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INTERNAL ASSIGNMENT
APPLICABLE FOR DECEMBER 2021 EXAMINATION
Sales Management
1. Design a Sales Process when
your organization is intending to enter Kenyan Market (10 Marks)
2. How would you set up a
sales organization (team) for a FMCG company setting up their operations and
having headquartered in Mumbai? (10 Marks)
3. Read the case ‘Levis India
offers – Jeans on EMI’ and respond to these questions. While answering
questions you are free to make reasonable assumptions. Please state them
clearly
In June 2009, apparel
manufacturer, Levis’ Strauss India Pvt Ltd offered to sell its well-known
Levi’s jeans and other Levi’s products on equated monthly installments (EMI)
payable through credit cards. Analysts viewed this as a bid by the company to
increase sales against the backdrop of the economic downturn. The company
planned to arrest its decline in sales through this innovative offer. Analysts
felt that the offer was the first such in the branded apparel industry. On the
launch of the scheme, Shumone Chatterjee. MD, Levi’s said – “it is for the
first time that a brand is offering this kind of deal in India. EMI has proven
good for several industries such as housing and white goods; therefore, I feel
it will make a significant difference to the branded apparel industry as well”.
The offer, launched as a pilot
program, in Bangalore, was valid only for consumers who purchased products
worth Rs 1500 and above. The consumers had to settle the bill in three
instalments. The EMI’s were zero percent interest. Levi’s had entered a tie-up
with ICICI Bank to offer this scheme. In return, the bank received service
charges from Levi’s for each transaction.
Levi’s is the Indian
subsidiary of US based Levi Strauss and Co. It sells denims jeans under the
brand Levi’s, a popular and aspirations brand of jeans in India. As of
September 2009, Levi’s operated through 230 stores and 500 points of sales in
nearly 200 cities.
By launching the offer, the
company planned to make the jeans affordable to consumers who aspired to own
the brand. Chatterjee added, “Many aspire to own a Levi’s but the price can be
a barrier. The EMI scheme makes it easier for the people to build the wardrobe
with a premium brand like ours. The company felt that it could make customers
spend more by easily making payments through installments. “the idea is to not
only achieve high conversion rate (walk-in’s conversion into spending) but also
enable our consumers to spend more and purchase higher-end denim through an
easy mode of payment. If the EMI scheme works well in Bangalore, then we can
unveil this nationally in a couple of months”.
The company received a good
response from customers. “ever since we introduced the ‘buy now, pay later’
scheme with interest of hidden charges in June, our sales have surged by 10-15
percent” said Mr. M Aaron, franchise manager, Levi’s. From June 2009 to August
2009, almost half the buyers who had an ICICI card used the EMI facility. “The
average value of their purchase was 50% higher than those who didn’t use the
EMI facility” added Chatterjee.
Encouraged by the response
received by the scheme, the company announced its plan to roll out the offer in
eight cities other than Bangalore by mid-September 2009. These cities were
Pune, Delhi, Ahmedabad, Chennai, Hyderabad, Kolkata, Mumbai and Chandigarh. The
success of the program, prompted Levi’s to enter into tie-ups with other
private banks such as HDFC Bank and Axis Bank. He criteria for usage of Axis
Bank credit cards was that the bill amount had to be Rs 5000 and above.
Some analysts felt that it was
logical for the Levi’s to offer the scheme through credit cards since there was
tremendous potential to be tapped in the Indian market, but they noted that the
number of credit card holders in India was less than that of developed
countries. According to a report by BankRate.com, only 28% of affluent Indians
have credit cards, a fraction of the average around the world. As of 2006,
credit cards accounted for just 1% of all purchased in India – one of the
lowest percentages in the world The offer launched by Levi’s received a mixed
response from Industry observers, customers and analysts. Customers appreciated
the scheme offered by Levi’s. According to Roger, a customer, “it helps the
consumers and the companies too. Recession has affected both the companies and
the consumers, so it’s a win-win situation for both of them,”. However, the
company maintained that the promotional technique was not a strategy to counter
the effects of the economic downturn. The company said that it was aimed to tap
the tremendous market potential offered by the organized retail market in
India. As of August 2009, the Indian organized retail market was just 4-5
percent, out of which 20% accounted for apparel and lifestyle, thus offering
scope for growth, according to Levi’s.
According to Sanjay Lalbhai,
CMD of Arvind Mills Ltd, “we have never offered such schemes and I don’t think
it has been tried anywhere in the world, unless you have a very loyal customer
base and are sure of their credit worthiness. It will be interesting to observe
how they are doing it”. On the other hand, some experts felt that though this
scheme might attract the masses to Levi’s initially, in the long run, it might
lose some premium customers since the branded products would be affordable to
most other sections of society.
a. Critically analyze Levi’s
offer to sell its Levi’s brand of jeans and other products on EMI (5 Marks)
b. What was the overall
objective of this plan? Do you think the company will succeed? (5 Marks)
Entrepreneurship and Venture Capital Management
1. Ruma is a final year hotel
management student, who is very much interested in starting her own business of
bakery. Home baking is the trend now so she wants to start from a small
business and then in future expand it. She is thinking of taking bank loan and has
approached you for advice. What would you advise her? (10 Marks)
2. Explain in detail business
canvas model for a business idea of your own. (10 Marks)
3. Arav and Maya are going to
start a business which is basically a PR firm which helps different organizations
to create brand image and communicate to public to attract customers to those
organization. a. What kind of innovation they should select so that they can be
one of the most chosen brands of all others? (5 Marks)
b. Do you think M/s XYZ can
expand their business by using the franchise model? What will you advice the
company? (5 Marks)
Corporate Finance
1. MCARTECH Pvt. Ltd. is
considering two mutually exclusive capital investments. The project’s expected
net cash flows are as follows:
|
Expected Cash Flows |
||
|
Year |
Project A |
Project B |
|
0 |
-500 |
-875 |
|
1 |
100 |
150 |
|
2 |
110 |
200 |
|
3 |
120 |
250 |
|
4 |
175 |
375 |
|
5 |
240 |
530 |
|
6 |
300 |
680 |
a. If you were told that each
project’s cost of capital was 12%, which project should be selected using the
NPV criteria?
b. What is the profitability
index for each project if the cost of capital is 12%?
c. What is the regular payback
period for these two projects?
(10 Marks)
2. Assume that you plan to
take a housing loan with a tenor of 20 year. The loan has to be repaid in equal
monthly installments. Considering that the loan amount is Rs. 50 lakhs and the
interest rate on loan is 9% p.a., what would be the equated monthly installment
(EMI)? (10 Marks)
3. LT India Ltd has the
following capital structure, which it considers optimal:
Debt 35%
Equity shares 65%
Total 100%
Applicable tax rate for the
company is 25%. Risk free rate of return is 6%, average equity market
investment has expected rate of return of 12%. The company’s beta is 1.10. Debt
will bear an interest rate of 9% p.a.
Calculate
a. component cost of debt and
equity shares assuming that the company does not issue any additional equity
shares. (5 Marks)
b. Weighted Average Cost of
Capital (WACC). (5 Marks)
Strategic
Financial Management
1. ABC Limited is looking at expanding its business and wants to
invest in a new plant to boost its production capacity. The plant has a life of
three years. The details are as follows.
· The plant would depreciate in three years from the acquiring cost
of Rs. 4,20,000 to zero in three years. There would be no salvage value at the
end of three years. The depreciation would be on a straight line basis.
· The additional revenue from the plant would be ~ Rs. 6,00,000 in
year 1, Rs. 7,00,000 in year 2 and 3.
· The input cost (raw material) is expected to be ~ Rs. 3,00,000 for
year 1 and 2 and Rs. 4,00,000 in year 3.
Assuming a tax rate of 30% and a discount rate of 20%, you are
required to
1. Arrive at the expected
annual cash flows (after-tax)
2. Compute the net present value
of the investment and determine if the investment is financially viable? (10
Marks)
2. As an investor in the
equity market you become aware of investment opportunity in 3 corporates.
Assuming that the cost of equity is 8%, compute the fair value of X Limited, Y
Limited and Z Limited using the Dividend discount model.
a. Given the history of the
company, X Limited is expected to pay a uniform dividend of Rs. 5.00 per share.
b. Being in the IT Industry, Y
Limited is expected to pay a dividend of Rs. 4.00 per share and an increase of
5% year on year thereafter.
c. A pharmaceutical company, Z
Limited has been paying a dividend of Rs. 2.00 over for the last 3 years. The
company is expected to do extremely well and increase the dividend pay-out by
7% year on year. This year the dividend expected is Rs. 8.00.
Additionally, what is the
biggest lacuna in the Dividend Discount Model in valuing stocks? Give an
example to explain. (10 Marks)
3. As an Investment Banker
your client, LMN Limited is looking at a restructuring its business. You
extract the following data from the financials of the company.
Particulars Rs. Crs.
Equity capital (Face value Rs.
10) 1,000.00
Debentures (@ 12%) 400.00
Long Term unsecured loan
(@15%) 200.00
Total 1,600.00
The company has been paying a
dividend of 20% per annum (historically). The stock of LMN Limited is listed at
Rs. 20 on the NSE. You are required to
a. Compute the cost of Equity
capital. (5 Marks)
b. Weighted Average cost of
capital of LMN Limited. (5 Marks)
International
Banking & Foreign Exchange Management
1. ABC Limited, an Indian
Company has an export exposure of 10 million Yen. Yen is not directly quoted
against the Rupee. The current spot rates are USD/INR = 41.79 and USD/JPY
=129.75. It is estimated that Yen will depreciate to 144 level and Rupee to
depreciate against Dollar to 43. The Forward rate for September 2020 USD/YEN =
137.35 and USD/INR 42.89. Given that the actual spot rate on 30 September 2020
was USD/YEN = 137.85 and USD/INR = 42.78, is the decision to take forward cover
justified in hindsight? (10 Marks)
2. Identify which party is
playing what role in the following Letter of Credit transaction. ABC Limited
wants to import raw material from Z123 Limited, a supplier in Germany who banks
with T.R.V. Bank. The supplier insists that ABC Limited issue a Letter of
Credit for the full value of the transaction. A tenure of 90 days is agreed
upon. ABC Limited approaches N.O.P. Bank to issue a Letter of Credit. You are
required to identify the steps involved in a Letter of Credit transaction. Also
Identify which party is playing the role of
Issuing Bank
Beneficiary
Applicant
Beneficiary Bank (10 Marks)
3. The prevailing market rates
are as follows.
INR/USD = Rs. 77.00
Interest rate for a 6 month
loan in India = 12% per annum
Interest rate for a 6 month
loan in USA = 6% per annum
a. Explain the concept of
Interest Rate Parity. What will be the expected 6 -months forward rate for US
dollar in India? (5 Marks)
b. Compute the Forward
premium/discount of USD/INR in the Indian Forex Market? (5 Marks)
Insurance
& Risk Management
1. Vaishali is working as an
actuarial in an insurance company. Few of the new joiners have been appointed
as an underwriter in their department. Vaishali’s manager asks her to prepare a
short presentation on the various methods used by them in calculating the
premium rate. Help Vaishali to complete the assigned task. (10 Marks)
2. Mr. Manohar is married and
have two kids. He has recently undergone a surgery, which made him think about
the financial security for his dependents after his death. Hence, he decided to
meet his friend who was an insurance advisor to understand the life insurance
policy and the various benefits attached to with this policy .Explain Mr
.Manohar on life Insurance policy with its need. (10 Marks)
3. Shyam is working in a
private investment firm. Unlike his parents who had a government job and had
retirement benefits, shyam lacks on that front being in a private firm. Now he
is worried about his retirement years.
a. As an insurance agent,
discuss the various Risk, which Shyam will consider while planning his
retirement plan. (5 Marks)
b. Also explain the various
steps which will be involved in framing the retirement plan (5 Marks)
Treasury
Management in Banking
1. Historically, only larger
Banks had the strength of providing Treasury products & services. Now even
smaller banks are into it in a strong way. Enumerate and describe at least 5
purposes for which a Bank Treasury exists (10 Marks)
2. The organization structure
of a Bank’s Treasury unit involves designing of its operations across Front
office, Mid-office, and Back office. Describe each of these three operating
arms in terms of its nature, purpose / objectives, and the skills / qualifications
of the people employed in these 3 operating arms (10 Marks)
3. Assume that you are one of
the advisors to customers on Payment options.
a. There are multiple
Electronic Payment options available in India. What electronic payment option
will you recommend for the following
1. A Corporate customer (ABC
automobiles Limited) wants to pay dividend of varying amounts to its 10,000
shareholders. ABC Automobiles maintains a current with SBI, Kolkatta.
2. A Retail Bank customer (Mr
Gupta) wants to make monthly repayment (EMI of Rs 15,000 per month) towards
Housing Loan taken from Punjab National Bank, Pune whereas the customer has his
Savings Bank account with HSBC Bank, Mumbai
3. A customer, Mr Raju who has
a Savings Bank account with ‘Indian Bank’ Chennai wants to make a one-off
payment of Rs 10,000 urgently to Mr Alex who has a Savings Bank account with
Citi Bank Mumbai.
4. A corporate customer, ABC
automobiles Limited that has a Current account with ‘Bank of India’ Bangalore
wants to pay a sum of Rs 1 crore urgently to another company called XYZ
automobiles who has a current account with State Bank of India, New Delhi.
(5 Marks)
b. For each of the 4 items
listed above, as an advisor, what will be your high-level advice on the process
involved and the benefits to the payer and the beneficiary (5 Marks)
Procurement
Management
1. Explain what is Ethics in
Procurement & why it is important? You are a Procurement Head of Consumer
Product organization, explain any 4 ISM Standards & link with mention
industry scenario. (10 Marks)
2. You are part of Pharma
Company who has grown immensely during Covid times. Your company is planning to
set up two more plants for manufacturing of vaccinations. As Procurement
Manager help them to evaluate between leasing or buying two factory premises.
Please support your answer with reasoning & mention advantages of selected
option. (10 Marks)
3.a. Oftenly we hear debate
that Purchase Requisition is whose responsibility? What do you think? Explain
Purchase requisition and its types. Why PR is one of the critical steps of P2P
cycle? (5 Marks)
3.b. What are various types of
Pricing Contracts; why they are used? Explain types, sub types and difference
between them in terms of responsibility of buyer or seller. (5 Marks)
Warehouse
Management
1. You are working as an
assistant intra consultant for Pharmaceutical Company. The company owns a
warehouse from last many years and due to COVID 19 company is planning to
expand and automate the existing warehouse. As a consultant advises the organization
to redesign the warehouse that ultimately improves efficiency. (10 Marks)
2. Consider above mention
scenario (check Q1) and share your opinion as on the below:
How an organization can create
a competitive advantage in warehouse management? (10 Marks)
3. ABC Ltd. is manufacturing
two wheeler scooter from last ten years. Company is planning to start new
manufacturing set up for E scooter. The organization has hired you as an
assistant intra-warehouse consultant to take better decisions.
a. Suggest organization
various factors while selecting the location of the warehouse. (5 Marks)
b. Explain top management of
organization regarding important warehouse design criteria. (5 Marks)
Enterprise
Resource Planning
1. Why do organisations
implement an Enterprise Resource Planning system? Why is OLTP a critical part
of an ERP? What component of ERP helps the Managerial level? Do these
components resolve the problems faced by organisations prior to introduction of
ERP? Give an example to show the before and after scenario.
(10 Marks)
2. Educational Institutions
are looking for ERP solutions to improve operational efficiency and student
life cycle. They need to manage numerous programmes, courses, student and
employee performance and records and provide services to students. Indicate how
ERP solutions can help them by focusing on the student life cycle and
identifying the supporting functional areas. You can take any case study to
support your answer. (10 Marks)
3. New Products Company
receives more than 12,000 customer orders a month, drawing on a combined
inventory of over 1,000 products stocked at the company’s warehouse. About 60
PCs are installed at New Products Company’s headquarters which are connected in
a local area network to several servers. Orders are received by phone or mail
and entered into the system by customer representatives or they are entered
directly by customers who use the electronic commerce website developed by New
Products Company. Well-designed user interfaces help users follow data entry
procedures. The servers store these orders in a database. They use simple
database management inquiry commands to get responses and reports concerning
sales orders, customers, and inventory to review product demand and service
trends. The company has initiated a lot of computerisation but in a fragmented
manner. The management of New Products Company wants to revamp its existing
system.
a. Indicate how information
flows through the various departments in the organization to fulfil an order
and identify delay points. (You can make assumptions if required). (5 Marks)
b. How can an ERP help them in
managing its order fulfilment process efficiently by reducing manual
intervention? Indicate at least two points. (5 Marks)
Operations
and Supply Chain Strategies
1. ABC Ltd. company is
operating in FMCG sector and company is planning to launch new product with own
brand. Because of various product mix customer demand is increasing. However
performance of the firm is not increased. Consider you are appointed as supply
chain managers, advise some strategies to the firm that eventually increase
performance. (10 Marks)
2. Mr. Gupta is supply chain
manager of OLB Ltd. and company is now focusing on manufacturing of E scooter.
By looking to the customer demand, company is constructing largest
manufacturing set up in India. In the dynamic market, you would face tough
competition from different companies. Analyze and suggest a different level of
strategies that you will implement in the firm that can improve overall
business profit. (10 Marks)
3.a. Consider situation
mentioned in Q. 2, explain various competitive dimensions in detail that
company needs to rework to get better market share and attain business
excellence in the supply chain. (5 Marks)
3.b. Management is confused
about the selection of the production process. Kindly suggest the best method
in the production process that improves efficiency. (5 Marks)
Supply
Chain Management
1. “Dharti” is a social enterprise
obtaining naturally grown cotton from West Bengal, Telangana and gets unisex
T-shirts made out of Tirupur and sold online, through kiosks at shopping malls,
at exhibitions and in various seasonal fairs across country. They use the
surplus after covering the costs to fund various educational purposes of the
needy. How can they leverage various supply chain drivers to meet their
objectives?
(10 Marks)
2. “Fruit Basket” is a fresh
vegetable and fruit shopping chain. Their specialty is organically grown and
seasonal fruits/vegetables. They have outlets at about 20 points across
Bangalore. Fruits and vegetables come from nearby states from farmers they have
tie-up with. With increase in business they also have FRUITBASKET.COM as online
portal which facilitates home delivery within 2 hours within Bangalore. Their
challenge is costs, freshness, quality, delays, availability etc. Their aim is
to reach lean and agile value chain over next 2 years. Prepare a road map to
enable them transition levels of supply chain improvement to be lean and agile
value chain? (10 Marks)
3. Mo-Bike is electric
two-wheeler mobility service provider. Their model is to provide quick,
flexible, self-driving mobility from Metro Station to near by Business and IT
park where about 5000 people commute every day. They want to forecast next 5
years number of users to plan business model.
a. Describe steps in demand
forecasting in this case situation? (5 Marks)
b. Describe methods of demand
forecasting? (5 Marks)
Total
Quality Management
1. Analyzing and understanding
the significance of quality cost in production enables an organization in
developing quality conformance in a competitive business environment. Explain
how you will implement cost of quality in your organization. In your opinion
should the organization spend more on cost of good quality or cost of poor
quality? Explain with reasons/examples. (10 Marks)
2. ISO 9001 specifies the
requirements of quality management system. As Management Representative of your
organization you have to implement ISO 9001. Explain the steps you will take to
successfully get the ISO certification for your organization. (10 Marks)
3. Maxx Industry is regularly
supplying some critical parts to your assembly line. These parts are either
good or defective. During each delivery a sample of 500 units is sampled and
the number of defective units in the sample is noted. The average defect rate
is 3.5%.
a. Develop the upper and lower
control limits (z=3). (5 Marks)
b. What is process capability
index and what will be your objective in finding the process capability? (5
Marks)
Consumer
Behaviour
Read the case below and refer
books and news articles to answer the questions below the case from the
consumer behaviour perspective
Nestles Maggi: The consumer
warfare
In early June 2015, Paul
Bulcke, Nestlé S.A.’s global chief executive officer, took an urgent flight to
India, having been advised that one of the company’s highly popular brands,
Maggi, was banned from its second- largest market. The issue was further
aggravated when the ban spread to India’s neighboring countries, Singapore and
Nepal. Food safety agencies of various developed countries, including the
United Kingdom, soon became concerned. India’s food regulatory body, the Food
Safety and Standards Authority of India (FSSAI), labelled Maggi as unsafe to
human health after samples showed excess levels of lead and monosodium
glutamate (MSG). Following considerable outrage over food safety fears in
India, Nestlé withdrew the entire stock of the product that had been
distributed at retail channels across the country. Nestlé persistently claimed
that the product was safe. However, the decision to recall the product was made
to retain consumer confidence, as noted in a press release issued by the
company:
The trust of our consumers and
the safety of our products is our first priority. Unfortunately, recent
developments and unfounded concerns about the product have led to an
environment of confusion for the consumer, to such an extent that we have
decided to withdraw the product off the shelves, despite the product being
safe.
The stock recalled from the
market was worth ₹2.1 billion, with an additional cost for materials valued at
₹1.1 billion, affecting
various stages of the supply chain. In terms of business share and potential,
Nestlé had no way of avoiding the product line’s impact on its portfolio in the
Indian market. Nestlé’s management team was busy drafting a new business
strategy to relaunch its highly popular Maggi brand. Etienne Benet, then
managing director of Nestlé India, stated, “We are determined to resolve the
Maggi noodles issue in the best possible way. We will return Maggi to its
rightful position as ‘the most trusted food brand in India.’” The management
team was grappling with an improved re-positioning strategy to help retain its
market share in India. Nestlé also wondered what critical role pricing would play
in influencing consumer purchase decisions during Maggi’s proposed relaunch.
THE MAGGI CRISIS
In India’s largest state,
Uttar Pradesh, standard testing of Maggi samples revealed excess quantities of
lead and MSG. The state directed the inquiry to the FSSAI and they confirmed
the allegation. The FSSAI stated, “We have tested Maggi samples at Kolkata's
referral laboratory. The test results show that there are added monosodium
glutamate and excess of lead. We have ordered further sampling.”7 The product was
found to contain 17 parts per million (ppm) of lead, which exceeded the
permissible limit of 0.01 ppm. Nestlé refuted all claims, asserting that the
lead content in the product was actually less than 1 per cent of the allowed
limit. The Nestlé spokesperson said,
We do not add MSG to Maggi
Noodles, and glutamate, if present, may come from naturally occurring sources.
Food regulators in India also do not specify any limit for the presence of MSG
[and/or] glutamate. We are surprised with the lead content supposedly found in
the sample. We monitor the lead content regularly as part of regulatory
requirements, and tests at our own accredited laboratories as well as those by
independent, external-accredited laboratories have consistently shown the
results to be well within the permissible limit.
Losses
The controversy caused both
tangible and intangible losses for the company. Nestlé India incurred a direct
loss of 20 per cent revenue due to the Maggi ban and nationwide recall.
According to Brand Finance, the brand value of Maggi was anticipated to fall by
approximately ₹13 billion. Nestlé’s stock fell by 15 per cent, resulting in a
market capitalization loss of ₹100 billion. However, analysts anticipated that
the company would rebound very strongly with full volume recovery within a
year. In addition, brokerage firms also predicted a sharp comeback on stock
values. One analyst suggested, “Nestlé stock is a good long-term buy for
investors as fundamentally the company has some great brands that give earnings
growth visibility and cash flows.”
The recall had an impact on
the entire value chain. It affected all direct and indirect stakeholders. The
1,500 permanent employees directly involved with Maggi production were
temporarily shifted to training activities and trade building exercises.
Suppliers who had strong dependence on Nestlé were exploring the prospect of
new customers. One supplier stated: “We were supplying around 200 tons of
spices per month to Nestlé. That has been affected. Now, we are trying to find
new customers, and in future we would try to reduce large dependence on a
single client.”
To recover all kinds of
losses, it became imperative for Nestlé to design a comeback strategy. The
relaunch strategy would require a focus on re-positioning, pricing, and other
operational issues. It was highly likely that such a crisis could extend to
other product lines or brands and also spread to different continents at any
stage of the business life cycle. Nestlé needed to take various proactive
measures to ensure that this major crisis would not be repeated at any point in
the future.
THE ROLE OF PRICING
In 2014, Nestlé recorded its
slowest sales growth in the previous five years. The Maggi recall had further
spread the negative publicity among buyers. Bulcke admitted that “consumer
trust [had] been shaken.” India was the second-largest market for its Maggi
brand. The Swiss food giant confessed that “India is important to Nestlé,” and
that it would strive to sustain its customer share in the Indian market.
With respect to marketing,
pricing could directly influence consumer purchase behaviour. The impact was
expected to be even more significant when relaunching a product that had
suffered a major market share loss due to a product recall. To use pricing as
the centre of the comeback strategy, it was essential for Nestlé to achieve
excellence at meeting the ideal product and market level. The strategy required
managing the trade-off between benefits and price. A value map was the ideal
tool to provide a snapshot of how consumers perceived that trade-off. All
competing brands needed to be mapped, including Sunfeast, Bambino, Top Ramen,
private labels, and other local brands. The exercise would provide useful
insight for the decision-makers to formulate a strategy that could achieve
ideal pricing at the best product and market level (see Exhibit 1).
The increased
demand-versus-supply gap created by the Maggi incident benefitted Patanjali
Ayurveda Limited (Patanjali), India’s fastest growing Ayurvedic company. The
company had numerous product lines to diversify its business, so it was easily
able to enter the noodles market. The product would be sold through the vast
distribution network of Future Group, India’s major retail chain. The promoters
of Patanjali’s Atta Noodles claimed that the upcoming product would be superior
to Maggi, but would be sold at only
₹15, compared to ₹25 for an
equivalent size of Maggi.
Of the many possible
strategies at its disposal, Nestlé concentrated on three key options to
re-enter the Indian market: increase value with the same prices, increase value
with lower prices, or increase value with higher prices. Undoubtedly, Maggi
would increase both tangible value (making the product safe for consumption)
and intangible value (promote awareness through effective labelling). As Nestlé
prepared to relaunch its product with enhanced value, management was concerned
about the decision over new pricing. Anticipating the customer’s response to
the price change, the core team was busy pondering various factors that would
influence the market’s response to a change in pricing.
THE URGENCY FOR A COMEBACK
Emerging economies already
contributed 43 per cent of Nestlé’s overall revenues and were expected to
further increase that share. Changing consumer lifestyle in emerging economies
had increased demand for packaged food, whereas buyers in developed countries
preferred fresh foods. In 2014, sales in emerging markets were growing at 8.9
per cent as compared to only 1.1 per cent in developed countries. With changing
consumer tastes in Europe and China, Nestlé concentrated more of its focus on
India.
In 2014, Nestlé reported
US$623 million in sales of Maggi noodles, table sauces, and other products in
India. The brand name Maggi became interchangeably used to refer to noodles in
India. India’s ₹40 billion
noodle market had many
players, but Maggi controlled 63 per cent of the industry (see Exhibit 2). A
2014 consumer survey declared Maggi one of the five most trusted brands. Future
sales forecasts revealed a growth rate of 50 per cent by 2019 against base
figures in 2014 (see Exhibit 3).
Therefore, resolving the
current Maggi crisis was of extreme importance to the Nestlé management team.
The senior leadership team was confident that it could regain its market status
as one of the most trusted and preferred brands in India. The relaunch strategy
needed to be both effective and timely to retain control of the market, which
was threatened by Maggi’s main competitors including Patanjali (Patanjali Atta
Noodles), ITC Limited (Sunfeast YiPPee! Noodles), Nissin Foods (Top Ramen), and
Hindustan Unilever Limited (Knorr Soupy Noodles). Nestlé’s international market
was also a concern. Indian-manufactured Maggi products were directly exported
to Canada, the United Kingdom, Singapore, and Kenya, and sold through third
parties in the United States, Australia, and New Zealand. Regaining these
markets after a long absence could become a very difficult task.
THE EXISTING POSITIONING
All previous promotional
campaigns for Maggi had consistently communicated a sense of happiness. Some of
Maggi’s most successful projects in India included the following three
marketing campaigns.
Me and Meri Maggi
In 2009, Nestlé India launched
the highly successful “Me and Meri Maggi” campaign. It was launched to
celebrate 25 years of Maggi’s presence in India. The rationale was to bring
consumers closer to the Maggi brand. Children who had grown up with Maggi as a
regular food were now adults, and some of them had unique stories to tell.
People were asked to share their memorable stories on any topic involving
Maggi, such as “Maggi on a Road trip.” The campaign was a resounding success
with over 40,000 stories submitted by devoted Maggi customers. The heartfelt
stories included some emotional and private moments involving Maggi (see
Exhibit 4), and the 50 best stories were printed on Maggi packaging. The
project also asked customers to submit filmed stories, of which three were
chosen to be featured in Maggi advertising commercials. The marketing group
that managed the project for Nestlé was overwhelmed by the response, as they
noted:
We realized that there [was] a
huge cluster of Maggi stories that were adventurous, naughty, and romantic.
This gave birth to the three flavours: the adventurous stories inspired a spicy
flavour that we named “Thrillin’ Curry,” the naughty stories inspired a khatta
meetha tomato flavour that we named “Tricky Tomato,” and the romantic Maggi
stories inspired an aromatic capsicum flavour that we called “Romantic
Capsica.” The television commercials were consumer stories, one picked from
every respective cluster that best represented the mood.
Meri Maggi: Two Minute Mein
Khushiyan
In 2012, Maggi extended the
earlier stories campaign and positioned Maggi as a source of happiness for its
customers. The idea behind the extended campaign, named “Meri Maggi—two-minute
mein khushiyan,” was explained by the marketing group as follows:
The idea really came from the
simple insight of how Maggi noodles delivers joy to consumers across India and
the love that they have for the brand. Whenever you think “two minutes,” you
think of Maggi. And Maggi is all about “khushiyan” [happiness]. Put the two
together and you have a simple, relevant- to-the-brand idea of “two minutes
mein khushiyan.” With this idea, we re-emphasized the brand’s evolution from a
functional two-minute proposition to an emotional two-minute proposition.
#HealthyIsEnjoyable
The launch of Maggi’s new
product variation “Oats Noodles” brought together “brities” (celebrities) with
Maggi in selected advertisements. Madhuri Dixit Nene, a famous Bollywood star,
positioned the new variant as a morning breakfast alternative. The campaign
leveraged the power of social media to reach to its potential buyers. The
campaign ran a selfie contest using the Twitter hashtag #HealthyIsEnjoyable
(see Exhibit 4).
Questions:
A New Positioning Strategy for
changed consumer behaviour
Maggi’s recent safety
controversy required a complete overhaul of the value communication strategy in
an attempt to regain the market position that Maggi had enjoyed for many years
in India. Health and safety had become the key values to communicate to its
customers.
1. How would Nestlé convince
its stakeholders that the relaunched Maggi was completely safe for consumption
and healthy for all consumers? What strengths, including media
sources and celebrity
endorsements, could Nestlé draw from to effectively motivate customer
behaviour? (10 Marks)
2. Reading the case above
suggests the segmentation, targeting, and positioning Nestle Maggi is trying to
achieve. (10 Marks)
3. Given the growth potential
of the industry, changing consumer preferences towards healthy products
a. Discuss the traditional /
modern day advertising strategies should Nestle Maggi use as a brand be following
to remain a market leader (5 Marks)
b. Discuss how the use of the
traditional or modern-day advertising strategies can help build the
motivational factors of buying different variants of Maggi be persuaded by the
tweens lifestyle (5 Marks)
Marketing
of Financial Services
1. One of your clients wants
to apply for a Home Loan in the next 12 to 18 months. In 2020 during the
pandemic the client had lost his job and delayed his credit card payments. The
client is worried that this may impact his credit score maintained by Credit
Bureaus. Suggest a roadmap to your client to improve his credit score. (10
Marks)
2. Develop a Public Relations
campaign for a Bank of your choice to highlight the “Digital Banking” edge that
your Bank offers. (10 Marks)
3. You are a Financial
Planner. Your client Ashwin Aswani aged 37 years and works with an IT company
earning Rs 15 lakhs per year. His wife Asha, aged 34 years, is a homemaker.
They have one daughter Rimmi aged 5 years. The couple requires your help to make
some financial decisions. (You can make any assumptions to further build up
your case.)
a. Ashwin wants to buy a Pure
Risk Life Insurance cover of Rs 1.5 crore. He is confused whether he should buy
a ULIP a Term Plan. Recommend the product best suited for his requirement. (5
Marks)
b. Ashwin has expressed his
desire to retire by the age of 55. Design a retirement plan for him. (5 Marks)
Commercial
Banking System & Role of RBI
1. Indian Banking has
witnessed major changes starting from nationalization in 1969 of 14 private
sector banks again to privatization of banks in 1990s. Year 2014 resulted in
setting of small Payment Banks in different nooks & corners of the country
to a diametrically opposite step of mergers and consolidation of many weak
public sector banks with a few large banks in 2018/19. What has been the
economic & financial compulsions/reasons for such changes in five decades?
(10 Marks)
2. Independence of RBI has
been a major subject of debate in India of late. A few Governors resigned on
this issue, as there was too much interference from the government in deciding
the policies of RBI. Do you agree/disagree on the question of RBI deciding its
own course of action while formulating macroeconomic policy of country or
should it listen to its political masters? (10 Marks)
3. Non-Performing Assets
(NPAs) in the Indian Banking sector has become the subject of much discussion
and scrutiny. Bank’s lending capacity has been severely eroded by mounting
NPAs, net worth of many banks have declined and a number of banks have reported
huge losses. In recent year’s plethora of rules and regulations have come from
RBI, Government, IMF, BASEL recommendations, etc to keep a tab on stressed
assets and timely resolution. In light of above statements:
a. Write the major reasons for
increase on NPAs since last 10 years (5 Marks)
b. According to you what would
be the mitigating factors/solutions for NPA management. (5 Marks)
Cost
& Management Accounting
1. Three partners choose to go
the start-up way. They run a chain of Pet Spa across Mumbai and Pune. For the
accounting year 2022, their business observes increasing prices for materials.
Hence, while preparing their financial statements, the three partners had
varying objectives behind the method they should adopt for pricing the
materials. Objective I: The partners wished to hypothecate inventory and take a
loan. Hence, a higher pricing of ending inventory in the business’ balance
sheet would be desirable.
Objective II: The partners
would wish to attract lower taxes on the business’ profit and hence a lower
profit before tax would be desirable.
Discuss in brief any five
material pricing methods that businesses may adopt. Identify the pricing
methods that would achieve objectives I and II. (10 Marks)
2. Mr. Sharma, founder of
Pioma Plastics desires to increase the profit of the business in the coming
year. He calls for a meeting with the managerial-level personnel and explains
them that the selling price of their product is based on the prevailing market
prices of their competitors. He seeks their advice on whether they should work
backward on optimizing their costs by determining a standard cost for each of
the components. Explain the process of standard costing to the founder as one
of the managerial-level personnel. Would following standard costing help the
founder in increasing the profit of the business? (10 Marks)
3. Futuristic was a newly
setup firm in 2019. It is in the business of providing artwork. However, being
in the business of standard art objects (non-essential items), it did not do
well once it was hit by COVID-19. It has a selling price of ₹2,500 per piece
and a variable cost of ₹1,000 per piece. It incurs an annual fixed cost of
₹30,00,000.
a. The manager of the business
wishes to know- the number of art pieces they must sell to be at the
break-even point the contribution margin
whether the firm is earning
a profit or incurring a loss by selling 2,100 art pieces (5 Marks)
b. To combat the current
difficult situation, the manager plans to curb the variable expenses and bring
them to ₹500 per piece. Compute the new break-even point and contribution
margin. Analyze and explain the movement in contribution margin to the manager.
(5 Marks)
Retail
Banking
1. Retail Banking is a prime
arm of banking for building up and grow its resources side. What does this mean
and what are Banks doing towards growing its resources side? Name any 4
resources-side products that Banks provide and explain their characteristics in
terms of product nature, its classification & benefits and cost benefits
for Banks
(10 Marks)
2. From an era of the past
when ‘Customer went to the Bank’, Retail Banking has transformed itself to
today’s era when ‘Bank goes to the customer’. Explain your understanding of this
transformation along with examples of ways and means adopted by Banks towards
achieving this transformational change. Also, explain any 4 of the mechanism /
tools used by Retail Banks in this regard along with merits and de-merits in
each of them (10 Marks)
3. “Bank Traditional Limited”
is a well-established old Retail Bank operating in India and is almost a
100-year-old Bank. Its customers are predominantly individuals who are senior
citizens (65 years old) who are comfortable only with traditional modes of
banking like branch banking, using paper cheques, etc. However, in the last few
years, this bank had embarked on various technology projects / initiatives like
ATM, internet / mobile banking, PoS, kiosks etc. due to various business and
operational compulsions.
a. Analyze the various
challenges that ‘Bank Traditional Limited’ will have to manage
(5 Marks)
b. Analyze the various steps,
ways and means this Bank must adopt to manage this necessary transition (5
Marks)
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