PRESTIGE INTERNATIONAL JOURNAL - :: PIMR

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PRESTIGE INTERNATIONAL JOURNALOF MANAGEMENT AND RESEARCH

Prestige Institute of Management and Research, Indore, INDIA

A Bi-Annual Journal Published by

ISSN: 0974-6080

VOLUME 11(R) NUMBER 1-2 2018

ARTICLES

Effect of Demographics on Customer Satisfaction in HealthInsurance Services in IndiaMonica Bhatia, Sachin Mittal 1

Employees’ Psychological Well-Being and Servant Leadership:An Exploratory StudySuman Pathak, Rajesh Jangalwa 11

Factors Affecting Usage of Internet Based Food Delivery Service AppsRaksha Thakur, Nidhi Sharma, Bhavya Bhatt 23

Financial Performance of Banks in India by CAMEL Model : A StudyRicha Bhatia, Ish Gupta 33

CASE STUDIES

Connectedness: Enhancing the Innovative Capacity of anOrganization in an Era of Big DataDorothea Greenwood Mastrangelo 50

Entrepreneurship E-Learning: XbrainYogeshwari Phatak, Raj Kishore Sharma, Tarun Kushwaha and Prayatna Jain 58

Innovation to Sustainability: A Case of DCISRanjana Patel and Satnam Ubeja 61

Looking For a Real Drug: IFPA LaboratoriesAnukool Manish Hyde, Seema Jhala, Ankita Jain 66

Reliance Jio: Predatory or Competitive Pricing?Ankita Pathak, Sunil Mishra 69

Wisethought: Taking Indore GloballyTarun Kushwaha, Suyash Jhawar, Prayatna Jain and Shaifali Tripathi 78

PRESTIGE INSTITUTE OFMANAGEMENT AND RESEARCH(An Autonomous Institution Established in 1994, Accredited TwiceConsecutively with ‘A’ Grade by NAAC (UGC))

2, Education and Health Sector, Scheme 54,Near Bombay Hospital, Indore – 452 010Madhya Pradesh INDIAPhone : +91–731–4012222, 2557510, 2571504, Fax : +91–731–4012256E-mail : [email protected], Website : www.pimrindore.ac.in

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EFFECT OF DEMOGRAPHICS ON CUSTOMER SATISFACTION INHEALTH INSURANCE SERVICES IN INDIA

Monica Bhatia*, Sachin Mittal**

Health insurance, being a customer-oriented industry levels out the risk in the financial servicesector. With the advancement in technology, customers of today are more aware and demanding.Today, where several companies operate and try to gain the same customer, customer satisfactionis considered to be the success essence. In India, customers in the sector of health insurance arein a strong bargaining position due to the increase in the number of health insurance companiesas a result of the entry of private players. The present study is an endeavour to understand theimpact of demographic variables of age and income on customer satisfaction in health insuranceservices. A structured questionnaire on a seven point Likert Scale was used to collect the data.The sample size of 513 respondents was taken for the study. The data collected was analysedusing two-way ANOVA. The results of the study showed that age does not affect customersatisfaction in health insurance services although income has a significant impact on the same.However, age and income both work independent to each other and no interactive effect wasfound to affect customer satisfaction in health insurance services in India.

Keywords : Health Insurance, Customer Satisfaction, Age, Income, Interaction Effect.

INTRODUCTION

Health Insurance

The insurance sector along with sectors likebanking and security trading is a part of thefinancial services sector. Insurance is one ofthe major contributors to the economicdevelopment of any country as it helps inleveling the risks. Like all other insurance,health insurance also works on the conceptof pooling of risk arising from the same cause.Health insurance is where a person or agroup of persons purchase health coverageby paying a premium; which is a fee paid tobuy a policy. In broader terms, it is anarrangement that helps in deferring,delaying, reducing or completely eliminatingthe expenses that an individual may have toincur otherwise for health care. Healthinsurance is one of the measures of socialsecurity through which members of thecommunity are guaranteed benefits ofmaintenance of health and medical carewhen they fall sick.(Vishwanathan, 1996).

The health of citizens is a top priority for anynation. Nations with healthy people groweconomically as there is less poverty and lowmortality rate. The success of many countriesis related to their special efforts of coveringthe citizens under health insurance thatprotects them from unforeseen healthhazards. In India, as in many other countrieswith low per capita, the burden to pay formedical treatment highly affects the people.The government should educate the citizensabout the rising cost of the medicaltreatments and the importance of healthinsurance which covers them from thisfinancial burden. Authorities and regulatorsshould work on the guidelines and allowonly the right players to enter and remain inthe market so that people are safe andsecured. The health insurance companiesshould develop the products considering theneeds of the customers, thereby,encouraging them to purchase healthinsurance plans. The combined effort of allbodies is sure to bring some improvement.

*Free Lance Consultant and Counselor, Indore.** Assistant Profesor, Jaipuria Institute of Mangement, Indore.

Prestige International Journal of Management and Research || ISSN: 09746080 || Vol. 11(R) (1-2), 2018

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Although, India’s health insurance sectorunderwent tremendous growth in last fewdecades with the entry of various playersand also with various schemes initiated bycentral and state government. Variousstudies implied that the insurance marketlacks transparency and is unregulated as theincidences were prevalent where customerswere being cheated on the basis likeinsufficient information, not receiving thementioned claim amount or third partyadministrators deducting the approvedamount with no reasons.

Under such a scenario, customers lookforward to have a regulated insuranceprogram to meet their needs which alongwith hospitalization, includes out-patientand domiciliary care. The governmentshould come up with policies that providesuch benefits at an affordable cost. Suchplans are provided by the private players butat a cost, that normal middle-class Indianfamily cannot afford. The majority of Indiansstill don’t opt for the health insurance policyto finance their medical expenses but pay ontheir own. This results in poor qualityhealthcare or financial hardships. The highcost of medical treatment puts an individualin financial stress and affects the quality oflife. The cause of concern is that if the samecontinues, a person will not be able to payfor the medical expenditure in the future. Inturn, the efforts of a medical service providerwill be worthless. Thus, there is a need toincrease health insurance penetration forwhich medical service providers andinsurance companies play a vital role. It isonly then possible for the people of thecountry to avail quality healthcare serviceswithout any financial pressure.

Customer Satisfaction

The advancement in information technologyhas made the world a “global village” wherepeople across the globe are closelyconnected. People are aware of the productsand services across all continents which

makes it easier for them to compare anddecide the product or service that bestmatches their needs in terms of cost,functionality and expectations. Thecustomers of today are more aware andmore demanding and want both quality andquantity in products and services. To stay inthe market, companies should focus more oncustomer relationship marketing thantraditional functional marketing. It is,therefore, important to understandcustomers and what affects customers’satisfaction so that the strategies formed arein the best interest of the customers and alsothe company.

Many definitions of customers are given byvarious authors and they defined customeras anyone who receives the results of thework and makes a judgment about theservices provided. Others define customersas the party to whom the goods/services aresupplied/rendered by the provider.However, the former definition goes betterfor the customers of the service sector.According to Gronroos (1990), the conceptof customer satisfaction has been an area ofmajor attention due to the shift torelationship marketing from transactionalmarketing. In the area of consumer researchand marketing research, ‘customersatisfaction’ has been one of the mostdebated subjects. It depends on perceivedperformance and relates it to the customers’expectations from the product or service.This means that if performance is less thanthe expectations, it leads to dissatisfaction.Satisfaction is seen if the performance of theproduct or service meets expectations and ifthe performance of the product or serviceexceeds the expectations, the customer willbe highly satisfied (Kotler and Armstrong,2006).

The present era of marketing emphasizes thatthe satisfaction of the customer is aprominent and inevitable concept for futureprofitability and sustainability of any

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organization. According to Liu and Yen (2010)customer satisfaction is customers gettinghigher benefits than the cost of product orservice. Havra (1995) stated that satisfactionof customers is important to the expanse thatit is considered as a key element in themarketing strategies by service institutions.

Customer Satisfaction in Health InsuranceServices

Health insurance, being a completelycustomer oriented industry depends oncustomers for its survival. Guoet. al. (2008)stated that customer is the focus and thedifferentiating factor is customer service. Theinsurance company can differentiate itselffrom its competitors by providing bettercustomer service than others. In thecompetitive era, where a number ofcompanies operate and try to gain the samecustomer, customer satisfaction is the successessence. The service providers who establishhigher service quality gain higher customersatisfaction and further achieve sustainablecompetitive advantage. Researchers haveindicated that attracting a new customer isalmost five times costlier than retaining theexisting ones. Health insurance companiesshould keep measuring customers’expectations to serve them well. With ahigher level of understanding of customers’perceptions, health insurance companies candetermine stronger actions required to meetthe expectations of customers. This way,customers can be easily satisfied. Customersatisfaction has a great significance towardsthe future of a company and is also a basisfor securing a higher market position.

In India, customers in the health insurancesector possess a strong bargaining position.Therefore, health insurance companiesshould provide better services to keepcustomers loyal. If a service failure occurs, itleads to a destroyed relationship between thecompany and customers, which in turnleading to dissatisfaction. Such customersare more likely to share their negative

experiences with others, thereby, degradingthe image of the company. Thus, thesatisfaction of customers is important intoday ’s competitive environment as itgreatly influences the repurchase decisionand is a common factor for customers’intention to switch.

REVIEW OF LITERATURE

Felix (2017) recommended that to enhancecustomer satisfaction, maintaining error-freerecords, handling customer problemsconstantly, providing a prompt response insolving customer problems, and alsounderstanding the needs of customers arethe prerequisites. Yadav and Sudhakar (2017),in their study, found tax benefits, awareness,financial security, lifestyle and risk cover asfactors that influence the purchase decision.Nair (2017), in his study, revealed that age,gender, income, education, and marital statushad a significant association towardscustomer satisfaction with service quality inpublic sector general insurance companies,but occupation did not. However, in theprivate sector, general insurance companies,income, age and marital status were foundto affect customer satisfaction with servicequality significantly but gender, educationand occupation had no significant impact.

Garg (2013) implied that health insurancecompanies should provide facilities forhealth check-ups free of cost at fixedintervals. These features may be provided asextra benefits on coverage and payment ofextra premium. Further, the documentationprocess should also be error-free and simple.Especially, the public sector should work inthis direction. Joo (2013) studied “Analysis ofFinancial Stability of Indian Non-LifeInsurance Companies” and implied that theinsurance sector all over the world has gonethrough a tremendous transformation afterliberalization. In India, the penetration anddensity of insurance are low in comparisonto various other countries. This allows theforeign companies to set foot in the Indian

Effect of Demographics on Customer Satisfaction in Health Insurance Services in India

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insurance market and tap the large untappedmasses mainly by joint ventures with localcompanies. The Indian insurance market hasbeen facing a lot of pressure globally frommultinational insurance companies.

Kavitha et. al. (2012) studied customers’attitude towards general insurance andhighlighted that India is becoming anattractive market for insurance with relativelyyouthful population. The study aimed toexamine the customers’ attitude towardsgeneral insurance and found that differentcustomers have different expectations fromgeneral insurance companies. Kedare (2012)identified that premium payment has beenthe most important factor affecting the choiceof health insurance plan. Households withhigher income have higher probability ofbuying health insurance. Less incomegroups, on the other hand, may not opt forhealth insurance plan. Also, hospitalnetwork and coverage of services areimportant in making healthcare plan choice.Therefore, insurance companies shouldprovide larger hospital network and servicesto completely satisfy the customers. Further,the study noted that the accessibility andimage of the company also influence thecustomer’s decision.

According to Mojaraddiet. al. (2008)customers’ expectations, views and resourceaccess have a positive influence on theirattitude. The study implied that optimumattitude towards the company can be metthrough meeting customers’ expectationsand making good use of mass media,specifically radio. Rahimi (2007) statedthat customer satisfaction causes customerloyalty and further customer retention whichis important for business as well ascustomers. Good customer relationshipmanagement reduces marketing costs,increases retention rate and increasespositive word of mouth.

Rajesham and Rajender (2005) noted thatIndian insurance companies should providepolicies including multi-benefits such as tax

benefits and customer services throughsmart marketing and aggressive distributionwith flexibility and transparency to increaseinsurance business volume. Bhat andReuben (2001) stated that health insuranceis a financial mechanism that protectsindividuals and groups or households fromthe expenses of healthcare that may beincurred because of unexpected illness orinjury. Here, the insurer agrees to guaranteethe insured, against the loss by specifiedcontingency and provides financialcoverage. For this, the person takinginsurance agrees to pay a price known aspremium. Day and Crask (2000) argued thatif customer satisfaction is a consequence,then what causes this should also be studiedand discussed. Consumers consider thelikelihood of product functionality, sense ofself-efficacy, approval of others and the time,money and effort in making a particularchoice as important factors.

As per Jackson (1993) selling insurance isselling an idea with intangible substance.Customer satisfaction comes throughcomparing expectations with the experienceof service. This satisfaction is critical forrepeat business. Building trust,understanding customers’ wants,discovering expectations and respondingeffectively are the keys to customersatisfaction. The study suggested that thecustomer should not be left alone at anystage; the insurer must go the extra mile byproviding extra services like filling up claimsforms, follow up on claims and keeping intouch with customers throughout the claimprocess. According to Sherden (1992) bothhealth insurance and life insurance marketsare characterized by acute competition formarket share. Maintaining existingcustomers has many economic advantagesfor insurance companies. The cost incurredin retaining a customer is about one-fifth ofthe cost which is incurred in acquiring a newcustomer. With increasing competition,insurance companies drive for seeking


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profitability. For this, one of the easiest meansis customer retention. The managementmust opt-out of the “traditional ‘quality’ or‘price’ is everything” approach and pursuethe integrated and comprehensiveapproaches for improving customerretention.

OBJECTIVES

To study the effect of age on customersatisfaction towards health insuranceservices in India.

To study the effect of income oncustomer satisfaction towards healthinsurance services in India.

To study the interactive effect of ageand income on customer satisfactiontowards health insurance services inIndia.

HYPOTHESES

H01:There is no significant difference betweenthe young age group and the old age groupin terms of customer satisfaction in healthinsurance services in India.

H02: There is no significant differencebetween various income groups in terms ofcustomer satisfaction in health insuranceservices in India.

H03: There is no significant interactive effectof age and income on customer satisfactionin health insurance services in India.

H04: There is no significant differencebetween the low-income group and themiddle-income group in terms of customersatisfaction in health insurance services inIndia.H05: There is no significant differencebetween the low-income group and high-income group in terms of customersatisfaction in health insurance services inIndia.H06: There is no significant differencebetween the middle-income group and high-income group in terms of customer

satisfaction in health insurance services inIndia.

METHODOLOGY

The Study: The study is exploratory innature and aimed to study the effect thedemographic variables on customersatisfaction in health insurance services inIndia. For the study, the independentvariable of age and income were used.Variable of age was divided into Young AgeGroup (35 years of age and under) and OldAge Group (Above 35 years of age). Variableof income had three levels, Low IncomeGroup (Less than Rs. 50,000 p.m.), MiddleIncome Group (Rs. 50,000 – Rs. 1,00,000 p.m.)and High Income Group (More than Rs.1,00,000 p.m.). Dependent variable for thestudy was customer satisfaction.

The Sample: For the study, data wascollected from 513 respondents who were allcovered under health insurance. Among the513 respondents, 203 respondents, whichwas 40 percent of the sample, was under thelower income group, 171 respondents, whichwas 33 percent of the sample, was fallingunder the middle-income group and 139respondents which comprised 27 percent ofthe sample size, was under high-incomegroup. Out of these 513 respondents, 284were of 35 years and younger which meansthat 55 percent of the sample belonged to theyoung age group. 229 respondents whichwas 45 percent of the sample size belongedto the old age group. The entire data wascollected from the major cities of Indiathrough a non-probability samplingtechnique.

Tools for Data Collection: Both primary andsecondary data was gathered for the study.Primary data was collected through astandardized scale developed with the helpof a well-structured questionnaire speciallydeveloped for the study. The questionnairecomprised of two parts: personal informationand questions related to customer


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satisfaction. The second part consisted of 36items that measured responses on a 7 pointLikert scale. Secondary data was alsocollected to support the results and findingsof the study. It comprised of research papers,journals, articles and online reports andother literature available related to theresearch purpose.

Tools for Data Analysis: The purpose of thestudy was to analyse the impact of age andincome on customer satisfaction. Mean andANOVA were used to analyse the collecteddata.

RESULT AND DISCUSSION

Various literature have indicated that age andincome are important demographic variablesthat may affect the purchase decision of anindividual regarding health insurance. Thepurpose of this study is to analyse the impactof these variables on customer satisfactionand whether they are independent of eachother to the satisfaction levels of customersin health insurance services in India.

From Table 1, the significant value for age is0.131 with F value of 2.284 which is higherthan 0.05. This implies that age does notaffect customer satisfaction significantly inhealth insurance services in India. Thus, thenull hypothesis “There is no significantdifference between the young age group andold age group in terms of customersatisfaction significantly in health insuranceservices in India” is not rejected.

This implies that the perception ofindividuals of all ages towards the satisfactionlevel in health insurance services in India isthe same. This can be because, in today’stechnologically advanced world, everyperson has access to several options andcarry almost the same level of expectations.Aaltonen (2004) revealed that age was not asignificant demographic in the loyalty modeland rejected the hypothesis that oldercustomers would likely to be more loyal than

young satisfied customers.

Table 1 further shows the significant valuefor income as 0.008 which is lower than 0.05and thus implies that income has a significanteffect on customer satisfaction in healthinsurance services in India. Therefore, thenull hypothesis; “There is no significantdifference between various income groupsin terms of customer satisfaction in healthinsurance services in India” stands rejected.

As income has been divided into three levels,post hoc analysis was applied to furtherassess the levels of satisfaction of differentincome groups.

Table 2 shows the mean perception score forthe low-income group as 190.31 which islower than the middle-income group(196.82). Table 3 further gives a significantvalue as 0.033 which shows that there is asignificant difference between low-incomegroup and middle-income group concerningcustomer satisfaction in health insuranceservices in India. Thus, the null hypothesis;“There is no significant difference betweenthe low-income group and middle-incomegroup on customer satisfaction in healthinsurance services in India” gets rejected.

The mean perception score of the low-incomegroup is 190.31 (Table 2) which is lower thanthe high-income group score (196.74). Thisimplies that the low-income group and high-income group differ significantly from eachother in terms of customer satisfaction inhealth insurance services in India. Thus, thenull hypothesis; “There is no significantdifference between the low-income groupand high-income group in terms of customersatisfaction in health insurance services inIndia” is rejected.

The mean score of the middle-income group(196.82) and the high-income group (196.74)seem almost similar (Table 2). Table 3 alsogives a significant value of 0.982 which statesthat there is no significant difference between


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the middle-income group and high-incomegroup in terms of customer satisfaction inhealth insurance services in India. Hence, thenull hypothesis: “There is no significantdifference between the middle-incomegroup and high-income group in terms ofcustomer satisfaction in health insuranceservices in India” is not rejected.

The analysis reveals that low-income grouphas the lowest perception towards customersatisfaction and it differs significantly withthe middle-income group and high-incomegroup. This can be because people with lowincome are satisfied with the basic servicesthey receive whereas, middle and high-income groups people expect more in termsof benefits like tax, riders, coverage etc. asthey can pay an extra amount to get theadded benefits which provide highersatisfaction. Various studies have shown thatincome as a demographic variable affects thesatisfaction of customers. Deshpande andDeshpande (2014) aimed at studying thefactors influencing customer satisfaction withhealthcare and stated annual incomesignificantly affected the satisfaction withhealthcare. Nair (2017) studied the effects ofdemographics on customer satisfaction ofhealth insurance policyholders. It wasrevealed that in both the public sector andprivate sector general insurance companies,income was found to have a significant effecton customer satisfaction with service quality.Razakiet. al. (2016) found a significantdifference between low-income customersand high-income customers on thecorrelation of customer satisfaction andcustomer loyalty.

As far as the dependence of age and incomeon each other for customer satisfaction isanalysed and the F value of 2.635 is notsignificant at 0.073. Therefore, the nullhypothesis: “There is no significantinteractive effect of age and income oncustomer satisfaction in health insuranceservices in India” is not rejected. This impliesthat age and income are independent of each

other towards customer satisfaction in healthinsurance services in India and do notoperate together to affect the perception ofcustomers towards their level of satisfactionin health insurance services in India.

CONCLUSION

Customer satisfaction is imperative for thesuccess of any organization. Healthinsurance companies being in the servicesector have to maintain the satisfaction ofcustomers in today’s globally competitivemarket. The study aimed to examine theimpact of age and income on customersatisfaction. The findings revealed that agehas no significant impact on the perceptionsof customers regarding their satisfaction withhealth insurance services in India. However,income was found to have a significant effect.Among all the income groups, the middle-income group had the highest meanperception score, followed by the high-income group and low-income group.It wasobserved that the low-income group peoplesignificantly differ with middle and high-income group people in terms of theirperception towards the satisfaction in healthinsurance services. As the income increases,people have more number of options tochoose from and, therefore, form theirexpectations. Studies suggest that as incomerises, the use of technology also increasesfurther connecting the people around theworld. This enables them to gain informationacross the globe for their need and they formnatural expectations. Sometimes, theseexpectations are more than what a companycan offer at a time. Although they are readyto pay an extra amount for the additionalservices, the higher income groups give moreimportance to overall satisfaction than thelow-income group who may be satisfied withthe essential features of services.

In this global economic world, insuranceneeds to become more diverse than everbefore. Each individual has a different needfor a health insurance plan which is based


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on income, family, several dependents andother factors that may be consideredimportant. Thus, the health insurancecompanies should focus on the customersand focus on their satisfaction to stay in themarket and work successfully.It is suggestedthat health insurance companies shouldfocus on providing quality services to keepthe satisfaction of customers high. Thisincludes providing individual attention tocustomers, handling customers’ complaintsand giving timely and proper response. Thishelps in better understanding of their needsand keeps them satisfied. Management of thehealth insurance companies should runregular research activities and keep theprofile of customers updated to find theexpectations of the customers about variousservice aspects. As expectations andsatisfaction levels are not static figures, timelyresearch would help in analysing thechanging demands. The study will bebeneficial for the researchers, customers,organizations and even the regulators togain a better understanding of the currentlevel of satisfaction of customers concerningage and income and make further strategiesthat become useful to them and also theeconomy as a whole.

References

Bhat, R. and Reuben (2001). Analysis of Claims andReimbursement made under Mediclaim Policy of GeneralInsurance Corporation of India. Working Paper, Indian Instituteof Management, Ahmedabad.

Day, E. andCrask, M. R. (2000). Value Assessment: TheAntecedent of Customer Satisfaction. Journal of ConsumerSatisfaction, Dissatisfaction and Complaining Behaviour, 13, 42-50.

Deshpande, S.P. and Deshpande, S.S. (2014). FactorsInfluencing Consumer Satisfaction with Healthcare. TheHealthcare Manager, 33(3), 261-265.

Garg, A. (2013). Satisfaction and Problems of Health InsurancePolicyholders in India. International Journal of Banking, Riskand Insurance, 1(2), 43-54.

Guo, X., Duff, A. and Hair, M. (2008).Service QualityMeasurement in the Chinese Corporate Banking Market.International Journal of Bank Marketing, 26(5), 305-27.

Havra, T. (1995). Selling After the Sale. Bank Marketing, 27(1),27-30.

Joo, B. A. (2013). Analysis of Financial Stability of IndianNon-Life Insurance Companies. Asian Journal of Finance and

Accounting, 5(1), 30-36.

Kavitha, T., Latha, A. and Jamuna, S. (2012). CustomersAttitudes Towards General Insurance – A Factor AnalysisApproach. IOSR Journal of Business and Management, 3(1) 12-14.

Liu, C.H. and Yen, L.C. (2010). The Effects of Service Quality,Tourism Impact and Tourist Satisfaction on Tourist Choice ofLeisure Farming Types. African Journal of Business Management,4(8), 1529-45.

Mojaraddi, G. R., Zamani, G.H. and Ahmedi, H. (2008). AnAnalysis of Determinant Factors in Policyholders’ AttitudeTowards Private Agencies: A Path Analysis Approach.Agriculture Economy (Agriculture and Economy), 2(2), 169-97.

Nair, S. S. N. (2017). Effect of Demographic Variables onCustomer Satisfaction of Health Insurance Policyholders: AStudy of General Insurance Companies in India. The IUPJournal of Marketing Management, 16 (4), 20-32.

Rajesham, C.H. and Rajender, K. (2005). Changing Scenarioof India Insurance Sector.Indian Journal of Marketing, 5(3), 12-14.

Razaki, A.,Palilati, A.,HajarIbnu and Madjid, R.(2016).Customer Income Role as Moderation Variable ofSatisfaction Effect on Customer Loyalty in Bank NegaraIndonesia (Persero) Tbk. In Southeast Sulawesi. TheInternational Journal of Engineering and Science (IJES), 5(3), 58-64.

Sherden, W. A. (1992). Hold that Policyholder. Best’s Review,92(9), 23-26.

Vishwanathan, R. (1996). Health Insurance and MedicalServices. Indian Journal of Social Work, 12(1), 70-73.

Yadav, C.S. and Sudhakar, A. (2017). Personal FactorsInfluencing Purchase Decision Making: A Study of HealthInsurance Sector in India. Bimaquest, 17(1), 48-59.

Bibliography

Aaltonen, P.G. (2004). Customer Relationship Marketing and Effectsof Demographics and Technology on Customer Satisfaction and Loyaltyin Financial Services. A Thesis, Old Dominion University.

Gronroos, C. (1990). Service Management and Marketing:Managing the Moment of Truth in Service Competition. LexingtonBooks.

Kedare, S. D. (2012). Health Insurance: Identifying AwarenessPreferences and Buying Pattern in Mumbai. Thesis, Dr. D.Y. PatilUniversity.

Kotler, P. and Armstrong, G. (2006). Principles ofMarketing.Prentice Hall.

Rahimi, R. (2007). Feasibility Study of Customer RelationshipManagement (CRM) Application in Hotel Industry: Case of HamgameArya Group Hotels.Master Thesis,Lulea University of Technology.

Webliography

Felix, R. (2017). Service Quality and Customer Satisfaction inSelected Banks in Rwanda. Journal of Business Financial Affairs6:246. doi:10. 4172/2167-0234.1000246.

Jackson, D. (1993). Your Next Choice: Compare CustomerService with Customer Satisfaction. Life and Health InsuranceSales, 136(2), 26. https://search.proguest.com/Docview/199921739? Accountid=135227


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EMPLOYEES’ PSYCHOLOGICAL WELL-BEING AND SERVANTLEADERSHIP: AN EXPLORATORY STUDY

Suman Pathak*, Rajesh Jangalwa**

Servant leadership and its outcomes have been of recent interest, ever since Greenleaf ’scontribution to the theories of leadership. This research study has investigated how the practiceof servant leadership relates to employees’ psychological well-being at the workplace. For thepurpose, a survey was conducted by using the Barbuto and Wheeler (2006) Servant LeadershipQuestionnaire and for the psychological well-being, Oxford Happiness Questionnaire of Argyleet.al. (1989) was used. In order to profoundly respond to negative and varied situations, theexperts have attempted to design many ethical leadership models. This study has been conductedon the employees in micro, small and medium manufacturing enterprises, located in India.Pearson Correlation and t-test were applied. The significant positive correlation was foundbetween Servant Leadership and Psychological Wellbeing. Further, on the basis of age and grades(levels) the employees were tested for their perception of servant leadership. So, for both agegroups and grades (levels) of employees results were found significant for psychological well-being and perception of servant leadership.

Keywords: Servant Leadership, Psychological Well- Being, Happiness, MSME.

leadership services, providing extendedfavor for the employees giving service andtheir precious lifetime (Greenleaf and Spears,2002; Grant and Mayer, 2009; Hoffman et.al.,2007; Ilies et.al., 2007).

Hale and Fields (2007) defined servantleadership as “an understanding andpractice of leadership that places the goodof those led over the self-interest of theleader, emphasizing leader behaviors thatfocus on follower development and de-emphasizing glorification of the leader”.

Characteristics of Servant Leadership

Spears (2004) draw and suggested qualitiesconsisting of servant leaders. There are quitedistinctive characteristics observed in theservant leadership viz. Calling, Listening,Empathy, Healing, Awareness, Persuasion,Conceptualization, Foresight, Stewardship,Growth and Community Building. Lookingto these characteristics such leaders havehigher degree of qualities such as Sensitivity

INTRODUCTION

In recent times, inestimable scandals with animmeasurable amount of money have beenobserved in the news, relating to thebusiness, government and sportsorganisations. This has led to contemplateadapting an apropos leadership modelleading to the ethical behaviour of theleaders resulting in better service to thesociety and wellbeing of the employees ofthe organisations. The sanity has led to theinvention of the new paradigm of leadershipproviding higher levels of proficiency tocheck aforesaid malpractice on one hand andon the other hand providing the approachesto hire and retain employees who can leadthe organisations with priority toorganizational interest and goals and not tothe personal and immoral interest.

Such a model was brought about byGreenleaf in 1974. This has been affirmed bymany researchers of the current times thatthere is increasing recognition for the

* Professor, MATS Institute of Management and Entrepreneurship, Bangalore.** Associate Professor, Prestige Institute of Management and Research, Indore.


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and Receptivity because they call, openlylisten and have empathy with followers.They are Smart as they have higher levels ofawareness as they are futuristic. Their focusis Service to Society and they are highlyinfluential, inspiring and motivating (Spears,2004).

Calling is a desire to willingly serveand sacrifice self-interest, even at thecost of personal life.

Listening is openly andwholeheartedly listening andimplementing subordinates’ suggestedideas. This morale component ispresent in the Servant Leadership.

Empathy is listening to others withsensitivity and realize the situation ofthe person.

Healing is the support, recognition,and appreciation given to thoseemployees who are suffering frombroken spirit due to loss of their hopeor dream.

Awareness is the all-round alertness ofa leader ’s wisdom for noticingimportant cues in the environment.

Persuasion is the orientation ofinfluencing others for accomplishingthe task assigned in the job withoutlegitimate authority or power.

Conceptualization is encouragingemployees for the application of theirimaginations to ensure creativeapplication.

Foresight is the leader ’s speculationand estimation for the future scenariofor organisation and its employees.

Stewardship is a leader encouragingthe employees of the organisation for agreat contribution to society.

Growth is described by Greenleaf et. al.(1996) as a process of reminding the

outcome to employees to developpositivity.

Community Building for leader isbeing capable to prove to employeesthat the organisation has the potentialto develop the organisation as aspirited community.

The morale component is missing in bothcharismatic leadership and also in thetransformational leadership, which is presentin the servant leadership. Ehrhart (2004) hadfound and reported some uniqueness inservant leadership in terms of commitmentof the followers, enhanced satisfaction withteam leaders especially in terms of followers’cooperation and procedural justice. There isno leadership behaviour whether it istransformational leadership or citizenshipbehaviour in which servant leadershipcompletely exists (Liden et. al., 2008).Psychological well-being provides a personwho has healthy psychological functioningcovers the behavioural aspectsviz. happiness, life satisfaction and self-growth (Bradburn, 1969).

The psychological wellbeing is generallydefined as a blend of happiness and positiveaffectivity with optional social effectivenessin life. It is also defined as “It is about livesgoing well. It is a combination of feeling goodand functioning effectively.” Highpsychological wellbeing such as spontaneoushappiness, faith in own capability andsatisfaction in life. The people with higherlevels of psychological wellbeing generallyreport that they comparatively, experiencemore happiness, life satisfaction and feelmore secure.

Many research studies have proved thatpsychological well-being occurs as a resultof positive feelings and most importantlyhappiness. Black et. al. (2015) had contendedthat many researchers observe wellbeingdoes not consist only of happiness or contentbut it has a naturally active life with other


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people. So, for overall organisationalprogress and development too,psychological wellbeing is essentialphenomena.

LITERATURE REVIEW

In 1970, Greenleaf had propounded theconcept of servant leadership and ever sincethen it has been added as one of the stylesof leadership. Although servant leadershipseems same as transformational leadershipbut it has been proved that it stands aloneas a unique leadership concept though it hasfew similar characteristics to the otherleadership concepts and styles. Ding et. al.(2012) had examined the effect of servantleadership on the attitudes of employees aswell as on Organisational CitizenshipBehaviour (OCB); and similarly, Fred et. al.(2010) had focused on quantitative study onservant leadership and OCB. Drury (2004)and Meyer et. al. (1993) had found asignificant and positive relationship betweenjob satisfaction and servant leadership.

Ryff and Keyes (1995) and Ryff and Singer(2008) have proposed Psychological Well-being Model, which is very different from thepast available models especially in terms ofpositive emotions and happiness, whereas,Velleman (1991) had mentioned thatbalanced life is capable of engaging variousfactors of well-being and does not have anytype of narrower. It was proved throughresearches that psychological well-being is aresult of positive feelings and mostimportantly happiness. Social well-being isa type of participation with people andcommunities. Psychological well-being is theaffective feeling associated with it. Black et.al. (2015) had found that many researcherswho study wellbeing believe that wellbeingis not only a state of happiness orcontentment rather it has additional qualitiessuch as involving activity with people andlife. When people try to meet the risingdemands of the society or the construct inwhich they are present it leads to stress as a

result of demanding situations whichdeleteriously affect the psychologicalwellbeing of employees.

Since servant leadership is an emergingconcept most researchers are trying toidentify its importance and the strength ofrelationship it has with many factors likeorganization citizenship behavior andemployee attitudes (Fred et. al., 2010),organization commitment (Drury, 2004), theeffectiveness of teams (Irving, 2005) andmany other factors. An OrganizationalCommitment Scale was used by Meyer et.al.(1993) for measuring the commitment andOrganizational Leadership Assessment Scale(Laub, 1999) was used for servant leadership.The correlation between organizationalcommitment and organizational leadershipwas found to be positive and significant.When servant leadership was correlated withorganizational commitment the result wascontrary and statistically significant.

Irving (2005) had found that significantrelationship between servant leadership andteam effectiveness exists. Reinke (2004) hadexplored whether employees’ perception ofservant leadership affects their trust amongstthem or not and it was observed that thereexists a significantly high positive correlation.Jia and Liden (2011) have studied variousfactors such as organizational goal, clarity inthe process, servant leadership and theirimpact on organizational citizenshipbehaviour; and the strength andperformance of teams. They found that thesevariables are significantly related. A studywas conducted by Joseph and Winston (2005)with research objective to explore therelationship between trust and servantleadership and it was found that both arepositively related. Similar results wereobserved by the Greenleaf (1977). Findingsof research studies conducted by Greenleaf(1977) and Lad and Luechauer (1998)suggested that job satisfaction is enhancedwhen factors of servant leadership are

Employees’ Psychological Well-Being and Servant Leadership: An Exploratory Study

14

applied. Servant Leadership was alsoinvestigated in the hospital setting by Jacket. al. (2014). It was contended that in a ruralhospital the employees’ perception of theirleaders’ servant leadership has positiveimpact and is strongly related to theirsatisfaction.

A study was conducted to prove that servantleadership leads to a decrease in job burnout(Rude, 2004). Psychological well-being is themost important factor that researchers try toexamine due to extreme work stress and lackof life satisfaction among people today. Inmost of the researches, psychological well-being is studied as a treatment variable ratherthan as a dependent variable mainly due tothe effect of other factors like job satisfaction,organization culture, supervisorinvolvement etc. that lead to an individual’spsychological wellbeing.

A study conducted by Wright and Bonett(2007) had contended that employees’psychological well-being has sufficientlyaffected job satisfaction with job separation.But, when the psychological well-being ofemployees was low; it had negatively affectedemployees’ turnover. Cohen and Shamai(2009) focus on the trend by examiningwhether employees’ values as individuals arerelated to psychological well-being andaffective organizational commitment. Bradand Thomas (2013) have focused onrelationship between workforce engagementand productivity and also with psychologicalwell-being. The low workforce engagementand productivity as well psychological well-being are negatively correlated.

Morgan (2013) had contended that there wasa positive and significant correlation betweenwork-life balance and psychological well-being. Ryff (1989) highlights whatpsychological well-being is and Nielsen et.al. (2008) studied relationships betweenleadership and employees’ well-beingthrough structural equation modeling.

RATIONALE OF THE STUDY

There is a growing tendency for economicprogress in the individuals. Most of thepeople are attracted for better andcomfortable life. The employees working onkey positons as leader are often observedinvolved in some corruptions. Such reasonshave dramatically increased malpractices inboth government and private sectors.Servant leadership is the way to put checkon such malpractices in the society. Thepsychosomatic diseases are increasing asreported by many research studies. Servantleadership may provide opportunity forbetter mental health since it has a basicpurpose of service to the organisation,people and society. Thus, current studybecomes imperative as it is important tounderstand psychological well-being in lightof servant leadership.

OBJECTIVE

To investigate Servant Leadership and itsrelevance with Psychological Well-Beingamongst the employees’ of MSME.

RESEARCH METHODOLOGY

The Study: The study is exploratory innature and aims to explore the relevance ofservant leadership with psychological wellbeing of employees.

The Sample: Total size of the sample was 30employees from MSMEs located in India. Thepercentage ratio between males and femaleswas 80 percent and 20 percent. The averageage of the respondents was 33 years. The ageranged between 22 and 58. The respondentswere categorized into two age groups. agegroup 1 was from 22 – 34 years and agegroup 2 was 34 years and above. The gradelevels of employees were also categorizedinto two levels – Grade Level 1 has top leveland senior level employees and Grade Level2 has middle and junior level employees.


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Tools for Data Collection: The treatmentvariable is the servant leadership. Theservant leadership variable is a multi-dimensional variable comprising of fivedimensions-altruistic calling, emotionalhealing, wisdom, persuasive mapping andorganizational stewardship. All the fivedimensions of servant leadership have beencollectively measured by the ServantLeadership Questionnaire (Barbuto andWheeler, 2006) consisting 23 items. Thedependent variable is psychological well-being (PWB) comprising of three dimensionsnamely, Positive Affectivity, NegativeAffectivity and Life Satisfaction. All the threedimensions have been collectively measuredusing the Oxford Happiness Questionnaire(Argyle et.al., 1989) having 29 items.

Tools for Data Analysis: The collected datawas analyzed using t-test and correlationanalysis were applied through SPSS 18.

HYPOTHESES

H01: There is no significant correlation existsbetween Servant Leadership andPsychological Well-Being of employees.

H1a: There is significant correlation existsbetween Servant Leadership andPsychological Well-Being of employees.

H02: There is no significant differencebetween the mean scores of ServantLeadership of employees of both age groups.

H2a: There is significant difference betweenthe mean scores of Servant Leadership ofemployees of both age groups.

H03: There is no significant differencebetween the mean scores of PsychologicalWell-Being of employees of both age groups.

H3a: There is significant difference betweenthe mean scores of Psychological Well-Beingof employees of both age groups.

H04: There is no significant differencebetween the mean scores of Servant

Leadership of employees of both grades.

H4a: There is significant difference betweenthe mean scores of Servant Leadership ofemployees of both grades.

H05: There is no significant differencebetween the mean scores of PsychologicalWell-Being of employees of both grades.

H5a: There is significant difference betweenthe mean scores of Psychological Well-beingof employees of both grades.

RESULTS AND DISCUSSION

The collected data was analysed and thefindings of t-test and correlation analysis arediscussed. Table 1 reveals the mean ofServant Leadership Scores and PsychologicalWell-being scores of employees of MSMEworking in Bengaluru. The score was foundto be 3.1933 for servant leadership and 4.7933for psychological well-being. Further, theresearch finding had exhibited a positivecorrelation between servant leadership andpsychological well -being, with Pearson’scoefficient ‘r ’ = 0.625 (63 percent), whichmeans that the servant leadership astreatment variable explains 63 percent of thevariation in the response or psychologicalwell-being as experimental variable and itwas found statistically significant at p <0.0001 level (Table 2). It can be cross checkedby referring the significance level at t Statvalues being greater than t-critical one-tailvalues. t-Stat value being greater than t-critical one-tail values. t-Stat value stands at14.55 and t- critical two tail value stands at2.004 (Table 1). Thus, null hypothesis H01 wasrejected and the alternative hypothesis H1athat “There is significant correlation existsbetween servant leadership andpsychological well-Being of employees ofMSME” is accepted.

In this research study the descriptivestatistics is used for the employees age groupand employees grade i.e. two levels or rank.It can be seen from the tables 3,4,5 and 6. The


16

mean scores for servant leadership for agegroup 1 stood at 3.32 whilst for age group 2stood at 3.72. The standard deviation,represents how much the members of agroup differ from the mean value for thegroup, stood at 0.29 for age group 1 and 0.28for age group 2 (See Table 3). Further, it wasobserved that t-Stat is greater than t- criticalvalue. Therefore, we do not accept theassumption that ‘means of the values for Agegroups 1 and 2 are statistically the same’, Agegroups 1 and 2 have statistically differentmean values for servant leadership. It furtherindicates that lower age group (22 – 34) feelsthat they receive lower levels of servantleadership. Hence, null hypothesis H02 isrejected and alternative hypothesis H2a“There is significant difference between themean scores of Servant Leadership of MSMEemployees of both age groups” is accepted.

The mean scores for psychological well-beingfor age group 1 stood at 4.56 whilst for Agegroup 2 it stood at 5.22. The standarddeviation, meaning the quantity expressingby how much the members of a group differfrom the mean value for the group, stood at0.41 for age group 1 and 0.44 for age group2, so the dispersion and spread was quitemoderate.

This can be seen in the result that t Stat isgreater than t-critical Value, therefore, we donot accept the assumption that ‘means of thevalues for Age groups 1 and 2 are statisticallythe same’ (Table 4). Age groups 1 and 2 - havestatistically different mean values forpsychological well-being. It further indicatesthat the higher age group (Above 34 yearsof age) feels that they receive higher levelsof psychological wellbeing. Here, nullhypothesis H03 is rejected and alternatehypothesis H3a that “There is significantdifference between the mean scores ofpsychological well-being of MSMEemployees of both age groups” is accepted.

It clearly indicates that low levels of perceivedservant leadership amongst the younger age

group (22-34) also reflects lower levels ofpsychological well-being, whilst higher levelsof perceived servant leadership amongst theolder age group (Equal to or Above 35 yearsof age) also reflects higher levels ofpsychological- wellbeing.

The mean scores for servant leadership forLevel 1 stood at 3.35 whilst for Level 2 it stoodat 3.44. The standard deviation, meaning thequantity expressing by how much themembers of a group differ from the meanvalue for the group, stood at 0.46 for Level 1and 0.40 for Level 2, so the dispersion andspread was quite moderate (Table 5).

The t Stat is lower than t-critical value,therefore, the null hypothesis H04 is acceptedthat “There is no significant differencebetween the mean scores of ServantLeadership of MSME employees of bothgrades”, meaning that the 2 groups ofanalysis - Levels 1 and 2 have similar meanvalues for Servant Leadership

Levels 1 and 2 comprise 15 employees each,with Level 1 comprising of employeesbelonging to the top management team andsenior management, whilst Level 2 comprisesof employees belonging to the middle andjunior levels of management. The meanscores for psychological well-being for Level1 stood at 4.82 whilst for Level 2 it stood at4.77. The standard deviation, meaning thequantity expressing by how much themembers of a group differ from the meanvalue for the group, stood at 0.54 for Level 1and 0.51 for Level 2, so the dispersion andspread was quite moderate (Table 6).

Since the t-Stat is smaller than t-Critical Value,therefore, null hypothesis H05 that “There isno significant difference between the meanscores of Psychological Well-being of MSMEemployees of both grades” is accepted.Hence, accepting the assumption that the 2groups of analysis, levels 1 and 2, havesimilar mean values for psychological well-being.


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In the light of the objective of this researchstudy it was found that there is significantpositive relationship between servantleadership and the psychological well-being.This indicates that higher degree of servantleadership will lead to better psychologicalwell-being of the employees working in theMSME, Bengaluru. No organisation can gaincompetence without employees’ well-being.De Voorde (2010) has defined employee well-being and stated that it has three dimensionhappiness, health and relationships. Theauthor has investigated 41 research studiesconducted during 1995 to 2008 andcontended that the employees’ well-being interms of happiness and relationshipsfunction provides mutual gain withperformance. This indicates that thepsychological well-being is of pivotalimportance, and current study found thatboth servant leadership and employees well-being are related.

Both age groups exhibited significantdifference in terms of servant leadership.Since, the younger group has lessor meanvalue for servant leadership, therefore, itimplicates that they feel that senioremployees are giving comparatively lessattention or discriminated in some of thedimensions of servant leadership vis.empathy, calling, listening etc.

SUGGESTIONS

It is vitally important for the employees todisplay high levels of psychological well-being (PWB), as PWB is seen to be linked tojob satisfaction, motivation as well asemployee health. There are several ways topromote PWB in organizations andorganizations of the day will do well toimplement human resources interventions,with motivational techniques and programsto inculcate higher levels of PWB.

This research has shown, the presence ofservant leadership will suffice for anemployee’s PWB levels to be higher, and

thereby, increase the motivation andsatisfaction levels too. In the backdrop of thisresearch, the suggestions from the researchwill be then to promote Servant Leaders, aswell and this may involve having ordesigning leadership programs, leadershipdevelopment and fostering a culturewherein servant leaders are recognized andhonored. So, the organizations across theworld have to adopt the concept of servantleadership which would result intogetherness and a collective sense ofpurpose and PWB amongst the employees.

In the organization regardless of the persons’positions, each one (whether a leader or asub-ordinate) has to be trained forawareness, acceptance, appreciation andrecognition of both servant leadershipattributes as well as psychological well-being.

Companies should adopt servant leadershipand develop corporate/organizational cultureto fostering ethics and values, norms andbeliefs. This situation leads to a positiveoutcome, particularly as the servant leaderdimensions that this research study hasmeasured to promote the leaders (who mayreinforce their behavior by further embracingservant leader attributes) as well as thesubordinates who have a reason to go wellabove and beyond their stated mandate. Assuch the employees and the organizationenjoy the positive outcomes.

Organizations need to modify the policies aswell as their regulations transparentenvironment. This will de-emphasis the‘Unservant’ behaviour and build a cohesiveorganisational culture. The supportiveorganisational climate will lead to free andspontaneous expression of employeesthanking, ideas, and emotions, which in thelong run cultivate PWB, in the organisation.

In a nutshell, organizations should embraceaspects aimed towards promoting servantleadership and also recognize themechanisms which will ascertain the PWBfeelings of the sub-ordinates, as a reason for


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the servant leaders’ behaviors. As such theremust be a relook on this servant leader –psychological well-being continuum by theorganizations to add value to its peoplepractices, not only from a psychologicalperspective but also from a pragmaticperspective. It will, in the long run, surely bea mean of positive strategic alliances in thecorporate practices.

References

Argyle, M., Martin, M. and Crossland, J. (1989). Happiness asa Function of Personality and Social Encounters. In J. P. Forgas,and J. M. Innes (Eds.), Recent Advances in Social Psychology: AnInternational Perspective. 189–203, North-Holland: Elsevier.

Barbuto, J. E. and Wheeler, D. W. (2006). Scale Developmentand Construct Clarification of Servant Leadership. Group andOrganization Management, 31(3), 300-26.

Black, S. V., Cooper, R., Martin, K. R., Brage, S., Kuh, D. andStafford, M. (2015). Physical Activity and Mental Well-beingin a Cohort aged 60–64 Years. American Journal of PreventiveMedicine, 49(2), 172-80.

Brad, S. and Thomas, G. Reio, Jr. (2013) EmployeeEngagement and Well-Being: A Moderation Model andImplications for Practice. Journal of Leadership and OrganizationalStudies, Vol. 21 (1), 43-58.

Cohen, A. and Shamai, O. (2009). The Relationship betweenIndividual Values, Psychological Well-Being andOrganizational Commitment among Israeli Police Officers.Policing-an International Journal of Police Strategies andManagement - Vol. 33 (1), 30-51.

De Voorde, F. C. (2010). HRM, Employees’ Well-being andOrganizational Performance: A Balanced Perspective.Ridderprint.

Ding, D., Lu, H., Song, Y. and Lu, Q. (2012). Relationship ofServant Leadership and Employee Loyalty: The MediatingRole of Employee Satisfaction. International Business, 4(03),208.

Drury, S. (2004). Servant Leadership and OrganizationalCommitment: Empirical Findings and WorkplaceImplications. Servant Leadership Research Roundtable, 1-14.

Ehrhart, M. G. (2004). Leadership and Procedural JusticeClimate as Antecedents of Unit©\level OrganizationalCitizenship Behavior. Personnel Psychology, 57(1), 61-94.

Fred, O. Walumbwa, Chad, A. Hartnell, and Adegoke, O.(2010). Servant Leadership, Procedural Justice Climate, ServiceClimate, Employee Attitudes, and Organizational CitizenshipBehavior: A Cross-Level Investigation. Journal of AppliedPsychology 95 (3), 517-29.

Grant, A. M. and Mayer, D. M. (2009). Good Soldiers andGood Actors: Prosocial and Impression Management Motivesas Interactive Predictors of Affiliative CitizenshipBehaviors. Journal of Applied Psychology, 94(4), 900.

Hale, J. R. and Fields, D. L. (2007). Exploring ServantLeadership across Cultures: A Study of Followers in Ghanaand the USA. Leadership, 3(4), 397-417.

Hoffman, B. J., Blair, C. A., Meriac, J. P. and Woehr, D. J.(2007). Expanding the Criterion Domain? A QuantitativeReview of the OCB Literature. Journal of Appliedpsychology, 92(2), 555.

Ilies, R., Nahrgang, J. D. and Morgeson, F. P. (2007). Leader-member Exchange and Citizenship Behaviors: A Meta-Analysis. Journal of applied psychology, 92(1), 269.

Jack, McCann, Daniel, G. and Lieven, C. (2014). ServantLeadership, Employee Satisfaction and OrganizationalPerformance in Rural Community Hospitals. InternationalJournal of Business and Management, Vol. 9 (10), 28

Jia Hu and Liden, R.C. (2011). Antecedents of Team Potencyand Team Effectiveness: An Examination of Goal And ProcessClarity And Servant Leadership. Journal of AppliedPsychology, 96(4), 851.

Joseph, E. E., and Winston, B. E. (2005). A Correlation ofServant Leadership, Leader Trust, and OrganizationalTrust. Leadership and Organization Development Journal, 26(1),6-22.

Lad, O. L. J. and Luechauer, D. (1998) On the Path to ServantLeadership. In L. C. Spears (Edition.), Insights on Leadership:Service, Stewardship, Spirit and Servant-Leadership: New York:John Wiley and Sons, Inc, 54-67.

Liden, R. C., Wayne, S. J., Zhao, H. and Henderson, D. (2008).Servant Leadership: Development of a MultidimensionalMeasure and Multi-level Assessment. The LeadershipQuarterly, 19(2), 161-77.

Meyer, J. P., Allen, N. J. and Smith, C. A. (1993). Commitmentto Organizations and Occupations: Extension and Test of aThree-Component Conceptualization. Journal of appliedpsychology, 78(4), 538.

Nielsen, K., Randall, R, Yarker, J. and Brenner, S.O. (2008).The Effects of Transformational Leadership on Followers’Perceived Work Characteristics and Well-being: ALongitudinal Study, Work and Stress, 22, 16-32.

Reinke, S. J. (2004). Service before Self: Towards A Theory ofServant - Leadership. Global Virtue Ethics Review, 5(3), 30.

Ryff, C. D. (1989). Happiness is Everything, or is it?Explorations on the Meaning of Psychological Well-being. Journal of Personality and Social Psychology, Vol 57(6),1069-81.36.

Ryff, C. D. and Keyes, C. L. M. (1995). The Structure ofPsychological Well-Being Revisited. Journal of Personality andSocial Psychology, Vol. 69(4), 719.

Ryff, C. D. and Singer, B. H. (2008). Know Thyself and BecomeWhat You Are: A Eudaimonia Approach to PsychologicalWell-being. Journal of Happiness Studies, 9(1), 13-39.

Spears, L.C. (2004). Practicing Servant-leadership. Leader toLeader, Vol. 34, (7), 7-11.

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Bibliography

Bradburn, N. M. (1969). The Structure of Psychological Wellbeing.Chicago: Aldine Publishing Company.


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Drury, S. (2004) Employee Perceptions of Servant Leadership:Comparisons by Level and with Job Satisfaction and OrganizationalCommitment. Doctor of Philosophy in OrganizationalLeadership. Submitted to Regent University.

Greenleaf, R. K. (1970). The Servant as Leader. Robert K. GreenleafPublishing Center.

Greenleaf, R. K. (1974). Trustees as Servants. Center for ServantLeadership, New Jersey.

Greenleaf, R. K. (1977) Servant Leadership: A Journey into theNature of Legitimate Power and Greatness. Paulist Press, NewYork.

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Greenleaf, R.K. and Spears, L. C. (2002) Servant Leadership: AJourney into the Nature of Legitimate Power and Greatness. New-York: Paulist Press.

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21Employees’ Psychological Well-Being and Servant Leadership: An Exploratory Study

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FACTORS AFFECTING USAGE OF INTERNET BASED FOODDELIVERY SERVICE APPS

Raksha Thakur*, Nidhi Sharma*, Bhavya Bhatt*

The lifestyle of the people in our country is changing rapidly. An increasing number of workingwomen, changing trends in families and offices and many other reasons have lead to a change inthe food habits of Indians. A huge expansion is being observed now-a-days in the number ofonline food delivery service apps. The most common apps are Zomato, Swiggy, Food Panda etc.The current study explores the factors affecting the usage of internet-based apps for food deliveryservice by the people of India. The study reveals seven factors on the basis of responses collectedfrom 143 respondents. The study concludes that Convenience and Value to Customer are themost important factors that affect customers’ perception towards food delivery apps followed byEase and Comfort, Customer Satisfaction, Menu and Items Offered, Dependability and Reliabilityand Outreach of Apps.

Keywords: Online Food Delivery Service, Apps, Consumers, Internet.

Since, visibility is better on apps, consumersreach out to such restaurants which helpthem attract new customers. Just as thedelivery of goods through online orders,companies are providing online delivery offood, providing expediency to customers.The business model of both is quite similarwhere customers have accounts with theservice providers. Customers get to selectbetween pick-up and delivery options; alsooptions of payment are there like digital orcash.

The first online food ordered was pizza frompizza hut, whereas, the first online foodservice provider was a worldwide waiter,found in 1995, and popular as waiter.com inthe current time. The company initiallyoperated only in northern California,expanding further to many other cities in theUnited States. Grubhub, established in 2004,is an online and mobile food company thatconnects clients with a local restaurant. Bylate 2000 major pizza chains had created theirmobile applications and were doing 20-30percent of their business online. There aresome advantages of online food orderingsystems. Firstly, products just one click away;

INTRODUCTION

The lifestyle of the people in our country ischanging rapidly. An increasing number ofworking women, changing trends in familiesand offices and many more reasons have ledto a change in the food habits of Indians (Rohand Park, 2018). Online food delivery is aconcept where food is ordered to local chefs,food outlets, local/national restaurants orinternational chain restaurants using amobile app or through websites; and isdelivered to the customer ’s destination(Jadhav, 2018). A huge expansion is beingobserved now-a-days in the number ofonline food delivery services apps. As manypeople nowadays prefer to order food onlineby mobile apps (Liu et. al., 2019) foodordering through online apps has grownsubstantially. India’s online food deliverymarket, comprising of aggregators andinternet kitchens, grew at 150 percent in 2016with an estimated Gross Merchandise Value(GMV) of USD 300 million (Kapoor and Vij,2018). If restaurants are linked with anyonline service provider they get a betterresponse as their information is visiblebrightly on mobile screens of consumers.

*Assistant Professor, Prestige Institute of Management and Research, Indore.


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secondly, services are fast, easy, comfortableand available 24/7. Third, it appears attractiveand stimulating to hungry and foodies.

Proliferation in the usage of online fooddelivery apps has generated the interest ofauthors in this paper to investigate factorsaffecting people’s perception of the onlinefood delivery services apps. The result of thispaper will be useful for companies offeringfood delivery services, multiple restaurantintermediaries and food retailers tounderstand the reasons for customersatisfaction. The companies would be ableto target different segments of customers ina better way. Reasons, motivating consumersto buy from an online medium are importantfor food retailers (Yeo et. al., 2017).


Kimes (2011) surveyed 470 internet usersand found that almost half of them orderedfood online through mobile apps or a textmessage. Patel (2015) suggested that theproposed online ordering system will makethe ordering process for the customer andthe restaurant very convenient. Theproposed system provides an interactive andup-to-date menu with wide options in a user-friendly manner. The customer has an optionto select one or more items and place anorder that will land in the Cart. The customercan view his entire order details beforechecking out.

According to Alagoz and Hekimoglu (2012),online shopping provides huge exposure toa variety of products and services tocustomers as compared to traditionalshopping. Customers can easily compareprices of products of different brands andpurchase from different apps at the sametime.As per the study conducted by Tobing(2016), one of the main issues in productdelivery services is to find the shortest pathbetween customers’ addresses that enablequick delivery of products, save fuel usageand optimize the usage of the vehicles and

delivery staff. The optimization requirementis usually expected from the delivery staff asthe applicants are required to know thestreets or shortcuts in a particular area or city.

Kedahet. al. (2015) conducted a study andfound that website trust and customersatisfaction as well as customer satisfactionand loyalty are positively related. The studyalso found an unanticipated link betweenservice quality and loyalty. The popularityof online banking among customersencouraged diverse online businessesincluding online food ordering. Online foodordering satisfies the rising demands ofpeople living in metropolitan and other citieswho are using such apps to receive quickdelivery of food. Acording to Parashar andGhadiyali (2017) digital technology isgrowing rapidly in India which has given riseto multiple online industries. The online fooddelivery industry is no exception. The usageof online portals has been continually risingand is estimated to augment at a swift rateeven in the near future. In a research, KimDang et.al. (2018) stated that the Internet hasempowered online food service providers byempowering people to search, compare andconveniently access these services. As of2016, around 95 percent of the United Statespopulation explored the internet for onlinefood service information at least once. In2015, it was studied that more than 75 percentof Asia-Pacific participants in developingcountries searched and ordered products viainternet.

OBJECTIVES

To explore the factors affecting the usage ofinternet-based food delivery service apps.

METHODOLOGY

The Study: The current study is exploratoryin natureand explores the factors affectingthe usage of internet based apps for fooddelivery service.


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The Sample: The population for the studywas constituted of all concerned people whoaccess mobile apps. The sampling methodfor the study used was convenient samplingand the sample was constituted of 143respondents from various cities of India.

Tools for Data Collection: For collectingprimary data, a self-developed questionnairehaving 24 items. Likert type five-point scale(where 5 denotes ‘Strongly Agree’ and 1denotes ‘Strongly Disagree’) was used. Thiswas based on thorough observation as wellas literature review and prepared with a viewto getting a clear idea about the usage of fooddelivery services apps amongst people ofIndia. The questionnaire consisted of twosections. Section one consisted of therespondent’s demographic information likeage, gender, income and education. Anothersection consisted of 24 statements on whichthe respondents were supposed to rate fromstrongly agree to strongly disagree. The linkwas shared online via personal/groupmessages after making respondents awareof the purpose of the study.

Tools for Data Analysis: The data wasanalyzed through Principal Componentmethod of factor analysis with the help ofSPSS.

RESULT AND DISCUSSION

Overall reliability was calculated for the scaleby assessing the internal consistency of the24 items using Cronbach’s Alpha. The scale(N=24) had reliability of 0.862 (Table 1). Dataadequacy was checked using KMO andBartlett’s Test. The Kaiser-Meyer-Olkinmeasure of sampling adequacy value was0.819, Bartlett’s test of sphericity wassignificant (p-value = 0.000) (Table 2).Therefore, all 24 sub-factors were acceptedfor the final scale and subjected to theprincipal component method of factoranalysis based on varimax rotation. Table 3and 4 show all explored factors with the itemsloads, eigenvalues and percent of variances(60.209).

Factor 1: Convenience of Consumers

This factor has a load of 4.911 with 9 itemsand all items in the factor are related to theconvenience of consumers(Table 3).The itemthat affects the usage of the online fooddelivery service apps the most is aboutdiscounts. The statement says “discounts,available on food delivery services app appsare highly attractive”, having an item loadeach equal to 0.688. Users of food deliveryservices apps are highly attracted by the foodavailable on discounted prices (Yeo et. al.,2017). Food delivery services app companieskeep coming with discount offers.Zomato’sPiggyBank scheme which offers a10 percent discount on the next orderforever is an example of this. Zomato,Swiggy, UberEats andFaasos offer variousdiscounts on many food items.Sometimes inpartnership with others with a restaurant ore-wallets with some percentage of discounton paying through Amazon Pay or Paytm.Orders with discounted rates are moredesired by the customers (Jacob et. al., 2019).There are different segments of consumerslike students, working bachelors, workingwomen, and housewives who enjoy thediscount offers on apps.

"Convenience of Consumers" factor is relatedto the convenience that consumers get onordering food online sitting at home. ‘It savesmy efforts too’ was the statement in thequestionnaire which is another major factor(item load 0.622) affecting usage of fooddelivery service apps. It is obvious that intoday ’s fast and stressful life, crowdedmarkets and roads, people prefer to orderonline than to dress up, personally visit arestaurant, order, dine and drive back. Mealdelivery services meet the needs of peoplewho want to save time and effort bypurchasing fully prepared meals (Roh andPark, 2018). The next major item affectingusage of food delivery services app, ‘the appsare well designed for an easy usage’ (itemload 0.559) further makes it easy for people

Factors Affecting Usage of Internet Based Food Delivery Service Apps

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to order quickly and easily add to theirconvenience. Features such as ‘one-clickordering’ and ‘check order status’ made theordering process easier for customers andenabled problem-free tracking of their ordersonline (Paul and Purkayastha, 2012).Thereare many attributes for a mobile app orwebsite, which influence a consumer ’spurchase intention. These attributes can beon the softer aspects, such as visual appealor navigation experience or towardstechnicalities such as smart filter options,payment gateways or real-time tracking(Kapoor and Vij, 2018). App developers mustconsider this factor to make the app moreuser-friendly so that more users can beattracted. Perceived complexity (the ease ofuse) is a major barrier to the adoption ofonline food shopping among consumers(Wang and Simon, 2018).

Another noteworthy item in this factoraffecting usage is ‘such apps are notdependable always due to their dependencyon the Internet’ (item load 0.555). Themajority of people agree that if the internetis not available, the convenience of orderingfood online may get disrupted. Online fooddelivery services apps offer all varieties offood (item load 0.546) is the fifth item in thefactor ‘convenience of consumers’. Gone isthe culture in many modern families whereall members eat the same menu. Childrenand youth don’t adjust to a simple menu athome and look for options and more choices.In such situations, online ordering of food ispreferred by many as the food deliveryservices apps offer a variety of food items tosatisfy varied choices of all members of thefamily. The sixth item in this factor is‘ordering food on food delivery services appssave money’ (item load 0.510). It is obviouswhen people order food sitting on theircouch, save expenses incurred on visiting arestaurant right from maintaining formaloutfits to transportation.

‘The food I get through online apps is alwaysfresh’ (item load 0.497) is the seventh item in

the first factor. The freshness of food is veryimportant for health of the consumer. This isan important factor affecting the usage offood delivery services apps. The next itemwhich majorly affects the usage of apps is‘the delivery charges are reasonable’ (itemload 0.494). The majority of respondentsagree that delivery charges are reasonable.Most of the companies do not chargeanything for the delivery of food. This maybe one of the reasons for the proliferation ofusage of food delivery services apps now-a-days. Some apps charge for delivery of smallorders below some minimum fixed value. Itseems that in the case where deliverycharges are taken, it is comparatively dearerfor consumers to pay delivery charges thanvisiting a restaurant.

The ninth item in this factor is ‘I enjoy usingthe apps offering multiple brands’ (item load0.422). Brand consciousness is increasingwith time and people tend to stick to theirchoice of brands. It is difficult for somepeople to try out new brands if they aresatisfied with one. It is not uncommon to seefamilies consisting of members having brandloyalty for different brands. Children todayare extremely aware of the various brandsin the market and are conscious of theproducts they use or consume. They pickand choose carefully according to theirneeds, style preference, etc. (Vincent 2014).Hence, the apps offering multiple brandsoffer choice and are convenient to theircustomers. This feature of apps is a majorfactor affecting the usage of food deliveryservices apps.

Factor 2: Customer Value

The second major factor affecting the usageof food delivery service apps is named as‘Customer Value’ (factor load 2.102) (Table3).Online food delivery apps provide afeedback system where the users can providefeedback and recommendations, rate thefood item and mode of delivering (Jacob et.al., 2019). The first item in this factor is ‘online


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food delivery services companies giveimportance to consumer feedback’ item load0.734.It is observed that the customers feelvalued when the service providers giveimportance to their feedback. Generalfeedback about their services and productsis collected with every purchase by almostall companies in this segment.

The second item related to customer valueis ‘companies respond quickly to complaints’(item load 0.721). The companies in thismatter quickly respond to complaints ofcustomers. The problems can range from thedelivery of the wrong food item to the wrongingredient in the food. In case of complaints,companies usually accept and refundcustomer ’s money. This feature isappreciated by the customers and they feelvalued. The third statement in this factor is‘payment options given by companies areeasy’ (item load 0.647) which affects theusage of food delivery services apps majorly.An array of payment options are offered bycompanies to their customers, e-wallets topay pals, debit and credit cards to the cashpayment option, keeping in mindcustomer’s ease and satisfaction, bestowingdue value to the online customers.

Factor 3: Ease and Comfort

The third factor (factor load 1.968) is aboutease and comfort that customers enjoy inordering online (Table 3). The first item was‘I prefer ordering food online sitting at homethan going to a restaurant’ (item load 0.749)which is an important point to be consideredin the usage of online food delivery apps. Inthis fast-paced life where people are in a rushmost of the time, sitting home is relaxing andcomfortable (Yeo et. al., 2017). It is easy toorder online well in advance. There is nopossibility of misinterpretation of orderssince it is not verbal. People take pleasure inordering online also because it saves theirvaluable time (Jadhav, 2018). ‘This is time-saving’ is the second statement in this factor

(item load 0.731). While the food is preparedand served by the delivery boys, people canutilize their time for other work making timemanagement easy for them. Ordering onlineis fast and one is not put on hold to speak tothe salesperson to place an order. The thirditem in this factor relates to ‘recommendationof apps to friends’ (item load 0.488). The easeand comfort in ordering through apps onmobile give users so much pleasure that theyrecommend the apps to their friends andrelatives.

Factor 4: Customer Satisfaction

This factor is related to customer satisfactionwith a factor load of 1.539 (Table 3). The firstitem in this factor is ‘delivery time is aspromised by the companies’ (item load0.801). Estimated time of delivery isdisplayed on the app; delivery within thistime is imperative in having customersatisfaction in online food ordering, alsoimportant in order on the table. Informationon the estimated delivery time of the requestis a determinant in the confirmation ofpurchase. If there is the information of delayin delivery, the customers may chooseanother restaurant available on the onlinemenu, without spending their time in thisprocess (Pigatto et. al., 2017).

The next item here is ‘I am satisfied withservices given by companies’ (item load0.738) is related to satisfaction of customersthat they get by services offered by suchapps. Services include notifications, phonecalls, emails, internet banking, feedbacksystems, online chat and physical productdelivery (Kim et. al., 2007). The moment oneorders on these apps, the status appears onthe app, showing a pictorial display of orderstatus like acceptance of the order by therestaurant, preparation or processing of foodor pick up/delivery of the parcel. Thedelivery boys call the customer and locate theaddress quickly providing you utmostsatisfaction. Right from ordering to payment


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till after-sales feedback etc. all services of fooddelivery services apps are important for thesatisfaction of users.

Factor 5: Menu and Items

With a factor load of 1.453, this factor is relatedto the menu and items (Table 3). Items in thisfactor are ‘The items on menu at restaurantand online menu are same’ (item load 0.765)and ‘There is no price difference betweenmenu at restaurant and online menu onapps’ (item load 0.688). Customers preferusing food apps where they find nodifference in the menu at restaurants oronline menu. Respondents do notappreciate differences in pricing of food atrestaurants and on apps. Hence, food appsmust try to have a similar menu and pricesin both online and offline menus.

Factor 6: Dependability and Reliability

Dependability and reliability is a factor thatdescribes the dependability of food apps ontechnical and networking effectiveness.Factor load of this factor is 1.224. This factorhas 2 items. First item in this factor is‘Installation of some food delivery apps fail’(item food 0.737). Other item in this factor is‘The quality of food ordered online throughapps is reliable’ (item load 0.487).Hence, foodapps are focused on making their installationand usage quicker and user friendly.Similarly, the usage of food apps is alsodependant on the reliability of those apps tomaintain their delivery of quality of fooditems regularly. A similar study on grocerysays that consumers see the risk of low-quality grocery being deliveredin orderingonline through apps (Kaur and Shukla,2016).

Factor 7: Outreach of Apps

The last factor in the list is ‘Outreach of Apps’with a factor load of 1.922. The first item hereis ‘I order online as it is in trend now-a-dayswith an item load of 0.798. The outreach ofapps is such that some people use it for the

sake of the following trend. Next item is ‘Iorder online as these companies produceemployment opportunities’ (item load 0.565).If people use it to support employmentgeneration, it shows the outreach of apps.The last item in this study is ‘Online foodservices are available in all areas’ with an itemload of 0.559. The usage of food deliveryapps is affected by the availability of servicesin all areas. Companies providing theseservices must focus on reaching out tomaximum locations in and out of cities.

CONCLUSION AND SUGGESTIONS

There is no doubt that food delivery appshave carved their niche in the market andare getting huge response from consumers.Though they are getting increasinglypopular as discussed there are few areas thatcall for substantial attention from serviceproviders to increase their penetration andsales. The major factors explored throughthis research were convenience, customervalue, ease and comfort, customersatisfaction, menu and items, reliability anddependability and an outreach of apps.Implications from the study can be used byfood delivery service providers and mobilecompanies to enhance their services andproducts.

Convenience of consumer should always beconsidered by service providers in designingthe app as well as service delivery. Globalfood producers, marketers and policymakersshould continually improve their online retailor promotional platforms to meet Chineseconsumers’ expectations related to the easeof use for online food shopping (Wang andSimon, 2018). Service providers should alsovalue customers and his satisfaction byoffering quality and timely services,providing ease of payment and ordering asthese were important factors behind theincreasing popularity of food delivery serviceapps. Companies should focus on improvingthe reliability and dependability factor andgain consumer ’s trust at large. Mobile


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companies can work on better devices tosupport the easy use of apps plus betterconnectivity of the internet. Lastly,companies need to expand to new areas andoptions to gain a large customer base.

References

Jacob, A.M., Sreedharan, N.V. and Sreena, K.(2019). ConsumerPerception of Online Food Delivery Apps in Kochi.International Journal of Innovative Technology and ExploringEngineering (IJITEE), 8(72), 302-305.

Jadhav, S. (2018). Food Ordering Mobile Applications – ANew Wave in Food Entrepreneurship. International Journal ofLatest Technology in Engineering, Management and Applied Science(IJLTEMAS), 8(4), 110-115.

Kapoor, A. P. and Vij, M. (2018). Technology at the DinnerTable: Ordering Food Online through Mobile Apps. Journal ofRetailing and Consumer Services, 43, 342–351.

Kaur, H. and Shukla, R.K. (2016). Consumer ’s Attitudetowards Online Grocery Shopping in Delhi City. InternationalJournal of Multidisciplinary Approach and Studies, 3(2), 1-40.

Kedah, Z., Ismail, Y., Haque, A.and Ahmed, S. (2015). KeySuccess Factors of Online Food Ordering Services: AnEmpirical Study. Malaysian Management Review, 50(2), 19-36.

Kim Dang, A., Xuan Tran, B., Tat Nguyen, C., Thi Le, H., ThiDo, H., Duc Nguyen, H., Hoang Nguyen, L., Huu Nguyen,T., Thi Mai, H., Dinh Tran, T., Ngo, C., Thi Minh Vu, T.,Latkin Carl, A., Zhang Melvin,W.B. and Ho Roger, C.M. (2018).Consumer Preference and Attitude Regarding Online FoodProducts in Hanoi, Vietnam. International Journal ofEnvironmental Research and Public Health, 15(5), 981.

Kim, H., Chan, H. and Gupta, S. (2007).Value-based Adoptionof Mobile Internet: an Empirical Investigation.Decision SupportSystems, 43(1), 111-126.

Liu, Y., Guo, B., Chen, C., Du, H., Yu, Z., Zhang, D. and Ma,H. (2019). FooDNet: Toward an Optimized Food DeliveryNetwork Based on Spatial Crowdsourcing. IEEE Transactionson Mobile Computing, 18(6), 1288-1301.

Paul, R. and Purkayastha, D. (2012). Feeding the HungrySurfers:w.justeat.in. Emerald Emerging Markets Case Studies, 2(8),1-21.

Pigatto G., Machado, J.G., Negreti, A.S.and Machado, L.M.(2017). Have You Chosen Your Request? Analysis of OnlineFood Delivery Companies in Brazil. British Food Journal, 119(3),639-657.

Roh, M. and Park, K. (2019). Adoption of O2O Food DeliveryServices in South Korea: The Moderating Role of MoralObligation in Meal Preparation. International Journal ofInformation Management, 47, 262-273.

Vincent, N. (2007). A Study on Brand Consciousness AmongChildren and its Effect on Family Buying Behaviour inBangalore City. Ushus-Journal of Business Management, 6(2), 91-107.

Wang, O. and Simon, S. (2018). Consumer Adoption of OnlineFood Shopping in China. British Food Journal, 120(12), 2868-2884.

Yeo, V. C. S., Goh, S. K. and Rezaei, S. (2017). ConsumerExperiences, Attitude and Behavioral Intention towardOnline Food Delivery (OFD) Services. Journal of Retailing andConsumer Services, 35, 150-162.

Webliography

Parashar, N. and Ghadiyali, S. (2017). A Study on CustomersAttitude and Perception towards Digital Food App Service.Amity Journal of Management, Retrieved November 10, 2019from http://www.amity.edu/gwalior/ajm/paper_5.pdf.


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ANNEXURES


31Factors Affecting Usage of Internet Based Food Delivery Service Apps

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FINANCIAL PERFORMANCE OF BANKS IN INDIABY CAMEL MODEL : A STUDY

Richa Bhatia*, Ish Gupta*

The research intends to analyze the financial performance of commercial banks in India. Sampleof six commercial banks was taken which includes three Public and three Private sector banksand the data collected ranges from 2008-09 to 2017-18. The banks included in the study are AxisBank, Bank of Baroda, Corporation Bank, HDFC Bank, ICICI Bank, and State Bank of India.The data is collected from various sources comprising of published annual reports, websites ofbanks, and Reserve Bank of India. CAMEL Model is applied for measuring the aspects of thefinancial performance of banks which includes capital adequacy, asset quality, managementefficiency, earning quality, and liquidity. The significance of these parameters was tested usingANOVA. The study found that the State Bank of India (public sector) and HDFC bank (privatesector) performed significantly well in almost all aspects. However, Bank of Baroda in thepublic sector and Axis Bank in the private sector exhibited maximum growth of their prices andreturns at the BSE.

Keywords : Banking, CAMEL Model, Financial Performance, Capital Adequacy, NPA.

systems to augment the user understandingand practice to gain a competitive edge. Thisresearch paper is an attempt to evaluate thefinancial performance of the selected publicand private sector banks in the sample periodof ten years.


Antoun et. al. (2018) investigated bankspecific, industry-specific andmacroeconomic determinants of the financialperformance of the Banks in Central andEastern European countries. To analyzethese determinants the author constructeda Financial Performance Index (FPI) based onthe CAMEL ratios. The data for 2009-14 wascollected from the bank scope database,World Development Indicators, and financialstructure and development database. Theempirical analysis using the fixed-effect panelregression concluded that the asset quality,earnings, capital adequacy, and liquidity arenegatively affected by the size and positivelyaffected by business mix and economicgrowth. Alemu and Aweke (2017) analysesthe overall performance of the private

INTRODUCTION

According to the Reserve Bank of India (RBI),India’s banking sector is amply capitalizedand well-controlled. India’s financial andeconomic status is far above as compared tothe rest of the globe. Modern bankingsystems like payments through digitalplatforms and small finance banks have beenobserved in India of late, like ImmediatePayment Service (IMPS) as well as FasterPayments Innovation Index (FPII). Theadoption of these new methods by RBI isexpected to restructure banking in India.Some more efforts like improvedexpenditure for infrastructural development,prompt project execution as well asreformations in the industry may give moremomentum. Therefore, the Indian bankingindustry is on the edge for enlargement asthe speedily rising companies may desirecredit support from banks.

Mobile and internet banking services areincreasing in demand. Banking in India isgreatly emphasizing on offering high-endservices plus raising the technological

*Assistant Professor, The Bhopal School of Social Sciences, Bhopal.


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commercial banks in Ethiopia for 10 yearsfrom 2007-2016 by using the CAMEL ratingapproach. The collected data from theaudited annual reports were analyzed bydescriptive statistics and the panel regressionmodel was applied to find the impact of theCAMEL elements on the bank performancei.e. ROA and ROE. The results of the studyconcluded that NIB bank stood on the topand the panel model estimations indicatedthat the explanatory variables weresignificant in the determination of theprofitability indicators. Kaur et. al.(2015) measured and compared the financialperformance of the leading five public sectorbanks SBI, Bank of Baroda, Punjab NationalBank, Bank of India and Canara Bank for theyear 2009-14. The study applied the CAMELModel i.e. Capital Adequacy, Asset quality,Management efficiency, earning quality, andliquidity to analyze the performance andconcluded that Bank of Baroda leads in allthe aspects of the CAMEL model. Bansal andMohanty (2013) analysed the financialperformance of the banks was evaluated byapplying the CAMEL Model based on marketcapitalization five major Banks SBI, HDFCBank, ICICI Bank, Axis Bank, and KotakMahindra Bank were selected for the studyfrom the period of 2007-11. The banks wereranked based on the overall weighted resultsof ratios in which HDFC stood first.

Hawaldar et. al. (2017) evaluated thefinancial performance of 8 commercial banksfrom the year 2005-2015. To determine therelationship between the financialparameters of these banks, regression,correlation, and t-test was applied. The studyconcluded that the profitability of the bankshas an impact on the capital adequacy andthe financial leverage but did not confirm therelationship between profitability and theefficiency of the banks. Gudata(2015) analyzed the financial performance inthe Ethiopian Commercial Banking Sector forfive years from 2007-2011. The banks selectedfor the study were Commercial Banks of

Ethiopia, Construction and Business Bank,Bank of Abyssinia, Awash InternationalBank, and United Bank. Ratio analysis wasapplied to study the financial performanceand t-test was used to see whether there is asignificant difference in the profitability,operational efficiency, liquidity management,solvency and risk of the selected commercialbanks. Srinivasan and Britto(2017) evaluated the financial performanceof 16 commercial banks from the period of201-2017. The liquidity, solvency, andprofitability ratios were calculated and one –way ANOVA was applied to determinewhether there is a significant difference inthe means of the financial ratios of the privateand the public sector banks. The impact ofliquidity, solvency, and efficiency on theprofitability of the public and private sectorbanks was studied by employing the paneldata estimation fixed and random effectsmodels. The empirical results revealed apositive and significant impact onprofitability.

Roy et. al. (2018) conducted study todevelop and validate a scale for measuringthe consumer’s perceived service value inIndian retail banking services. Based onexpert opinion through focus groups andliterature review, the author compiled a listof possible measurement items. The samplesize for the study was 442 that included therespondents using retail banking services.The survey instrument was used andanalysis was done through the structuralequation modeling. The study discovered aseven-dimensional scale for measuringservice that included service equity, servicequality, customer intimacy, productleadership, operational effectiveness,customer communication, and perceivedsacrifice. Repkova (2015) in the studyapplied data envelopment analysis todetermine the efficiency in the Czechbanking sector for the period of 2001-12. Theauthor applied panel data analysis toestimate the determinants of the banking


35

efficiency and concluded that the level ofcapitalization, liquidity risk, and riskinessportfolio has a positive impact on bankingefficiency. Tzeremes (2015) analyzed thebanking efficiency in Indian bankingindustry from 2004-12. To analyze thedynamic effects on the industry ’sperformance level the author applied theconditional directional distance estimator.The results of the study indicated that foreignbanks perform better compared to nationaland domestic private banks. The findingssupport the view that ownership structureaffects bank technical efficiency levels.

Fahad (2014) empirically analyzed andcompared the financial performance of theconventional and Islamic banks inBangladesh. The analysis was done from theyear 2008-12 and the panel data of 10conventional banks and 6 Islamic banks werecollected from the audited annual reports.The author calculated the relevant financialratios and regression model in which Returnon Assets (ROA) and Return on Equity(ROE) were used as dependent variablesalong with various internal and externalindependent variables. The results of thestudy indicated that credit risk,concentration, size, and economic conditionsare most significant to conventional banksin Islamic Banks. Karim and Alam(2013) measured the financial performanceof five private sector banks of Bangladeshfrom the period of 2008-12. The author usedthe secondary data collected from the variousaudited annual reports and financial ratioslike net interest margin (NIM), returns ofassets (ROA), return of equity (ROE) and nonperforming assets (NPA) were analysed. Theinternal performance was measured byreturn on assets, the market-basedperformance was measured by Tobin’s(price/book ratio), and the economy basedperformance was measured by the economicvalue. By applying multiple regressionanalysis the study showed a positive impactof the three indicators on the financialperformance of the Bangladeshi banks.

Miencha and Selvam (2013) examined andcompared the performance of the Kenyancommercial banks after the global financialcrisis era. The data was collected from theAnnual Report, Banks in Kenya, publishedreports and journals from the period of 2007-11. By the Data Envelopment Analysis (DEA)it was found that the performance of privatebanks was relatively high compared to thepublic sector and foreign sector banks inKenya. Goel and Rekhi (2013) investigatedthe profit earning capacity and the factorsaffecting the profit earning of the selectedprivate and public sector banks from the year2009-12. Based on the data collected from theaudited annual reports of the banks theROA, ROE, demand deposit, saving depositratio, debt-equity ratio, credit deposit ratio,and net interest margin was calculated.Based on the correlation matrix, the authorconcluded that interrelation existed betweenefficiency and profitability and the privatesector banks showcased higher efficiencythan the public sector banks.

Paradi et. al. (2011) analyzed a majorCanadian bank with 816 branches based ona two-stage data envelopment analysisapproach that has been developed forsimultaneously benchmarking theperformance of units along variousdimensions with a modified Slacks-BasedMeasure Model. This was applied toaggregate the efficiency scores obtained fromstage one and generate a compositeperformance index for each unit. Theperformance dimensions were evaluatedbased on production, profitability, andintermediation. This three- dimensionalefficiency analysis shows a significantly morecomprehensive evaluation of bank branchperformance that is also likely to be betteraccepted by branch level management. Thestudy concluded that poor performance inone aspect does not predict similar poorresults in the other two aspects.

Financial Performance of Banks in India by CAMEL Model : A Study

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OBJECTIVES OF THE STUDY

To evaluate the financial performanceof the selected public and private sectorbanks using the CAMEL Modelapproach.

To evaluate whether there is asignificant difference in the CapitalAdequacy, Asset Quality, ManagementEfficiency, Earnings and Profitabilityand the Liquidity of the sample banks.

HYPOTHESES

Ho: There is no significant difference in theCapital Adequacy, Asset Quality,Management Efficiency, Profitability, andLiquidity of the Sample Banks.

Ha: There is a significant difference in theCapital Adequacy, Asset Quality,Management Efficiency, Profitability, andLiquidity of the Sample Banks.

RESEARCH METHODOLOGY

The Study: The study is exploratory in natureand is aimed to study financial performanceof nationalized commercial banks in Indiausing CAMEL Model. The study hasconsidered six banks, three nationalized andthree private banks and various ratios formeasuring the performance have beencalculated.

The Sample: For conducting the research,sample of six commercial banks was takenwhich included three Public and threePrivate sector banks. The data was collectedfor the period of 2008-09 to 2017-18. Thebanks included in the study are Axis Bank,Bank of Baroda, Corporation Bank, HDFCBank, ICICI Bank and State Bank of India.

Tools for Data Collection: The data wascollected from various sources comprising ofpublished annual reports, websites of banksand Reserve Bank of India.

Tools for Data Analysis: CAMEL Model wasapplied for measuring the aspects of the

financial performance of banks whichincludes capital adequacy, asset quality,management efficiency, earning quality andliquidity. The significance of theseparameters was tested using ANOVA. Thefollowing ratios were calculated to evaluatethe financial performance of the samplebanks:

CAPITAL ADEQUACY

1. Capital Adequacy Ratio (CAR): CARis critical to ensure that banks haveenough cushions to absorbreasonable amount of losses beforethey become insolvent. Banks with ahigher capital adequacy ratio areconsidered safe and are able to meettheir financial obligations. Theminimum ratio to be maintained bybanks is 8 percent under Basel II and10.5 percent under Basel III.

2. Debt Equity Ratio: This ratio isconsidered as the key financial metricas it indicates positional financial risk.A high debt equity ratio indicates anaggressive growth strategy by thecompany as it is dependent on debt.A debt equity ratio of 1.5 or lower isconsidered desirable and the ratioshigher than 2 are less favorable.

3. Credit Deposits Ratio: This ratio willindicate how much a bank lends outof the deposits it has mobilized. Thecredit deposits ratios of the bank are75 percent.

4. Cash Deposits Ratio: The cashdeposits ratio of the banks is the ratioof cash in hand and the balances withRBI as a percentage of the aggregatedeposits. This ratio is maintainedabove CRR given by the bank.

5. Investment Deposits Ratio: This ratioindicates how much of the bankdeposits are invested in governmentsecurities. This ratio is normally the


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higher value of Statutory LiquidityRatio (SLR).

ASSET QUALITY

The loan portfolio and the creditadministration program will determine theasset quality of the bank. It indicates theefficiency of the bank in controlling andmanaging the credit risk and the credit ratingto be achieved. The percentage of gross andnet non performing asset (NPA) is analyzedfor determining the asset quality of banks.

MANAGEMENT EFFICIENCY

The efficiency ratio of the banks will measurethe bank’s overhead as a percentage of itsrevenue. This ratio indicates the ability of thebanks to convert assets into revenue. Thisratio is calculated as the ratio of expenses torevenues. A lower efficiency ratio means thatthe banks are operating better, and a ratiounder 50 percent is considered to be optimal.An increase in the efficiency ratio means thatbank expenses are increasing or its revenuesare decreasing. The ratios like total income /total assets, total Income /compensation toemployees, interest income of bank as apercent of working funds, operating profitof bank as percent to working funds, netinterest income / interest earned are alsocalculated for the study.

EARNING AND PROFITABILITY

1. Operating Profit Margin: This ratioindicates the proportion of therevenue which is available to coverthe non operating costs like interest.A high operating profit marginindicates a lower risk.

2. Net Profit Margin: It indicates howmuch net profit is generated as apercentage of revenue. A high netprofit margin indicates profitability.

3. Return on Net Worth: This indicatesthe efficiency of the shareholder ’scapital to generate profits. A high ratio

indicates the prudent use of theshareholder’s money.

4. Return on the Total Assets: This ratioindicates how effectively thecompany is using its assets togenerate earnings. A high return ontotal assets will help investors inrecognizing good stockopportunities.

5. Return on Capital Employed: Itindicates the company’s profitabilityand the efficiency with which thecapital is employed. A high return onthe capital employees is the indicatorof the success of the company as itindicates a large number of profits canbe reinvested for the benefits of theshareholders.

LIQUIDITY

Current ratio and quick ratio measures theshort term liquidity of the banks. It measuresthe ability of the company to meet its shortterm obligations. The dividend payout ratioindicates how much money the banks returnto its shareholders and the retention ratioindicates the net income which can beretained by the company after payment ofdividends.

RESULTS

For the evaluation of the banks, a differentset of fundamental factors are considered asthey have a different operating structurethan the regular industrial companies. Table1 shows that the Capital Asset Gearing Ratio(CAGR) of net worth for the sample periodof 10 years is 14.39 percent and 14.49 percentfor SBI and Bank of Baroda and in the privatesector, HDFC maintains 24.26 percent.Deposits growth indicates how much a bankcan lend. SBI and HDFC maintain a highCAGR of 15.46 percent and 20.91 percent.Advances of the banks assess theaggressiveness of bank management, SBIand HDFC maintain a high CAGR of 15.18


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percent and 23.45 percent. The growth ininvestments will indicate the amount is beinginvested by the Banks. SBI and HDFC showsa high CAGR of 16.14 percent and 17.03percent. Table 2 showcases the NPA positionsof the banks. Lower NPA indicates bettercredit policy and ability of loan recovery fromthe debtors than the other banks.

Table 3 shows all the six banks namely AxisBank, Bank of Baroda, Corporation Bank,HDFC Bank, ICICI Bank and State Bank ofIndia have an average capital adequacy ratioranging from 12 percent to 18 percent. Inpublic sector bank SBI and BOB have anequal average of 13 percent and in privatesectors, ICICI maintains a high average ratioof 18 percent, whereas, Axis Bank has anaverage of 15 percent. This shows that thesetwo banks have more capacity to adjust totheir losses. The assets / loans fund percentaverage is highest for SBI 76.82 percent andHDFC in the private sector at 81.68 percent.The credit deposit ratio indicates how thebank lends out the deposits it has mobilized,SBI at 80.72 in the public sector, and ICICI at97.10 in the private sector indicates fullutilization of resources. But the credit depositratio above 75 percent also indicatespressure on the resources. The cash depositratio is the ratio of cash in hand and balanceswith RBI as a percentage of aggregatedeposits; it’s always maintained more thanCase Reserve Ratios (CRR) given by RBI forstudy period is 4 percent. In public sector SBI6.53 and the private sector, HDFC 6.78maintained the highest average cash depositratio. Investment deposit ratio indicates thenumber of deposits of banks invested in thegovernment securities and is maintainedabove Statutory Lending Ratio (SLR) as perstudy period is 19 percent. In the publicsector, SBI and corporation banks stood at33 percent and in the private sector, ICICIstood at 62.83. The debt-equity ratio of AxisBank is 9.91 in the private sector andcorporation bank in the public sector at 18.86is the highest, which means that the

creditors and depositors of these banks areat the highest risks as they are focusing moreon debt than shareholders fund.

Table 4 shows Bank of Baroda secures thefirst position with the lowest NPA of 2.09followed by corporation Bank 2.28 and StateBank of India with the highest NPA 2.74. Itshows that when compared with otherbanks, Bank of Baroda has a better creditpolicy and the ability to recover loans fromthe debtors. The risk of increasing Non-performing assets is also low. The NPA of theother four banks is comparatively high whichsignifies that these banks are lacking effortsto decrease their NPA’s. In the private sector,HDFC secures the first position with thelowest NPA of 0.21 followed by AXIS Bank0.79 and ICICI with the highest NPA 1.75.

Table 5 shows the management efficiencyratio of the banks. The total income to totalassets shows how effectively a bank uses itsassets to generate earnings. In the publicsector, SBI and Corporation Bank have anequal ratio of 0.09 with BOB at 0.08. In theprivate sector, HDFC and Axis Bank have anequal ratio of 0.1, and ICICI Bank has thepercent lowest ratio of 0.09. Both public andprivate sectors perform fairly close for totalIncome to total assets. In total income tocompensation to employees, SBI and ICICIperform well at 7.25 and 13.73 respectively.The interest income of banks as a percentageof working funds is 8.50 for corporation Bankfollowed by 7.27 for SBI and Bank of Barodastands last at 6.89. In the private sector, HDFCBank shows the highest average of 9.15,followed by 8.27 in Axis Bank and 7.69 inICICI. The average operating profit of banksas percent to working funds is 1.97 in SBI and3.27 for HDFC Bank. The net interest income/ interest earned is 36 for SBI with a very lesscoefficient of variation of 7 percent and in theprivate sector, HDFC maintains a highaverage of 47.20.

Table 6 shows the earning and profitabilityratios. A high operating profit margin shows


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fewer financial risks as compared to a lowratio. SBI secures the first position with thehighest operating profit margin of 21.2followed by Bank of Baroda 20.9, andcorporation Bank with the lowest margin of14.47. In the private sector at Axis Bank hasa high margin of 29.22. A high net profitmargin makes the company control its costs.SBI secures the first position with the highestnet profit margin of Bank of Baroda 6.53followed by SBI at 5.82 and Corporation Bankwith the lowest margin of 0.84. In the privatesector, HDFC Bank has a high margin of 15.26which is very high as compared to the privatesector. The wise use of shareholders fundsis indicated with a high return on net worthwhich is 9.67 in Bank of Baroda and privatesector HDFC shows a high return of 17.17. Alow percentage indicates the less efficientdeployment of equity resources. CorporationBank and ICICI shows a low return of 1.02and 10.26 respectively. The return to totalassets is considered a sign of how well acompany is using its assets to generateearnings. In the public sector, Bank of Barodahave a high ratio of 0.55 followed by SBI with0.53 were as the Corporation Bank is at 0.09.The private sector performs well than thepublic sector with the highest average ratioof 1.62 for HDFC, 1.30 for ICICI, and 1.26 forAxis Bank. Return on capital employedindicates that a large portion of capital isinvested back in the company for the benefitsof the shareholders and is a sign of thesuccessful growth of the company. In thepublic sector, BOB secures the first positionwith the highest return on capital employedratio of 4.92 followed by SBI at 3.32 andCorporation Bank with the lowest margin of0.06. In the private sector, HDFC secures thefirst position with the highest return oncapital employed ratio of 9.56 followed byAxis Bank at 5.93 and ICICI Bank with lowestreturn of 3.39.

Short term liquidity of banks is measured bythe current ratio and quick ratio. Table 7shows that in public sector SBI has a high

ratio of 0.05 followed by Corporation Bankat 0.04 and lowest is Bank of Baroda at 0.03.The private sector performs well then thepublic sector with the highest average ratioof 0.1 for ICICI Bank. HDFC and SBI had avalue 0.05. In quick ratio, public sectorCorporation Bank has a high ratio of 23.98followed by Bank of Baroda is at 21.36 andthe lowest is SBI at 10.90. In private sectorAxis Bank 19.21, followed by ICICI at 14.06and the least value of 9.77 for HDFC Bank. Ahigh dividend payout ratio means that thecompany is sharing more of its earnings withthe shareholders and therefore the retentionratio will be low. In public sector SBI maintainsa high average dividend payout ratio of 18.8and in the private sector, ICICI has a ratio of26.2 were Axis Bank. The retention ratioindicates the profits retained by the banksfor future investments in which CorporationBank is at 86.333 and in private sector HDFCis at 86.07.

Table 8 shows the trends of annual stockreturns based on BSE. In the public sector,the average of 10 years shows that Bank ofBaroda gives the maximum returns at 20.57percent followed by SBI at 17.76 percent andcorporation Bank at 10.96 percent. In privatesector Axis Bank, shows the highest averagereturns of 35.04 percent. HDFC and ICICIshow a return of 30.75 percent respectively.

Table 9 shows the application of ANOVA fortesting the significant difference in theCapital Adequacy, Asset Quality,Management Efficiency, Profitability, andLiquidity of the sample banks for ten Years.

The p-value for all the selected ratios on theapplication of ANOVA is less than 0.05 whichrejects the null hypothesis. Therefore, thereis a significant difference in the CapitalAdequacy, Asset Quality, ManagementEfficiency, Profitability, and Liquidity of thesample banks.

CONCLUSION

The research sought to examine the financialperformance of commercial banks in India.


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Six Commercial Banks were taken as thesample which included three Public andthree Private sector banks. The data for thecurrent study was collected for a period often years from 2008-2009 to 2017-2018. Thebanks included in the study were Axis Bank,Bank of Baroda, Corporation Bank, HDFCBank, ICICI Bank, and State Bank of India.The collection of data from various sourceshas been done, comprising of publishedannual reports, websites of banks, andReserve Bank of India. CAMEL Model wasapplied for measuring the aspects of thefinancial performance of banks, includingcapital adequacy, asset quality, managementefficiency, earning quality, and liquidity. Thesignificance of these parameters was testedusing ANOVA. The results confirm thefollowing:

1. In the first parameter of the CAMELModel which measures CapitalAdequacy in the public sector, SBI andthe private sector HDFC Bank performwell as compared to the sampleBanks. This ensures the efficiency andthe stability of the banks, that they arecapable of meeting its financialobligations. The application ofANOVA shows a significant differencein the capital adequacy ratio of thesample Banks.

2. In the second parameter of theCAMEL Model reveals Asset Qualitywhich assesses the credit riskassociated with particular assets.These assets require interestpayments such as loans andinvestment portfolios. In the Publicsector Bank of Baroda and privatesector, HDFC Bank shows the lowestaverage in the percentage of Net NPAin the sample period of 10 years.

3. In the third parameter of CAMELModel, management efficiency ismeasured. In the public sector SBI andthe private sector HDFC Bank perform

well as compared to the sampleBanks. The management efficiencymay improve by more focus on thecustomer’s service.

4. In the fourth parameter of CAMELModel shows the earnings andprofitability measures. In the publicsector SBI and the private sector,HDFC Bank performs well ascompared to the sample banks inoperating profit margin, return ontotal assets and in net profit margin,return on net worth, return on capitalemployed in the public sector Bankof Baroda and the private sectorHDFC Bank perform well ascompared to the sample Banks in thesample period of 10 years. In a highlycompetitive market and the digitalrevolution, banks need to movebeyond the model of “one-size-fits-all”.Sophisticated customersegmentation, product bundling andrelationship, pricing automating,customer care, and multi-channelseamless experience will help banksto attract and retain its customers andincrease its profitability.

5. In the fifth parameter of CAMELModel liquidity is measured. In thepublic sector SBI and the privatesector ICICI Bank performs well ascompared to the sample banks. Inpublic sector category SBI and privatesector category ICICI bank maintainsa high average dividend payout ratioin the sample period. A high liquidratio will add good value to meetunforeseen contingencies and shortterm obligations. Controllingoverhead expenses, negotiating forlonger payment cycles, allows havingbetter quick and current ratios andallows you to save some of yourliquidity in the near term and put itto better use.SBI in the public sector


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and ICICI in the private sectormaintains a stable dividend payoutRatio.

The banking sector of India has witnessed aparadigm shift, evolving from physicalbanking to becoming digital anchors. Therole of technology has become an integralcomponent in the strategic framework ofbanks to driving, shaping, and redefining thebusiness models and the revenue streams.Enhancing customer’s banking experience,credit re-engineering, digitization forcustomer efficiency, and customer inclusionand banking with quality are the parametersto focus on growth and face the challengesof the banking sector. In the current scenario,the customers are spoilt for choices, but theywant to bank with the “fittest “bank. It isinevitable for the banks to spend ondigitization and customer services but alsoto maintain their profitability through costoptimization. The bank’s overall strategyshould be towards its growth. The bankingsector should be forward-looking inintegrating the upcoming technology andleveraging data and analytics to becomesmarter in identifying and servicingcustomers’ needs.

References

Alemu, M. and Aweke, M. (2017). Financial PerformanceAnalysis of Private Commercial Banks of Ethiopia: CamelRatings. International Journal of Scientific and ResearchPublications, 7(10), 367-395.

Antoun, R., Coskun, A. and Georgiezski, B. (2018).Determinants of Financial Performance of Banks in Centraland Eastern Europe. Business and Economic Horizons (BEH),14(3), 513-529.

Bansal, R. and Mohanty, A. (2013). A Study on FinancialPerformance of Commercial Banks in India: Application ofCamel Model. Al-Barkaat Journal of Finance and Management,5(2), 60-79.

Fahad, N. (2014). An Econometric Analysis on the FinancialPerformance of Commercial Banks in Bangladesh: AComparative Study. Journal of Business Studies, 8, 33-50.

Goel, C. and Rekhi, C. B. (2013). A Comparative Study on thePerformance of Selected Public Sector and Private SectorBanks in India. Journal of Business Management & Social SciencesResearch, 2(7), 46-56.

Gudata, A. (2015). Research on Financial Performance Analysisin Banking Sector (in selected commercial Banks in Ethiopia).International Journal of Current Research, 7(10), 21883-21886.

Hawaldar, I.T., Pinto, P., Rahiman, H., Sarea, A., Rajesha, T.M.and Uppinanga, H. (2017). An Evaluation of FinancialPerformance of Commercial Banks. International Journal ofApplied Business and Economic Research, 15(22), 605-6018.

Karim, R. A. and Alam, T. (2013). An Evaluation of FinancialPerformance of Private Commercial Banks in Bangladesh:Ratio Analysis. Journal of Business Studies Quarterly, 5, 65-77.

Kaur, J., Kaur, M. and Singh, S. (2015). Financial PerformanceAnalysis of Selected Public Sector Banks: A CAMEL ModelApproach. International Journal of Applied Business and EconomicResearch, 13(6), 4327-4348.

Miencha, I. O. and Selvam,, M. (2013). Financial Performancein the Banking Sector: A Study with Special Reference toKenyan Commercial Banks using Data Envelopment Analysis(DEA). The Research Journal of Social Sciences andManagement, 2(9), 48-53.

Paradi, J. C., Rouat, S. and Zhu, H. (2011). Two-StageEvaluation of Bank Branch Efficiency Using DataEnvelopment Analysis. Elsevier-Omega 39, 99-109.

Xepková, I. (2015). Banking Efficiency Determinants in theCzech Banking Sector. Procedia Economics and Finance, 23, 191-196.

Roy, S . K. , Paul , R., Quazi, A. and Nguyen, B. (2018).Developing a Service Value Measurement Scale in RetailBanking Services. International Journal of Bank Marketing, 36(4),616-633.

Srinivasan, P. and Britto, J. (2017). Analysis of FinancialPerformance of Selected Commercial Banks in India.TheoreticalEconomics Letters, 7(7), 2134-2151.

Tzeremes, N. G. (2015). Efficiency Dynamics in IndianBanking: A Conditional Directional DistanceApproach. European Journal of Operational Research, 240(3), 807-818.


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ANNEXURES


43Financial Performance of Banks in India by CAMEL Model : A Study

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CONNECTEDNESS: ENHANCING THE INNOVATIVE CAPACITY OFAN ORGANIZATION IN AN ERA OF BIG DATA

Dorothea Greenwood Mastrangelo*

In today’s economy, big data is driving disruptive change through the stimulation of inventionsof new technologies and innovative business models. It is the premise of this paper that interactionsacross the ecosystem increase idea generation to advance the capacity for an organization’sinnovation with new value to the organization. The study also highlights reviews on author whohave found a higher pace of innovation than in cities compared to smaller towns attributed tohigher levels of interaction. Similarly, few studies also suggested that innovation emerges bestin a dense network, like a city or corporation, where interaction stimulating new discoveries isfostered. In today’s world, enlightened organizations can consider unleashing big data technologiesand organizational processes to interconnect individuals and organizations, with differentperspectives across industry, academia and government, towards enhancing the organization’scapacity to innovate and enable new value for the organization. This article describes the fourbuilding blocks of connectedness and offers six propositions to cultivate innovative behaviorsand actions for connectedness in the big data economy. Business processes and social networkanalysis tools that enable an organization to move from current levels of connectedness todesired levels are also detailed.

Keywords : Social Capital, Network Ties, Absorptive Capacity, Big Data, Innovation ValueChain.

These assertions lead to the understandingthat network connections across theecosystem which combine deep expertisefrom different perspectives across industry,academia and government, are likely tostimulate interactions amounting to enhanceinnovation. These network interactions alsoresult into connectedness among people inenlightened organizations leveragingdiverse networks of expertise. They alsoaddress the new demands better emergingto enhance value. Accomplishing this,requires a collaborative mindset inorganizations for connectedness with othersacross the ecosystem and openness toexternal ideas for rapid internal creation ofnovel ideas for new innovative products andservices.

This article identifies six propositions withprocesses and social network analysis toguide executive leadership towardsconnectedness and the cultivation of

INTRODUCTION

In today ’s economy, new technologiespermit access to data everywhere, now calledbig data, driving disruptive change withinnovation emerging daily. It is the premiseof this article that interactions across theecosystem increase idea generation toadvance the capacity for an organization’sinnovation with new value to theorganization. West (2006) discovered thatcities had a higher ideas-per-capita thansmaller towns due to the greater interactionamong diverse people. Johnson (2010)similarly reveals that innovation emergesbest in a dense network, like a city orcorporation, due to increased interaction.A.G. Lafely (2008), former CEO of Proctor &Gamble, offers that interaction thoughconnections across the ecosystem with theconsumer at the center are essential toinnovate for sustained profitable growthover time.

* Professor, University of Maryland University College, Baltimore, USA.


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innovative behaviors and actions of theorganization for enhanced capacity forinnovation in the fast-paced big dataeconomy. Increased connectedness acrossindividuals in Corporations, Universities andGovernments increases the flow of newideas, practices and methods making senseof big data and stimulating innovation(Barabasi, 2003; Gray and Vander Wal, 2012;Sari et.al., 2007), driving speed in decision-making and shifting power in organizations(Gailbraith, 2014) for increased innovativecapacity. Maturing an Organization’scapacity to continually innovate in the worldof big data is an emerging challenge andopportunity for organizational design toenable innovative capacity and organize forconnectedness across the organization andinnovation value chain.

An understanding of connectedness canguide leadership in adapting organizationaldesign to increase and sustain innovativecapacity for enduring competitive advantage.

An organization can assess its current levelof connectedness and establish strategies toincrease its connectedness andinnovativeness utilizing practices andmethods presented in this article.

INCREASING INNOVATIVE CAPACITYOF ORGANIZATIONS

Innovative capacity is an organization’sability to bring new value to the organizationthrough its invention of new products andservices. Innovative capacity is aconsequence of emerging organizationalprocesses, shown in Figure 1 and employingthe building blocks for connectedness shownin Figure 2. In the fast-moving world of bigdata, connectedness leverages diverseperspectives across an organization’sinnovation chain to make sense of ever-changing data to stimulate identification ofnovel external data, access the data, andintegrate new ideas discovered into anorganization’s internal thinking to increasethe organization’s capacity to innovate(Greenwood, 2010).

Figure 1: Emerging Organizational Process for Innovation

Source: Greenwood, 2010

Figure 2: Connectedness Building Blocks for Organizational Innovative Capacity


Connectedness: Enhancing the Innovative Capacity of an Organization in an Era of Big Data

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The four building blocks for connectednessare social capital, network ties, ability to spaninnovation network boundaries and theagility of an organization’s internalabsorptive capacity (Greenwood, 2010). Thefirst building block of innovative capacity isan organization’s social capital. Personnel inthe organization individually and collectivelycontribute to the organization’s social capitalrepresenting its reputation of a willingnessand motivation to share (Alder and Kwon,2002; Batt, 2008). This reputation affects theorganization’s likelihood of agreements forconnectedness and business ventures withother organizations across the innovationecosystem.

An organization’s ability to build networkties is the second building block which spansboundaries with leaders and individuals ofother organizations in the innovation chain.The relationship among these ties willstrengthen the trust for connectedness andsharing.

Spanning boundaries of other organizationsis the third building block of innovativecapacity which helps discover fresh externalideas across the innovation value chain. Itsboundary spanning helps the organizationsdiscover unusual information to create newideas for novel products or services (Flemingand Waguespack, 2007). The first, second andthird building blocks are interdependent justfor the reason that the ability to spanboundaries is reliant on an organization’snetwork ties and the culture as reflected inits social capital.

Finally, the fourth building block helps anorganization to develop absorptive capacity.

Absorptive capacity measures how well anorganization recognizes and welcomes thevalue of external ideas. It helps assimilate theideas with current internal knowledge andbrings innovative products and services tofruition (Cohen and Levinthal, 1990; Zahraand George, 2002).

SIX PROPOSITIONS FOR ENABLINGINNOVATIVE CAPACITY

Figure 3 illustrates six propositions enabledby the four building blocks forconnectedness discussed above to enhancethe innovative capacity of an organization inthe world of big data (Greenwood, 2010). Asper the first the proposition, thepervasiveness of big data requires highersocial capital leading to openness for sharingwith valued external network ties along withboundary spanning. Second, externalnetwork ties are also required for moreboundary spanning necessary to accessmore big data with reciprocal exchanges ofinformation. More network ties andboundary spanning also provide for higheractivation triggers for research anddevelopment from the novel external ideasfound in Big Data increasing the capacity forinnovation in an organization. Moreactivation triggers from the novel externalinformation lead to higher agile absorptivecapacity enhancing collaborativerelationships in an innovation ecosystem andhigher social capital for more big datacollaborative exchanges. Fifth, agileabsorptive capacity produces moreinnovation with big data in an organization.Sixth, more innovation leads to moredifferentiating market opportunities forpromotion by executive leaders.


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Figure 3. Propositions of Connectedness for Innovative Capacity


less time and energy spent nurturing therelationships, as shown in Proposition 2b.With the broader access to diverse externalknowledge through weaker ties across theecosystem, an organization can identify“structural holes”, as shown in Proposition2c, providing opportunities for organizationsto pursue first-to-market advantage.

As shown in Proposition 3, triggers areactivated in organizations when ideas aregenerated from the novel external ideasdiscovered through boundary spanningwith network ties. Increased social capital andnetwork ties will likely lead to moreboundary spanning permitted bycollaborative organizations for deep divesinto the organization’s information andenhancing the capacity for innovation. InProposition 4, more activation triggers resultin higher absorptive capacity.Theseactivation triggers are driven by the externalideas from Proposition 3 and lead to

For Proposition 1, the organizations withhigher social capital develop a reputation infair and open collaboration through networkties spanning the boundaries of externalorganizations. Higher social capital leads togreater trust with other organizations andfurther increases an organization’s socialcapital.

For Proposition 2, information is exchangedmore regularly and freely with trustednetwork ties to enhance the discovery ofnovel external information, increasingopportunities for internal idea generation.organizations must balance their investmentin strong and weak ties (Ahuja, 2000). Strongties require directed energy to build andretain a trusted relationship with a selectivenumber of organizations and deeperinvestigation, as shown in Proposition 2a.Weaker ties tend to be more superficial withmuch broader access to more diverseinformation of the external organizations and


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innovative practices, products and servicesfor the organization. It is through theabsorptive capacity of an organization thatrelevant external ideas are integrated withinternal thinking to trigger innovativeinvestigations in the organizations. Asshown in Proposition 5, an organization canthen chose to pursue candidates most likelyto achieve innovative products and services.

Finally, as shown in Proposition 6, morerapid and targeted innovative products andservices with big data in the organizationincrease its opportunities for marketsuccesses. Increasing innovative capacityrequires critical review and consideration ofthese six propositions enabled by thebuilding blocks discussed to move anorganization towards more mechanisms tocontinually discover and analyze novelinformation from people, devices andsensors across collaborative networksworldwide to create new, innovativeproducts and services (Manyika et. al., 2011).

NEW PROCESSES ENABLINGPROPOSITIONS FOR INNOVATIVECAPACITY

Organizations require new processes toachieve the six propositions leveraging BigData with the four innovative capacitybuilding blocks, as shown in Table 1. Theseprocesses enhance the innovative capacityof an organization to appropriately leverageand scale Big Data across the enterprise forincreased capacity for innovation.

The first process, linked to Proposition 1, isto collaborate to build organizational socialcapital and an organization’s reputation fora willingness and motivation forconnectedness. To develop higher socialcapital, leadership must ensure thatemployees welcome new ideas, from insideand outside the organization, and shareopenly and fairly with others to sparkcreativity towards the invention of newproducts and services.

The second process, linked to Proposition 2,is to build relationships and trust to enhancenetwork ties. This process includesmechanisms to track the connections andcollaboration among those in theorganization and across its value chainincluding customers, partners, suppliers andeven competitors in industry, academia andgovernment. Collaboration providesopportunities to collectively make sense outof the ever-changing and voluminous bigdata with trusted partners spanning theboundaries of the other organizations to gainaccess to external knowledge and expertiseregarding Big Data (Wood et. al., 2012).

In the third process, linked to Propositions 2and 3, novel information is discovered indeep dives into information in externalorganizations triggering innovation in theorganization. Mechanisms are needed toestablish network ties with externalorganizations of interest in the innovationchain, monitor the levels of collaboration withthe organizations, the depth of accesspermitted by the external organizations intotheir information and the flexibility withwhich an organization can mine the externalinformation. Finally, once an organizationhas identified novel external information,mechanisms are needed to track how wellthe organization triggers the integration ofthe external information into internalthinking for innovation.

The fourth process, linked to Propositions4, 5 and 6, is to continually assess anorganization’s agile absorptive capacity. Witheffective network relationships andboundary spanning, connection to theseideas can be rapidly transferred into anorganization to enable innovation and speedof transition to new products services. Agileabsorptive capacity in organizations relies onopenness to external ideas, the creative useinternally of external ideas discovered andthe flexible exchange of creative thinking andresearch and development of the


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organizations with open experimentation todevelop marketable products and serviceswith partners in the innovation valuenetwork.

SOCIAL NETWORK ANALYSIS (SNA)TOOLS TO SUPPORT PROCESSES FORPROPOSITIONS FOR INNOVATIVECAPACITY

Big Data has redefined business intelligencein industry, academia and government. Ithas moved executives from traditionalreporting and printouts to tools with real-time dashboards that provide visualizationsof relevant data. Computer and mobiledevice used by people and systems in anorganization today form network accessible“nodes” on the organization’s “digitalnetwork” and are valuable sources ofinformation to assess connectedness.Connectivity among the nodes form the“social networks” of an organization with acomputational engine behind it called SocialNetwork Analysis (SNA) (Krebs, 2013). SNAis the primary tool emerging to analyze

connectedness. It helps map and measurethe relationships and flows between people,groups, organizations, computers, websitesand other network-accessible knowledgeentities. SNA tools permit an organization tounderstand the shape, composition andconnectedness of its innovation networkdiagramming who is talking to whom totarget ways to expand or reshape onlineinteraction and communities (Jones andWilliam, 2013). Most importantly, SNA canreveal the silos in the organization withislands lacking interaction, as shown inFigure 4. Organizational leadership canconsider use of the dynamic SNA tools toassess the ever-changing organizationalpatterns of behavior and migrate theorganization away from the undesiredpatterns of unconnectedness, as shown inFigure 4, to patterns that addressesinteractions across the broader socialnetwork of the organization’s value chain tosustain collaborative knowledgeconnectedness, as shown in Figure 5 (Frank,2012).

Figure 4: Unconnected Islands of Information Sharing


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Figure 5: Desired Connectedness

CONCLUSION

Connectedness may be a primary successfactor for innovative capacity in today’s fast-paced economy. This article initiates adiscussion for organizational leaders toconsider the prospective influence ofconnectedness on the enhancement of theorganization’s capacity to innovate. Thearticle provides propositions, buildingblocks, processes and social network analysistools for an organization to consider and usefor monitoring an organization’s capacity forinnovation towards desired activities andbehaviors to accelerate an organization’sinnovation. These four building blocks offermechanisms to migrate towardsconnectedness to allow an organization toaccumulate social capital, organically buildnetwork ties, span boundaries oforganizations to access knowledge, andmaintain absorptive capacity crucial for speedof action in organizational learning,knowledge transfer and innovation.

Executive leaders should consider adoptingrecommendations postulated in this article

and monitor organizational effectiveness ininnovation for sustained and enduringcompetitive advantage. As innovativecapacity is enhanced, executive leadershipcan adapt and refine its organizationalstrategy, investments and practices toachieve and sustain enduring competitiveadvantage through empoweredconnectedness in this era of Big Data.

References

Ahuja, G. (2000). The Duality of Collaboration: Inducementsand Opportunities in the Formation of Inter firm Linkages.Strategic Management Journal, 21(3), 317-343.

Alder, P. and Kwon, S.W. (2002). Social Capital: Prospects fora New Concept. Academy of Management Review, 27(1), 17-40.

Batt, P. J. (2008). Building Social Capital in Networks. IndustrialMarketing Management, 37(5), 487-491.

Cohen, W. M. and Levinthal, D. A. (1990). AbsorptiveCapacity: A New Perspective on Learning and Innovation.Administrative Science Quarterly, 35 (1), 128-52.

Fleming, L. and Waguespack, D. M. (2007). Brokerage,Boundary Spanning and Leadership in Open InnovationCommunities. Organization Science, 18(2), 165-180.

Zahra, S. A. and George, G. (2002). Absorptive Capacity: AReview, Reconceptualization and Extension. Academy ofManagement Review, 27(2), 185-203.

Bibliography

Barabasi, A. Z. (2003). Linked: How Everything is Connected toEverything else and What it Means. London, England, PenquinGroup.

Frank, B. (2012). Taming the Big Data Tidal Wave: FindingOpportunities in Huge Data Streams with Advanced Analytics.Hoboken, New Jersey, John Wiley & Sons. 336.

Gailbraith, J. R. (2014). Designing Organizations, Third Edition.San Francisco, Jossey-Bass. 352.

Gray, D. and Vander Wal, T. (2012). The Connected Company,Sebastipol CA: O’Reilly Media.

Johnson, S. (2010). Where Good Ideas Come From: The NaturalHistory of Innovation, London, England, Penguin Group.

Lafely, A. G. (2008). Game Changer, New York, CrownPublishing Group.

Sari, V., Salmi, P. and Torkkeli, M. (2007).Implementation ofOpen Innovation Paradigm Cases: Cisco Systems, DuPont,IBM, Intel, Lucent, P&G, Philips and SunMicrosystems, Tutkimusraportti Research Report, 189.

Webliography

Greenwood, D. G. (2010).Collaborate to Innovate: InnovativeCapacity Index for Effective Open Innovation. (Order No.3475095, University of Maryland University College). ProQuestDissertations and Theses, 75-n/a. Retrieved on August 14, 2012from http://ezproxy.umuc.edu/login?url=http://search.proquest.com/docview/899758959?accountid=14580.(899758959)


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Jones, J. and William, G. (2013). NodeXL: Social NetworkAnalysis for Scholars, The Chronicle of Higher Education,October 14, 2013. Retrieved on October 4, 2013 from http://chronicle.com/blogs/profhacker/nodexl-part1/47621

Krebs, V. (2013). Social Network Analysis, a Brief Introduction.Retrieved on October 3, 2013 from www.orgnet.com/sna.html.

Manyika, J., Chui, M. and Brown, B. (2011). Big data: TheNext Frontier of Innovation, Competition and Productivity.Retrieved February 18, 2013, romhttp://www.mckinsey.com/insights/mgi/research/technology_and_innovation/

big_data_the_next_frontier_for_innovation.

Woodie, A., Hemsoth, N. and Lopez, I. (2012). DistributedSenseMaking for Everyday Big Data, Retrieved 9/18/2013fromhttp://www.datanami.com/datanami/2012-05-07/distributed_sensemaking_for_everyday_big_data.html

West, Geoffrey (2011). The Surprising Math of Cities andCorporations, Ted Talk, Retrieved September 18, 2014 from http://www.ted.com/talks/geoffrey_ west_ the_ surprising_ math_of_cities_and_corporations/transcript.

Table 1: New Processes Enabling Innovation Capacity


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ENTREPRENEURSHIP E-LEARNING: XBRAIN*

E-learning market in India is growing at phenomenal speed. One such start-up Xbrain wasstarted in 2013 with the objective of trying to change the way people learn. It is a Delhi basededucation marketplace incepted by two young entrepreneurs Rohit Kapoor and Aman Mehtawith the vision of providing marketplace for self-paced online courses on professional skills,exam preparation and hobbies. In spite of increasing demand for online education the companyhad a negative net margin because of high cost of funds, depreciation expenses etc. The organizationwas no-where near break-even. Besides, the organization faced the challenge that students werenot open to online education and therefore, winning their trust was very important to penetratethe market.

Keywords : E-learning, Education Marketplace, Online Education, Net Margin.

India was estimated to be around $3 billion.In an another report published in IndiaToday, online education market in India wasexpected to grow at a CAGR of 17.50 percentover the period 2014-2019. A lots of start-upswere already setting their foot in onlineeducation. They were not only focusing onchunk of prospective Indian customers butthey also seen a significant number of usersall around the globe.

Background

Xbrain Elearn Private Limited was Delhibased education marketplace which wasincepted in 2013 by two young entrepreneursRohit Kapoor and Aman Mehta with thevision of providing marketplace for self-paced online courses on professional skills,exam preparation and hobbies. It providedonline courses on various topics, such asAndroid development, art and drawing, bigdata, cloud computing, digital marketing,entrepreneurship, game development,graphic design, HTML/CSS, language,maths, MS Office and Web design etc.However, the main focus was on exampreparation especially for GATE, IIT-JEE,IELTS and Bank-PO. It also offerd courses

INTRODUCTION

With the growing role of e-commerce in India,a large number of start-ups have came intoexistence offering a varied range of productsand services online. One such start-up hadbeen Xbrain which started in 2013 with theobjective of trying to change the way peoplelearn.

The formal education in India which wasbased on classroom teaching can be foundin the long history of thousand years whereshishya learned under the supervision ofgurus in Gurukuls. Today, it is the mostcommon and widespread method oflearning all over the world. However, theguru-shishya teaching was one to one or oneto few, whereas, now the education hasbecome one to many. With a rapidpenetration of internet and smart phones,new–start-ups are focusing on providing e-learning or what is commonly known asdigital learning.

Online Education in India

According to one of the report published inBusiness Standards by Anita Babu onFebruary 6, 2015, the e-learning market in

* The case was developed by Yogeshwari Phatak, Raj Kishore Sharma, Tarun Kushwaha and Prayatna Jain of PrestigeInstitute of Management and Research, Indore during Thirty Sixth National Case Writing Workshop organized by PrestigeInstitute of Management and Research, Indore in collaboration with Association of Indian Management Schools, New Delhion November 28 – 30, 2016.


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on spoken English with guaranteed job.Xbrain was the third venture of these twoalumni of IIT Delhi. Prior to this both of themco-founded Aaarambh Knowledge Solutionsin 2007 and Maximus Education Pvt. Ltd.with Patel group in 2008 which was alsoinvolved in providing desktop solutions forKG to class twelve (K12) students with e-learning solutions. The present day smartclasses are based on this concept. However,the two partners sold out their share toMaximus after which they started Xbrain.

The idea behind Xbrain was that the expertsfrom around the world shall be able to comeand create courses on the portal and find aworldwide audience as subscribers/students.At the core of the marketplace lies its uniquecourse delivery tool, which combined stateof the art teaching tools, technology andlearning pedagogy to deliver an interactiveand adaptive, online learning experience. Onthe site, users could learn from individualresources, engage one on one with experts,participate in projects and courses with themand interact with peers through themarketplace. The platform empoweredexperts with teaching tools, pedagogicalstructures and student interaction events,thus, providing them increasing number ofways to ‘productize’ their knowledge andtime.

Working Approach

The organization has divided its operationPAN India with its corporate office at Delhi,Chandigarh office catered to contentdevelopment, Chennai office was dedicatedtowards technical management and recentlythe organization has started an office inIndore which took care of sales andcustomer support. The organization workedon the concept that certain things cannot betaught solely through e-learning modulesand there was a need for mentoring in orderto clarify student difficulties. To provide thishand holding the organization besidesproviding pre-recorded lectures through

CDs and online modes also provided eachstudent customer with a faculty mentor.These mentors were available to the studentsthroughout the day through Skype,WhatsApp, phone calls and emails. Thisrequired a large number of high qualityfaculty to be on the roles of the company.The faculty mentors were recruited in twoways. Firstly, through their web portal wherefaculty could register themselves with theirCVs indicating their willingness to be on thefaculty mentor panel and secondly, the firmidentified faculty which it felt were neededto mentor students and provide high qualityinput for course material provided tostudents. Faculties were, therefore, recruitedas full time or part time employees. A full timeemployee had to be available to theorganization for eight hours a day whereas,a part time employee had to be available fortwo to four hours a day. The salary dependedon the qualification, experience and type ofemployee namely, full time or part time.

The lecture recording, course contentdevelopment, web portal and other onlineservices were handled by the Chandigarhoffice. The work was outsourced as well assome content was developed in-house. Toensure that the e-course material and lectureswere not pirated, the CDs which were givento the student customers came with threelocks which required authentication keys.Besides, there was a need to connect to theorganization server for the CD material to beaccessed. This ensures that the copyright ofthe content is maintained. Sometimes,student customers change computers orlaptop requiring reloading of the coursecontent which was done after proper studentauthentication after student requested for thesame. The organization understood theneed for student satisfaction and therefore,had a dedicated staff looking after feedbackof both, student customers and facultyemployees. In case students were not happywith faculty mentors faculty were changedand sometimes even fees was refunded.

Entrepreneurship E-Learning: Xbrain

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However, this happend only 1 in 500students. The organization had a goodsuccess rate of their programs with 80percent success rate in IELTS examinationmodules and a 60 percent success rate in theIIT-JEE examination.

In case of the English module course whichwas for three months students were offeredjobs with the company if they cleared the endexamination. This the organization couldafford to do as the recently set up Indorebranch which handled marketing and salesneeded to recruit at least 100 tele-callers-cum-counselors which stood at 25. Initially theorganization used only digital marketing forawareness and marketing of its program,however, it has realized that this strategy wasnot very effective as in the education businessstudents needed counseling before they wereconvinced about the program. Once lead wasgenerated through social media marketing,the tele-callers-cum-counselors needed tocontact and follow up these leads. For whichthey needed to be proficient in English andHindi as the student customers were PANIndia and in South English was a prerequisite. This was a challenge as Indorecomes in a Hindi speaking belt and therefore,employees even if they knew English werenot good with their pronunciations. Theorganization was offering English languagecourses from Hindi to English but later plansto make it available in regional languagesalso.

The organization had total 200 employeesboth full time and part time including faculty.Full time faculty was 80 in number. The costof the courses offered was Rs. 4000 to Rs.35000, highest being for the English speakingcourse. In case of English module thecompany allowed the student to pay Rs.20000 initially and Rs. 15000 was to be paidin installments once the student got the Job.As it is an employment guaranteed course,the company provided placement to studentcustomers. Besides this, other strategy theorganization used was that the organization

also provided students with free trials of thecourses to give the students a feel of onlinelearning. Students were also allowed to buya part of the program like only mock testmaterial or only course content.

Staff for tele-calling and counseling includedgraduates, engineers etc. The salary offeredis Rs. 15000 to Rs. 25000 per monthdepending on the qualifications with targetsof Rs. 100000 business in one month. Salarieswere increased in two months to Rs. 35000with increased target of Rs. 150000 volumeof business per month. The staff wasrecruited initially for a week with a stipendof Rs. 1000 and post one week if theirperformance was found to be satisfactorythey were retained. This was done as theirtele-calling skills were difficult to judge in ashort interview. The company had a grossmargin of 40 percent but a negative netmargin because of high cost of funds,depreciation expenses etc. The organizationwas no-where near break-even for which itrequired to generate a business of Rs. 1 croreper month. It was looking at some venturecapital funding. It was also trying to havesome B2B tie ups with educationalinstitutions for its programs to get massstudent customers but these institutionsthemselves offered certificate programs andthus, were actually competitors of Xbrain.The organization faced competition fromanyone offering classroom education be iteducational institution or coaching classes.However, it was the only organization to offerthis large basket of e-learning programsbesides Easyelearn Inc. Besides, theorganization faced the challenge thatstudents were then not open to onlineeducation and therefore winning their trustwas very important to penetrate the market.Questions :1. Suggest an appropriate marketing

strategy for the company.2. Comment on the future of online

education in India.


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INNOVATION TO SUSTAINABILITY: A CASE OF DCIS*

The case discusses the issues and challenges faced and strategies adopted by an NGO set up inIndore region of M.P. The case highlights the dilemma of a local NGO in light of environmentaland societal factors along with limitation with respect to promotion and growth. The case isstructured in a manner so as to enable students to understand the challenges faced by socialentrepreneurs in a highly competitive and globalised environment. The case is designed to exposestudents to the working and challenges of decision making of entrepreneur. The purpose of thecase is to give exposure to the students/participants to the concept of innovation, entrepreneurshipand decision making.

Keywords : Innovation, Sustainability, NGO, IT.

In May 2002, they started getting clients andin August 2002, DCIS completed its firstinternational assignment for a New Yorkbased company. In November 2003, it was abig day as the Company got its own domainand first internet presence with aninvestment of $150 (Appendix 1).

The company was growing steadily andDCIS showed its maturity in ComputerProtection and System softwaredevelopment capabilities by launching its PCprotection suit for public, in December2005.In July 2006, company started its KPO(Knowledge Process Outsourcing) servicesfor a Florida based giant real estate companyand by June 2008, they had received theirFirst Joint Venture contract with Sky-RiseDevelopment group, Florida, USA. TheCompany had more than 100 employees atIndore, US and European locations and wasproviding its services in 5 major areas namelySoftware Development, Customer SupportServices, Offshore Staffing, SEO Services andUSA nationwide staffing services. Theinformation technology and businessprocess outsourcing were among the fastestgrowing sectors, with a cumulative growthrate of revenue 33.6 percent between 1997–98 and 2002–03 and contributing to 25percent of the country’s total exports in 2007–08 in India. The performance of IT sector wasnot only fueling growth for developing

INTRODUCTION

Mou, a young and dynamic HR manager inone of the leading IT solution company wassipping coffee in a warm winter afternoon.She was looking outside the glass windowtowards one of the busiest roads of centralIndore from her newly furnished cabin. Shegot a call from one of the founder directorsand he congratulated her for a new officepremises and called her up for a meeting todiscuss the new expansion plan of thecompany.

She was recalling her journey, when as ayoung management graduate she joinedDynamic Cyber Infrastructure (P) Limited(DCIS), in the year 2010 to team of 100 andtoday she was a part of a team of 400employees. The company had its new officepremises situated in 3000 square meters inIndore, industrial and business capital ofMadhya Pradesh, India.

Background of DCIS

DCIS was started in 2003 by three collegegraduates with a mission to continuouslystrive to make IT work better. It started in theyear 1999 when three engineering graduatesKaran, Amit and Rohan along with techdevelopers Phizo and John (see Appendix1) were trying to earn some pocket money.

*This case was developed by Ranjana Patel and Satnam Ubeja during Twenty Eighth National Case Writing Workshoporganized by Prestige Institute of Management and Research, Indore in association with AIMS, Delhi on November 26-28,2012.


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countries like India but also paving way ofgrowth for companies like DCIS. The shareof the Indian IT industry in the country’sGDP also increased from 4.8 percent in 2005–06 to 7 percent in 2008.

By the year 2009, DCIS started offeringservices with Open Source Technologies andwas recognized by Drupal Organization fortheir quality Drupal Development Serviceswhich helped them in gaining more andmore projects and clients in this domain. Thiswas followed by the achievement ofMicrosoft Gold Partner Status and openingits first marketing office in Sunnyvale, USAin the year 2009. The year 2009, also gaveplace to seven Indian firms as they werelisted among the top 15 technologyoutsourcing companies in the world. DCIScontinued expanding by promoting itself inthe international IT events and expos of theworld, Like Gitex, Dubai and IndiaSoft whichalso gave them new avenues to promote thecompany. The company also starteddeveloping mobile application wing by theend of year 2009.

By 2010, DCIS had more than 150 members,and the value as per the NASSCOM Reports,2010 was more than 4.5 Million dollars. Thecompany aimed at expanding more in thecoming year and targeted a fourfold growthin the number of employees and business.DCIS pioneered the Right SourcingModel (RSM), which emerged as adisruptive force in the outsourcing industry.The RSM was based on taking work to thelocation where the best talent was availableand where it makes the best economic sensealong with the least amount of acceptablerisk. RSM allowed the company to sourcebest talent and provide service at least costto its client. In 2011, DCIS had become aleading IT and consulting company withturnover in the millions and offices in 3countries, regional representatives in over 13different countries and deliveringtechnology-enabled business solutions for

companies in more than 45 countries. By theend of year 2012 DCIS was shifted to a newbusiness location in the centre of city withover 3000 square meters area and theemployee strength grew to 400.

Working Process of DCIS

DCIS was one of the best OutsourcingSoftware Development Methodologies tomake the whole Offshore SoftwareOutsourcing and Development Process gosmother and easier. The company operatedon unique Software Development Life Cycle(SDLC). The company had expertise inMicrosoft .Net Platform such as – asp.net,vb.net, C#, Soap, xml and many others. DCISalso provided services in PHP (HypertextPreprocessors) technology and imageprocessing services in the abovetechnologies as a part of OutsourcingSoftware Development. The company hadbest talent and skilled developers, who werewell equipped and trained to meet the globalchallenges for Offshore SoftwareOutsourcing Services. The working anddevelopment was divided into six phasesnamely, envision, planning, design anddevelopment, testing, delivery and aftersales services.

Once the RFP (Request for Proposal) wassubmitted by the prospective client to DCISthen the team started to analyze the givenproposal. The team tried to implement thebest combination of the resources availableto start the analysis of the possible CustomDevelopment Services as the first step.Planning was the second step of SDLC whereall possible functionalities such as FunctionalSpecification, Time and Cost Estimation, BestResources to be Implemented and all otheraspects of Custom Software Developmentwere taken care off. After this step it becameclear for the client, as to what to adopt andas how to manage the schedule for allpossible Offshore Software DevelopmentOutsourcing Services.


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Once the project was approved by the clientin terms of time and cost estimates then thethird step was design and developmentstarted and in this step usually a prototypewas given to the client that gave the actuallook and feel of the system without coding.Further, Coding and Software Developmentwas done once the design and prototypewere approved by the client. Then the nextstep was software testing, where thedeveloped software had to go throughSoftware Outsourcing Testing Phase and itis was delivered and implemented at clientsend when it passed the testing phasesuccessfully. This was the last and final phasewhere Outsourcing Software Developmentcontract with the client was completed.Training to the clients was also provided asper the clients need. Once the total SoftwareDesign and Development Services werecompleted and the project was handed overto the client. After delivering the developedsystem to the clients the Custom SoftwareDevelopment Contracts ended and as perthe need of the client after sales support andservice was given.

Functional Areas of DCIS

There were major three functionaldepartments in the organization whichincluded marketing department, HR andtraining and development and developmentand quality assurance department.

Marketing Department

DCIS had a strength of seven employees inthe year 2003 in its marketing departmentand grew to 50 employees in 2012. Themarketing team was based in USA, Iceland,Sweden and Europe. The company had itsbusiness development centers located in USAand Europe as they had their major projectsbased in these countries. The company alsohad Phizo Hayat as Vice President, BusinessDevelopment USA who was responsible forstrengthening DCIS in USA and Globalclientele and helping wide range of clients

for their long term successes. While JohnHardy was working at Iceland and Swedenmarket as Vice President, BusinessDevelopment in Europe and was developingand helping widen clientele base inEuropean countries (Appendix 1).

The growth in the Indian IT sector by theyear 2012 was attributed to increasedspecialisation, and an availability of a largepool of low cost, highly skilled, educated andfluent English-speaking workers, onthe supply side, matched on the demandside by increased demand from foreignconsumers interested in India’s serviceexports, or those looking to outsource theiroperations. DCIS also had competitiveadvantage over other IT companies as it wasproviding services in the developedcountries like America and Europe at costeffective prices which was a key growthaspect.

HR and Training and DevelopmentDepartment

The company had vertical training anddevelopment department where the teamleads were responsible to train the newemployees in every department. Thecompany believed that senior team leadsknew better about the working, althoughthey did not had any formal training andinduction department. The newly recruitedwere trained for fortnight period and thenwere assigned live projects under thesupervision of team leads. The team leadswere responsible for the supervision andworking of the team. DCIS had an ERPbased online HR system for the convenienceof the employees with flexibility and ease toemployees for updating and availing, leaves,filing taxes etc. DCIS followed a 360 degreeappraisal system which was done every ninemonths. DCIS believed in employeesatisfaction and, thus, followed a benchmarkappraisal system that appraised theemployees not only on performance basis but

Innovation to Sustainability: A Case of DCIS

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was also unique as the IT industry usuallyhad a yearly system of appraisal.

Development and Quality AssuranceDepartment

DCIS had its development department basedin Indore headquarters. The department hademployees who were engineering graduatesand were responsible for undertaking thetask of developing and coding. DCIS was aproject based company that catered to theneeds of the client on demand basis. DCIShad a strong team of 400 employees in itsdevelopment department.

DCIS also had quality assurance departmentwith strength of fifteen employees which wasresponsible for rigorous testing of thedeveloped project. The project had to passthrough the quality testing before it wasimplemented at the client’s end to ensurecomplete satisfaction of the client.

DCIS Certifications and Strategic Alliance

DCIS had CMMI Level 3 practices andMicrosoft Certified Partner and had an ISO9001: 2000 certification.DCIS had strategicalliances with Microsoft, Apple, Google,Paypal, Drupal, Joomla, Adobe, googlecheckout, ZOHO, Eye Os, Sun Microsystemsand Double Click.

Expansion Plan

DCIS had an expansion plan looking into theglobal scenario and the businessdevelopment prospects of the IT sector in thedeveloped nations. In the year 2012, theworld was economy witnessing recoveryfrom global meltdown crisis and there wereonly few Asian countries like India and Chinawho were able to outperform in the overalleconomic crisis scenario. Of all the sectors inthe economy, few sectors like IT, ITES andtelecom and BPO were able to perform asthey were competitive enough in terms ofcost involved for technological developmentand human capital.

DCIS was growing leaps and bounds with a300percent growth rate and was targeting towiden its employee base to 1000 in 2013 and1700 by the end of the year 2017. DCIS hadstate of the art head office with well equippedfacilities aimed at better and conduciveworking environment looking into thefuture expansion plan. The company wasalso expanding its operations in otherEuropean and American countries. DCISalready had an edge over with respect tocurrent trends and technology in the sectorand was continuously striving anddeveloping new technology and applicationto broaden the range of its products andservices. DCIS was also focusing ondeveloping in the arena of applicationsoftware development market. As accordingto a recent Gartner report the world wideapplication software development marketwas expected to cross $9 billion in 2012 andwould continue to increase by a ratio of 4:1compared to native PC project by 2015.

Questions :

1. Analyze the case with the help ofTOWS Matrix and highlight on thestrengths and Opportunities of DCIS.

2. Discuss the expansion strategy ofDCIS in light of the products offeredand overall expansion.

APPENDIX 1

Note on Promoters and Management Team

Karan, Amit and Rohan, graduate inengineering in 2002 from RGPV foundedDynamic Cyber Infrastructure (P) Limited,“DCIS” in the year 2003. All had experienceof different companies and specializedexperience in marketing and development.

Karan’s responsibilities encompassed,providing strategic direction to the company,corporate planning, corporate policies andcorporate finance. His distinguishedknowledge came from an abundance of


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experience in developing large distributedsystems. He has conceived, designed, andimplemented several web products, had anextensive technology background, gainedthrough years of experience.

Amit was responsible for providingtechnology direction at DCIS and buildingtechnology capabilities. He championedDCIS’s Operations Quality & Processinitiatives and oversees buildinginfrastructure and solutions that wereinstrumental in driving major financial andoperational benefits to DCIS’s clients. He wasalso instrumental in establishing keyalliances and building well-informed teamson best-of-breed technologies, giving DCIS’sa competitive edge. Amit managed multipleprojects running at DCIS, while maintainingbudgets and deadlines. He steered thedevelopment lifecycle for their web initiativesand mentored the research andimplementation of innovative web/ mobile &cloud tools. He was also responsible for newtechnology assimilation and adoption in thecompany.

Rohan was responsible for the team’s overallvision, business direction, corporateinitiatives and goals. He was a proven hands-on leader with a successful track record inbusiness leadership and ownership, both

Offline in the development of domesticproject development and sales, and Onlinein creating compelling web solutions. Thebalance of ‘brick and mortar’ and ecommercebusiness experience has resulted inaccomplishing goals successfully. Over theyears he had been handling businessactivities in Real-estate businesses andsoftware based business and had beensuccessful in all of them.

Phizo Hayat born and brought up in UnitedStates, had strong capabilities of starting,running and leading flagship globalbusinesses from scratch. With degree inCommerce he started his career at the age of17, and since then had successfully runmultiple businesses in USA and UK. WithCyber Infrastructure as V.P. BusinessDevelopment USA, he was strengtheningDCIS’ USA and Global clientele and helpingwide range of clients for their long termsuccesses.

John Hardy born and brought up in Icelandand was working at Iceland and Swedenwith Cyber Infrastructure as V.P. BusinessDevelopment, Europe. John was developingand helping DCIS’ wide clientele inEuropean countries and helping them fortheir every day success.

Innovation to Sustainability: A Case of DCIS

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LOOKING FOR A REAL DRUG: IFPA LABORATORIES*

nearly 25 percent of the turnover comingfrom APIs. Regulated markets like the USA,Canada, Europe and Australia account for 75percent of their API exports. IFPA was oneof the world’s largest manufacturers of APIs- Atenolol (Anti-Hypertensive), ChloroquinePhosphate (Anti-Malarial), Furosemide(Diuretic), Hydroxychloroquine Sulphate(NSAID), Metoprolol Succinate (Anti-Hypertensive), Metoprolol Tartrate (Anti-Hypertensive) and Pyrantel Salts(Anthelmintic) besides being one of thelargest suppliers of these APIs worldwide.IFPA’s domestic customers included Abbott,AstraZeneca, Bayer, Cipla, Dr. Reddy’s,Merck, Pfizer, Ranbaxy and Wockhardt.IFPA’s formulations basket included genericsfor the developed markets and brandedformulations for emerging markets.Formulations accounted for 67 percent ofexport turnover, making IFPA one of India’slargest formulation exporters. IFPAmanufactured over 350 formulationsvirtually every dosage form oral, solids andliquids, dry powders for suspension andinjectable (liquid and dry).

Indian Pharmaceuticals Sector

Indian pharmaceuticals sector accounted forabout 1.4 percent of the globalpharmaceuticals industry in value terms and10 percent in volume terms. The cost of

This case is focused on issues and challenges faced by IFPA in managing the product lifecycle ofa drug and how to appreciate the need for better decision making in drug research and developmentin the pharmaceutical industry. Progress had actually been made by the company towardsustainable development. The acquisition gave the Indian company front-end sales and marketingaccess to the highly regulated life-saving drug market having the USFDA and CFD(Computational Fluid Dynamics) Certification. This case illustrates the impact of prepackagedpharmaceutical products, usually manufactured by multinational firms, on the health care sectorof developing market economies.

Keywords : Pharmaceutical, Durgs, Prepackaged Products.

*This case was developed by Anukool Manish Hyde (PIMR, Indore), Seema Jhala (Indore Institute of Management andResearch, Indore) and Ankita Jain (SVIM, Indore) during Thirty Sixth National Case Writing Workshop organized by PIMR,Indore on November 28-30, 2016.

IFPA Laboratory

IFPA was an International Pharmaceuticalcompany based in Mumbai, India. It was fullyintegrated Indian Pharmaceuticals companymanufacturing over 350 formulations and 80APIs (Active Pharmaceutical Ingredient) forvarious therapeutics segments. PraveshGupta was the president of this company. Itwas founded on October 19, 1949. The mainactivities of company were to produce andmarket pharmaceuticals and drugs. In 1975,the management of the company was takenover by Ashish Bhalchandra. IFPA was atherapy leader in India for anti-malarialdrugs with a market share of over 34 percentwith a fast expanding presence in theinternational market as well.

IFPA Laboratories started its operations in1994, specially-focused on Lariago drug- Antimalarial life-saving drug initially havingcapacity six tons per month and increasedtheir capacity to 130 tons. But again capacitydecreased to 50-60 tons due to CGMP(Current Good Manufacturing Practices) andsafety concern.

For over 20 years, IFPA had been playing alead role in the Indian APIs market, both inthe anti-malarial and anti-hypertensivetherapeutic segments. IFPA had emerged asone of India’s top exporters of APIs with


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setting up a production plant in India was40 percent lower than in western countries.India had a skilled workforce as well as highmanagerial and technical competence incomparison to its peers in Asia. Indiaaccounted for 20 percent of global exports ingenerics. The strength of IndianPharmaceuticals company was low cost ofproduction. India’s cost of production wasnearly 60 percent lower than that of the USAand almost half of that of Europe Thestructure of pharmaceuticals sector includedactive pharmaceuticals ingredient/bulk drugsand formulations.

The Indian Pharma industry, which wasexpected to grow over 15 percent per annumbetween 2015 and 2020, will outperform theglobal pharma industry, which was set togrow at an annual rate of 5 percent betweenthe same period. The market was expectedto grow to US$ 55 billion by 2020, thereby,emerging as the sixth largest pharmaceuticalmarket globally by absolute size, as stated byMr. Arun Singh, Indian Ambassador to theUS. Branded generics dominated thepharmaceuticals market, constituting nearly80 percent of the market share (in terms ofrevenues).

India has also maintained its lead over Chinain pharmaceutical exports with a year-on-year growth of 11.44 percent to US$ 12.91billion in FY 2015-16, according to data fromthe Ministry of Commerce and Industry.Imports of pharmaceutical products rosemarginally by 0.80 percent year-on-year toUS$ 1,641.15 million.

Overall drug approvals given by the US Foodand Drug Administration (USFDA) to Indiancompanies had nearly doubled to 201 in FY2015-16 from 109 in FY 2014-15. The countryaccounted for around 30 percent by volumeand about 10 percent by value in the US$ 70-80 billion US generics market. India’sbiotechnology industry comprising bio-pharmaceuticals, bio-services, bio-agriculture, bio-industry and bioinformatics

was expected to grow at an average growthrate of around 30 percent a year and reachUS$ 100 billion by 2025. Bio-pharma,comprising vaccines, therapeutics anddiagnostics, is the largest sub-sectorcontributing nearly 62 percent of the totalrevenues at Rs. 12,600 crore (US$ 1.88 billion).

Human Resource at IFPA

IFPA believed in safety of employees as itleads to satisfaction of workers and reducedrate of accidents hence less compensation toemployee. HR Manager was little flexible inapproach and he believed that if employeeswere late, did not make any difference to theorganization but if it is a practice then actionwould be taken against employees.Employees were getting canteen facility onsubsidized rates. Employees used to meetHR Manager every month to discussproblems otherwise they used to givesuggestions for improvement. Culturalprograms were organized on the day ofMahashivratri in which employees along-with their family members used to come toorganization for fun with other employeesas well. Looking to the safety aspect, IFPAhad hired a world renowned consultant forgiving advice on safety measures. Twice in ayear employees were given Safety shoes andthey were also provided with uniform.Ronald Daniel (Senior HR Manager) sharedthat once the young employee met with anaccident and died, his wife got Rs. 8.laccompensation. 10-25 percent hike was givento the employees annually.

Daniel was worried about IFPA as it did notoperate for more than eight months. he wasin dilemma as to how to generate morerevenue so that it does not close down anytime. Management thought that this plantwas not a cash cow so why to continue withit but they were worried about employeesand their dependents too.

CSR at IFPA

IFPA donated blood testing machine for

Looking For a Real Drug: IFPA Laboratories

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Thalassemia patients to a hospital. IFPAbelieved in donating money to theorphanage. Plantation was being doneregularly to save environment. Full medicalcheckup of employees was also being doneannually.

Challenges Ahead

There were many players in Indore (M.P.)region which were dealing with same typeof products. Company had to reduceoverhead cost in any case to survive. IFPAhad decided to go for product diversificationwhich could help them to fetch money asIFPA used to function only for eight months.IFPA had been facing financial burden ofaround Rs. 3.5 crore per month as a totalexpense. IFPA was still dealing with oldissues like compensation which put theminto trouble all the time. Government forced

organizations to implement new system,documents to maintain on a regular basiswhere objective was to have transparencyand better quality of product. There was asevere problem of attrition. Fresher used tojoin IFPA and worked there around 1-2 yearsand used to go to the competitors in the sameregion or outside. Daniel shared that younggeneration had a problem of low patienceand subject knowledge was not sound.Freshers never treated training as a learningperiod.

Questions :

1. Do SWOT analysis.

2. Discuss HR practices of IFPA. Are thesepractices sufficient? Justify.

3. Suggest the ways to overcomechallenges.


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RELIANCE JIO: PREDATORY OR COMPETITIVE PRICING ?

Ankita Pathak*, Sunil Mishra**

The case discusses how Reliance Jio Infocomm Limited (RJIL) disrupted the competition in theIndian telecom sector and became one of the main telecom networks in India. The Indian Telecomindustry has seen tremendous and remarkable growth in the last few years. Expeditious changestook place in the network from 2G to 3G and 3G to 4G. Well-known players like Airtel, Idea andVodafone came later on with the 4G bandwidth but Jio has made a masterstroke in the industry.The entire industry is flustered by the entry of Reliance Jio. Jio became a strong challenger forevery player in the Indian telecom industry. Jio used the strategy of providing low-cost data andfree calling to target the need and wants of the Indian customer and attracted them towards 4Gspeed. Indian customers are price sensitive and Jio focused on this segment. Jio provided the 4Gspeed, Volte technology and unlimited free calls which contumacious in the telecom industry.Mukesh Ambani brought the digital revolution in the telecom industry and holds the flagship ofReliance Telecom. Reliance Jio captured a large market share than its competitors like Airtel,Idea and Vodafone. Its competitors were framing defense measures to retain their market shareto overcome from huge losses.

Keywords : Reliance Jio, Competitors, Disruption, Price Sensitive, Business Strategy, PricingStrategy.

Direct Investment) to meet the fund demandin the industry. Policies were liberalized toinvite foreign investors to invest in the sector.Foreign Investor no longer required anIndian investor to invest in the market.

The Telecom industry was always attractingthe various business giants in India whichshowed rapid growth in the world. The giantlike Vodafone group (VOD), which was thesecond largest operator after China Mobilelimited (CHL) and Bharti Airtel Limited wasthe third largest telecom operator on thebasis of its subscriber in home turf. TheTelecom industry has strengthened theeconomy as well as showcased thecontribution to the economic growth of thecountry by generating employment, trade,investment and an increase in GDP. Thewaves in the industry were creatingemployment opportunities as well as

INTRODUCTION

If we look into the past, in the year 1852, theBritish Government in Calcutta was the firstlandline operator in the history of the Indiantelecom sector. After Independence, in theyear 1986, the Department ofTelecommunication (DOT) was formedwhich was regulated by the Ministry ofCommunication (MOC). Thetelecommunication was controlled by thestate. DOT was totally dependent upon thefunding and expansion plan of MOC. Amajor change was observed after theformation of the Telecom RegulatoryAuthority of India (TRAI) which regulates theagency. The lack of infrastructure acted as adrawback which had restricted at 2G and 3Gnetwork. The government was activelyparticipating in the development of thesector. It provided 100 percent FDI (Foreign

* Assistant Professor, Sanjivani College of Engineering, Kopargoan, Ahmednagar.** Associate Professor, Medi-Caps University, Department of Management and Commerce, Indore.


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uplifting the standard of living in the globalvillage. Globalization has lessened theboundaries and communication hasconnected the people of the various nations,states and regions. The telecom industry hasbrought people together through varioustypes of communication. Cell phones, Wi-Fi,broadband and internet were the variousservices provided by the telecom industry.It created prominent changes in the opinionsof consumers, business units, principles ofentrepreneurs, legal frame-work andphilosophy of the government’s policies andprocedures.

India had the second largest market formobile service providers. At the same time,India was having the third position in termsof number of internet users in the world. Thepropensity for utilizing a mobile phone in abrief period has made the telecom industrya profitable and developed industry. Notonly Indian players, but the global serviceprovider was also engaged in providingservices in the Indian market and earning agood market share. Among various players,Jio entered the telecom industry which hasspread its radicals in the entire industry.Reliance Jio has chosen the most recent 4Gtechnology which acted as a benchmark forother service providers. The adoption of thelatest technology has made Jio a leader in theindustry. It has changed the way of offeringservices to the customer. Reliance strategy offree 4G internet has brought an unexpectedchange in the industry, consumer behaviorand preferences.

ABOUT THE COMPANY

In the year 2003-04, Mukesh Ambani cameinto the telecom sector by the successfulexecution of the mega project with the tagline“Kar Lo Duniya Muthi Mein”. But the splithas made Reliance Infocomm fall in the bagof Anil Ambani in the year 2005 which lateron became Reliance Communication. In theyear 2010, a purchase of Infotel has startedthe journey of Reliance Jio. Infotel was a

successful bidder for 4G spectrums in PANIndia, which was auctioned by theGovernment of India (GOI). Acquisition ofthe Infotel has given the strength of PANIndia for all 22 circles of telecom which hasmade Jio an independent Internet ServiceProvider. The acquisition made Reliancestronger as they were able to provide fourtimes higher speed than the speed of 3G andsixteen times higher speed than 2G. It createdthe problem for other 3G players whoneeded to pay higher prices for buying thespectrum.

In the year 2013, Reliance Industries receivedpermission from India’s Department ofTelecommunication to offer telecom relatedservices which included voice telephoneservice in all 22 telecom service areas.Separate permission and license wererequired for providing internet services till2nd August 2013. A sudden change was seenin August 2013 when the government haschanged the rule and has allowed providingvoice service which accounted for 85 percentof the revenue in India’s Telecom Sector. Theold license was converted into a unifiedlicense.

Jio conducted many researches beforecoming into the market to know the marketneed and requirement of the customers. TheJio team came up with new eyesight that itwas an era where everything is available onthe internet and customers were trying tofind the internet access of high speed at lowcost. Research also concluded that peoplewere paying a huge amount for the GBs (GigaBytes) of data. The idea of giving the 4Gnetwork to the customer was growing in thecompany. A pilot study was done among theemployees and partners in December 2015to test the network and efficiency beforecommercialization. Finally, Jio was launchedin September 2016 in the market for the endusers. Reliance Jio Infocom was very late toenter into the market of telecom. The leadingcompanies like Airtel, Idea and Vodafone


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were beating the market from the lastdecades. An analytical skill of the MukeshAmbani has made a unique image and brandname for Jio due to its 4G network in India.Jio was one who adopted the 4G technologywhich has set the benchmark for othertelecom service providers. Reliance telecomserved the need of the customer at a low costwhich created a strong business strategy.

Reliance Jio was able to create 16 millionsubscribers in a month by using the strategyof providing free internet and calling to thecustomers which acted as a Unique SellingPoint (USP). The free offer was acting as adisruptor for Airtel, Vodafone, Idea andAircel. The major merger of Airtel and ideahas corral with Telenor and Vodafone wasbeing executed with the motto of expandingthe resources which would reduce the costof providing the services which directly leadto reducing the data usage rates. The newamalgamation was done to maintainsustainability and to remove the marketleader. Jio wanted to create a demand for thedata in the market and it succeeded inmaking people addicted to the data. MukeshAmbani in his speech said that “Jio means tolive and to be alive to every opportunity”.People were demanding digital oxygenwhich was provided by the Jio as per thedemand of the people. Relianceaccomplished the goal of 50 million in shortspan though Vodafone and Airtel tookthirteen and twelve years respectively toreach 50 million people. Reliance Jio was ableto satisfy the need of the people. People wereannoyed because of the slow speed of thenetwork and the price associated with that.Jio has solved both the problems of thecustomer which has made them shift fromthe existing providers to Jio. The shift hascreated waves for the other operators.

The existing players were in fear of the offersand data services of the Jio. It has made themlose the market share and at the same time,they were being forced to reduce the tariff oftheir plan in order to retain the subscriber. It

has made the Idea bankrupt because it wasthe one who was badly affected by the Jio.Many subscribers shifted which lead to theshutdown of the partial network. Theshutdown has created a shortage of cashwhich has crushed the entire company. Thespeed of Jio to capture the target customerhas created a competition among theindustry. The companies were able to attractthe attention of the people due to brandambassador like Shahrukh Khan andAmitabh Bachchan who acted as a strongsupport pillar in creating a connection withthe customer. The number reached 50 millionin three months. The strategy of creating astrong buzz about their offers in the marketwas successfully implemented and it createdcuriosity in the mind of the people.

Jio has not only launched the 4G networkbut has provided the products and facilitiesto every segment of the people. Jio has notonly focused on a selected target group butalso planned the strategy for the untappedmarket. Reliance Jio has, firstly, targeted thepeople with the smart phone who were inneed of high speed and good mobile service.It segmented the people in urban, middleand upper-class people. In the next step,Reliance launched the Jio phone with 4Gconnectivity for the customer who was notable to afford the Volte phone. The companyhas given the offer to have the phone byminimum security amount of Rs 1500 whichwould be refunded back when a Jio phonereturned to any Jio store after 3 years. Afacility of pre-booking made available fromAugust 24, 2017. There were many fruits inthe basket of Reliance Telecom like Jio Apps,Jio Wi-Fi etc. The company has crossedrevenue of 108.9 million in the year 2016-17.The Telecom industry was generating hugerevenue from data transmission and dataseeker. The youth are the ones who arehaving more preference for datatransmission. A prediction by the Delloitte,stated that up to 2020 the telecom industrywould be generating revenue of $9 billion.

Reliance Jio: Predatory or Competitive Pricing?

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According to Ambani launching newtechnology was not a tough task butproviding convenience and making everyindividual take advantage of the offer was atough task. It has broken the myth andproved that people wanted to accept theadvance technology. As per the report of thecompany the usage of mobile data has gonefrom 20 GB to 150 crore GB per month in aspan of a year. A complementary and freeoffer boosted the sales of the organizationand has helped the company to outperform.Jio owned the spectrum in 800 MHz in tencircles and 1800 MHz in six circles out oftwenty two circles in the country. RelianceJio also owned a 2300 MHz spectrum licenseof PAN India which is valid till 2035 (Mhabdeand Dhamani, 2018). A fiber optic cable wasbeing spread in more than 250000 kms. forthe network in the nation which will bandtogether with the local cable operators to getbroader connectivity for broadband services.It was possible because of the Multi-ServiceOperator (MSO) License. The speed ofacceptance of Jio by the people was fasterthan that of Facebook and Skype. RelianceJio had a target to add a 3.7 crore subscribersin the next quarter.

Reliance was creating a strong database ofthe subscribers along with the income. Thetrust and love for the Jio has created loyaltyfor the brand. Such change was seen in theyear 2000 where Dhirubhai Ambani haschanged the scenario of the telecomindustry. Reliance Jio has changed the peopleis mindset, business entities, entrepreneur’sideologies, legal frame-work, government’spolicies philosophy and the procedures.

EVOLUTION OF PRICING IN MOBILENETWORK

Telecom industry is continuously adoptingnew ways and methods to retain itssubscribers. Years back company used tocharge high call rates. Subscribers used totake the services at high call rates ascompetitors were not there and the

subscribers were not having an alternativeoption available with them. In order toprovide something new and add-on benefit,a scheme of free SMS was introduced by thecompanies. It has created an interest in theexisting service provider. A scheme of lifetimeSIM was another add-on to free SMS.Customers were happy and were influencedby the service provider. Again, to addsomething new a rate cutter was given to theuser depending upon the user frequency ofcalling. The need for data has created a stormwith the time plan and packages were offeredby the various operators to their customersas per their need, usage, and desire. This hasled to various mobile data offers add-onpacks for the extra use of data. Reliance Jiohas focused on the need for data and itsoffers. Reliance used the strategy ofcompetitive kill in pricing in order to possessthe leadership in the entire market.

PRICING LEADERSHIP OF JIO

The price of the product or the services isdecided on the basis of a condition in themarket, the ability of the user to pay, the costof providing the service, margins and actionsof the competitors. Company advisorssomewhere knew the mindset of the Indiancustomers who were much price sensitive.Reliance Jio entered into the telecom sectorwith the motto of acquiring the market shareof other competitive players. There werevarious pricing strategies like premiumpricing, penetration pricing, high low pricing,loss leader pricing etc. which were used byplayers to enter into the market. Reliance Jioentered the market with the strategy ofpenetration pricing, loss leader pricing andcompetitive pricing to acquire the marketshare. During the time of entry in the market,they followed the strategy of penetrationpricing. It is the strategy to attract thecustomer towards the new product byoffering them services at a lower price at itsinitial offering. The lower price takes awaythe customer from their competitors. Jio used


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the strategy of penetration pricing which hasmade their competitors lose their marketshare and lower the price of the serviceswhich lead to losses. The competitive killpricing strategy lead the other firms to cuttheir prices to retain the customers and be inthe market. The free calling and free data at4G speed have made the adoption of thetechnology fast.

The goal of reliance Jio was to attract thecustomer and enter into a new market byfollowing the strategy of penetration pricing.The strategy of predatory pricing was usedto create a glass wall for entry of newcompetitors and the lower price affected theexisting players. The predatory pricing ofReliance Jio has helped the organization inenhancing its brand image and sales.Reliance Jio offered free voice, data andmessage services in the name of its “WelcomeOffer” from September 5, 2016 to December31, 2016. Later, the offer was extended up toMarch 31, 2017 as the Happy New Year Offer.

Later on, with the time, Reliance Jio followedthe loss leader pricing strategy where theysold their selected product at below the costprice in order to attract the people who werestill unreached. The below cost price wouldmake the untapped people think to shiftfrom existing company to reliance Jio.Reliance Jio offered a free subscription whichhad lured the customer traffic from their retailcompetitors. At the start, they did’nt makeany profit on goods that were earmarked asloss leaders. With the pricing strategy,Reliance Jio was able to capture the marketwith the loss leader and penetration pricingstrategy. Reliance Jio was able to make a 44percent market share. They have captureda good market and in order to be in themarket, they followed a competitive marketpricing strategy. In this strategy, thecompany follows the price after consideringthe price of the competitors. The prices of theproduct were raised by the Jio gradually tomake the profits and follow the price of the

competitors. People were very well addictedto the internet and the speed of the relianceJio. They analyzed the market andintroduced a competitive pricing strategy tomake profits. Reliance Jio did not only focuson the high-end customer but also focusedon low and mid-range customers. Thesesections of the market were being targetedby offering all services at a reasonable price.

FIRST LINE OFFER AT THE LAUNCH

Jio has made a strategy to launch a Jio SIM inthe market and attracted people by providingthem free SIM with minimum procedures.Only an Aadhar card was required tocomplete a registration process and the SIMwould get activated within 15 minutes. Thefree SIM provided the facility of free unlimitedcalls, SMS, free-roaming, and unlimited datafor five months.

SECOND LINE OFFER

Jio at the second line focused on theavailability of the SIM in the market. A changewas seen, the validity was reduced from fivemonths to three months and an offer ofunlimited data was converted to 4GB per day.Other offers remained the same.

THIRD LINE OFFER

The third line offer again a reduction of dataoffer was done. From 4GB per day, then cometo 1GB per day, and increased the validityby 1 month, that is, 4 months.

FOURTH LINE OFFER

Customers with the above three offers, havebecame addicted to data usage and speed.They were using and enjoying the facilitieswithout any problem which created a trustfor the Jio and free SIM offer and data hasattracted customers which created a largedatabase of the subscribers. A ball wasthrown by Jio in the fourth line of the Jioprime membership offer. Under the primemembership offer, two plans were made.Existing user can become the prime member


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by recharging for Rs. 99 and can enjoy theavailable offers. With a very short time span,a new Jio Dhan Dhana Dhan offer wasintroduced and the subscriber could use theservices by paying Rs. 303 for 90 days. Fornew users, a minute change has made in theprice of Dhan Dhana Dhan offer. The pricefor the new users was Rs. 309 for receivingthe services of Jio.

Employees were complimented for breakingthe records and creating a milestone in thetelecom industry. Free unlimited calling andfree 4G data usage for the 3 months has ledthe Jio to get popular and bet the old playerslike Airtel, Idea and Vodafone. The strategyof retaining and adding new customer wassuccessfully implemented when the freecalling and free 4G data was expanded foranother three months. A strong foothold wasbeing created by Jio, offering various schemeslike free calling, data and messages till 31December 2016, and an extension for morethree months was given as a gift of New Yearwhich was applicable till 31 March 2017.

WAR BETWEEN JIO AND OTHERCOMPETITORS

A war was going on in the telecom industryto enlarge the subscribers as well as to holdand absorb the existing consumer. Jio cameup with the idea of digitizing the life of everyperson so it came up with the tagline “JioDigital Life”. It has positioned itself as atransformer of India into the digital world atan affordable price. Price was considered asa major weapon to defeat competitors.Reliance Jio provided the free offer for threeto six months which resulted in millions ofJio subscribers. It created a strong data forthe company. Reliance Jio was able tosubscribe to 100 million people in just 170days after its launch. It has broken all therecords in history of telecom industry.Reliance Jio was able to attract large customerbase but was not able to handle thecustomers. The customers faced issuesrelated to the activation of SIM card. Reliance

Jio came up with the latest technology ofLong Term Evolution which was the besttechnology in the world. But it forgot thepeople who were having a 3G smartphone.The VOLTE doesn’t support 3Gsmartphones. The speed of Jio attractedmany other network subscribers too but theyfaced the problem in porting the SIM fromone provider to Jio. According to the datareceived by Indo-Asian News Service Jio wasable to provide a speed of 18.331 Mbpswhereas Airtel 9.266 Mbps, Idea cellular 8.822Mbps and Vodafone 9.325 Mbps. Jio offereda high speed to the user but still, people werefacing the problem of call dropping. In certainregions, Jio was not able to provide properspeed which resulted in a poor connectionand slow loading speed. The problem wassolved by the time as the improvement wastaken place.

Reliance Jio has fallen into pricingcontroversies as they were charging the pricelower than the ethical penetration. Thecompany can’t afford free offers which willnegatively affect the business and profits.Activities like corruption and launderingwere alighted on Reliance Jio. It was not ableto maintain a code of ethics as they wereusing the various strategies of low pricing,the strategy of market penetration whichwould affect the organization in the longrun. When a comparison was made betweenJio and other competitors Jio is providingmany add-on benefits that attracted the newand existing customers. Reliance Jio hasdiversified themselves into various otherareas like chats, games, movie andmessenger which created a source ofrevenue for the company and customer gotthe benefit of selecting the option of theirchoice. It was the VOLTE who had a widescope in bandwidth which could offer manyapps to the customer. Reliance Jio has offereda pack of Rs. 153 per month for the Jio phoneuser which provided unlimited calls, SMSand unlimited data with access to Jio apps.In addition to that various small caps were


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also introduced to reach every segment ofthe people. A plan of Rs. 54 for a week andRs. 24 for two days has providedconvenience to the consumers.

The government wanted to bring an era ofdigitalization but it could be possible if thecost of internet connectivity gets low. Theproject was boosted by the scheme of Jio.Indian would cross 500 million users, adynamic change, and improvement wasseen and felt in the last three years. The lowrate has led 48 percent of populations fromrural areas, 80 percent of the total populationstarted experiencing the Jio internet withina month of launch. Some argued that Jio wasable to get popularity because of the brandname and popularity of the Reliance but thefact is that Jio made a space in heart of thecustomer by their pocket-friendly packs andoffers. Reliance always thought a step aheadfrom others. Depending upon the futureneed huge investments were done on fiberoptical cable and towers. LTE will not onlysupport the present requirement of thespeed but also take care of the coming need.LTE would be supporting 5G and 6Gtechnology which will be coming in the nearfuture. Jio planned up for the 5G networkand launch the 5G network in India. It canact as a supporting hand to the PrimeMinister ’s vision of Digital India. It canexpand its market by establishinginternational towers and networks with theexisting network. Still, there are lots ofopportunities to expand themselves inneighboring countries. In future Jio cantarget the people who are frequentinternational fliers. They either need tochange their SIM or pay higher charges forthe calls. Jio can create an alliance withinternational companies and set the networktower in the International market.

Jio was always creating competition for othercompanies in the industry. It could be onlypossible by continuously analyzing themacro environment. Micro as well as macro

environment affect the smooth functioningof the company and can help theorganization in taking better decisions. Themarket analysis helps the Jio in making theirmarketing strategy in product development.The lower price strategy used by thecompany to attract more people can create aproblem for the company. The competitorshave appealed TRAI for their rights as ascheme of Jio was continuously making theircompetitors change their price and offer. Inthe current scenario it is very difficult for thebusiness to run in highly competitive marketwhere there are number of segments. Indiais a country which has youngsters, middle-age people and old age people. Differentsegment of the consumer has a differentexpectation from the company but Jio hasconnected people and helped the nation inconnecting altogether. People can beconnected when they have a price that putsless weight to their pockets. Every commonman is getting the benefits which havechanged the life. The youth foundemployment opportunities as well asopportunity of doing business online, as theheavy cost was not associated with that. Thethought of digitalizing India is being rootedin the mind of Indian citizens. Jio is acting asa blessing for the people and strongcompetitors to the rivalries. In both the cases,it is a win-win situation for the consumer.

CONCLUSION

Reliance Jio entry in the Indian market andits free introductory offer engendered a greatdeal of radical and unexpected changes incustomer ’s behaviour and competitor ’sstrategies. The new competitor in the mobileindustry impacts the equilibrium and stunsthe telecom sector. The major servicesproviders started making huge losses andtalked about ‘mergers and acquisitions’. Dueto exiting barriers, it turned out to beunreasonably difficult for them to survive asthey could not get off the business. It wouldbe unreasonably difficult for small players in


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the business to make a considerable marketshare.

Reliance Jio has revolutionized the businessand has totally changed the manner in whichthe business works. The consumersperceived that Jio has driven a digitaltransformation in the Indian TelecomIndustry. Out of the entire clients of Jio, amaximum number of clients of Jio fall in theage group of 15 to 20, Jio should concentrateon this age group as this is the age whenyoung people will, in general, spend moreon entertainment and features. It shouldconcentrate more on the rural regions of thenation, with the literacy levels improvingand the requirement for progressionemerging in rural regions, it is an idealopportunity for them as an ever-increasingnumber of individuals adapt to 4G andutilize increasingly more of information i.e.Data.

To determine whether Reliance Jio conducthas been predatory, a close assessment isrequired other than evaluating the pricingof products and services. Further, the marketstructure of the telecom industry, regulatorychanges, spectrum auctions and issuesrelated to interconnection charges need tobe examined. Reliance Jio at present cannotbe pronounced as a market leader and saidto be associated with predatory pricing.However, conduct and the way of its entranceinto the broadcast communications industrymay absolutely be considered as predatory.

As appropriately said in a discourse by Mr.Mukesh Ambani, the data will prompt Indiaout of poverty, out of misery in this way it islike Oil. With the increase in data utilizationand each individual presently depending onand getting dependent on the web, Jio hasmade an ideal opportunity for itself. Byluring free calls to the end-users andafterward enticing the clients with theexpectation of complimentary data in thebeginning and now cheap data, when thehabit is formed it won’t be hard for them to

hold the customers. Jio swallowed eachcontender, taking the life out of them,constraining them to move or exit or merge.From the investigations, it tends to bepresumed that after the launch of Jio themonetary structure of the market was as yetthe same, but the degree of rivalry has grownunexpectedly. In the event that Jio proceedsat this pace, it will totally reclassify theTelecom area in India and another post Jioera will be formed in the telecom industrywhere everything without exception isconceivable.

Questions :

1. Analyze the market penetrationstrategy of Reliance Jio when themarket is already dominated by bigplayers?

2. What are the various issues andchallenges faced by Reliance Jio insustaining the market leader positionof the Indian telecom industry?

3. Perform the SWOT and PESTLEanalysis for the Reliance Jio.

4. What are the future challenges forReliance Jio?

Reference

Mhabde, R. and Dhamani, A. (2018). Internal and ExternalAnalysis of Jio. International Journal of Advance Research andInnovative Ideas in Education, Vol 4(2), 1057-1061 [ISSN (O)-2395-4396].

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WISETHOUGHT: TAKING INDORE GLOBALLY*

science. Soon he realized that he had anunconditional interest in computers so afterfew serious enquiries with his mentors hefinally decided to explore his career inengineering rather than medical science.With a merit rank in IIT-JEE, he was selectedfor BVS University, Bengaluru for his B.Techin Computer Science in the year 2009.

Though, he joined the course in computerscience, yet he was not interested in codingand programming. He wanted to dosomething different in the field ofInformation Technology. In his secondsemester, he observed that many studentswere lacking in the basic general knowledgeskills. Thus, he along with his six friendsincepted an NGO called ‘Buland India’ onMay 8, 2010. The basic idea was to providenecessary general knowledge to thestudents and other relevant informationabout which people were not generallyaware of. To arrange the funds to run theNGO they started developing websites andproviding digital media solutions to theirnear and dear ones. On the suggestion ofone of the seniors they formalized the wholestructure and finally came up with Instatag

Wisethought, claimed to be the world’s second largest online content company, founded underthe banner of Instatag Technologies which was the entrepreneurial venture of seven youngengineering students. The promoters of Wisethought realized that there were many publisherswho had the sharing platform but lack contents, similarly there was content which could goviral but it did not had access to the targeted audience. Wisethought, through its affiliated‘Halla9’, tried to draw a commercially viable triangle in the field of content industry havingthree peripherals of creation, distribution and consumption of contents. Wisethought provided aplatform where anybody could express or explore content, thus, was able to generate tremendousonline traffic. Wisethought wanted to be the king of content consumption. Their vision was tobecome holistic new media organization to survive for the decades.

Keywords: Content Marketing, Social Media, Native Marketing, Online Marketing,Entrepreneurship.

Wisethought, was one of the most renownedand successful name in the field of onlinecontent platform under the umbrella ofInstatag Technologies Pvt. Ltd. based at thecity of Indore, Madhya Pradesh, India. In theyear 2015, it was awarded as the ‘FastestGrowing Company in IT Sector’ by All IndiaAchiever ’s Foundation. Google had alsoselected it amongst the elite group of startupsas case studies on successful companiesusing their products. It claimed to be theworld’s second largest online contentcompany with the net-worth close to Rs 300Crore in the year 2015-16 and around 120million users worldwide.

Wisethought was yet another milestone inthe entrepreneurial journey of its Co-Founder Manoj Joshi. Manoj, a 25 yearyoung charismatic guy spent his childhoodin an almost unknown village in the map ofIndia named Nunsar, in Bhiwani District ofstate Haryana where his father was runninga small grocery shop. Following the villagetrend, like other youths, he moved to Jaipur,Rajasthan in his final years of schooling inthe year 2007 and joined coaching to facecompetitive examinations. Initially, hewanted to pursue his career in medical

* The case was developed by Tarun Kushwaha, Suyash Jhawar and Prayatna Jain of Prestige Institute of Management andResearch, Indore and Shaifali Tripathi, Millenium Institute of Science and Technology, Bhopal during Thirty Fifth NationalCase Writing Workshop organized by Prestige Institute of Management and Research, Indore in collaboration withAssociation of Indian Management Schools, New Delhi on April 28-30, 2016.


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Technologies in June 2010. The nameInstatag, which means faith in Thailanguage, was derived from the initials ofseven co-founders of the company. Afterforming Instatag, they started developingwebsites commercially targeting those firmswho were not having presence in onlinemarket as their earning source.

Being the engineering students it was verydifficult for the founders of Instatag tomanage between the academics and runningday to day affairs of the company. Also, therewere differences in the opinions of thedirectors. Finally, five out of seven membersmoved out by the year 2012 and only Manojand Shirish were left to run Instatag. Duringthis period, Pawan, younger brother ofManoj joined them. Pawan understood thepower of social media and made the firstFacebook page of Instatag with the name‘Unique Facts in the World’ to share contentsbased on positivity and to inspire people toexplore the world.

Yet another twist came and Manoj andShirish got separated in late 2012. Manoj wasstill continuing with Instatag and Shirishstarted his own venture ‘Followheart365’. In2013, Shirish rejoined Instatagwith hisbrainchild ‘Followheart365’ based on a modelfor filling the communication gap andconnecting the students and teachers of anycollege. The pilot test was done at BVSUniversity. However, they had to shutdownit as it was not commercially viable.Meanwhile, ‘Unique Facts in the World’ wascontinuing successfully and was able togenerate 1 million organic likes within 6months of its inception. In 2013, it hit 2 millionlikes and in 2016 it claimed to have 4.2 millionorganic likes.

Manoj realized that Facebook had its ownlimitations where the monetization of theaudiences was a big issue. With the idea ofmonetizing the Facebook followers, Instatagtried various products like‘Thecrazyguy.com’ and ‘urstory.com’. All

these were disasters on the branding frontand as a result Instataghad almost reachedthe verge of Bankruptcy.

In 2014, Manoj came to Indore, to pay visitto Shirish’s parents. He stayed in Indore foraround 3 months and discovered the latentpotential of Indore with amazingly low costof operations as compared to other metrocities. Looking at this he decided to shift fromBengaluru to Indore. In September 2014,‘Wisethought’ came into existence with anidea to explore the untapped growing onlinecontent market. Content writing is a mostgeneralized form of technical writing limitingthe expertise of the writer to generaloverviews rather than specifics. Due towhich web- publishers have enter intocontent writing business where they foundover 50 percent of India’s population wasunder the age of 30 and was tech savvy.Wisethought realized that there were manypublishers who had the sharing platform butlack contents, similarly, there was contentwhich could go viral but it did not had accessto the targeted audience. Wisethoughtthrough its affiliated ‘Halla9’ tried to draw acommercially viable triangle in the field ofcontent industry having three peripherals ofcreation, distribution and consumption ofcontents. Wisethought provided a platformwhere anybody can express or explorecontent thus was able to generatetremendous online traffic.

Wisethought claimed to be the world’ssecond largest viral native marketingcompany with more than 120 million digitalaudiences in its community network afterTheBestfeed.com. The major chunk of theseaudiences i.e. around 35 percent were fromUSA, 15 percent from UK, 15 percent fromIndia and 5 percent from Canada andAustralia respectively. Wisethought did notface any major competition in Indian market;the closest competitor is Scoopwhop.comwith almost half the number of audiences incomparison to Wisethought. The revenue of

Wisethought: Taking Indore Globally

80

Wisethought was coming from onlineprovomatic ads and was around Rs. 26 crorein the year 2015-16. Manoj had decided atarget to raise it to around 80 – 100 crore bythe year 2017. Wisethought was also thebiggest client of Google in India whichprovided almost 800, 000 to 1 million $business to Google every month. Looking atthis Google has appointed a dedicatedaccount manager exclusively forWisethought. Many business partners haveshowed their interest to invest inWisethought but the founders believed inbootstrapping. As Wisethought wasreceiving an overwhelming response of theircontents they decided to offer ‘Live Chat’ totheir current and prospective customers.

At that point of time Wisethought had aworkforce of 55 people and majority of themdid not belong to Indore. The company tookcare of their lodging and boarding in the city.The company believed in open work culturewhere everybody can express his or herviews in a platform called ‘panchayat’. The

company had a flat hierarchy and believedin hiring people with ‘passion and notqualification’. However, talent acquisitionwas still a major challenge for Wisethought.Manoj and his team aimed high to expandtheir business in future and wanted to be theking of content consumption in variouslanguages besides English such as Spanish,French and even Hindi and other vernacularlanguages of India. Their vision was tobecome holistic new media organization tosurvive for the decades. To achieve this fastthe company was going to shift in its newpremises with almost double the work force.This mission did not seem to be too far asManoj and his team worked with philosophyof great intent with Amazing Ideas along withPassionate Team to offer Amazing Products.

Questions :

1. Express your views on expansionstrategies of Wisethought.

2. Comment upon the entrepreneurialskills of Manoj.


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