Case study --- Business Environment --- McDonald’s -- part 2

26-7-17

McDonald’s knew foods whereas Amit Jatia (who managed McDonald’s branches in South and west India)  and Vikram Bakshi (who managed McDonald’s branches in North and East India)  knew properties (Real Estate). The first question which should come in mind is “why the two business entity from different business affair joined hands IN 1995 to start a Joint Venture?”

If we closely observe, the reason is apparent. It was a win-win situation for both the parties. India was open for new business Ideas. In their meetings they had discussed all the reasons and conditions which were outside and inside the control of the future joint venture. First they discussed political, social and newly changed economical conditions of India. Once they found them favorable they brought their discussions to prospective customers and competition in India. 

McDonald had International quality of food which most of the Indians had not tasted before. There was almost no competition for McDonald’s products. Huge market was waiting for the penetration, indicating wishful revenue generation. However, McDonald’s management also noticed that Indian business environment is different from the business environment of Europe or America, so they needed a different plan for Indian market to grow the business. 

  Amit Jatia  and Vikram Bakshi used their past experience and made proper surveys  in real estate to find suitable properties and Invested the money at proper location. There was no Internet in 1995 to enter and spread into Indian Business environment (like Amazon is doing in India these days). Brick and mortar was the only way to start and expand.

Value alone, of these properties, have made them milliners (comparing prices of properties in 1995 and in 2017). Apart from that, McDonald’s food became alternative of weekend, holiday and birthday food.The food was safe, delicious and affordable to pocket. Parents approved the food whereas children loved it consequently profit poured in. Restaurants branches spread generating full as well as part time Jobs for Indian youngsters and taxes for Indian government.

Q.1 Which three feature of environment mentioned above?

Q.2 Which type of plan they were thinking to use in India?

         

Q.3 Which two importance of environment highlighted above?

        

Q.4 Which two importance of management highlighted above?

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To be continued..... 

Case study --- Power Plant worth core available at Rs 1 only

20-7-17

"They (‘power plant’ Investors, lenders and other stake holders) should have foreseen that there may be a change, but there is no limit to how much one can imagine about the change." Piyush Goyal – Power Minister  @PiyushGoyal had to say these words on the plight of some of the mega power projects In India.

Back in 2006 February, Tata power @TataPower had won the bid for 4,000- MW Mundra Ultra Mega Power Project known as Coastal Gujarat Power Ltd (CGPL) , quoting a price of Rs. 2.26 unit of electricity generated. The project was to run on coal imported from Indonesia. In 2010, Indonesian Government came up with new regulation that coal can be exported at par with International Rates. The price of coal doubled, consequently, power generation became costly, and so it was no more profitable to supply the power at 2.26 Rs. per Unit.   

CGPL’s accumulated loss is 6,457 crore where as its paid up equity capital is Rs. 6,083 crore. Its outstanding loan is Rs. 10,159 crore. Tata power has also burned its money by lending Rs. 4,460 crore. Supreme Court has disallowed compensatory increase in tariff to the company. Tata power claims that if the tariff is not increased company will lose Rs. 47,500 crore. Moreover, tariffs of solar power and other renewable source of power have come down to Rs. 2.97 per unit.

Looking for rescue, 4,000- MW Mundra Ultra Mega Power Project, Tata power has written to the centre proposing to sell 51% equity for a nominal fee of Rs. 1.

Q. Which step of planning has been pointed out by power minister?

Q. Which limitation of planning has been pointed out by power minister?

Q. How many Environment elements have seen the change since 2006?

Q. How many concepts of plan have been involved?

Q. How many limitations of planning suffered by Tata Power

For more read at

http://www.thehindubusinessline.com/companies/tata-power-offers-to-sell-51-stake-in-mundra-for-re-

1/article9732822.ecehttps://qz.com/956477/a-sluggish-economy-and-cheap-renewables-are-choking-indias-giant-coal-power-plants/

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send your views at avnishpathak18@gmail.com or at  @pathaksirbst ( at twitter)

To be continued..... 

Case study --- Business Environment --- McDonald’s -- part 1

19-7-17

Every business has to work in an environment which is popularly known as Business Environment. There are five dimensions or elements of Business environment one of which is economic environment which saw sea changes in India in 1991.   

In 1991, INDIAN economy faced a serious foreign exchange crisis, together with high government deficit and  rising prices. There was only one lucky event – India had bumper crops that year.

As a part of economic reforms, the then Government of India announced a new industrial policy in July 1991, which left lasting impact on the future of Indian economy.

The policy got favorable response from many multinationals as India was open to them and proposals of many Joint Ventures started pouring in. One of such company was McDonald's @McDonalds (27.5 billion dollars company) which was looking to enter into Indian territories for further growth.

Finally McDonald’s entered in India in 1995. It selected two Partners Amit Jatia and Vikram Bakshi.

McDonald’s has around 34,000 outlets in more than 180 countries. It has opted two business models

A. License Model-Giving license to a local player for an agreed fee together with a royalty linked to sale that is more the sale more the amount of royalty McDonald’s get. Company prefers this model as it is has low risk and minimum hassle. 80% of 34,000 outlets runs on this model.

B. Ownership model- where McDonald’s invested money by entering into a Joint venture and was followed in developing countries. 

In India it followed Ownership model with 50-50 Joint venture for 25 years i.e 1995 to 2020. However, it preferred two partners instead of one.  Amit Jatia  was to control south and west of India whereas  Vikram Bakshi was to control North and East of India.

Interestingly both of the partners who were selected were from real estate business and not from food business or restaurant business. This is normally done to avoid conflict in future and to have upper hand in the operational management to safeguard its investment and expansion rights.   

NEXT PART 2.....

Q.1 which principle of Fayol is followed by McDonald's?
      

Q.2 which two managerial response were opted by McDonald's?
     

Q.3 which level of management is involved?
     

Q.4 which environment has been targeted by McDonald's?
   

Q.5 which environment has been used by McDonald's?

     

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To be continued..... 

Tata Motors from Vertical to Horizontal

12-10-17

Case study ---  Say No to Designations

Tata Motors @TataMotors is India’s largest automobile company by revenue. In a major decision it has decided to scrape designations and create a flatter organization. This will lead to flattening of hierarchy level to 5 from 14. Designations such as senior vice president, vice president, senior general manager, general manager, deputy general manager etc. will be scraped. All managers with a team reporting to them will simply have the job title ‘Head’ followed by function name or department name e.g. Head of planning or Head of marketing.

The company expects that the move will help to bring the same work culture in Tata Motors, which is followed at global companies. Employees will now focus on work instead of their designations. Now onward their will not be routine promotions that an employee gets purely by virtue of time spent in the company. Promotions will happen only when there is a vacancy.

In the opinion of management experts, flat organizations are more successful at the lower level of management in term of communication and implementation. However, flat organizations are not successful at top level. In India Designation is one of the top five motivating factors for employees. Indians place lots of emphasis on hierarchy and small change in designation. At some point of time money is not everything for Indians.    

Q 1. Which level of management has not been discussed above?

Q 2. What are other motivating factors other than mentioned above?  

Q 3. Which type of incentive has been taken away by the company? 

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To be continued..... 

Out of sight is out of mind

3-7-17

Vivo @Vivo_India Chinese handset manufacturer has won title sponsorship of IPL with a record breaking bid of Rs. 2,199 crore for next five year, almost 440 crore per year. The amount is huge considering the fact that DLF which was the first title sponsor, had paid only 200 crore for 2008-12 that is 40 crore per year.

In 440 crore, two to eight, Bollywood movies can be made, per year. Consider the budget of latest Bollywood movies--- JOLLY LLB(2) -- 45 crore, HALF GIRL FRIEND -- 48 crore, KABIL -- 60 crore, RAEES -- 85 crore,  TUBELIGHT -- 100 crore, BAHUBALI – 250 crore. 

Spending so huge amount makes sense considering the fact that Not only in human relationship but in business world especially marketing of products and services ‘Out of sight is out of mind”. People forget the brand quickly. To attract prospective buyer it is essential to be in their memory. Total viewer of IPL - 2017 were 363.9 million. That is 1.25 billion Impressions (number of times watching). If the same viewership remains next five year the cost will be less than one paisa per viewer.

It will provide huge benefit to VIVO, as,  title sponsorship winner gets its name embedded in tournament name. The name of trophy will be ‘Vivo IPL’. This name ‘Vivo IPL’ will be read and seen millions of times not only in electronic but print media, when IPL’s new season will start.  Vivo is aiming that every 1 Indian out of 3 should be using their handset. Their main focus is on tire II and tire III cities.

OPPO (hand set) was the second highest bidder (1430 crore). Interestingly VIVO, OPPO are owned by same parent company BBK which also owns ‘ONE PLUS’ (hand set).

Q.1 which principle of Fayol is followed by BBK?
      Options: a. Division of work b. Unity of direction  c. Order  d. Initiative

Q.2 which limitation of advertisement highlighted above?
      Options: a. Add to cost b. creates confusion c. Multiplies the needs

Q.3 which level of management is involved?
      Options: a. Top b. Middle c. Operational

Q.4 which environment has been targeted by going for sponsorship?
     Options: a. Technological b. Social c. Economical 

For more on movie budget

http://mtwiki.blogspot.in/2014/09/bollywood-2014-movie-budget-profit-box-office.html

COMPOSED BY   PATHAK SIR   @pathaksirbst ( at twitter)

send your views at avnishpathak18@gmail.com or at  @pathaksirbst ( at twitter)

To be continued.....