Case-Lets Manimala 26SEP

8/3/2019 Case-Lets Manimala 26SEP

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* Prepared by Prof. Mathew J. Manimala as a basis for class-room discussions

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Case-lets content

An Aspiring Entrepreneur..............................................................................................................................................2The Capital Constraint................................................................................................................................................4Freelance Programmers Limited....................................................................................................................................6Irregular Supplies ..........................................................................................................................................................9

The Shenandoah reaper Part I...................................................................................................................................10The Shenandoah reaper Part II .................................................................................................................................11The Glass Ceiling Part I............................................................................................................................................12The Glass Ceiling Part II ..........................................................................................................................................14The Refugee Girl from Germany.................................................................................................................................16The Unfair Excise Policy ..........................................................................................................................................18The Unwilling Market .................................................................................................................................................19The Engineered Entrepreneur ...................................................................................................................................20


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* Prepared by Mathew J. Manimala based on an enterprise report in Business India, November 18December 1

1996, pp. 184-185.

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Case-let 1*

An Aspiring Entrepreneur

Mr. K. Nagesh hails from a middle-class family. His father was an officer in the Finance

department of the Government of India; he has retired recently and is settled in Delhi.

Nagesh had his School and College education in Delhi. Though he was a bright student, he

could not achieve his desired goal of doing B.Tech. in Electronics/Computers from one of the

IITs. So he took up studies at the Delhi College of Engineering in the branch of MechanicalEngineering.

Soon after he completed his engineering studies, he got a shop-floor job with TELCO in1982. Considering the jobs available for mechanical engineering graduates in the early 1980s,

this was a very good job. However, Nagesh was not happy with it, as his heart was always with

electronics and computers. Since he has not had any professional education in the field, it was

not very easy for him to get a respectable job in a computer/IT company. Starting something onhis own in the field was an option but he felt that it would be very risky because of his lack of

education or experience in the field. Nagesh was therefore considering the various options

available to him.

Even with his mechanical engineering background, he could get a job in acomputer/electronics company. But without proper qualifications, the chances of his

getting into the mainstream business was low.

Opportunities for part-time education in computers near the place of his work was non-existent at that time. Nagesh was prepared to quit his job to pursue full-time studies in

electronics/computers. But his parents were not in favour of that. They thought it wasunwise to leave the job in a respectable company, especially at a time when his father

was retired and the family had to depend on his income to a large extent.

Nagesh spotted a few business opportunities in the computer and electronics field:a) There were hardly any companies doing the maintenance of electronic equipment in

those days, except CMC. The latter would do it only for government organizations,

leaving a large gap in the private sector.

b) The most neglected segment is that of the low-end machines. But the problem here isthat these machines are widely dispersed and give very low returns compared to theefforts required to maintain them. The high-end machines, on the other hand, willgive good returns but needs very high levels of expertise as well as investment.

c) Large companies selling computers find it unviable to service the machines evenduring the warranty period. However, there was no system at that time to contract out

such services. So it would be difficult to persuade these companies to do so and take

a service contract from them.


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* Prepared by Mathew J. Manimala based on an enterprise report in Business India, November 18December 1

1996, pp. 184-185.

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d) Computer manufactures at that time were concentrating on large volume/large valuesales. One of the segments that was neglected at that time was the educational and

scientific research institutions. Developing sales in this segment could be a business

opportunity, but there is a risk of the developed market slipping away into the handsof large players.

e) Networking of computers within the organization was not very common at that time.Companies were not very convinced about the advantages of networking; so there

were difficulties in creating a business opportunity from this situation, even though

the scope for such work is fairly large.

f) In a casual conversation with an NRI entrepreneur it was suggested that Nagesh couldtake up the distribution of the communication equipment being manufactured by the

NRI. The latter was also prepared to provide part of the initial capital required.There were, however, some complaints that the equipment manufactured by him had

quality and reliability problems.

g) The most important problems being encountered by the aspiring entrepreneur,according to his own perception, are the following: (i) his own lack of expertise in his

field of interest; (ii) his inability to attract highly qualified professionals for a venture

to be started by him (such professionals would rather work in large reputedcompanies and would not care for a start-up venture); (iii) shortage of funds and/or

investor partners with the right competencies.

Under these circumstances, Nagesh is thinking hard for a way out to fulfil his aspiration

to be an entrepreneur in his chosen field. You are required to suggest innovative, implementableand cost-effective solutions to his problems. Prepare a detailed plan for the start-up, specifying

the choices to be made at each stage and justifying those choices.


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* Prepared by Prof. Mathew J. Manimala based on the information supplied by an aspiring entrepreneur who wishes

to remain anonymous.

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Case-let 2*

The Capital Constraint

At the age of 14, David Gonsalvez had to discontinue his studies to take up a blue-collar job in a

small company doing fabrication of consumer durables (such as helmets, wash-basins, furniture,

bath-tubs, roofing sheets etc.) using fiber-glass reinforced plastics (FRP). The job was, so to say,forced upon this 9th class student in a vernacular-medium school in rural Kerala, because of his

fathers accidental death in 1974. He took upon himself the responsibility of looking after his

mother, two sisters and a brother. Though he belonged to the Anglo-Indian community, he couldhardly speak or write English as the family lived in a village.

On taking up the job, he had to move to the nearby town where his employers firm was located.There he lived in a rented room with his mother, brother and sisters. Four years of work helped

him to save about Rs 5000/-. With the confidence he has gained about executing FRP

fabrication work, David thought that he could himself start a similar business rather than wastehis life working for a meager salary. As the FRP technology (of reinforcing several layers fibre-

glass mats with a combination of resin and accelerator) is used not only for fabricating consumerdurables, but also for giving anti-corrosion lining for vessels and tanks in the chemical industry,

David felt that the market is large enough for several players. While the opportunity wastempting, Davids personal situation posed a few problems, which seemed to be insurmountable.

The main problem was that of finance. The minimum investment required for a projectof this kind at that time was Rs 10 lakh, as per the project report being supplied by the

Industrial and Technical Consultancy Organization, which was the governmentapproved

agency for preparing SSI project reports. The cost of such a project report was Rs 1000/-.

The advantage of buying this project report was that it would almost automatically beaccepted by the public financial institutions.

Educated individuals could get concessional finance up to 80% of the project cost. Butthis is not available to David because he was a school dropout.

Even if he was eligible for concessional finance, it was impossible for him to raise the20%, which would be Rs 2 lakh.

David was not even in a position to invest his own savings (Rs 5000/-) because he neededthat amount or more for maintaining the family until the new business became viable andyielding.

While David was a very good worker, he felt that his knowledge of the FRP technologywas inadequate. His employer was very secretive about the right proportion of resin andaccelerator. If this proportion was not correct, there might be problems with drying or

the work might develop cracks later.

Davids lack of knowledge in the English language was also perceived by him to be adisadvantage especially when dealing with suppliers and customers from outside thestate.


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* Prepared by Prof. Mathew J. Manimala based on the information supplied by an aspiring entrepreneur who wishes

to remain anonymous.

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Assignment

You are expected to find a way out for David. He is keen on starting his own business. Advise

him on the practical and cost-effective ways in which he can achieve his goal.


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Case-let 3*

Freelance Programmers Limited

Freelance Programmers Limited was founded in 1962 by Ms Steve Shirley with an initial

investments of 6, operating from her own home. Shirley, who was of Jewish origin,came to the UK from Germany during the Nazi persecution. She studied mathematics atschool and worked with British Telecom and ICL before starting her own venture. The

motivation for the start-up was two fold:

(i) The difficulty experienced by Shirley in getting re-employed after she had taken abreak from her job for family reasons, and the realization on her part that this may

be the case with several other qualified women professionals.

(ii) The prevailing practice of large computer companies focusing almost exclusivelyon the hardware aspects of computers, to the near-total neglect of the software

issues by the organized sector.

The opportunities provided by these problems were also correspondingly large.

The market for software products and services was largely unexploited andgrowing very fast.

Even though there was enough scope for a few large players in the softwaresegment, if such companies were to be organized in the traditional manner with

heavy overheads, they would not be able to compete with the freelanceprofessionals operating as individuals and with very little overheads.

Hence a via-media organizational solution was to be found. Shirleys answer tothis problem situation was to create and co-ordinate a consortium of freelancewomen programmers, each operating from her own home. These professionals

were registered with the company as panel members, not as employees. The

companys job was to get business and allocate it to the panel members based ontheir interest and availability.

The initial size of the company was 12 freelancers working for it on a retainershiparrangement. Even though they were supported to be freelancers operating from their

own houses, some of them had to be given the space to sit and to work, which was given

at Shirleys own house. It was not a very pleasant existence at all in the initial years, asShirley recollects: In our tiny cottage, I had one woman working in a spare bedroom,two more in the living room, with the files piled on top of the piano, and the baby and me

at the dinning room table. It was pretty much like hell.

In spite of its hardships in the initial years, Freelance Programmers grew fast because of

its cost-effective and flexible organization. Compared to individual freelancers, it had a

variety of competencies to offer and the capability of taking up larger projects because of


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* Prepared by Prof. Mathew J. Manimala based on published material, after disguising the identity of the

person(s) involved.

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the large number of professionals available to it. However, since these professionalswere retained as panel members operating from their own houses, the company had very

little overheads in terms of office space and equipment. There was also no commitment

of salaries for the panel members, who were paid only if they were given work. Theretention fee given to the panel members were very low as the company operated

exclusively with women professionals who had become unemployable in the organizedsector because of the career break taken by them for family reasons.

It was undoubtedly the cost-advantage associated with the flexible organization that

helped the growth of Freelance Programmers. By 1970, it had over 100 people working

with it and had operations in two foreign countries, Denmark and the Netherlands. Itcould manage the severe recession of the early 70s only because of its flexibility and low

overhead costs. When the recession eliminated a few other competitors, the company

expanded its activities further offering its products and services to three major sectors,Financial, Commercial, and Public Sector. Its operation spread to many more countries

including the US. By 1984 the company became the 20th largest computer consulting

firm in the UK with a market-share of 1.5% (the largest one had a share of 4%). By theearly 1990s, its turnover crossed 1.5 million with a staff strength of more than 800.

Growth has brought with it some problems as well.

The investment needs of the company was growing fast. While the profitabilitywas good, internal accumulation was not sufficient for meeting the expansion

needs of the company.

The name Freelance Programmers was becoming a deterrent to a few largeclients, who saw a lack of professionalism implied in the name.

The all-female employment policy was not helpful in hiring the best talents,especially in areas where there were skill shortages. Besides, the home-boundnature of its panel members came in the way of organizing discussions, testing,

trouble-shooting, etc at the customers premises.

Working from home had its other disadvantages too. There is hardly anyspontaneous interaction and knowledge-sharing among professionals. Even when

some professionals wanted to hold discussions with others particularly on

complex issues relating to large projects, it was not possible because people were

not available at one place at a fixed time.

Many professionals had career ambitions, even though they have joined thecompany as panel members. When some were given organizational

responsibilities out of the exigencies of work, others became unhappy about it.


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person(s) involved.

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There were also complaints about work allotment. Those who had locationalproximity or were keeping in regular contacts with the head office were alleged to

be favoured with more prestigious and interesting assignments. Others were

given routine and uninteresting work. Since the nature of work also had a bearing

on the remuneration, there was widespread unhappiness about work allotment as

well.

The company board is meeting this evening to discuss these and various other issues.Could you please advise the board on the future course of action for Freelance

Programmers?


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* Prepared by Prof. Mathew J. Manimala based on published material, after disguising the identity of the person(s)

involved.

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Case-let 4*

Irregular Supplies

It was the early 1930s, when a physician-turned textile trader in rural Karnataka found his

business getting interrupted for want of regular supplies of cloth from the weavers. When heenquired with the weavers about the reason for their irregularity, he was told that there was no

working capital available to them. There were no banks in the area. The one located in the townwas not interested in lending to small operators particularly in the rural area. Local money-

lenders used to charge very high rates of interest; borrowing at those rates had ruined some

weavers in the past. The weavers therefore have developed a habit of working intermittently asand when their own money from sales came in.

The trader therefore had to find a way to ensure uninterrupted supply of goods in his shop,

without which his own business was not viable. He thought of bringing the goods from Bombay,but found that the process would be very expensive and time-consuming, as the area did not have

any direct road/rail links with Bombay. Besides, the transporters were not at all reliable.

AssignmentExamine the courses of action available to the trader under the above circumstances. What are

your recommendations?


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Source: Adapted from The Entrepreneurs: An American Adventure (Boston: Enterprise Media, 1987),

Film No.2. AlsoInternational Harvester: A History of Invention (Chicago: International Harvester

Corporation, 1964).

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Case-let 5*

The Shenandoah reaper Part I

The Shenandoah Valley was a sleepy agricultural village, where John McKinley (not the

real name) had his farm. During the early 1800s, the American economy was struggling

to recover from the destruction and destitution caused by the American War ofIndependence (1763-83). John had witnessed starvation in the cities and undernourishedchildren in townships due to chronic food shortages. It was indeed quite paradoxical that

there should be food shortages in a country having vast stretches of arable and fertile

land, which made John thinking about the causes of such shortages. Based on his ownfarming experience, John came to the conclusion that harvesting is the major constraint

among the various activities involved in farming. As harvesting is a time-bound activity

that can be started only after the grains are ripe and has to be completed before they fallto the ground. This would imply that a farmer can cultivate only as much as he can reap

using a scythe or sickle during the ripening period. Johns answer to this problem was to

create a new method of harvesting food grains. So he started working on the development

of a mechanical reaper. Unfortunately he could not complete the work, but died with hisdream unfulfilled!

It was Johns son Cyrus pursued the idea further and finally designed and developed thereaper. He made the first reaper in 1831 and unveiled it in the Shenandoah Valley, cutting

6 acres of wheat in less time than a healthy farmer could cut one acre with a scythe or

sickle. When the reaper went into commercial production and sale, it created chaosamong farmers because those who had a reaper suddenly out-produced their neighbours

by a substantial amount and could market grain at very low prices. The Shenandoah

Reaper replaced the way farmers had harvested grain for more than 2,000 years, and farm

productivity was increased more than tenfold. The farmer who worked only with a scythe

quickly realized that he had to accept the inevitable change and purchase a reaper or losehis farm. However, during those early days farmers had little money to buy such costly

equipment. Hence the sales of the reaper were very sluggish. For Cyrus too, who hadinvested a lot of time and money on this invention, it was very critical to increase the

sales. Thus the new invention created financial problems for both the inventor as well as

the potential user.

Assignment

Discuss the course of action that may be taken by Cyrus to increase the Reaper sales


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*Source: Adapted from The Entrepreneurs: An American Adventure (Boston: Enterprise Media, 1987),

Film No.2. AlsoInternational Harvester: A History of Invention (Chicago: International Harvester

Corporation, 1964).

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Case-let 6*

The Shenandoah reaper Part II

In view of the sluggish sales of his new harvesting equipment, Cyrus McCormick (real

name) founded a company International Harvester Corporation with the main

objective of facilitating large-scale adoption of the reaper by the farmers. One of the firstactions taken by him in his new company was to let farmers use the reapers and pay oncredit terms, and soon had sales offices in every state and territory in the country. Later

McCormick refined his credit policies and introduced installment sales with low down

payments and periodic payments. This innovation in financing may have been asmonumental as the invention of the reaper, and although a credit craze did not

materialize, many companies such as Kraft and Wells Fargo quickly adopted credit

policies. A commercial finance industry evolved several years later to provide equipmentloans to manufacturers.

McCormick was an inventor-turned-entrepreneur who recognized the value of marketing,

but he also hired the best people he could find with marketing and engineering talent. Heencouraged them to think and act independently and many unusual innovations were

made. Prior to the Civil War, for example, the company introduced four-color

advertisements and posters; these were the forerunners of billboards. Later, he createdbrochures to attract customers, and these evolved into mail-out orders that were among

the first efforts at direct marketing.

The heart of McCormicks business, however, was his line of International Harvester

machinery. During 20 years spanning the reconstruction period following the Civil War,

IH introduced more than 200 models of field planting and harvesting equipment. Each

item was based on the simple idea that a standard model using interchangeable parts

could be produced in large quantities and sold, repaired, and serviced at very low costs.This system made field repairs easy and allowed farmers to replace worn machinery

parts. The idea was adopted by Samuel Colt, who used interchangeable parts in hismanufacture of fire-arms, and the Winchester Company quickly followed. Together,

their fire-arms became legends in western folklore.

Assignment1. Identify and classify the innovations introduced by McCormick.2. Evaluate the strengths and weaknesses of the strategies that led to IHs success

and compare them to what may be done in newer industries.3. Evaluate the spin-off effects and impact of a simple invention like the reaper on

the style and quality of peoples lives.


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Prepared by Prof. Mathew J. Manimala using published materials, as a basis for classroom discussions.

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Case-let 7*

The Glass Ceiling Part I

Jayadeva Reddy (not the real name) had an exceptionally bright academic career. He was

born in 1952 in Bangalore (South India) then a sleepy little town of mild weather and

therefore often called the pensioners paradise. Indeed, this epithet gained a lot oflegitimacy because of the fact that pensioners really preferred this town for a peaceful lifeafter retirement, far from the hustle and bustle of the commercial cities of Bombay

(Mumbai) and Madras (Chennai) and the scorching heat of the plains. Though Bangalore

did have a few educational institutions including the renowned Indian Institute of Science(IISc) which offered only postgraduate and research courses none of the

undergraduate colleges in Bangalore had the facilities and reputation of Bombay or

Madras based colleges. Jayadeva therefore was sent to Loyola College, Madras, for hisgraduate studies, wherefrom he graduated in 1971 with Chemistry as his main subject of

study.

Though Jayadeva came out with flying colours in his undergraduate studies of Chemistry,that, apparently, was not his passion. For a time he toyed with the idea of specialising in

literature/journalism, where he had interest and competence, and had won a few prizes in

poetry writing competitions. But a career in literature was perceived as slow-moving andnon-remunerative compared to those in business and management. Jayadeva was

therefore counselled to pursue MBA studies, which he did at the Indian Institute of

Management Ahmedabad (IIMA).

While a degree from IIMA opened the flood-gates of corporate careers to Jayadeva, the

poet and philosopher in him still craved for more intellectual pursuits, which led him to

take up doctoral studies at the Graduate School of Business (GSB) of the University of

Chicago. Although he did very well in his doctoral studies, the seeker in him wasbecoming increasingly restless. Apparently there was a conflict between the thinker and

the doer in him, and finally just before writing his dissertation, he left his doctoral studiesto take up a corporate job with Citicorp.

At Citicorp, Jayadeva held many important portfolios and developed a truly internationalperspective of the world business scenario, as his position gave him opportunities to work

in New York, South America, India, the UK and finally California. While in India, as the

country head for consumer banking, he built Citibanks most successful Asian retail andcredit card franchises. In the UK too, he was instrumental in building the banks

consumer business. He has also served as Head of the Development Division of Citicorp

and Chairman and CEO of Transaction Technologies Inc, a Citicorp subsidiary based inCalifornia. In the latter job, one of his responsibilities was to identify, evaluate and selectsub-contractors for developing and installing the software required for supporting the

banks operations. The sub-contracts that he used to award to software SMEs were in the

range of USD 1 to 2 million, which then triggered an entrepreneurial thought in him thathe could be the recipient of these contracts rather than the giver. That became a recurring

thought especially when he served Citicorp in India also as a Director of Investments inthe IT sector, and it was getting constantly reinforced when in contact with his own uncle


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who ran a successful software firm in India. Later in California, during the late 1990s, hefelt himself to be an odd man out because every other person he met there was running

his own company!

But career considerations have always outweighed entrepreneurial ideas and aspirations.

Citicorp kept on rewarding Jayadeva with periodic promotions in recognition of hisexcellent performance on whatever task assigned. As head of the Development Division,Jayadeva was among the top 50 managers of the firm, who constituted Citicorps

Operating Review Group. And yet there was a lingering feeling within him that he would

never make it to the top 15 who would be steering the companys destiny. The glass

ceiling naturally was invisible but apparently impenetrable. Should he try for anentrepreneurial escape or find solace in writing poems and historical novels, which was

indeed a passion for him?


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Case-let 8*

The Glass Ceiling Part II

It was when the perceived glass ceiling (refer Part-I of the case) began to be felt as real

that Jaithirth (Jerry) Rao (real name of the protagonist in Part-I) decided to take the

entrepreneurial plunge. If they had promoted me, I would have stayed, said Rao. Theydidnt; they did me a favour.

In December 1998, Jerry Rao quit his Citicorp job and founded the software development

and consulting company MphasiS in partnership with Jeroen Tas, a colleague from thesame bank. Together they raised USD 5 million as start up capital, which included a 25%

investment by Bearings Private Equity Partners India Ltd. Soon after the start up, a friend

persuaded him to take over a call centre in India, which Jerry added to his company in1999, as a favour to this friend. The Bearings connection brought in a further impetus

for the growth of MphasiS. Among the several companies wherein Bearings had made

equity investments was a company called BFL in which Bearings had a 52% stake. BFL

was in trouble, and so Bearings made a merger proposition to Jerry. The CEO has quit atBFL, and we have a 52% interest there. Would you consider a reverse merger where they

take you over and you become CEO of the joint company? Jerry accepted this

proposition as an opportunity to scale up his operations and formed MphasiS-BFL in2000. That is when things really took off. But bad luck struck the fledgling new

venture in the year 2001, when the IT bubble burst. We were in deep trouble as our

growth rates plummeted.

Ironically, it was the reluctantly added BPO unit that saved the company from folding up.

Jerry Raos explanation on this was quite edifying. Initially I said, No, we are a high-

end IT company; we dont do grubby stuff like call centres. But when the IT industry

slowed down, that call centre started growing gangbusters, 100% quarter on quarter.Today, it has become a BPO (Business Process Outsourcing) service provider that

handles such tasks as tax returns and equity research. It became our engine of growth.Today we are a combined company with a top line of about USD 200 million USD 60

million from the BPO side and USD 140 million from the IT side. We have a total of

12,000 employees now. There were just 2 of us in 1998.

It should also be noted that more than half of these 12,000 employees are women, and

according to Jerry, these are women who have suddenly become the highest wageearners in their families. Implied in this claim is a philosophy of taking ones employees

into confidence and compensating them well for their contribution. Asked about his

greatest achievement he stated that it is to be able to attract a lot of very talented peopleto work with me in a start up that nobody had heard of, purely based on my reputation fortrust. I never used a headhunter; all the people came through word-of-mouth references.

The reputation that I was a person who could be trusted, who would treat them fairly,

helped.

The growth of MphasiS-BFL from 2 employees to 12,000 was achieved primarilythrough a series of acquisitions. Unlike the first of these acquisitions (BFL), which was


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described as a reverse acquisition), the subsequent ones were all initiated by MphasiS-BFL in order to broaden its product offerings. It has now become the sixth largest

software company in India (which was achieved in just 7 years). As of 2005, the

company has 10 offices in India including the headquarters in Bangalore besides havingoffices in Japan, China, Singapore, Australia, Europe, North America and Central

America. When the software giant, Electronic Data Systems (EDS) wanted to expand itspresence in India, it sought to acquire MphasiS-BFL. The proposal is to acquire 52% ofMphasiS-BFL for USD 380 million. It is indeed another case of reverse acquisition.

Would it be a desirable move for MphasiS-BFL? Would MphasiS-BFL and Jerry Rao be

in control of the companys affairs after the event?


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Case-let 9*

The Refugee Girl from Germany

In 1939 Sharon Herzlinger (not the real name) crossed over from Germany to the United

Kingdom along with about 20,000 Jewish refugee children. Each one of them had asmall back-pack and a number for identification tied around his/her neck. Orphanagesand rescue homes in the UK became houses for these children, and Sharon too had the

good fortune of getting a shelter and the opportunity to go to school.

As a student, Sharon recognized that she had some special competencies in Mathematics.

But the girls school where she was studying did not have maths beyond the elementary

level. The right thing for a girl in those days was to pursue liberal arts and humanities inher studies. Maths and science were not for them to pursue. The system was obviously

unfair to the girl students who were gifted in maths and science, and it was difficult for

anyone to change the system, particularly so for an orphan girl. And yet Sharon decided

not to give up. She made a special request for permission to attend maths classes in thenearby boys school, which was a parallel institution run by the same management. Her

request was granted, rather surprisingly! Though it was somewhat uncomfortable to be a

lone girl student among several boys, Sharon thoroughly enjoyed her hard-wonopportunity to learn maths.

Though Sharon had the ambition to pursue her studies in maths beyond the school level,it was not possible for her to do so; her orphan/refugee status once again proved to be a

major impediment. She therefore took up a job with the British Telecom. Considering

her special competencies in mathematics, BT offered her the position of a research

mathematician. The designation sounded great, but the job was thoroughly boring.

There was no research in her job. She was nothing more than a glorified mathematicalclerk. The BT job was also one of the lowest paid among government jobs. But it

offered her a lot of leisure and more holidays than on a private job. The extra time thusavailable to Sharon was gainfully utilized by her; she used her spare time for learning

computers, which were just becoming popular at that time.

During a nine year period of work at BT, Sharon developed proficiency in computer

software through her evening courses. This gave her an opportunity to move from the

boring job at BT. She took up a job with ICL, the largest computer hardwaremanufacturer in the UK at that time. Even though she was working in a computer

company, she felt her job was peripheral to the business, as the company, like many other

similar companies, focused on the hardware and neglected the software part of it.

While she did not enjoy the ICL job much on account of the companys neglect of the

software part, that was not the reason for her to quit this job. It was her marriage,

pregnancy and the birth of her soon. After that break, when she wanted to get back into a job, apparently nobody wanted her! Software was not in much demand in established

companies, whose focus was on the solid stuff like the hardware. The software serviceswere provided to customers by the unorganized sector constituted by freelance


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professionals. While the sector was growing fast, there were very few organized playersin the sector, who could offer employment to others. The large players with their

overheads found it difficult to compete with the freelancers. But the greatest stigma on

women professionals like Sharon was that they were not in touch with the field for sometime. For a field that was changing so fast, such a break is enough to make the

professional obsolete, and they were treated as untouchables by establishedorganizations. Sharon too had her thoughts on creating her own enterprise, but found thatthe investment needed for meeting the overheads and the cost of the professionals was

formidable!

Group TaskDiscuss Sharons situation in groups. Assuming that you were in Sharons position, what

would you have done? Justify your action-plans.


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person(s) involved

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Case-let 10*

The Unfair Excise Policy

During the early 1970s, when Dinkarbhai returned from the Middle East to his native

town in Gujarat, he had ambitions to set up a textile business of his own. The choice of

textiles as the area of his potential business was not guided by any analysis of theindustry and market, but by a consideration of his own competencies. The onlycompetency he could confidently boast of was his ability to accurately discern the quality

of yarn. This ability was developed though his experience of having worked with a

trading company for about 20 years after his matriculation, beyond which he had not hadany opportunity to pursue formal studies.

Dinkar spoke to a few friends working in the textile industry to get a clearer picture of the

industry scenario. The friends cautioned him against doing any business in the textileindustry. He soon realized that there was hardly any match between his own

competencies and the market conditions. The textile industry in India was in a recession.

The hardest blow was on the composite mills which had to pay excise duty on theirproducts, whereas the power-looms, which could produce equally good quality textiles,

were exempted. This has naturally created an artificial advantage for the power-looms.

The latter, however, are small operators and therefore, have difficulty in marketing their

products. The textile manufacturers association has been making several representationsto the government for correcting the anomalies in the duty-structure. Their argument

was that when the quality of the goods is the same it is unfair to have a different duty-

structure; but the government remained firm in their pro-SSI policy. In this scenario,there is apparently no place for a new player, and so Dinkar was wondering whether to go

ahead with his proposed project.

AssignmentExamine the possibility of Dinkar starting a textile business. Can you suggest a way in

which he can start a new venture in the area of his competency?


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person(s) involved.

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Case-let 11*

The Unwilling Market

Mr Piyush Jain was a salesman with a company in Calcutta, manufacturing writing

instruments. In the early 1980s, when there were very few manufacturers of writing

instruments, Piyush found it a relatively easy task to sell pens. He was, however,concerned that there was hardly any variety in designs the existing manufacturers werenot interested in bringing out new designs as they were comfortably settled in their niche

markets.

When Piyush was transferred to Chennai to take charge of that region, he got theopportunity to develop a more comprehensive perspective of the market; and he got

increasingly convinced of the scope for introducing new varieties and designs into this

stagnant market. He thought that the best place to launch a new venture of this kind wasMumbai, the commercial capital of the country. He therefore resigned his job and moved

to Mumbai.

At Mumbai, Piyush contacted a few distributors who too agreed with him that there was

tremendous scope for new varieties and designs, and expressed their willingness to

promote the new designs if supplied. Encouraged by such promise of support, Piyush

commissioned a mould-maker to manufacture 600 pieces of a new design of pen. Thefirst consignment of 50 dozens, each dozen separately packed in paper boxes as was the

practice in those days, was placed in stores. Two days later Piyush went to the stores to

find out about the fortunes of this new venture. He was shocked to find that not a singlepen was sold!

Assignment

Please advise Piyush whether he should go ahead with his new venture. If so what kindsof changes would you suggest in his manufacturing/marketing strategies?


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20

Case-let 12*

The Engineered Entrepreneur

During the mid-1970s when Arun graduated in Mechanical Engineering from a local

engineering college in Kerala, jobs were scarce even for engineering graduates. In one of

his courses (Industrial Management) he had some lectures on entrepreneurship deliveredby a guest speaker from a reputed national level institute of entrepreneurship (NIE). Arunwas inspired by this speaker and decided to start his own venture after his graduation.

The faculty from the national institute advised him to join a short course in

entrepreneurship offered by NIE, which he did. Arun found the course to be very useful.He particularly liked the exercises on Achievement Motivation Training (AMT), which

showed that he was very high on the Need for Achievement (n-Ach) and therefore has the

potential for becoming a successful entrepreneur.

Contrary to the general perception about the start-up process, Arun found it to be quite

easy, particularly because of the facilitative attitude of the various government agencies

involved. The programme at NIE helped a lot in enhancing his credibility with thegovernment agencies. Participants of NIE programme were eligible to get a free project

report from the State Industrial and Technical Consultancy Organization (SITCO). Arun

obtained a project report from SITCO for manufacturing consumer durables (likehelmets, wash-basins, bathing tubs, roofing sheets, furniture, etc) with Fibre-glass

Reinforced Plastic (FRP). This project was chosen on the advice of SITCO officials

about the market potential of these products, even though Arun felt that he does not havethe required knowledge in the field, as he was a mechanical (not a chemical) engineer.

SITCO officials reassured him that FRP is a very simple technology (involving the

reinforcement of fibre-glass mat with a mixture of resin and accelerator for as many

layers as necessary for getting the required strength), and can be easily managed through

a few experienced workers, who were available in plenty. In any case, he had to recruitten workers, which was the number recommended in the project report. With their arrival,

there would not be any problem about the knowledge and skills required for the project.

The investment required for the project (as per the project report) was Rs 1 million (10

lakhs), which included land at a special price from State Industrial DevelopmentCorporation (SIDC), building for factory as well as office, and machinery mainly for

making dies and moulds. SITCO officials told Arun that money should not be a problem

for him because of the low-interest (12%) loans available on SITCO project reports forengineering graduates from the State Financial Corporation (SFC). Under this scheme,

the banks would lend 80% of the project cost as term loan. The entrepreneur has to raise

20%, which implied that Arun had to raise Rs 200,000/-. As he had difficulty in raisingthis amount himself, he started looking for partners, who were easily available fromamong his friends. Three of them joined the project with Rs 50,000/- each, thus raising

the Rs 200,000/- including Aruns contribution of the same amount.

Since SIDC had ready-made factory buildings in the industrial estate with road, power,

water and telephone facilities, there was no delay in starting the new business. Out of thefour partners, only three were actively involved in the business. One had a job, which


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* This case was prepared, as a basis for class discussion, by Prof. Mathew J Manimala, Indian Institute of

21

kept him away from any formal responsibilities in the new venture. Arun, being anengineer and the initiator of the venture, became the Managing Director with

responsibilities for the factory and the manufacturing function. The second partner had a

small trading business in another town, and so he said he would be the MarketingDirector, but would have the marketing office in his own town rather than at the factory.

The third partner was a commerce graduate, and so he thought he was the most suitableperson to be the Finance Director. One of his regular chores as the Finance Director wasto go to the bank every morning and socialize with the friends of his unemployment days

in a near-by club on his way back to the factory, often reaching back only in the evening.

Socialization of this kind, he thought, was essential for creating the network that would

support the business in times of need.

The products manufactured by the new venture were not consistent in quality. Some

batches developed small cracks. Such products were discarded and only the good qualityproducts were sent to various shops for sale as per prior arrangement. To the utter dismay

of the partners, there was hardly any sale for their products. The only item that showed

some movement was helmet. Taking a clue from this the company started pushing thisproduct, leaving the manufacturing facilities idle for other products. One of the strategies

adopted by Arun to increase the helmet sale was to influence the state government,

through a relative working as the personal secretary to the home minister, to make helmet

compulsory for two-wheeler riders in the state. Consequent to the introduction of thehelmet-rule in the state, there was some improvement in the helmet sales of the

company, but the revenues were hardly enough to pay even the interest on the term loan.

Arun had to take personal loans at high interest rates (24-36%) to meet the companysinterest obligations with the State Financial Corporation, as his partners put on him all the

responsibility for the poor performance of the company and refused to help in any way.In fact, they started blaming him for dragging them into this quagmire and wanted him to

pay their money back with interest!

Arun was desperately looking for some ways to rescue his venture. In the meantime he

saw an announcement by the local business school about its part-time MBA programme,

where the classes would be held in the evenings every working day for three years. Hethen joined the programme, and found some solace in discussing the problems of other

companies.

AssignmentDiscuss the problems of Aruns venture in your respective groups and suggest strategies

for dealing with them.

Case-Lets Manimala 26SEP

Documents

Transcript of Case-Lets Manimala 26SEP