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DOMINATION
OC
TO
BE
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NEWSLETTER FROM DEPARTMENT OF MANAGEMENT STUDIES, IIT ROORKEE
VOLUME-III ISSUE-05
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Editorial ………………………………………………………
02 | DOMINATION, OCTOBER 2012 DEPARTMENT OF MANAGEMENT STUDIES, IIT ROORKEE
- Regards
Team DoMination
Dear Readers,
Marking the end of sum-
mer and the onset of winter,
Halloween is celebrated with
feasting, bonfires and ‘trick-or-
treats’. Following in the same
spirit, we would like to treat
you to thought-provoking and
interesting articles brought
forth by investigative minds.
This edition of Domina-
tion features three entries from
the article-writing contest Ab-
hivyakti, organized by the
team. ‘Edible Oils- Procurement
Strategies in India’ compiled by
Aashwi Verma, PGP-
Agribusiness Management, IIM
Ahmedabad, details India’s
journey towards being self-
sufficient in production of oil. It
discusses with the readers the
price scenario in the sector and
how its burden is eventually
passed on to the end customer.
A similarly stimulating
article ‘The Fourth World’, au-
thored by Siddharth Jaiswal,
IMT Hyderabad, questions the
incidence and acceptance of
globalization in the vast tract of
lawlessness that many a mar-
kets are facing. While identify-
ing the most isolated and dis-
connected markets and de-
scribing the tedious journey
towards growth, the writer still
manages to leave you with a
vision of light at the end of the
tunnel. Walking you through
the evolution of consumerism,
‘The Powershift’ from IRMA,
outlines the conquering and
losing of the power over con-
sumer choices by various mar-
ket participants.
Analyzing the two sides
of the coin, ‘Social Media: A
double-edged sword’, by
Sharad Srivastava, presents
both the views and the counter
-views surrounding the utility
and need of Social media. It
takes into account the rise and
fall of social networking giants
and identifies the general trend
followed.
This edition’s Success
Story illustrates the business
acumen of the entrepreneur
and visionary, Mr. Kishore Bi-
yani, the Group CEO of Future
Group and Managing Director
of Pantaloons Retail. Treading
through innumerable struggles
and squashing all obstacles in
the path to success, he truly
has been rewriting the rules.
‘CRR: A Necessary Evil’,
co-authored by Abhay Kumar
and Sharad Srivastava, takes a
sneak peek into the controver-
sy currently broiling over the
bearing of CRR for liquidity
management by RBI. The au-
thors propose a cautious ap-
proach towards deciding the
fate of CRR as a regulatory tool.
Sharing his experiences as the
Executive (HR), BHEL
Haridwar, Mr. Varun Goel, em-
phasizes communication, posi-
tive outlook and open-
mindedness for success in any
professional undertaking.
With the motto of Work
Hard, Party Harder and a beau-
tifully written poem
‘Happiness…at Last’ by Karun
Sethi, we hope the edition in-
fuses your day with fun and
knowledge in equal measure.
Happy Reading !!
Contents
Editor
Anurag Agrawal
Team DoMination
Abhay Kumar
Aditi Joshi
Ankit Katiyar
Arun George
Ashish Agarwal
Gundeep Singh Kapoor
Manav Kaushik
Manoj Kumar
Nilaya Mitash Shanker
Pawan Upadhyay
Priyank Singhal
Rohan Krishnan
Ruchi Gupta
Saumya Dani
Saumya Verma
Saurabh Paul
Sharad Srivastava
Shibi Singh
Designing Team
Ritesh Kumar
Sabhariswaran P
Saurabh Patel
Roorkee - 247 667, India Tel: +91-1332-285014, 285617 Fax: +91-1332-285565 Email: domination.doms.iitr@gmail.com
DEPARTMENT OF MANAGEMENT STUDIES INDIAN INSTITUTE OF TECHNOLOGY ROORKEE
04
08
12
15
20
28
21
A Double Edged Sword Cash Reserve Ratio
The Fourth World
The Powershift
Happiness..At Last..
Edible Oil: Procurement Strategies
Qutopia
DoMS da Evince
23
DEPARTMENT OF MANAGEMENT STUDIES, IIT ROORKEE
Success Story
26
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The trend is clear. The
world is moving and that too at
a fast pace!! Much of it has to
be attributed to the technologi-
cal advancements. Among
them, Internet and web based
technologies are the recent
and most significant ones. The
internet has not only altered
the manner by which people
gather knowledge, communi-
cate, entertain themselves, it
has also affected how they in-
teract in this socially connected
world. Social media, the new
buzz word, is one invention
which allows individuals,
teams, communities, compa-
nies, organizations, govern-
ments, and parliamentarians to
reach large masses.
No wonder popularity of so-
cial media is increasing leaps
and bounds. The growth of the
social media is really impres-
sive. The basic purpose of so-
cial media is to connect people
and it has been quite successful
in achieving that. Today Face-
book is estimated to have more
than 900 million registered
people. In India too, social me-
dia usage is on rise. With 50+
million active social media us-
ers, Indians spend more time
on social media than on any
other activity on the Internet,
according to Nielsen.The Bar
graph below depicts the in-
crease in users of various social
networking sites in India. Ac-
cording to the data, Facebook
is the undisputed market lead-
er in India. Interestingly Orkut
which is assumed to have be-
come dormant a lont time ago,
is still alive and occupies se-
cond position. LinkedIn and
Social Media
DEPARTMENT OF MANAGEMENT STUDIES, IIT ROORKEE
Cover Story
Perspective | Chlorophyll | Qutopia | DoMS da Evince | Success Story | Regardez I’economie
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04 | DOMINATION, OCTOBER 2012
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………………………………………………………Twitter are relatively newer but
they are hot on the heels of
sites like Facebook in terms of
users. Social media has found
its acceptability in other fields
too. Social networking sites
such as LinkedIn is increasingly
being used for professional
purposes. Another social net-
working site Twitter is getting
its foothold, particularly in In-
dia. Facebook and Twitter have
also played an instrumental
role in various political move-
ments. Facebook is used by An-
na movement activists to con-
nect with masses. Likewise
Twitter is cited as an important
factor in Arab Spring move-
ment. This is a significant omen
as mainstream (conventional)
media is either censored or it
colludes with one party.
Needless to say, social
media has a profound impact
on an individual and society.
The most visible change we see
is that it has brought people
closer to each other. The cen-
tral benefit of social media is to
connect and communicate with
people across the world. Social
media provides a platform to
share our life with whomsoever
we want. By sharing our experi-
ences through social media, we
create empathy towards oth-
ers. Someone else may have
gone through a similar situa-
tion and they can make a sug-
gestion which could help im-
prove the situation.
Social networking sites can
also help us to find people you
share interests with. Facebook,
for example, provides an op-
portunity to list our views and
thoughts and therefore may
help us to establish common
ground with others. This con-
tributes towards building an
open society. Some organiza-
tions are sensing this trend and
started using social media as an
apparatus to collect opinions to
chart out their strategies. Re-
cently, anti-corruption move-
ments in India used social me-
dia to spread its vision and to
communicate. Social media
sometimes acts as a track 2
version of conventional media
as well. It offers details and
opinions which is not available
in mainstream media. Admis-
sion processes of some of Indi-
an business schools can be tak-
en as an example. These sites
provide information which is
otherwise not available on
mainstream media.
In spite of all nice things
about social media, not every-
thing is alright. There are a lot
of young people who wake up
and the first thing they do is to
check their Facebook account.
There are cases where people
have been online on Facebook
for ages without even signing
out. This obsession is driving
frequent users to physical and
psychological stress. This addic-
tion makes one prioritize incor-
rectly and putting insignificant
things over many more vital
activities.
It is observed that social
media does only provide data
and information but not the
understanding or knowledge.
Many times personal opinions
are presented as data. And
people believe it without realis-
ing that it is purposefully done.
It has a ripple effect. Firstly,
people who spend a lot of time
on social networking sites are
flooded with incorrect infor-
mation and thus are led to in-
correct conclusions. Since their
perception is different from the
reality, the actual result is often
poles apart from what it is
DEPARTMENT OF MANAGEMENT STUDIES, IIT ROORKEE
Social Media
05 | DOMINATION, OCTOBER 2012
Perspective | Chlorophyll | Qutopia | DoMS da Evince | Success Story | Regardez I’economie
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DEPARTMENT OF MANAGEMENT STUDIES, IIT ROORKEE
not accountable and virtual in
nature.
The second effect is
more concerning. Those who
spend a lot of their time on so-
cial networking sites, start liv-
ing in their own world of per-
ceptions. This poses a serious
challenge to the analytical and
intellectual capability of an in-
dividual. A recent riot in Mum-
bai is a glaring example of what
such situation might lead to. It
is said that factually incorrect
data and morphed pictures
were the main reason behind
the violence. People believed
whatever was supplied to them
without any investigation.
Despite all its social rele-
vance, social media is definitely
not a substitute for meeting in
person or other such forms of
social interactions. Social me-
dia lacks the warmth and affec-
tion when compared to con-
ventional relations. In other
words, social media is alleged
to depression as well as aloof-
ness. Facebook for example, is
considered to be addictive in
nature. Due to this very nature,
an individual might talk too his
far-away friends and relatives
but he may avoid or overlook
family members or close
friends. Social media is also be-
lieved to contribute to the de-
velopment of self-centrism in
an individual. Rather than
keeping in touch and inter-
acting with folks, millennial
narcissists are more driven to
acquire as many friends as pos-
sible and use their carefully
crafted profiles to impress. This
trend is observed more among
young age group users.
Like everything else, so-
cial media has its own virtues
and vices. It is a resource which
should be exploited carefully
instead of being exploited by it.
One should remember that so-
cial media is after all a virtual
world. It should not be equated
with actual read world. Equilib-
rium should be the key, with a
sound understanding of the
difference between the virtual
and real world. Only this stabil-
ity and a mature mindset can
leverage the social media in a
positive way.
To start with, a sensitiza-
tion program can be initiated
with respect to social media
usage. Including this into aca-
demic curriculum is also a con-
siderable idea. One should be
educated about the social me-
dia contents, its validity and
relevance. As the old proverb
says, all data is not Infor-
mation, all information is not
knowledge, all knowledge is
not understanding, all under-
standing is not wisdom. Same
applies to social media as well.
An immature mind may per-
ceive and interpret the sea of
information in a wrong manner
which might lead to disastrous
consequences. People should
also be informed that excessive
use of social media hampers
other dimension of personality
development. A person, who
spends a lot of time on social
media, may fall short on out-
door activities which would re-
strict the overall personality
development.
There is a need for par-
ents and elders to keep an eye
on any behavioural changes
such as impatience, aggression,
depression etc. Parents should
open all possible communica-
tion channels so that the young
minds do not get carried away
by the mirage of social media
sites. There is a fine line here
tough between monitoring and
what youth would consider as
Social Media
Perspective | Chlorophyll | Qutopia | DoMS da Evince | Success Story | Regardez I’economie
06 | DOMINATION, OCTOBER 2012
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DEPARTMENT OF MANAGEMENT STUDIES, IIT ROORKEE
Social Media
Perspective | Chlorophyll | Qutopia | DoMS da Evince | Success Story | Regardez I’economie
invasion of privacy.
Parents need to under-
stand this difference and han-
dle the situation cautiously.
Sometimes it is required to sit
with the youth and make them
see the reality behind the
smokescreen.
On the whole, social me-
dia sites are helpful if used with
caution. It is only excessive us-
age which may lead to several
problems. A little chit chat with
an old friend not only refreshes
but also fulfils social needs.
Therefore an awareness pro-
gram coupled with some initial
mentorship is best possible
way to get maximum ad-
vantage and would prove to be
a win-win situation for user and
society both. Finally it is im-
portant to remember that so-
cial media can be as effective
and as disastrous as we allow it
to be. The problems in today’s
world are not caused by social
media but by people using so-
cial media.
Article By - Sharad Srivastava DoMS, IIT Roorkee sharad.iitr@gmail.com
07 | DOMINATION, OCTOBER 2012
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Perspective ………………………………………………………
Recently Pratip Chaudhuri,
Chairman of India’s largest
bank SBI, created a flutter by
suggesting that Cash Reserve
Ratio or CRR needs to be abol-
ished as it is not sensible in
modern times. He also called
for paying interest on CRR
funds till it is discontinued. Mr.
Chaudhuri propagated these
views at a conclave organised
by the Federation of Indian
Chambers of Commerce and
Industry, FICCI.
CRR or Cash Reserve Ra-
tio is the proportion of deposits
banks have to keep with RBI.
Currently this proportion is
4.50% which means for every
100 rupees, banks would have
to put 4.50 rupees with RBI.
Furthermore, banks do not
earn any interest which makes
this amount as good as non-
existent for banks. An estimate
says 0.25 reduction in CRR
would result in an influx of
17000 crore rupees in the mar-
ket. By this calculation, a mind
boggling sum of rupees 3.06
lakh crores is with RBI (do the
math!!).
His reasons are simple.
Banks have no control over this
money which is dumped with
reserve bank. If they were giv-
en an opportunity to utilise this
money, this huge cash will be a
growth engine for India’s eco-
nomic developments. SBI chair-
man also argued that since this
money does not yield any re-
turns, it creates an unnecessary
burden for rest of the amount.
Daily commercial banks deposit
Rs 3,14,000 crore with RBI. If
RBI starts paying interest on
this humungous amount at an
interest rate of say 10%, then
banking industry will get an
amount of Rs 31,000 crore per
year. Also total net profit of en-
tire banking industry last year
was nearly Rs. 70,000 crore.
DEPARTMENT OF MANAGEMENT STUDIES, IIT ROORKEE
Perspective | Chlorophyll | Qutopia | DoMS da Evince | Success Story | Regardez I’economie
08 | DOMINATION, OCTOBER 2012
Cash Reserve Ratio
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Cash Reserve Ratio ………………………………………………………
In addition to the above
views, there are other reasons
which are cited. The require-
ment of CRR is only for banks,
not for Non-Banking Financial
Corporations (NBFCs). Though
they do not operate in same
space often, it still does not
make for a level playing field.
That might be the reason why
some people are supporting
the theory of doing away with
CRR. For example, Mr. V Jagan
Mohan, MD of AP State Coop-
erative Bank Ltd. appreciated
the SBI chairman’s views. He
questions the relevance of CRR
in this information age where
RBI can get any figures by just a
click.
Though the above views
are interesting, not everybody
is ready to accept them. RBI
deputy governor K C
Chakrabarty openly came out
against SBI chairman’s opinion.
He stressed that CRR is a part
of monetary policy and banks
should work in the established
framework. He seems to imply
that CRR is a crucial liquidity
management tool which pro-
vides regulatory power to RBI.
Below diagrams show the sym-
bolic representation of how li-
quidity is affected by change in
CRR.
By eliminating CRR, RBI
would lose its power to control
or regulate the money supply.
Very few people would want a
central bank to dilute the influ-
ence. This has achieved more
significance particularly in the
wake of worldwide economic
crisis.
There are other reasons
too which are more technical in
nature. If banks are exempted
from CRR then banks would
stand as a more risky option.
Adhering to Basel norms, the
change in CRR would also alter
Capital Adequacy Ratio, a ratio
of bank’s capital to its risk. Ba-
sically banks may have to set
aside even a larger quantity of
cash (though not with RBI) for
risk management which would
prove counterproductive in the
long run. No wonder ICICI bank
chairman K V Kamath joined
RBI for continuing with the cur-
rent structure.
Lastly with a surging in-
flation rate, CRR can be a ne-
cessity for handling the money
flow. India’s GDP growth was at
5.5 percent in the second quar-
ter which is lowest in the two
decades; it is expected to be
near or less than 5.5 percent in
2012-13 as well. On the other
hand, inflation is near 8% and it
is persistently hovering in dou-
ble digits for the last 2 years.
For any government, control-
ling inflation is prime objective
DEPARTMENT OF MANAGEMENT STUDIES, IIT ROORKEE
Perspective | Chlorophyll | Qutopia | DoMS da Evince | Success Story | Regardez I’economie
09 | DOMINATION, OCTOBER 2012
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we have to do trade-off be-
tween GDP growth and Infla-
tion, However one must keep
in mind that CRR can only con-
trol inflation up to a certain ex-
tent.
Overall, it does not look
a viable choice to remove CRR
altogether. RBI has already
slashed cash reserve rates from
11% (in 1998) to 4.50% (in
2012). Similarly paying interest
on CRR defeats the very pur-
pose CRR is created for. There
is a need for discussion among
all stakeholders for such a pro-
posal. Trading some part of
CRR with an equivalent magni-
tude of another tool SLR
(statutory liquidity ratio) can be
the first step to begin with. The
result should be carefully stud-
ied and evaluated in all as-
pects. This is the time for re-
forms 2.0 but with a security
system.
DEPARTMENT OF MANAGEMENT STUDIES, IIT ROORKEE
Cash Reserve Ratio
Perspective | Chlorophyll | Qutopia | DoMS da Evince | Success Story | Regardez I’economie
10 | DOMINATION, OCTOBER 2012
Article By - Abhay Kumar Sharad Srivastava DoMS, IIT Roorkee
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Perspective ………………………………………………………
We along with many an-
alysts and economists seem to
think this convergence force of
globalization is real and univer-
sal, and that all the emerging
markets will continue to grow
rapidly, catching up with in-
come levels in the west. A clos-
er look shows that globalization
did not, in fact, resonate equal-
ly in all developing nations.
There is a broad array of coun-
tries that are not fully connect-
ed to global flows of trade and
money. These nations comprise
a chaotic Fourth World of
“frontier markets” in which po-
litical leaders have yet to buy
fully into the global market
consensus, and the economic
expansion is still more erratic
than the norm. The frontier na-
tions occupy a world where in-
sider trading can run rampant
because it’s officially tolerated,
where financial data is unrelia-
ble as authorities don’t really
demand clarity from business-
es, research here is often less
about number crunching than
about pressing one’s ear to the
walls for the latest rumors. The
state of semi-lawlessness
makes them volatile, with eco-
nomic growth from a high of 20
percent in Ghana to a low of 2
percent in Serbia compared to
big emerging markets like Chi-
na and South Africa with 9 and
3 percent respectively. The
“macro mania” that seized ob-
servers of emerging markets
over the last decade, as they
rose and fell in unison, this
phenomena did not extend to
the fourth world where every
market tends to follow its own
peculiar rhythms often at the
whim of local leaders. Combo-
dia opened its stock exchange
in July 2011 and there were no
companies ready to list, making
it the only stock exchange in
the world with zero trading and
another instance is that of
Ukraine’s “forced listing” in
2008 when the government
forced big companies and
banks to sell stock to the public
which resulted in companies
DEPARTMENT OF MANAGEMENT STUDIES, IIT ROORKEE
Perspective | Chlorophyll | Qutopia | DoMS da Evince | Success Story | Regardez I’economie
11 | DOMINATION, OCTOBER 2012
The Fourth World
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The Fourth World ………………………………………………………
DEPARTMENT OF MANAGEMENT STUDIES, IIT ROORKEE
Perspective | Chlorophyll | Qutopia | DoMS da Evince | Success Story | Regardez I’economie
12 | DOMINATION, OCTOBER 2012
selling a tiny portion to comply
with the rule which triggered
lesser free float leading to less
commitment a company has to
the basic values of a public en-
terprise i.e return to stakehold-
ers, not surprising outsiders
see the Ukraine market as
something of a joke. Frontier
markets of the fourth world
often fail the basic task of the
market, which in theory is to
match buyers and sellers in an
open forum that allows them
to agree upon a fair price.
When rumors pass as infor-
mation and rules make no
sense, neither do prices. There
is no doubt about the huge po-
tential these nations hold, but
they need to capitalize on this
potential by opening up to the
outside world and work to-
wards proper governance. They
are home to more than one
sixth of the world population,
but account for just 5 percent
of global GDP and attract only
0.5 percent of global invest-
ment. An at most universal as-
sumption holds that this gap
will close over time and the
fourth world is the place where
the world will witness most ex-
plosive growth in the coming
decades.
Disconnected in Middle:
The most isolated region
from the global market and its
trend is the Middle East, Iran
and Iraq. The key frontier mar-
kets in the Middle East are the
petro-monarchies of the gulf
region, and the largest among
these by far is Saudi Arabia
which is the only country which
is open for investors, but only
from within the gulf. This re-
sulted in a spectacular stock
market bubble in 2005, with
Saudi Arabia’s stock market be-
coming the biggest among the
developing world, larger than
that of China and India, solely
based on oil-rich locals and
neighbors. The quantum of this
bubble was a good deal crazier
than the dotcom insanity that
gripped the United States at
the turn of the millennium, and
it pooped soon enough. But
when a bubble pops in the gulf
it does not make any sound as
no one pays much attention as
foreigners are not allowed in.
Hence, it would be good idea
for the middle east to open the
gates to its economy and gear
up for a diversified growth
model.
Promising Road:
Few among the Fourth
world nations have already
started showing ability to grow
and grow quick. They are in line
to be called the next emerging
markets of the world. Few of
such economies are Sri Lanka,
Vietnam etc which could prove
to be the next growth miracle.
Sri Lanka’s Peace Dividend:
n the 1960’s Sri Lanka
was billed as the next Asian
growth miracle, only to be sty-
mied by tryst with socialism
that played a direct role in ig-
niting the civil war which de-
railed Sri Lanka’s development
for 30 years. Today after the
civil war, it seems that Sri
Lanka’s time has finally come.
Though the growth dipped
sharply during the war, the
economy continued to grow at
an average pace of 5 percent.
The only reason for this was
the young educated population
situated in the western prov-
ince that produced strong
growth in service industry. The
north and east province that
account for 30 percent of land
and 15 percent population was
mostly war zone. With the na-
tion whole again, achieving 7 to
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DEPARTMENT OF MANAGEMENT STUDIES, IIT ROORKEE
Perspective | Chlorophyll | Qutopia | DoMS da Evince | Success Story | Regardez I’economie
13 | DOMINATION, OCTOBER 2012
8 percent of growth in the next
decade could be well within
reach. With government keen
on growth and the aim to raise
the country from 102nd position
to 30th in the world bank’s
rankings by business climate by
2014. But the path doesn’t
promise to be easy as the so-
cialist experiment of 1970 had
lead to high taxes and govern-
ment debt which still equals to
80 percent of GDP. However, it
is bringing the vast swaths of
formerly rebel-held territory
back into play and exploit the
country’s long-standing
strength of highly literate pop-
ulation and its geographical lo-
cation between the two key
shipping routes of India and
China. Markets are especially
bad at foreseeing the financial
implications of war, the most
famous example is World War
1, which took the investors by
complete surprise, leaving with
huge losses. Conversely, mar-
kets are also quite week at rec-
ognizing the financial benefits
from peace, well studied by
agencies such as world bank
and UN, the peace dividend is
real and Sri Lanka is poised to
be a big beneficiary
Vietnam’s Port to Nowhere:
Vietnam offers a classic
case of a small country that
had greatness thrust upon it.
By middle of the last decade
investors were not only hyping
Vietnam as the next China but,
also throwing more money at it
than it could absorb. In 2007
the investment produced a net
inflow of $17 billion in a $80
billion economy, a ratio four
times than China ever
achieved. The leadership simp-
ly lost control of the economy
and in 2008 the bubble went
bust. Vietnam always followed
the footsteps of China, but it
lacked the volume and scale
which China held as its biggest
strength. Additionally the oper-
ating cost in China was much
lesser than in Vietnam, it is
very difficult to connect with
international shipping ports as
most of its 54 ports were built
for river routes which in-
creased the logistics cost. It has
to get back to the basics of eco-
nomics by building roads, com-
munications and infrastructure
to connect business. The lead-
ership is investing into educa-
tion at a high pace than China
and focus on high skill labor de-
velopment. It’s a good time for
the government to deep dive
into fundamental issues and
concerns of the economy and
plan a path ahead, hence a
huge potential to regain its
charm as the next China.
Article by: Siddarth Jaiswal IMT Hyderabad sidharthjaiswal9@gmail.com
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Perspective ………………………………………………………
Once upon a time, the
storekeeper had power over
the consumer’s purchasing
choices. Then over the past cen-
tury, this power was stripped
from the merchant. It became
prized territory and was fought
over in the battle for market
dominance. The trophy was
wrested from the hands of the
vanquished and held briefly by
successive victors – the con-
sumer, the manufacturer, the
brand, the retailer and now...?
Since more than five
decades now, the consumer
habits and procurements have
been modelled by environmen-
tal engineers. Cultural and
physical environments have
manipulated and been manipu-
lated by evolving consumerism.
The Generic Shopping List of
the Fifties
During the fifties, daily
visits to corner mom and pop
store were the order of the
day. This frequent household
chore was a matter of personal
contact between the consumer
and the storekeeper. The con-
sumer would stand in front of
the counter with his bag in his
hand, while the grocer would
preside over his domain behind
the till. He would take your or-
der and fetch every item for
you. The shopping list would
also have been a generic one –
sugar, flour, salt, spices, etc.
With time, these generic de-
scriptions became brand ori-
ented. So the soap became Lux,
toothpaste became Colgate
and washing powder became
Surf. But the power of making
choices still remained with the
grocer. It was he who collected
the comestibles from the
shelves and gave it you. Gradu-
ally, he came to know your pur-
chase patterns as well as you
knew them yourself!
The Powershift—The Shopping Evaluation
DEPARTMENT OF MANAGEMENT STUDIES, IIT ROORKEE
Perspective | Chlorophyll | Qutopia | DoMS da Evince | Success Story | Regardez I’economie
14 | DOMINATION, OCTOBER 2012
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The Powershift—The Shopping Evaluation ………………………………………………………
DEPARTMENT OF MANAGEMENT STUDIES, IIT ROORKEE
Perspective | Chlorophyll | Qutopia | DoMS da Evince | Success Story | Regardez I’economie
15 | DOMINATION, OCTOBER 2012
Product Retailer Consumer
The Birth of Choice in Sixties
and Seventies
Now the grocer’s dominion be-
gan disappearing. The super-
markets had arrived and the
world of shopping changed and
the retailer’s power over con-
sumer choices shifted to the
consumers themselves. Now
shopping became the domain
of individual choice. Now the
grocer did not decide what you
wanted and what you did not.
This was the first time that the
consumer got an opportunity
to establish a relationship with
the FMCGs. The retail price
maintenance systems also
changed. Originally the retailer
would charge a price different
from the one recommended by
the manufacturer, and this
compromised the consumer’s
perception of a brand and even
risked diluting the brand’s val-
ue. The Maximum Retail Price
(MRP) arose in this era. This
practice guaranteed profit mar-
gins, forced retailers into obei-
sance and removed the prime
motivator in the consumer’s
choice of one retailer over the
other (apart from the geo-
graphic location). The price and
selection in all stores now be-
came uniform. Consumer loyal-
ty to retailer dissolved and
gave way to brand loyalty. Now
it was up to the brands to keep
promises – not only of price,
but of consistent quality and
reliability. In this process,
brands built platforms on
which to establish consumer
trust.
Consumer Brand Retailer
The Branding Power of the
Eighties
Now the power of the brands
and the weight of reputation
they carried grew. Procter and
Gamble, an emerging name
then, paved the way for brand-
ing and fashioned the consum-
er experience. Consumer items
began existing as icons and
metaphors for their own func-
tions. In the late eighties, the
power of consumer choice
shifted again. The retailers be-
gan creating their own brands.
So, the retailer’s own products
began to compete with the
other brands, leading to lot
many established brands losing
out on significant sales volumes
and revenue.
The Rise of the Retail Power in
the Ninties
The retailers began realizing
that they accounted for a sizea-
ble portion of a manufacturer’s
business. Brands were then
forced to create points of
differentiation that were based
on client-store needs. This
turned the tables on the con-
sumer’s prime loyalty to the
brand and resurrected consum-
er loyalty towards the retailer.
Retailers increasingly began
coming up with their own pri-
vate labels the way the Future
Group has “Golden Harvest”,
Tata Group has “Star”, etc. The-
se sub-brands sold at lower or
competitive prices and market-
ed under the umbrella of the
………………………………………………………
………………………………………………………
DEPARTMENT OF MANAGEMENT STUDIES, IIT ROORKEE
retailer’s name. This put the
retailer in-charge of the con-
sumer product choice once
again. Loyalty was no more
connected to FMCG brands but
also to store’s own private la-
bels. But the resurgence of re-
tailer power over consumer
choice didn’t stop there. The
retailer and its brand suddenly
became the small player in the
big competition for consumer
attention. Consumer loyalty
followed the options it was
offered and shifted from indi-
vidual brands to retail identi-
ties. These retailers now
offered warrantees, price re-
duction, handy locations and
often private label brands. This
was the time when the DNA
governing consumer behaviour
was mapped. As a result,
brands not only had to offer
discounts but also pay extra fee
to guarantee preferred shelf
position. Eventually retailers
conceived and introduced loy-
alty programs. And while the
retailer was focussed on keep-
ing the enemy, the brand, at
bay; the internet crept up on
the adversaries’ flanks. A pow-
ershift was about to occur, this
time moving the power over
consumer choice away from
both brands and retailers to e-
tailers.
The Story of the Millenium
The advent of internet
gave manufacturers an oppor-
tunity to bypass the stores,
which was traditionally their
link to the consumer. By using
the consumer data acquired
from research companies, from
the loyalty programs; the com-
panies could interact directly
with the consumers and pro-
mote their brands through di-
rect marketing campaigns. The
manufacturer thus regained
some control over the consum-
er’s choice and also to control
consumer flow in a low profile
fashion. The internet thwarted
the retailer’s ability to inter-
The Powershift—The Shopping Evaluation
Perspective | Chlorophyll | Qutopia | DoMS da Evince | Success Story | Regardez I’economie
16 | DOMINATION, OCTOBER 2012
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DEPARTMENT OF MANAGEMENT STUDIES, IIT ROORKEE
The Powershift—The Shopping Evaluation
Perspective | Chlorophyll | Qutopia | DoMS da Evince | Success Story | Regardez I’economie
17 | DOMINATION, OCTOBER 2012
Brand Wholesaler Retailer Consumer
cept consumers as they previ-
ously used to. The dialogue
now became one-to-one basis.
The internet prevented com-
petitors from obtaining the full
picture of what went on be-
tween the competition brands
and their consumers. The man-
ufacturer now acts as a retail-
er. The internet turned the
battle for power over consum-
er choice upside down one
more time, creating a new and
unexpected retailer enemy.
Internet shopping and mar-
keting offered what retail had
failed to offer – no queues, no
geographic barriers, low prices
and unlimited selection. A con-
sumer dream world had ap-
peared.
This way the world has
changed from the fifties to
now. Today, e-tailers like flip-
kart, myntra, fashionandyou,
indiatimes, eBay, Amazon, etc.
have established themselves.
Everything from groceries to
home appliances, apparel to
books, everything can be
bought online and delivered
home in no time. And the pow-
ershift keeps going...
Article by Bhavi Patel IRMA brazenberry@gmail.com
………………………………………………………
A smile may dwell on my face for a moment or more, I may appear to be in the high skies, waiting to soar,
I may be radiating with the joy of someone’s presence, But what I feel from inside is all that makes sense. My heart is wailing with the pain of the unknown, It seems to have hardened into nothing but stone.
The spark in my life seems to have faded, All ethics and morals seem to have degraded,
Even inspiring stuff now seems nothing but words, The eye-filling thoughts are flying away like birds.
The joy, the splendour - everything is missing, All the inner turmoils seem to be shouting and hissing,
All hopes appear bleak and out of sight, A warm, sunny day looks like a pitch black night.
To cut it short, I don’t feel happy anymore, Every cramped passage leads to a closed door. But, it’s at this moment that I remember God,
The saviour of my life - guarding me with a sword. I know He’s watching, knowing I can withstand,
Throwing subtle hints about a world that is grand, Failures will haunt us on every step we take,
Problems will surface, but remember they are fake. This is the time to enjoy and to rejoice.
Building our destiny is a matter of our choice. Life is not only about miseries and pains,
To see rainbows, we have to go through the rains. And this feeling brings the smile back on my face.
My world seems to be filled once more with grace. So there’s happiness…at last, in the recesses of my mind.
A panorama of emotions which are soothing and kind. I may not get someone, but love never dies.
Maybe God has chosen someone else for me guys. So I will always remain cool and that’s a promise,
Because I have learnt one thing which goes like this, “Life is really beautiful, beyond any measure,
And living it fully is the ultimate treasure.”
Chlorophyll ………………………………………………………
Poem By - Karun Sethi DoMS, IIT Roorkee karunsethi.iitr@gmail.com
Happiness …… At Last Its wise to learn, its GOD like to create
DEPARTMENT OF MANAGEMENT STUDIES, IIT ROORKEE
Perspective | Chlorophyll | Qutopia | DoMS da Evince | Success Story | Regardez I’economie
18 | DOMINATION, OCTOBER 2012
………………………………………………………
Qutopia ………………………………………………………
It‖s Exquizite, Kills your Quriosity and adds to your Quizdom. Need we say more? ―Qutopia‖ – A Utopia of the best Biz Quiz Tidbits to wreck your brains! Rush in your answers to domination.doms.iitr@gmail.com before 31st October, 2012. The winner will have their names published in the next issue. Also, person getting the highest score in the current quarter (Jul-Dec 2012) will get a gift voucher. Answers in the next issue of DoMi-nation.
Section A (1 Point for each correct answer)
DEPARTMENT OF MANAGEMENT STUDIES, IIT ROORKEE
Perspective | Chlorophyll | Qutopia | DoMS da Evince | Success Story | Regardez I’economie
19 | DOMINATION, OCTOBER 2012
1) The Titanic, with 2,200 people on board, departed from which of the following British ports
on 10 April 1912, for its fateful voyage from Europe to the US?
2) 'Mini Countryman' is a SUV car launched by _________.
3) Which of the following countries is India’s second largest supplier of crude oil - against
which western countries have imposed sanctions?
4) First African woman to win a Nobel prize?
5) Who are Bretton Woods Sisters?
6) Picture—What is the event that is described?
………………………………………………………
Qutopia ………………………………………………………
Winner of Qutopia (August 2012)
1. Sowmiya V—SDM IMD, Mysore
2. Varun Sharma— DoMS, IIT Roorkee
DEPARTMENT OF MANAGEMENT STUDIES, IIT ROORKEE
Answers to Aug’12 Qutopia
Section A: -
1. Videocon
2. Jet
3. Gujarat
Section C: -
1. Solar-powered lamp/Danish(Iceland origin)/Olafaur Eliasson
2. Partha Chatterjee/Maruti Suzuki/RC Bhargava
Section D: -
1. Advertising Standards council of India/HUL/Kwality Walls/Amul.
2. Pakistan/Bangladesh/Srilanka/2007
Perspective | Chlorophyll | Qutopia | DoMS da Evince | Success Story | Regardez I’economie
20 | DOMINATION, OCTOBER 2012
Section B (2 Point for each correct answer)
ID the Logos
A) B)
C) D)
Section B: -
1. Mr. Sushil Kumar shinde/Mr. pranab Mukher-jee
2. Royal Artillery Barracks/1716
………………………………………………………
DoMS-da-Evince
Varun Goel is 2011 batch pass out of DoMS, IIt Roorkee and presently working as Executive (HR) at BHEL, Haridwar
1. What are your roles and re-
sponsibilities with BHEL?
I am working in HR department
as Executive (HR). Within HR
department, there are different
sections like Recruitment, Poli-
cy, Industrial Relations, and Es-
tablishment etc. There are two
establishments here in BHEL
Haridwar – Executive Establish-
ment and Non-Executive Estab-
lishment. I am in Executive Es-
tablishment where I take care
of the requirements of the em-
ployees in officer cadre from
the time they join till the time
they retire. Our team in Execu-
tive Establishment takes care of
the annual appraisals, promo-
tions, transfer requests, pay
fixation/anomalies, disciplinary
cases, absorption of trainees,
probation clearance etc.
Apart from these, there
are some routine activities like
issuing medical cards, giving
reply to RTI Queries, getting
the different nomination forms
filled up by employees etc.
2. How was your experience
working with INFOSYS and
how it is different from BHEL?
First of all, there is a lot of
difference in working pattern of
a PSU and that of a private
MNC. Second, industries are
totally different. While in IT in-
dustry everybody is at least an
Engineer, where people work
in a multicultural environment
round the clock; in manufactur-
ing set-up, people come with
different educational back-
grounds ranging from Engineer
to simple graduates to just
10th pass with I.T.I. working in
strict shift patterns. Then, my
profile is completely different.
The work in Infosys was pure
technical (sitting all day and
coding complex algorithms)
whereas in BHEL, the work is
totally related to HR
(Interacting with people, e-
mailing, preparing reports, Or-
ganising meetings). At Infosys,
we were pampered a lot, were
given a lot of training before
going to production. At BHEL, a
lot more maturity is expected
from us. It is expected that we
the youngsters will lead the
team from the front solving all
the problems that might come
in our way. We had an induc-
tion programme of just 15 days
after which we were allotted
our sections. However, the
training provided by Infosys is
being put in use from the day
one in BHEL. It helped me in
picking up the local legacy sys-
tem quickly and contributing in
implementation of SAP - HR in
BHEL Haridwar.
3. What has been the most
challenging role in your career
so far?
It is tough to answer that. Defi-
nitely there are times when
you don't know how to go
DEPARTMENT OF MANAGEMENT STUDIES, IIT ROORKEE
Perspective | Chlorophyll | Qutopia | DoMS da Evince | Success Story | Regardez I’economie
21 | DOMINATION, OCTOBER 2012
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DEPARTMENT OF MANAGEMENT STUDIES, IIT ROORKEE
when you don't know how to
go about things coming in your
way but that happens for a
short time as I believe every
problem has a solution. You
take help of your colleagues
and seniors, learn from the
past experiences, even do
some new experiments but
come out of the problem. I also
believe that I am yet to face a
situation in which I feel com-
pletely helpless. Few essentials
that I would mention here that
will help in dealing with chal-
lenges:
- A positive never-say-die atti-
tude.
- Communication - communi-
cate, communicate, communi-
cate!!! upwards, downwards
and within your team.
- Accurate, Brief and Clear (the
ABC
- Open Mindedness.
- Keep patience.
4. How has DoMS, IIT Roorkee
contributed to your success?
It has helped me in every way. I
am a much better person now.
Apart from immensely contrib-
uting to my knowledge from
the respected teachers and
friends, it has also helped me in
developing my soft skills. Extra-
curricular activities made sure
that we did everything to be-
come a good manager. Apart
from that, I have made friends
for life.
5. Any message for the read-
ers, especially the current
batches of DoMS?
Utilize the most of your time
while you are there. Keep on
improving, be it in what-ever
field. Interact with your peers,
seniors, juniors, professors,
PhD students, B.Tech students,
M.Tech students. (Remember
Rancho of 3 idiots!). There is lot
to know and learn in this world.
Take part in extracurricular ac-
tivities. This will make sure you
are corporate ready when you
passout and join some compa-
ny. Go on trips. Some of you
may never get chance to be in
uttarakhand for so long.
Believe in Work Hard, Part
Hard. Cheers !!!
DoMS-da-Evince
Perspective | Chlorophyll | Qutopia | DoMS da Evince | Success Story | Regardez I’economie
22 | DOMINATION, OCTOBER 2012
Success Story ………………………………………………………
………………………………………………………
A true Indian retail czar,
Kishore Biyani is the Group CEO
of Future Group and Managing
Director of Pantaloon Retail.
The man who triggered the
concept of retail supermarkets
in India like Big Bazaar, Panta-
loon, Mega Mart and Banga-
lore Central is popularly known
as KB. With his sheer ‘guts and
instincts’ he created Future
Group, a USD 1 billion enter-
prise and spearheaded the
emergence of Pantaloon Retail
as the leading retailer in the
country.
Born on August 9, 1961 into a
small trading family, right from
childhood, he was rational and
insisted on logical explainations
to his questions. He strongly
believed in himself and never
gave up. He did his college in
Mumbai and did a commerce
degree. He did a course in im-
port and export of garments,
studied advertisements,
attended marketing seminars
and did a course in marketing.
Biyani started his first business
enter selling stonewash fabric
to small shops in Mumbai. Fa-
mous for his unconventional
style of running the business he
was initially written off by the
media. His stores were referred
as 'dirty’ and he was never
called for any trade body
meetings or investors confer-
ence. Biyani defied the status
quo and challenged the con-
ventional mindset by signifi-
cantly thinking big. He tried his
hands in various other busi-
nesses, some failed, some were
moderately successful contrib-
uting to his greater under-
standing of customers and the
foundation of organization.
A staunch believer in the
group’s corporate credo,
‘Rewrite Rules, Retain Values,’
Biyani considers indianness as
the core value driving the
group. He registered his brand
name with a American name
John Miller with a tagline ‘A
shirt Inspired by America’. He
was the first person to intro-
duce exchange offers. Led by
its flagship enterprise Panta-
loon Retail, today operates
around 16 million square feet
of retail space in over 85 cities
and towns and 65 rural loca-
tions across India. Headquar-
tered in Mumbai it employs
around 35,000 people and is
listed on the Indian stock ex-
changes. Manufacturing appar-
els at their own factories and
utilizing Economies of scale has
helped in providing low priced
goods.
Biyani designed his outlets to
Kishore Biyani CEO of Future Group & MD of Pantaloon Retail
Perspective | Chlorophyll | Qutopia | DoMS da Evince | Success Story | Regardez I’economie
DEPARTMENT OF MANAGEMENT STUDIES, IIT ROORKEE 23 | DOMINATION, OCTOBER 2012
Success Story
………………………………………………………Perspective | Chlorophyll | Qutopia | DoMS da Evince | Success Story | Regardez I’economie
DEPARTMENT OF MANAGEMENT STUDIES, IIT ROORKEE
………………………………………………………suit the need of Indian custom-
er, who were most important
to him. Future Group’s retail
arm follows a multi-format re-
tail strategy and some of its
leading formats include Big Ba-
zaar, Central Food Bazaar, Pan-
taloons, Ezone, Home Town
and Planet Sports. It also oper-
ates popular shopping portal,
futurebazaar.com and rural re-
tail chain, Aadhar. Future
Group’s other businesses in-
clude financial services, insur-
ance, brand development and
logistics.
Biyani faced many com-
plaint from investors for rolling
out retail stores which ate
more money than it could gen-
erate. But he always thought in
terms of “Mass Customers”
and what would fire their imag-
ination. he was a firm believer
in reaching out to the public
and making emotional connec-
tion with them. He had lots of
passion and values like simplici-
ty, humility and willingness to
learn. He had the leadership
qualities of a keen observer in
choosing right location and ide-
al people, own vision of deliv-
ering everything, everywhere
to every customers in most
profitable manner.
Biyani has been follow-
ing the ideals of Sam Walton
and Dhirubhai Ambani since his
late teens. He has never met
them, but would read about
them, their books and follow
them pretty closely. They have
helped him hone his leadership
skills on how to dream big, how
to build a business and how to
create an organisation that is
able to scale up. Two of his fa-
vourite quotes from Sam Wal-
ton are, “Capital isn’t scarce;
vision is.” And “There is only
one boss, the customer. And he
can fire everybody in the com-
pany from the chairman down,
simply by spending his money
somewhere else.”
The 49-year-old maver-
ick received the Ernst & Young
Entrepreneur of the Year
Awards. In year 2006 he was
awarded ‘The First Generation
Entrepreneur of the Year’ by
CNBC Indian Business Leaders.
The same year he was awarded
the ‘Young Business Leader’
conferred by the IIM Lucknow
National Leadership.
He recently authored
the book, ‘It Happened In In-
dia.’ which traces his struggle,
failures, restlessness, and sheer
grit. The book has sold some
100,000 copies, more than any
other business book published
in India so far. Often been
called ‘the Sam Walton of In-
dia,’ Biyani’s success is a classic
example of how deep insights
can create an impregnable
differentiator among your com-
petition which are purely led by
observations and theoretical
market research reports.
Though most of KB’s
deep understanding is attribut-
ed to his ‘marwari trading fami-
ly upbringings and his interest
in observing people and under-
standing their behaviour he
jokes as a child he has always
been a big source of irritation
for his family as he used to
question every damn thing in
the world.
Though he would never consid-
er collaborating with Wal-Mart
he asserts, “We are investing a
lot in food through future ven-
tures in food processing cen-
tres, FMCG products and so on.
In the next three to four years
we want to be the largest food
and FMCG Company in the
country. What makes our inno-
vations different is that we try
24 | DOMINATION, OCTOBER 2012
Success Story
………………………………………………………Perspective | Chlorophyll | Qutopia | DoMS da Evince | Success Story | Regardez I’economie
DEPARTMENT OF MANAGEMENT STUDIES, IIT ROORKEE
………………………………………………………to sell by people and not to
people.”
We can learn from him
simplicity in ideas, speed in the
essence of everything, learning
while execution and liking
thrift. His belief in himself and
the customers he served along
with the core values of Indian-
ness has made him an optimist
leader among all. He also
showed us the importance of
building and nurturing relation-
ships while rewriting rules and
most importantly retaining val-
ues.
25 | DOMINATION, OCTOBER 2012
Article by: - Priya Adhikary DoMS, IIT Roorkee priyaswit@gmail.com
………………………………………………………
Regardez I‖economie ………………………………………………………
The edible oil sector in
India is huge. It forms a large
part of consumption of Indian
consumers in households ei-
ther directly as a cooking medi-
um or indirectly in the form of
foodstuffs or cosmetics. India
produces less than 50% of its
domestic oil consumption and
meets the rest of its demand
by imports. It is the largest im-
porter of oils in the world. To-
tal edible oil consumption in
the year 2010-11 was approxi-
mately 16 million tons and only
7 million tons was produced
domestically. India imported
around 9 million tons of oil out
of which 80% was Palm Oil.
Palm Oil is mixed with other
oils and used in the food indus-
try on a large scale due to its
low cost. Soybean Oil, Rape-
seed Oil and Groundnut Oil are
few of the other major oils
used in India.
The oilseed production
in India was enhanced by Tech-
nology Mission on Oilseeds
(TMO), an initiative of Ministry
of Agriculture in 1986. This was
started to make India self-
sufficient in oil production.
Even though the Oilseed pro-
duction in India has increased
with time owing to high Mini-
mum Support Price (MSP) pro-
vided by the Government, India
is unable to meet the growing
demand of its consumers. The
increase in demand is mainly
attributed to increasing popula-
tion of the country as well as
changing investment patterns
and improving living standards.
Edible oils category
mainly consists of 8 major Oils:
Palm Oil, Soybean Oil, Rape-
seed Oil, Groundnut Oil, Sun-
flower seed Oil, Palm kernel
Oil, Cottonseed Oil and Coco-
nut Oil. The consumption of all
the oils is region specific. The
major factor responsible for
Edible Oil-Procurement Strategy in India
DEPARTMENT OF MANAGEMENT STUDIES, IIT ROORKEE
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26 | DOMINATION, OCTOBER 2012
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Edible Oil—Procurement Strategy in India ………………………………………………………
the region-specific consump-
tion trend in oils is the produc-
tion of different oilseeds in
different areas of India. For ex-
ample, Groundnut Oil is major-
ly used as a cooking medium in
Western and Southern India
due to large scale groundnut
production in Gujarat, parts of
Andhra Pradesh, Tamil Nadu
and Karnataka. All the edible
oils are also utilized by FMCG
industry as ingredients in
different products along with
their use as a cooking medium.
The price of the Oils also varies
region-wise but it is usually
close to the price at which it is
traded on a commodity ex-
change. The category (oils) has
experienced high volatility in
DEPARTMENT OF MANAGEMENT STUDIES, IIT ROORKEE
Perspective | Chlorophyll | Qutopia | DoMS da Evince | Success Story | Regardez I’economie
27 | DOMINATION, OCTOBER 2012
prices since past few years. In
the past one year, prices have
increased by double digits.
Whenever the price of any oil
increases, the price burden
doesn’t stay limited to the oil
manufacturer or FMCG Compa-
ny that is using it as a raw ma-
terial. But it is also passed on to
consumers who buy the end
products from the market.
From the graph, we can
notice that these Oils operate
at a certain premium to each
other. Also, we observe that
Groundnut Oil has always been
the most expensive and Palm
Oil has been the cheapest in
the Edible oils category. The
graph also tells us that the Oil
market moves together i.e. the
whole basket of edible oils
shows the same price trend at
one point of time.
There are various rea-
sons for fluctuation in prices.
The most important factor is
the Supply-Demand mismatch.
Apart from that, other factors
are: Exchange rate fluctuation,
availability and price of respec-
tive oilseed, proportion of
oilseeds crushed to produce oil,
………………………………………………………
Edible Oil—Procurement Strategy in India ………………………………………………………
price of other oils as well as
overall economy.
Major Players:
The major players in the
industry are companies like
Adani Wilmar (largest producer
of edible oils in India), Marico,
Cargill India and Ruchi Soya
which have edible oil as their
major business and other
FMCG companies like Hindu-
stan Unilever, Proctor and
Gamble, PepsiCo, ITC, Kraft
foods, Heinz, etc which use
these edible oils in manufactur-
ing various products.
Oil manufacturers:
Edible Oil suppliers can
be categorized as:
Millers are manufacturers who
crush oilseeds to expel oil or
use solvent extraction methods
to extract oil. The oil that is ob-
tained by crushing of oilseeds is
known as Expelled Oil whereas
the oil that is obtained by sol-
vent extraction technique is
known as Solvent-extracted Oil.
These millers not only sell the
Oil after it is obtained from the
oilseed but also sell the Oil
cake i.e. the by-product of
crushing. Oil cakes obtained
from different oilseeds are
traded on Bombay Commodity
Exchange. These oil cakes are
majorly used as cattle feed be-
cause of their high protein con-
tent.
Refiners are manufac-
turers who chemically refine
the oil to purify it and remove
all contaminants and impurities
if any. Many oil companies ob-
tain expelled oil, refine it and
supply to their clients or sell in
the market.
There are also manufac-
turers who do both milling and
refining. Suppliers are also cat-
egorized as Traders or Brokers
who act as a third party and
help the FMCG companies
meet the vendors and assure
the companies of a regular sup-
ply.
Commodity Exchange
Oils are traded on Com-
modity exchanges either in the
form of Spot trading or Future
contracts. Spot trading is buy-
ing and selling of commodities
on the spot i.e. at the current
price whereas Future contract
involves a contract made at the
current price but the delivery
and payment is made at a later
stage. There are a number of
risks associated with the com-
modities. So as to mitigate the
risks, Hedging is done. Hedging
is making an investment to
mitigate the risk associated
with price fluctuations. Two
concerned parties i.e. buyer
and seller decide to exchange a
certain quantity of commodity
at a future date at the price de-
cided today. This is done by in-
volving a third party i.e. a fu-
tures exchange. In this way,
DEPARTMENT OF MANAGEMENT STUDIES, IIT ROORKEE
Perspective | Chlorophyll | Qutopia | DoMS da Evince | Success Story | Regardez I’economie
28 | DOMINATION, OCTOBER 2012
………………………………………………………
Edible Oil—Procurement Strategy in India ………………………………………………………
both the parties hedge against
the risk.
Procurement of Edible Oils:
FMCG companies have
various business verticals: Mar-
keting, Human Resource, Fi-
nance, IT, Sales and Distribu-
tion and Supply Chain. All the
business verticals are im-
portant but a robust upstream
definitely gives the company an
edge over others. It is very im-
portant to have an efficient
Supply chain as it has a direct
impact on finished product’s
quality as well as price. Both
the parameters are very im-
portant for any FMCG compa-
ny. High quality and Low priced
products are what the consum-
ers demand. In order to deliver
high quality finished products,
the company needs to procure
high quality raw materials. Pro-
curing these raw materials is a
function of the Procurement
division of Supply Chain. Also, it
is expected from the procure-
ment team to procure these
high quality raw materials at
minimum possible prices. This
can be done by tracking price
of commodity on an exchange
or in the local market and then
negotiating the price with ven-
dors so that it is procured at
least possible price. Apart from
price and quality, the team is
also held responsible of the
timely delivery of the raw ma-
terials at the manufacturing
plant i.e. Availability. Generally,
the vendor/ supplier should be
located in the region close to
the plant for timely delivery of
oils as well as low freight charg-
es. Therefore, the procurement
team must ensure quality, price
and availability of raw materi-
als.
In order to ensure the
above, the procurement team
forms various purchasing strat-
egies like developing vendors in
the region close to their plant,
in regions where the availabil-
ity of raw material is high or
inplaces where there is a com-
petitive market i.e. where man-
ufacturers are concentrated.
Other strategies include track-
ing commodity exchanges to
negotiate prices and develop-
ing other cost cutting models.
For example, recently
Groundnut Oil prices were very
high as compared to other
commodities. This was mainly
due to diminishing availability
of the oil in Indian market. Due
to the reduced availability and
high prices, procurement
teams of all the companies that
use Groundnut Oil as an ingre-
dient would have developed a
strategy to mitigate these is-
sues. The strategy could have
included getting into long term
contracts for groundnut oil,
buying oil at spot price and
storing it for a long period of
time, buying and storing
groundnuts and processing
nuts when required, backward
integration or in extreme cases
switching to a different oil alto-
gether. Surprisingly many com-
panies in India did use the last
option and switched to other
oils such as Rice bran oil,
Cottonseed oil and Soybean
Oil!
DEPARTMENT OF MANAGEMENT STUDIES, IIT ROORKEE
Perspective | Chlorophyll | Qutopia | DoMS da Evince | Success Story | Regardez I’economie
29 | DOMINATION, OCTOBER 2012
Article by Aashwi Verma PGP-Agribusiness Management, IIM Ahemdabad a11aashwiv@iimahd.ernet.in
Department of Management Studies, IIT Roorkee
Roorkee - 247667, INDIA
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