where it offered
a large pizza for Rs.129/-. The demand was overwhelming and the company sold close to 5000 pizzas in
the first week of its launch. During late 1998, both Domino's and Pizza Hut were trying to lure the
customers with discount coupons by issuing such coupons through several schemes. Said an analyst,
"Even then, the prices are too high.

Globally, fast food chains only succeed when they bring their prices down to the same level as the street
food." However, both Domino's and Pizza Hut were concentrating more on data base marketing and
below-the-line activities and special offers. Domino's was spending 50% of its total marketing budget
on special offers and discounts along with delivered direct mailers and pizza training classes.

Domino's also had a tie-up with Discovery Channel under which the channel advertised its pizzas while
Domino's put the channel's name on its mailers. Domino's conducted Pizza making classes for school
students. In 1998, it offered a clock to all its customers who had bought Rs.15,000 worth of pizzas
throughout the year. Said a company official, "Database marketing is an important part of our strategy.
We have a special cell analyzing our database to look for repeat and loyal customers."

In 1998, Pizza Hut also launched a promotional campaign to attract the customers. It had a 'Pan In Your
Name' contest where it offered a free pizza to anybody with the word Pan in his/her name - for example,
Pankaj or Panandikar. In April 2000, Pizza Hut launched its innovative Pizza Pooch Menu and a Pizza
Pooch Birthday Party package exclusively for kids in the 6-10 age group. Batra said, "There is a specific
reason to cater to this segment.

Though, at this age, children are under their parents' guidance, they perceive themselves to be teenagers
- and have the ability to choose or demand a particular brand of their own choice." The Pizza Pooch
menu included a wholesome delicious meal and a gift for the child. The menu was intricately designed
with pictorial games. A free set of crayons was also provided to keep the children occupied while their
parents dined.

The campaigns were eye-catching with cartoon characters on the mailers, hoardings and print
advertisements where the cartoon characters were aimed at matching varying moods of kids. The Pizza
Pooch birthday package was full of fun and excitement. The birthday party included a well-decorated
area within the Pizza Hut outlet with several gifts for the children. The party was conducted by a trained
host with lots of games, prizes and a special gift for the birthday child.
In March 2000, Domino's slashed prices of Pizza by 40%. The price of a regular Pizza with three
toppings was cut from Rs.225 to Rs.130. In October 2000, Domino's ran a scheme, where it gave away


two pizzas for the price of one, within five days of placing an order. During the same time, Pizza Hut
launched a 'one rupee pan deal' scheme.

Under the scheme, for every pan Pizza purchased, another was given away for Re.1. In November 2000,
Pizza Hut introduced a scheme called 'barah nahin to tera (if not served in 12 minutes, it is yours free)'.
The scheme offered a speed lunch in 12 minutes for Rs.89. One second over 12 minutes guaranteed that
the customer would get it for free.

Domino's supply chain management enabled it to cut costs. In late 2000, it revamped its entire supply
chain operations (Refer Exhibit I). This enabled Domino's to slash prices. For instance, the price for a
no-frills cheese pizza was down from Rs.75 to Rs.49. A 10" pizza with at least three toppings was
available for Rs.119 as against the earlier price of Rs.225.

Brand Building Through Advertising

Domino's and Pizza Hut initially restricted their ad strategy to banners, hoardings and specific
promotions. In August 2000, Domino's launched the 'Hungry Kya? (Are You Hungry)'9 sequence of
advertisements on television.

A company official said, "We realized that a Pizza couldn't be slotted - it could be a snack; then again, it
could also be a complete meal" The only definitive common link between Domino's Pizzas and eating
was the hunger platform.

The launch of 'Hungry Kya?' campaign coincided with Domino's tie-up with Mahanagar Telephones
Nigam Ltd. (MTNL) for the 'Hunger Helpline'. The helpline enabled the customers to dial a toll-free
number (1600-111-123) from any place in India.

The number automatically hunted out the nearest Domino's outlet from the place where the call was
made and connected the customer for placing the order. The number also helped Domino's to add the
customer's name, address and phone number to its database. This was followed by

Pizza Hut's first campaign on television in July 2001, which said, 'Good times start with great
pizzas.'10 The ad was aired during all the important programs on Star Plus, Sony, Sony Max, Star
Movies, HBO, AXN, and MTV. Pizza Hut planned to spend between Rs.70-75 million on the ad
campaign in 2001. Said Pankaj Batra, "The first ad campaign on TV defines Pizza Hut as a brand, and
what it offers to its existing and potential customers. Once the awareness of this message is high, we
will focus on other facets of the brand and its offerings."

Going Places (Literally)

By March 2000, Domino's opened 37 outlets all over India. Between April 2000 and February 2001,
Domino's set up 64 more outlets in India. Delhi had the maximum number of outlets - 17, followed by
Mumbai with 13.

Domino's had the largest retail network in the fast food segment in India- with 101 outlets across 40
cities. Domino's had a tie-up with a real estate consultant Richard Ellis to help with locations, conduct
feasibility studies, and manage the construction.

It was also looking at non-traditional outlets like large corporate offices, railway stations, cinema halls
and university campuses. In early 2000, Domino's had opened an outlet at Infosys, Bangalore, which
was very successful. It also had outlets at cinema halls - PVR in Delhi, Rex in Bangalore, and New
Empire in Kolkata. By January 2001, Pizza Hut had 19 outlets across India.


In a move to expand further, Pizza Hut planned to open an additional five restaurants in Mumbai and 30
restaurants across major cities in India, by 2001 end. Tricon announced that the company would invest
Rs.30 million on each of the restaurants.

In March 2001, Pizza Hut opened its first three-storeyed 125-seater dine-in restaurant at Juhu in
Mumbai. Said a company official, "We are expanding the number of restaurants across the major cities
to cater to today's youth which has taken to pizzas as a cuisine."

Amul's Diversification Strategy: A Pizza for Rs 20!

"You've got to think big."
- Verghese Kurien, Chairman, GCMMF, Commenting on Amul's diversification, 2001.

"This dairy, non-dairy thing is a producer's distinction."

- B M Vyas, Managing Director, GCMMF, 2001.

In early 2001, Gujarat Cooperative Milk Marketing Federation (GCMMF)1planned to leverage its brand
equity and distribution network to turn Amul2 into India's biggest food brand. Verghese Kurien,
Chairman of GCMMF, set a sales target of Rs.10 bn by 2006 as against sales of Rs 2.3 bn in 2001. In
2001, GCMMF entered the fast food market in India with the launch of vegetable pizzas under the
brand name SnowCap in Ahmedabad, Gujarat. GCMMF was also planning to launch its pizzas in other
western Indian cities like Mumbai, Surat, and Baroda.

Depending on the response in these cities, GCMMF would decide to introduce its pizzas in other cities
in India. The pizzas were offered in four flavours: plain tomato-onion-capsicum, fruit pizza (pineapple-
topped), mushroom and 'Jain pizzas' (pizzas without onion or garlic). GCMMF launched the pizzas in
the Rs.20-25 price range. The existing players in the pizza market, like Domino's, Pizza Hut and
Nirula's offered pizzas at nothing less than Rs.39. (Refer Exhibit I). Analysts felt that GCMMF's move
would force the existing players to reduce their prices in the long run.

GCMMF planned to open 3,000 pizza retail franchise outlets all over the country by 2005. The pizzas
would be made at the retail outlets. The technical training and the recipe for the pizza would be
provided by GCMMF. It would also negotiate with bulk suppliers of vegetables to get these at
wholesale rates. These would be provided to the retailers.

The main cost component of the pizza is the mozarella cheese. GCMMF would offer the cheese at a
bulk rate of Rs.140 per kg, compared to the market price of Rs 146 per kg, thus saving the retailers Rs.6
per kg. GCMMF on its part would have a ready market for its cheese products. Analysts felt that the
supply of cheese products by GCMMF at a cheaper price would enable the retailers to price pizzas
lower than that of the competitors. R S Khanna, General Manager-North zone, said that GCMMF
intended to do to pizza what it had already done to ice cream. He said, "We want pizzas to become a
mass consumption item. And as in the case of ice cream, we will force pizza manufacturers to slash
prices. Eventually, this would expand the market for cheese."


In 1996, B M Vyas, Managing Director, GCMMF, commissioned the Indian Market Research Bureau
(IMRB) to conduct a consumer survey to identify the products consumers wanted from Amul. Based on
the findings, Amul entered into the following areas: ice cream, curd, paneer3, cheese, and condensed
milk. (Refer Exhibit II for Amul's product portfolio). In 1997, Amul launched ice creams after
Hindustan Lever acquired Kwality, Milkfood and Dollops4. Positioned as the 'Real Ice-cream,' Amul Ice
cream was one of the few milk-based ice creams in the market.

With GCMMF gradually expanding its distribution reach, Amul was all set to strengthen its share in the
ice cream segment. (Refer Exhibit III for market share). In August 1999, Amul launched branded
yoghurt in India for the first time, when it test marketed "Masti Dahi" in Ahmedabad first and then
introduced it all over the country. "Masti Dahi" was plain yoghurt sold in plastic cups. Each 400 gm cup
was priced at Rs 12.

In January 2000, Amul re-entered5 the carton milk market with the launch of "Amul Taaza" in Mumbai.
Amul Taaza was non-sweetened, plain, low fat milk. The product was positioned as a lifestyle as well as
functional product. It was targeted at the upper middle class housewife who could use it for different
occasions. Amul was targeting sales of about 0.1 mn litres per day. In November 2000, Amul decided to
promote mozzarella cheese, which was used in pizza.

The growing demand for mozzarella cheese from pizza making companies like Pizza Hut and Domino's
Pizza was expected to give Amul's cheese sale an additional push. In July 2001, Amul planned to enter
the instant coffee market through a tie-up with Tata Coffee. GCMMF had a strong national distribution
network while Tata Coffee had expertise in manufacturing and marketing coffee. As a part of the tie-up,
Amul was to source the instant coffee from Tata Coffee and distribute it.

The domestic coffee market was estimated at Rs.11bn, with the instant coffee segment being around
Rs.4.5bn. In August 2001, Amul decided to enter the ready-to-eat stuffed paratha, cheeseburger, cheese
and paneer pakoda8, and cheese sandwich segments. The products were to be marketed under the
SnowCap brand. The SnowCap brand would also include tomato sauce and ketchup.

Amul was also restructuring its chocolates business9. Seven of its brands that were withdrawn from the
market were to be relaunched soon. Amul tied up with Campco, the cocoa and arecanuts farmers'
cooperative in Karnataka and Kerala, for the supply of cocoa beans.10 Amul marketed Milklairs, which
was manufactured by Campco. This tie-up was expected to help Amul in the expansion of its chocolate

Why Diversify?
With the liberalization of the Indian economy in the early 1990s, and the subsequent entry of new
players, there was a change in lifestyles and the food tastes of people. The new team that took over the
management of the GCMMF in the mid-1990s hoped to take advantage of the change. The management
adopted Total Quality Management (TQM) and set for itself higher benchmarks (in terms of growth).
They also diversified the Amul portfolio, offering a range of food stuffs such as ketchup, jam, ice-
cream, confectionaries, cheese, and shrikhand.

According to some analysts, this diversification was probably not entirely demand-driven. Being a
cooperative, GCMMF was compelled to buy all the milk that was produced in Gujarat. And with milk
production having increased since the mid 1990s, GCMMF had to make use of additional milk, and
hence the pressure to make and market more and more processed-milk products. Amul had to expand
the consumption base of milk-based products in India. It planned to make its products (butter and


cheese) a part of the regular diet in most households.

Amul launched its new products with the intention of increasing the offtake of its basic milk products,
including cheese. This in turn was expected to increase the earnings of the farmers. The pizzas were
expected to increase the sale of its cheese. The entry into the confectioneries market was another avenue
for increasing milk consumption. This flurry of launches helped Amul broaden its appeal across all
segments. Price was an advantage that Amul enjoyed over its competitors. Amul's products were priced
20-40 % less than those of its competitors.

Analysts felt that Amul could price its products low because of the economies of scale it enjoyed. Amul
created two new distribution set-ups: a cold chain for ice-cream, and another for limited life fresh foods
like curd. Expecting the demand for ready-to- eat foods to grow, Amul prepared to leverage the ice-
cream cold chain for a new range of frozen foods, beginning with pizza. However, some analysts felt
that as the pizza's would be made by the retailers, Amul would have little control over the quality of the
pizzas. That was why Amul was marketing the pizzas under the brand name SnowCap.

Said S K Bhalla, Chief of Quality Control, "The product has received premature hype. Meeting
consumer expectations will be a challenge, until we make the frozen pizza in our own facilities."
According to some analysts, Amul's obsession with keeping down manpower costs and dealer
commissions could be a weakness. In ice-creams for example, Amul's retail commission in Ahmedabad
city was 17.5% which was 10% lower than what competitors offered.

They also pointed out that Amul might not have the financial muscle that multinationals had to achieve
rapid growth. However, all said and done, Amul seemed to be all set to make steady progress in the
coming years with its products having become quite popular in both rural and urban households. Said
Vyas, "We've handled liberalisation and globalisation far better than our transnational rivals. It has
made us fitter than ever."

Fairness Wars: Who's The Fairest of Them All?

"The saffron and milk combination in Fairever clicked with the people because they were familiar
with the goodness of the products. And we changed the rules by introducing saffron which had
never been used in fairness creams in the past."

- C.K. Ranganathan, CEO & MD, CavinKare Ltd

"Fair & Lovely continues to grow in a healthy manner. Only two out of ten Indians use face
creams. That means strong growth prospects for all brands."

- A HLL Spokesperson

In June 1999, the FMCG major Hindustan Lever Ltd. (HLL)1 announced that it would offer 50% extra
volume on its Fair & Lovely (F&L) fairness cream at the same price to the consumers.2 This ve was
seen by industry analysts as a combative initiative to prevent CavinKare's3 Fairever from gaining
popularity in retail markets. HLL's scheme led to increased sales of F&L and encouraged consumers to
stay with F&L and not shift to the rival brand. In December 1999, Godrej Soaps created a new product
category - fairness soaps - by launching its FairGlow Fairness Soap.
The product was successful and reported sales of more than Rs. 700 million in the first year of its


launch. Godrej extended the brand to fairness cream by launching FairGlow Fairness Cream in July
2000. By 2001, CavinKare's Fairever fairness cream, with the USP of 'a fairness cream with saffron'
acquired a 15% share, and F&L's share fell from 93% (in 1998) to 76%. Within a year of its launch,
Godrej's FairGlow cream became the third largest fairness cream brand, with a 4% share in the Rs. 6
billion fairness cream market in India.
The other players, including J.L. Morrison's Nivea Visage fairness cream and Emami Group's Emami
Naturally Fair cream, had the remaining 5% share. Clearly, the fairness cream and soaps market was
witnessing a fierce battle among the three major players - HLL, CavinKare, and Godrej - each trying to
woo the consumer with their attractive schemes.

In 1975, HLL launched its first fairness cream under the F&L brand. With the launch of F&L, the
market, which was dominated by Ponds (Vanishing Cream and Cold Cream) and Lakme (Sunscreen
Lotion), lost their dominant position. The dominance of HLL's F&L continued till 1998, when
CavinKare launched its Fairever cream in direct competition with F&L. Within six months of its launch,
Fairever captured more than 6% of market share. The success of Fairever attracted other players. Every
product in this segment was witnessing growth higher than the overall personal care product category
growth. The fairness cream market was growing at 25% p.a., as compared to the overall cosmetic
products market's growth of 15% p.a. In 2000, there were 7 main brands in the fairness product market
across the country.

Fair (Ness) Wars

In 1998, CavinKare launched Fairever fairness cream. The company took care to stick to the herbal
platform that its consumers had come to associate with all CavinKare products. Fairever seemed to be
an instant success. Fairever's market share jumped from 1.23% in 1998 to 8.13% in 1999. The brand
was expected to grow from Rs 160 million 1999 to Rs 560 million in 2000. Its success attracted many
players, including Godrej (FairGlow) and Paras Chemicals (Freshia). Existing products like Emami
Naturally Fair and F&L were promoted with renewed vigor.

In December 1999, Godrej launched FairGlow fairness soap and created a new product category. The
soap claimed to remove blemishes to give the user a smooth and glowing complexion. FairGlow was
positioned as a twin advantage soap - a clean fresh bath and the added benefit of fairness. In early 2000,
Godrej Soaps launched Nikhar, which was based on the ancient Indian formula of milk, besan and

Though Nikhar and FairGlow were positioned differently - Nikhar targeted fairness and FairGlow
claimed to protect skin naturally - the objective of both was the same, get more of a stagnating market.
In April 2000, HLL introduced Lux Skincare soap, positioned on the sunscreen platform. Priced at
Rs.14 for a 75gm cake, it was able to garner only a 0.5% share by 2000 end. In comparison, the mother
brand Lux had a share of 14%.

Retailers claimed that sales for the Lux variant were poor as it promised only protection from ultraviolet
rays. While this soap prevented one from growing darker, it did not promise to enhance the complexion.
By 2000 end, F&L cream seemed to be losing ground not only to other creams but also to FairGlow
soap. The switch from cream to soap was largely because soaps were perceived to be less harmful to the
skin than cream.

HLL did not have a product in its soap portfolio for this segment, and this was where Godrej seemed to
have gained. However, in 2001, HLL followed Godrej's footsteps and launched Fair & Lovely Fairness
Soap. This intensified the competition. F&L's extension into soaps was in tune with HLL's strategy to


develop and grow the premium segment of the market. Since the growth in the toilet soap market had
slowed down, the industry felt that premium soaps would re-energise the market.

Sangeeta Pendurkar, Marketing Manager, HLL, said, "We are targeting the 50,000 tonne premium soaps
market with F&L. We believe F&L soap will synergise with F&L cream as research reveals that the
usage of both will deliver better fairness." Analysts felt that though FairGlow had the first mover
advantage, F&L soap's growth potential could not be underestimated given the strong equity of the
mother brand.

In 1999, HLL and CavinKare hiked the price of F&L and Fairever by Re. 1 from Rs.25 and Rs.26
respectively. In 2000, Fairever was back to its original price to maintain price parity. Many stockists
said that this was done to push the product against F&L. A stockist commented, "The company was
trying out this price to compete with F&L and other new brands that have come in.

But we did not see higher sales due to this and the company reverted to its original price." F&L too
followed suit. During 2000-01, while the fairness cream market was growing at an average of 15%
Fairever's growth had slowed down. Analysts felt that this was mainly because Fairever was priced
higher than competing products. Meanwhile, in January 2000, HLL filed a patent infringement suit for
Rs.100 million in the Kolkata High Court against CavinKare Ltd.

HLL alleged that CavinKare was using its patented F&L formula without its knowledge or permission.
HLL obtained an ex-parte stay on CavinKare, but CavinKare got the stay vacated in a week's time. It
also filed a patent revocation application in the Chennai High Court and defended the suit on the
grounds that HLL's patent was not valid. CavinKare further claimed that the ingredients contained in the
composition were 'prior art' and that the new patent was not an improvement of the earlier patent, which
had expired in 1988. In September 2000, the companies suddenly opted for an out-of-court settlement.

CavinKare gave an undertaking to the court that the company would not "manufacture and/or market
either by themselves or by their agents any fairness cream by using silicone compound in combination
with other ingredients covered in patent no. 169917 of the plaintiff (HLL), namely Niacinamide, Parsol
MCX, Parsol 1789, with effect from September 15, 2000." HLL also gave an undertaking that it would
not interfere with the sale of the cream manufactured on or before September 15, 2000, lying with the
wholesalers, re-distribution stockists, and retailers.

Promotional Wars
During 2000-01, with major players entering the market, the existing products were promoted with
renewed vigor through price reductions, extra volumes, etc. Many products were marketed aggressively.
While F&L advertisements projected fairness comparable to the moon's silvery glow, FairGlow offered
the added benefit of a blemish-free complexion.

But Fairever, which sold at a higher price, did not initiate any promotional activities. B. Nandakumar,
President (Marketing) CavinKare, explained, "We will not tailor our product to the competition. We'll
do so for the consumer. Freebies are not the only way to garner sales." However, analysts believed that
CavinKare did not undertake any promotional activities due to lack of financial muscle.

On February 14, 2000, as a part of its promotional activities, Godrej Soaps announced the 'Godrej
FairGlow Friendship Funda'5 in various colleges in Maharashtra. In August 2000, it launched the
'FairGlow Express,' the first branded local train in India, in Mumbai, in partnership with Western
Railways. In December 2000, Godrej took its FairGlow brand to the web by launching

[CASE STUDY- MBA-2018 -: SRMSFMS, BAREILLY:- ] Page 38 Later, it launched a unique online promotional scheme - 'the FairGlow Face of the

Every fortnight, one winner was selected and showcased on the website. The winner also won prizes
like perfume hampers, gold and pearl jewellery, holiday for two etc. In early 2001, Godrej Soaps also
launched its FairGlow cream in an affordable sachet (pouch pack). The 9gm sachet was priced at Rs. 5,
and claimed to give around 15-20 applications per pack. It was initially launched in South India, and
was expected to enter other markets very soon.

The Wars Continue Unabated

In early 2001, three major players - HLL, CavinKare and Godrej - competed fiercely to penetrate the
market further with their attractive schemes. A growing number of pharma and OTC drug companies
like Emami, Ayurvedic Concepts, Paras etc. also entered this segment.
Companies were also facing competition from Amway, Avon, Modicare etc., which were into direct
selling. The market was seeing a major convergence of product categories with the emergence of more
and more variants to fill every conceivable niche. This heightened competition forced companies to
increase their advertisement spends.

HLL re-launched F&L and quadrupled its advertising expenditure. CavinKare more than doubled its ad
spends from Rs.215 million in 1999 to Rs.500 million in 2001. Godrej and Emami too planned to raise
their ad spends. But even as ad spends increased, fakes entered the market.

Fair & Lovely's fakes were rampant with names like Pure & Lovely and Fare & Lovely. Fairever's
copies were Four Ever, For Ever or Fare Ever. In early 2001, HLL launched Nutririch Fair & Lovely
Fairness Reviving Lotion to protect its brand from any threat in the premium segment. The new product
was claimed to be scientifically formulated to protect the skin from harmful ultraviolet rays and enhance
natural fairness. The new formula, containing Triple UV Guard Sun protection system and the fairness
ingredients Vitamin B3 and milk proteins, promised to restore and protect the natural skin colours from
the sun's darkening effects.

The product was also claimed to contain Niacinamide making it the only patented formula fairness
cream. It was targeted at women in the age group of 18-35 and was priced at a premium. A 50ml pack
was priced at Rs.38 and a 100ml pack at Rs.68. HLL also launched 'Pears Naturals Fairness cream' at
the same time. By mid 2001, the fairness concept was no longer restricted to creams and soaps, but had
expanded to talcs also. Emami was test marketing a herbal fairness talc in the South.

The rapid expansion of the fairness business had two consequences: cutthroat competition and a flurry
of copycats. Every company - from the market leader to the new entrants - was forced to rethink its
marketing strategies, spend lavishly on advertisements, and even seek legal action against unfair claims.
Even though there was no scientific backing for the manufacturer's claims that their products enhanced
fairness, prevented darkening of skin, or removed blemishes, sales of fairness products continued to

Dr R.K. Pandhi, Head of the Department of Dermatology, AIIMS, Delhi, said, "I have never come
across a medical study that substantiated such claims. No externally applied cream can change your skin
colour. Indeed, the amount of melanin in an individual's skin cannot be reduced by applying fairness
creams, bathing with sun-blocking soaps or using fairness talc." In 2001, the organised market of
branded fairness cream products was worth about Rs 6 billion. The unbranded and fakes market was
estimated to be Rs 1.5 billion. The market was big and the potential was even bigger. In India, beauty


seemed to be associated with fairness more than with anything else. With such an attitude firmly
entrenched in the minds of millions of people, the fairness products market would see fair days ahead.


Case 1

As one of the first to enter the field of office automation, Sagatec Software, Inc. had built a reputation
for designing high-quality and user-friendly database and accounting programs for business and
industry. When they decided to enter the word-processing market, their engineers designed an effective,
versatile, and powerful program that Sagatec felt sure would outperform any competitor.

To be sure that their new word-processing program was accurately documented, Sagatec asked the
senior program designer to supervise writing the instruction manual. The result was a thorough, accurate
and precise description of every detail of the program’s operation.

When Sagatec began marketing its new word processor, cries for help flooded in from office workers
who were so confused by the massive manual that they couldn’t even find out how to get started. Then
several business journals reviewed the program and judged it “too complicated” and “difficult to learn.”
After an impressive start, sales of the new word processing program plummeted.

Sagatec eventually put out a new, clearly written training guide that led new users step by step through
introductory exercises and told them how to find commands quickly. But the rewrite cost Sagatec
$350,000, a year’s lead in the market, and its reputation for producing easy-to-use business software.

Case 2


Effective Business Communication Case Study

A multi-national organisation operates in various countries including Australia, Vietnam, India, Oman,
and Nigeria. The organisation manufactures and distributes agricultural equipment to local and
international clients. In total the organisation has 8,000 employees in five countries and more than 1
million customers worldwide. The head office is based in Australia. In recent years the organisation is
facing several communication challenges.

They include:

1. Ineffective use of social media such as blogs, wikis, social networks to support teams in sharing
ideas, building knowledge bases and task management.
2. Lack of quality feedback from clients on ways to improve product quality and service delivery
3. Misunderstandings and lack of trust based upon intercultural communication issues in different

Your manager has asked you to develop strategies and plans to improve communication at all levels In
order to complete this task, you will need to review relevant academic literature and case studies to
provide evidence and examples.

Case 3

Case Study 1 – Barry and Communication Barriers Effective Communication as a Motivator One
common complaint employees voice about supervisors is inconsistent messages – meaning one
supervisor tells them one thing and another tells them something different. Imagine you are the
supervisor/manager for each of the employees described below. As you read their case, give
consideration to how you might help communicate with the employee to remedy the conflict. Answer
the critical thinking questions at the end of the case then compare your answers to the Notes to
Supplement Answers section. Barry is a 27-year old who is a foodservice manager at a casual dining
restaurant. Barry is responsible for supervising and managing all employees in the back of the house.
Employees working in the back of the house range in age from 16 years old to 55 years old. In addition,
the employees come from diverse cultural and ethnic backgrounds. For many, English is not their
primary language. Barry is ServSafe® certified and tries his best to keep up with food safety issues in
the kitchen but he admits it’s not easy. Employees receive “on the job training” about food safety basics
(for example, appropriate hygiene and handwashing, time/temperature, and cleaning and sanitizing).
But with high turnover of employees, training is often rushed and some new employees are put right
into the job without training if it is a busy day. Eventually, most employees get some kind of food safety
training. The owners of the restaurant are supportive of Barry in his food safety efforts because they
know if a food safety outbreak were ever linked to their restaurant; it would likely put them out of
business. Still, the owners note there are additional costs for training and making sure food is handled
safely. One day Barry comes to work and is rather upset even before he steps into the restaurant. Things
haven’t been going well at home and he was lucky to rummage through some of the dirty laundry and
find a relatively clean outfit to wear for work. He admits he needs a haircut and a good hand scrubbing,
especially after working on his car last evening. When he walks into the kitchen he notices several trays
of uncooked meat sitting out in the kitchen area. It appears these have been sitting at room temperature


for quite some time. Barry is frustrated and doesn’t know what to do. He feels like he is beating his head
against a brick wall when it comes to getting employees to practice food safety. Barry has taken many
efforts to get employees to be safe in how they handle food. He has huge signs posted all over the
kitchen with these words: KEEP HOT FOOD HOT AND COLD FOOD COLD and WASH YOUR
HANDS ALWAYS AND OFTEN. All employees are given a thermometer when they start so that they
can temp food. Hand sinks, soap, and paper towels are available for employees so that they are
encouraged to wash their hands frequently.


1. What are the communication challenges and barriers Barry faces?

2. What solutions might Barry consider in addressing each of these challenges and barriers?
3. What are some ways Barry might use effective communication as a motivator for employees to
follow safe food handling practices?

Case 4

You may know the expression "it's like a car crash" to describe a fascinatingly bad situation. (You know
you shouldn't stare, but you just can't look away.) In a somewhat grim and literal example, Toyota
recently had a bad brush with a series of recalls and a blow to its reputation. The upside, however, is
that this provides an excellent case study about how a communication failure in the workplace should be

The Facts on the Toyota Recall

In 2002, Toyota began warning dealerships of an electrical issue in Camry models. Between 2007 and
2009, millions of Camrys faced recalls, but the reason given was for problems created by stuck floor
mats. The company later admitted that stuck floor mats were only incidental to the problems in the
vehicles. Soon the company faced widespread consumer outrage, censure from the National Highway
Transportation Safety Administration (NHTSA), and a congressional hearing. Things had gone
dramatically bad.

The Communication Failure

If this was an electrical issue, how was it also a poor communication failure in the workplace? Easy. In
2002, the marketplace didn't have to account for the degree of consumer engagement that services such
as Twitter and Facebook bring. But over the next decade, the marketplace responded to these new media
by becoming a place where transparency, accountability, and clear communication had more social heft
than established authority. Toyota failed these new criteria in a couple major ways:

 It changed its story from an electrical issue to stuck floor mats, failing to realize that in an era of
leaks, Internet archives, and rapid spread of awareness through media such as Twitter and
Facebook, inconsistencies could be widely exposed.
 When it had to admit fault, its spokespeople were evasive rather than upfront, even when the
CEO testified before Congress.


In this marketplace, communication is king. Most consumers understand that mistakes happen, and they
look for companies that can acknowledge and correct mistakes.

Case 5

Herb had been with the company for more than eight years and had worked on various R&D and
product enhancement projects for external clients. He had a Ph.D. in engineering and had developed a
reputation as a subject matter expert. Because of his specialized skills, he worked by himself most of the
time and interfaced with the various project teams only during project team meetings. All of that was
about to change. Herb’s company had just won a two-year contract from one of its best customers. The
first year of the contract would be R&D and the second year would be manufacturing. The company
made the decision that the best person qualified to be the project manager was Herb because of his
knowledge of R&D and manufacturing. Unfortunately, Herb had never take Nany courses in project
management, and because of his limited involvement with previous project teams, there were risks in
assigning him as the project manager. But management believed he could do the job.
Herb’s team consisted of fourteen people, most of whom would be fulltime for at least the first year of
the project. The four people that Herb would be interfacing with on a daily basis were Alice, Bob, Betty,
and Frank.

Alice was a seasoned veteran who worked with Herb in R&D. Alice had been with the company longer
than Herb and would coordinate the efforts of the R&D person-nel.

Bob also had been with the company longer that Herb and had spent his career in engineering. Bob
would coordinate the engineering efforts and drafting.

Betty was relatively new to the company. She would be responsible for all reports, records management,
and procurements.

Frank, a five-year employee with the company, was a manufacturing engineer. Unlike Alice, Bob, and
Betty, Frank would be part time on the project until it was time to prepare the manufacturing plans. For
the first two months of the program, work seemed to be progressing as planned. Everyone understood
their role on the project and there were no critical issues. Herb held weekly teams meetings every Friday
from 2:00 to 3:00 p.m. unfortunately the next team meeting would fall on Friday the 13th, and that
bothered Herb because he was somewhat superstitious. He was considering canceling the team meeting
just for that week but decided against it.At 9:00 a.m., on Friday the 13th, Herb met with his project
sponsor as he always did in the past. Two days before, Herb casually talked to his sponsor in the
hallway and the sponsor told Herb that on Friday the sponsor would like to discuss the cash flow
projections for the next six months and have a discussion on ways to reduce some of the expenditures.
The sponsor had seen some expenditures that bothered him. As soon as Herb entered the sponsor’s
office, the sponsor said:
It looks like you have no report with you. I specifically recall asking you for a report on the cashflow
Herb was somewhat displeased over this. Herb specifically recalled that this was to be a discussion only
and no report was requested. But Herb knew that “rank has its privileges” and questioning the sponsor’s
communication skills would be wrong. Obviously, this was not a good start to Friday the 13th.At 10:00
a.m., Alice came into Herb’s office and he could see from the expression on her face that she was
somewhat distraught. Alice then spoke:


Herb, last Monday I told you that the company was considering me for promotion and the
announcements would be made this morning. Well, I did not get promoted. How come you n ever wrote
a letter of recommendation for me?
Herb remembered the conversation vividly. Alice did say that she was being considered for promotion
but never asked him to write a letter of recommendation. Did Alice expect Herb to read between the
lines and try to figure out what she really meant? Herb expressed his sincere apologies for what
happened. Unfortunately, this did not make Alice feel any better as she stormed out of Herb’s office.
Obviously, Herb’s day was getting worse and it was Friday the 13th.
No sooner had Alice exited the doorway to Herb’s office when Bob entered. Herb could tell that Bob
had a problem. Bob then stated:
In one of our team meetings last month, you stated that you had personally contacted some of my
engineering technicians and told them to perform this week’s tests at 70°F, 90°F and 110°F. You and I
know that the specifications called for testing at 60°F, 80°F and 100°F. That’s the way it was always
done and you were asking them to perform the tests at different intervals than the specifications called
for. Well, it seems that the engineering technicians forgot the conversation you had with them and did
the tests according to the specification criteria. I assumed that you had followed up your conversation
with them with a memo, but that was not the case. It seems that they forgot. When dealing with my
engineering technicians, the standard rule is, “if it’s not in writing, then it hasn’t been said.” From now
on, I would recommend that you let me provide the direction to my engineering technicians. My
responsibility is engineering and all requests of my engineering per-sonnet should go through me.
Yes, Friday the 13th had become a very bad day for Herb. What else could go wrong, Herb thought? It
was now 11:30 a.m. and almost time for lunch. Herb was considering locking his office door so that
nobody could find him and then disconnecting his phone. But in walked Betty and Frank, and once
again he could tell by the expressions on their faces that they had a problem. Frank spoke first:
I just received confirmation from procurement that they purchased certain materials which we will need
when we begin manufacturing. We are a year away from beginning manufacturing and, if the final
design changes in the slightest, we will be stuck with costly raw materials that cannot be used. Also, my
manufacturing budget did not have the cash flow for early procurement. I should be involved in all
procurement decisions involving manufacturing. I might have been able to get it cheaper that Betty did.
So, how was this decision made without me?
Before Herb could say anything, Betty spoke up:
Last month, Herb, you asked me to look into the cost of procuring these materials. I found a great price
at one of the vendors and made the decision to purchase them. I thought that this was what you wanted
me to do. This is how we did it in the last company I worked for.
Herb then remarked:
I just wanted you to determine what the cost would be, not to make the final procurement decision,
which is not your responsibility.
Friday the 13th was becoming possibly the worst day in Herb’s life. Herb decided not to take any
further chances. As soon as Betty and Frank left, Herb immediately sent out e-mails to all of the team
members canceling the team meeting scheduled for 2:00 to 3:00 p.m. that afternoon.
1. How important are communication skills in project management?
2. Was Herb the right person to be assigned as the project manager?
3. There were communications issues with Alice, Bob, Betty, and Frank. For each communication issue,
where was the breakdown in communications: encoding, decoding, feedback, and so on?