Focus 2015 10.2 issue

OCTOBER 2014 - MARCH 2015

Vol: 10. No: 2

ISSN: 0973-9165

www.ifimbschool.com

IMPACT OF MANAGEMENT AUDIT SYSTEM ON ORGANISATIONAL EFFECTIVENESS A STUDY OF SELECT PUBLIC AND PRIVATE SECTOR COMPANIES IN INDIA

Dr. K. Nirmala

FOCUS, the management journal, is being brought out by the Institute of Finance and International Management (IFIM) with a view to facilitate effective dissemination of information with regard to various management issues and problem solving methodologies relevant for practising executives as well as for academicians working in the field of management. This is to foster a better understanding of the theories and practices of management. More specifically, the coverage will include discussions on theories and concepts, problem solving through consultancy assignments, research papers based on industry studies or on findings of research projects executed and case studies as an important tool for getting an insight into industry practices and to understand the need for adopting an integrated approach to problem solving.

The following could be some representative topics or focus areas for writing an article: • Services marketing • Strategic issues, discussions, approaches with regard to different functional specialisation • Operations management • Logistics and supply chain management • Papers focusing on globalisation issues • E-business and e-marketing • Business process outsourcing • Environmental management systems • Service operations management • Entrepreneurship and small business management • Computer applications • Human resources management • Insurance, health, infrastructure management, etc • Financial management • Case studies related to the above topics • Review articles on state-of-the-art topics, issues, subjects, concepts, strategies, techniques and management approaches.

Guidelines for authors are available at www.ifimbschool/focus Frequency of publication: Biannual - April/October Annual subscription for authors are available at www.ifimbschool/focus Views expressed in the articles are those of the respective authors. IFIM, Bangalore does not accept any responsibility and do not necessarily agree with the views expressed in the articles. All copyrights are respected. Every effort is made to acknowledge source material relied upon or referred to, but IFIM FOCUS journal does not accept any responsibility for any inadvertent omissions. Except as authorised, no part of the material published in IFIM FOCUS may be reproduced or stored in retrieval systems or used for commercial or other purposes. All rights reserved. Copies of published material from the journal may be obtained on prior permission for limited and specified reproduction sought on payment of prescribed charges.

The Refereeing Process All articles received by the journal will be first reviewed by the Chief Editor for their appropriateness and completeness in terms of the requirement of the journal. Articles, that meet the committee’s basic requirements, will be reviewed by two referees conversant with the subject. Once the papers are cleared by the referees, they will go for final publication in the journal. This is keeping in with the standards stipulated by any international refereed journal.

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IFIM International Journal of Management | FOCUS October 2014 - March 2015

Contact Address: The Chief Editor, FOCUS The International Journal of Management Digest, Institute of Finance and International Management (IFIM) #8P & 9P, KIADB Industrial Area, Electronics City, Ist Phase, Bangalore-560 100.

Tel: 91-80-4143 2888, 4143 2800.

Fax: 91-80-4143 2844.

Website: www.ifimbschool.com/focus Email: research@ifimbschool.com

Editorial Board: 1. Mr. Sanjay Padode, Secretary, Centre for Developmental Education, Bangalore 2. Dr. Madhumita Chatterji, Director & Professor, Chairperson - Centre for Social Entrepreneurship and Management, IFIM B-School Bangalore 3. Dr. R. Satish Kumar, Chief Editor, Professor, Marketing and Dean (Research & International Relations), IFIM B-School Bangalore 4. Dr. M. R. Gopalan, Member of Board of Governors, IFIM B-School Bangalore 5. Dr. Prakash Apte, Ex. Director, IIM Bangalore 6. Dr. Pankaj Chandra, Ex. Director, IIM Bangalore 7. Dr. S. Sadagopan, Director IIIT-Bangalore 8. Dr. C. Jayachandran, Professor & Director, Center for International Business, School of Business, Montclair State University, Montclair, NJ 07043 9. Dr. Namjae Cho, Director, Digital Business & Management Center, HIT # 309, Hanyang University, Seoul, 133-791, Korea 10. Prof. John Bicheno, Reader of Operations Management Department, Business School, University of Buckingham, U.K. 11. Dr. Paul Swamidass, Director of Thomas Walter Center for Technology Management, Auburn University, USA 12. Dr. R. Balachandra, Professor, Information, Operations and Analysis Group, College of Business Administration, Northeastern University, Boston, USA 13. Dr. Soumendra K. Dash, Ph.D. – African Development Bank, HQs, Tunisia 14. Prof. Chowdari Prasad, Dean (Academics), IFIM Business School, Bangalore Editorial Representative Outside India 1. Dr. R. Nat Natarajan, Asst Dean, W.E. Mayberry Professor of Management, 407B, Johnson Hall, College of Business, Tennessee Technological University, Cookeville, TN 38505, USA. Editorial Committee (Operations): 1. Dr. R. Satish Kumar, Chief Editor, Professor, Marketing and Dean (Research & International Relations), IFIM B-School Bangalore 2. Dr. M.R. Gopalan, Member of Board of Governors, IFIM B-School Bangalore 3. Prof. Chowdari Prasad, Dean (Academics), IFIM B-School Bangalore 4. Dr. Sridevi, Professor of Finance & Associate Dean (Academics), IFIM B-School Bangalore Referee Panel: 1. Prof. Ramesh Kumar, Professor of Marketing, IIM Bangalore 2. Dr. Nat Natarajan, Tennessee Technological University, USA 3. Dr. Rishikesh Krishna, Director, IIM Indore 4. Dr. Mathew Manimala, Chairperson, Organisational Behaviour and Human Resources Management Area, IIM Bangalore 5. Dr. Vasanthi Srinivasan, Chairperson, Centre for Corporate Governance and Citizenship 6. Dr. Ravi Anshuman, Professor of Finance & Editor IIMB Management Review, IIM Bangalore 7. Dr. R. Srinivasan , Professor of Finance & Control, IIM Bangalore 8. Dr. Madhumita Chatterji, Director & Professor, Chairperson - Centre for Social Entrepreneurship and Management, IFIM B-School Bangalore 9. Dr. R. Nargundkar, Professor of Marketing, IIM Indore 10. Prof. Rahul Gupta Choudhury, Associate Professor- Marketing, IFIM B-School Bangalore 11. Dr. Gunjan Mohan Sharma, Assistant Professor - HRM, IFIM B-School Bangalore 12. Prof. M H Sharieff, Associate Professor, IB & Strategy Area, IFIM B-School Bangalore

Published by Dr. R. Satish Kumar on behalf of Institute of Finance and International Management, No-8 (P) & 9 (P), KIADB Industrial Area, Ist Phase, Electronics City, Bangalore - 560100.

Email: satish.kumar@ifimbschool.com

IFIM International Journal of Management | FOCUS October 2014 - March 2015

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From the Editor's Desk

The Focus Journal was launched in the year 2005 and is completing ten years now.

This is the Volume: 10, No. 2 issue of Focus. Thanks to all the Editorial Board Members, Referee panel members, Subscribers, and Authors who have supported us during these ten years.

Management Institutes need to encourage their faculty in writing quality research papers and publishing in National and International Journals of repute. This requires the management institutes to invest a considerable amount of money on various researh ativities such as organising Case Workshops, and FDPs to facilitate the faculty members in achieving their research goals.The management institutes must enhance their infrastructure in terms of Library, Computer Labs and Electronic Databases such as Ebsco, J-Gate and Emerald. Subscription of Harvard Case Studies will help the faculty members to update their curriculum and include Case Discussions and Presentations in their classroom teaching.

Need of the hour is to collaborate with the industry practitioners and invite them for guest lectures, make them part of Board of Studies to upgrade the management curriculum on a continuous basis.

Management Institutes need to organise Management Conferences/ Seminars which will provide the opportunities for the faculty members to connect with both the academia and industry pratitioners.

Management Institutes need to get certified by both national and international accreditation bodies such as NBA, NAAC, AACSB, etc. This will help them in streamlining their pedagogy, learning goals and the academic delivery processes so as to meet everchanging needs of the students and the industry.

These initiatives will definitely make our MBA graduates placeable and help them to become future corporate leaders.

Dr. R. Satish Kumar Chief Editor - FOCUS

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Index

S.No.

Title and Name of the Author

Page No.

1

IMPACT OF MANAGEMENT AUDIT SYSTEM ON ORGANISATIONAL EFFECTIVENESS Dr. K. Nirmala

01-18

2

A STUDY OF THE PERFORMANCE MEASUREMENT TOOLS IN SOCIAL ENTERPRISES WITH SPECIAL REFERENCE TO BLENDED VALUE ACCOUNTING

19-29

Aparna R Hawaldar | Dr. Manita D Shah

3

IMPACT ON CUSTOMER SATISFACTION THROUGH CRM AT BIG BAZAAR (MPM MALL)

30-43

IMPLICATIONS OF IFRS IMPLEMENTATION IN INDIA

44-51

DR. Y. Vinodhini

4

Dr. P.Paramshivaiah | Mr. Puttaswamy | Ms. Ramya S.K

5 6

APPLICABILITY OF THE LINEAR CVP MODEL IN THE INDIAN CEMENT SECTOR Mihir Dash

52-55 56-66

PREDICTORS OF WORK-FAMILY CONFLICT & FAMILY-WORK CONFLICT

Nita Choudhary | Shikha Ojha | Niranjan Kumar Singh

7 8

CREATIVE ACCOUNTING-CONCEPT, PRACTICES AND MEASURES Poonam Dugar | Neha Desai

67-75

A STUDY ON RURAL YOUTH'S SHOPPING PREFERENCES TOWARDS MOBILE PHONES AND PERSONAL COMPUTERS

76-83

USE OF SOCIAL NETWORKING WEBSITES AS AN EMERGING MARCOM TOOL

84-90

Kavitha R Gowda | Dr.Soney Mathews

9

Charu Bharti

10

CONVERGENCE OF AS 14 AMALGAMATION TO IND AS 103 BUSINESS COMBINATION AND CARVE OUTS FROM IFRS 3.

Vibha Tripathi

91-97

11

SHOE POLISH- CASE SUDY

98-100

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A SELFMADE MARKETING PROFESSIONAL-PROFILE STUDY OF MR. RAMACHANDRAN R.V

101-105

Dr. Pankaj Jain | Prof. (Dr.) V. S. Dahima

Dr. Hari Krishna Maram

13

BOOK REVIEW- JUGAD INNOVATION

Dr. Pankaj Jain

106-107

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IMPACT OF MANAGEMENT AUDIT SYSTEM ON ORGANISATIONAL EFFECTIVENESS A STUDY OF SELECT PUBLIC AND PRIVATE SECTOR COMPANIES IN INDIA Dr. K. Nirmala* ABSTRACT: To meet the global challenges companies have to adopt appropriate strategies and structure for enhancing the organizational efficiency. Management Audit is one such tool to evaluate the performance of business organizations. The paper focuses on Management Audit System implementation and its impact on Organisation Effectiveness in both Public and Private sector companies. Empirical and analytical method is adopted for the study. Sample companies selected are ten each from public and private sectors. The statistical test like t-test, correlation and Ratio analysis are conducted to evaluate the impact and implementation of Management Audit System. The outcome of the analysis revealthat Organisational Effectiveness is better in Public sector companies as compared to Private companies. The authors state that Management Audit System helps in examining managerial decisions which have a strong impact on the performance of business organizations.They further opine that this method of evaluation doesnot need specialized knowledge or tool like operation research etc. The paper concludes that Management Audit System is must for every enterprise to be successful and compete in global competition.

Key words: Management Audit System, Organization Effectiveness, Public sector, Private sector, Ratio analysis.

1. INTRODUCTION The management of business is becoming more and more complex because of globalization of economies. Almost all the countries are liberalizing for the entry of foreign operators. This had resulted in a competitive environment in which the business organizations have to function very effectively and efficiently for their survival and to stay as a potential competitor in the global socio-economic ambience (Khan. A. Q. 1996).

Today's mantra of business is “survival of the fittest”. To be in the competition they have to evaluate their weaknesses, utilize their strengths and improve their performance. In other words, they have to undergo a broad examination of their managerial decisions, achievements, failures delays, etc. and provide all findings, favorable or unfavorable, which have a bearing on their performance. All this calls for the conduct of “Management Audit” in these 0rganisations.

Management audit therefore, is future oriented, independent and systematic evaluation of the activities at all levels of management for the purpose of improving Organizational effectiveness through the attainment of the Organizational objectives (Anil. B. Roy Chowdhury, 1996).It is considered as a comprehensive and constructive examination of an

*Associate Professor, Department of Commerce, Bangalore University, Bangalore,India | E-Mail: knirmalareddy@rediffmail.com

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Organization, its plans, objectives and means of operations, and an investigation from top level to lower level of management. It is a critical review of all aspects or processes of management and reviews the performance of various managers and systematically examining, analyzing and appraising the management's overall performance.

1.1 MANAGEMENT AUDIT IN INDIA The Indian companies are growing both organically and inorganically. Many companies are competing with global companies in offering goods and services. The concept of management audit is quite novel in the Indian context.

(Satyanarayana Chary T, et.all. 2004) in their study conducted regarding the implementation of Management Audit System, indicates that it is still in nascent stage and some companies having foreign collaborations have attempted to implement Management Audit in all their activities and some are in the process of implementing. (Khan A Q,1996) in his study indicate that the accomplishment of systematic Management Audits are very often caused by major changes in the business such as change in the top management, mergers and acquisitions, succession planning and restructuring/strategic alignment .

Some companies conduct Management Audit only to those activities or functional areas where the performance is poor or needs immediate improvement to maintain a proper rate of growth of business and returns.

2. STATEMENT OF THE PROBLEM The literature review on Management Audit and Organizational Effectiveness indicates a mixed result. Some companies which have adopted Management Audit System have fared remarkably better, whereas, in case of some companies, in spite of having Management Audit System, these companies have failed to improve their Organizational Effectiveness. This leads to the necessity of studying important issues and problems relating to linkage between Management Audit and Organizational Effectiveness.

To assess the Organizational effectiveness few measures such as return on sales, return on equity, market share change and customer satisfaction are considered. (Rodsutti M.C, & Swierczek F.W., 2002) indicated organizational effectiveness, capabilities-managerial skills, organization culture, organization communication and perceived organization reputation are other parameters considered in assessing organizational effectiveness.

One of the basic issues relates to the question that, if implementation of Management Audit System is going to improve the Organizational Effectiveness, then why it is not made mandatory like financial audit.Is it because of the experience of some companies where in spite of introduction of Management Audit System the organizational effectiveness has not improved. Does it mean that Management Audit System does not have any value? Are there problems which make implementation of Management Audit difficult or is Management Audit still not accepted as measurement of management performance tool for improving the organizational effectiveness? Or is it that the cost and time factor which has come in the way of implementing Management Audit System in all Organizations or is it because of the non-feasibility in ensuring the co-ordination in the entire Organization? Or is it because Management Audit covers non-financial parameters which could be theoretical concept requiring some more validation and authentication. The other issues could be failure of many companies in not having clear-cut idea about their vision, mission and objectives,Organizations feel that the internal audit system automatically takes care of Management Audit and there is no need to have separate Management Audit.

These are some of the question which requires an in-depth study. This study is a humble attempt in this direction.

Even though, there is theoretically and logically a clear positive linkage between Management Audit System and Organizational effectiveness, it is still observed that all the companies from both public and private sectors are not very keen in introducing Management Audit System. What could be the reason for this?

Is Management Audit System a sound concept? Is there any problem in the introduction of Management Audit System? Or is there a doubt of who is the right person to do this type of audit? and so on. All these research questions needed an empirical study on different aspects of Management Audit System in the existing scenario relating to implementation of Management Audit System and its impact on organizational effectiveness.

3. REVIEW OF LITERATURE As noted by the authors not much of literature review is available on Management Audit System and its adoption in enhancing Organizational Effectiveness by Indian Companies.

Management Audit System seem to be in the infancy stage due to many reasons like no rules governing the system as in the case of financial audit, who is the right person to do the audit and so on. The literature review relates to Management Audit System and Orgnisational Effectiveness is given belowManagement Audit is a “procedure for systematically analyzing and appraising a management's overall performance�. An effective management audit will induce constructive thinking and reveal the firm's strong and weak points and it will also

IFIM International Journal of Management | FOCUS October 2014 - March 2015

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Cover Story increase the firm's effectiveness and efficiency and thereby, increase the firm's profit (Brown, J R. &Cooper, W. D.,1988).

To ensure the effectiveness of Organizational activities in any Organization syntheses among three different things needs to be established. They are – individual, group and organizational effectiveness. The causes of individual effectiveness includes physical attributes, personality traits, motivation and morale etc., the causes for group effectiveness comprise of leadership, communication and socialization etc., and the causes of organizational effectiveness include technology, environmental conditions, competence and many other variables (Lawless D.,1972).Flesher D.L. (1993) in his paper claims that the small businesses today could probably benefit from a management audit of the firm's long-term financial affairs. Management Audit by articulating the missions, objectives and expected results along with the methods of performance evaluation goes a long way towards improving the performance of public enterprises Batra GS (1997). Management Audit helps in examining managerial decisions which have a bearing on the performance of business Organizations. The evaluation is more suited as the management of a business enterprise need not be equipped with specialized knowledge of tools such as operations research,advanced statistics etc. they further indicate procedure to conduct management audit and conclude that management audit is a must for every enterprise (T.Satyanarayana Chary &et.all2004). Similarly Cann J.M.,(2004)says while organizational agility is certainly essential, so is organizational resiliency. Further he suggests that academics and practitioners must work even more closely together to understand the trends and to translate theory into usable and practical recommendations for managing highly dynamic Organizational environments.

Wang Z. (2005) presents general frame work for understanding the Organizational Effectiveness which includes three-strategy model for global technology innovation and organizational development. The frame work discussed personnel strategy, system strategy, and organizational strategy. He concludes that the personnel strategy could play a crucial role in enhancing the effects of human resources management and entrepreneurship by supporting the main dimensions of HRM. The system strategy was use to facilitate technology innovation through knowledge management while the organizational strategy was adopted to create positive organizational culture and high performance system. Burton J.C., (1968) reveals how the auditors in future would attest the effectiveness of the management's performance. According to the author there are four areas in developing a frame work for Management Audit.

First, the criteria for a management audit must be considered.

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Second, standards of managerial performance must be developed, if the evaluation of management stewardship is to have meaning. Third, a method of reporting must be established, so that the auditor can have a structured means of disclosing the results of his examination, finally, it will be necessary to develop management auditing procedures and standards of documentation to support the report given. The methods of critical path and PERT analysis could be used in office management as well as to other activities. Picketh T. R. (1968).

4. OBJECTIVES OF THE STUDY Based on the research gap found from the literature review on Management Audit and Organizational Effectiveness and problem statement, the following objectives have been formulated for this study-. > To compare the implementation of Management Audit System between public and private sector company > To assess the impact of implementation of Management Audit system on Organizational Effectiveness between public and private sector companies: 5. HYPOTHESES To achieve the above objectives the following Hypothesis havebeen formulated.

H1= There is a significant extent of implementation of Management Audit System in functional activities between public and Private Sector Companies.

H2= There is a positive impactof Management Audit Systemon Organizational effectiveness reflected in Management Process between public and private sector companies.

H3= There is a positive impact of Management Audit System on Organizational effectiveness reflected in Production between public and private sector companies.

H4= There is a positive impact of Management Audit System on Organizational effectiveness reflected in Marketing between public and private sector companies.

H5= There is a positive impact of Management Audit Systemon Organizational effectiveness reflected in Accounting and Finances between public and private sector companies.

6. METHODOLOGY This study is based on empirical and analytical method. There are 245 central government and 160 state government public sector companies of which 50 percent are not performing well.

For present study Bangalore based Ten public sector companies were selected. Similarly Ten private sector companies were selected from 282 companies which were listed in Bangalore

stock exchange. The criteria followed for choosingpublic and private sector companies were minimum of ten years in business and having 500 employees, existence of all functional departments., clear organization structure with regular meeting of Board of Directors, head office in Bangalore and implementation of Management Audit System partially or fully for at least last 3 years. Ten public and private sector companies selected for the study shown in (Annexure Table- 1) Organizational effectiveness was measured through financial ratios like Net Asset Ratios, profitability ratios, net sales ratios (Annexure Table -2). Ten years data was taken for calculating

financial ratios i.e. from 2003 to 2012. For analysis, the ten years data was divided into two parts pre-implementation period and post-implementation period. The variables chosen for management process were objectives, planning, organization, control and systems, and procedures. The functional activities were Production, Marketing, Research and Development, Accounting and Finance, Human Resource Management and Information Technology.The data collected was been analyzed using statistical tools such as , analysis of variance, Ratio Analysis.

7. DATA ANALYSIS AND DISCUSSIONS

The above table reveals the level of implementation of Management Audit System overall variable wise mean scores in public and private sector companies. It shows that when public and private sector companies are compared, in public sector management process(77.02 percent), production(80.10 percent), marketing(75.76 percent), financial accounting(79.02 percent), human resource(79.38 percent), and information technology(80.51 percent) which are greater than the private sector companies. In private sector research and development which is 74 percent is greater compared to public sector with 71.13 percent. It is evident from the statistical results that the mean response on Management Audit System between public and private sector companies for all the seven different aspects

of study are found to be non-significant (P<0.05). It further reveals the data subjected for statistical test indicate the mean response under different variable of Management Audit for the Public sector (F=0.48NS), private sector (F=0.16NS) and combined (F=0.41NS).

Public Sector Companies have implemented Management Audit System to the extent of 77.9 percent and private to the extent of 74.51 percent. The 't' Test (0.47NS) indicates the difference is not significant. Hence, H1 is rejected i.e there is no significant difference in the extent of implementation of Management Audit System across public and private sector companies.

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Table 2 indicates company wise the degree of implementation of accounting in public and private sector companies.

Management Audit System with regards to management The Karl Pearson's coefficient of correlation for public process, production, marketing, research and development and companies between the level of implementation of

10 IFIM International Journal of Management | FOCUS October 2014 - March 2015

Management Audit System on management process, production and the number of ratios which indicate positive impact as shown in Table 2 indicates -0.14 and -0.20 this reveals that there is insignificant negative correlation i.e the level of implementation of management audit has not impacted Organizational Effectiveness, where as in case of marketing it is +0.55, R&D +0.14(not impacted) and accounting +0.14.

The Karl Pearson's coefficient of correlation for private companies between the level of implementation of Management Audit System on management process, production and accounting the number of ratios which indicate positive impact as shown in Table 2 indicates 0.603, 0.27(moderately positive correlation) and 0.74, this reveals there is positive correlation, where as in case of R&D it is -0.026 showing negative correlation.

Table-3 Impact of Implementation of Management Audit System on the Organisational Effectiveness

Table indicates the impact between implementation of Management Audit System on the Organizational Effectiveness through Ratio Analysis. This table reveals that there is significant impact of Management Audit System on Accounting and Finance in both public and private sector companies and hence accept the Hypotheses(Hyp-5)and Management process in the case of Private Sector companies (p<0.05-Hyp 2). Apart from these, there is no impact of Management Audit System on Management Process in public sector companies (Reject Hyp 2), production and marketing in both the sectors (Reject Hyp 3, Hyp 4) .

8. SIGNIFICANT FINDINGS OF THE STUDY < The result of empirical data reveal that there was no significant difference in the extent of implementation of Management Audit System on functional activities like management process, production, marketing, R&D and accounting. < The extent of implementation of Management Audit System is found highest in IT(80.51) and production(80.10) in public sector where as in private sector only in IT the impact was high(80.34). < Implementation of Management Audit System on Organizational Effectiveness is moderately positive across public n private sectors. < There is a significant impact of Management Audit

System on accounting and finance in both public and private companies, in case of management process there is significant impact only in private sector companies. < There is no impact of Management Audit System on management process in public sector companies and productionand marketing functions in both the sectors. < The vertical analysis indicates implementation of Management Audit System has created positive impact in the case of net profit to fixed assets in eight of ten companies.

Similar is the case with cash from operations to fixed assets.Management Audit has impacted net sales to fixed assets, net profit to capital employed and cash from operations to total assets in case of six out of 10 companies. Further analysis indicate implementation of Management Audit has impacted net sales to capital employed, net profit to total assets and cash from operations to capital employed in the case of five out of ten companies. The least impact is seen in the case of net sales to total assets. The above analysis indicates the Management Audit System has impacted significantly using of fixed assets compared to other variables. (AnnexureTable-3) < Vertical analysis indicates implementation of Management Audit System has created positive impact in the case of Cash from operations to Fixed Assets ratio in eight out of ten companies. Similarly in the case of Net Profit to Total Assets and Net Profit to Fixed Assets there is positive impact in seven out of ten companies. Further analysis indicate that Net Sales to Capital employed, Net Sales to Total Assets and Net Profit to

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Cover Story Capital employed and Cash from operations to Capital employed reveal six out of ten companies having been impacted after the implementation of Management Audit System.

(Annexure Table-4) < The vertical analysis indicates implementation of audit system has created positive impact in the case of inventory turnover ratio in seven of ten companies. Management audit has impacted Cost of production to Net profit, Cost of production to Cash from operations, Cost of raw materials to Net profit and Cost of raw materials to Cash from operations in case of six out of ten companies. Further analysis indicates implementation of management audit has impacted Cost of production to Net sales five out of ten companies. The least impact is seen in the case of Asset utilization ratio and Cost of raw materials to Net sales. The above analysis indicates the Management Audit System has impacted significantly using of inventory compared to other variables. (Annexure Table-5) < Vertical analysis indicates implementation of management audit system has created positive impact in that case of Cost of production to Net profit and cost of raw materials to Net profit in seven out of ten companies. Similarly in the case of Cost of production to Cash from operations, Cost of raw materials to net sales, Cost of raw materials to Cash from operations and inventory turnover ratio impact in five out of ten companies. (Annexure Table-6) < The vertical analysis indicates implementation of audit system has created positive impact in case of debtor's turnover ratio out of ten companies. Management audit has impacted selling and administration expenses to net sales,cost of production to net sale in case of five out of ten companies.

Further analysis indicate implementation of Management Audit has impacted selling cost to net sales and debtors velocity in case of two out of ten companies, which indicates the least impact. The above analysis indicates that the Management Audit System has impacted significantly debtor's turnover ratio compared to other variables. (Annexure Table 7) < Vertical analysis indicates implementation of Management Audit System has created positive impact in case of debtor's turnover ratio in seven out of ten companies. Similarly in case of selling and administration expenses to net sales there is positive impact in six out of ten companies. Further analysis indicates that cost of production to Net Sales reveal four out of ten companies having been impacted after the implementation of Management Audit System (Annexure Table-8) < The vertical analysis indicates implementation of audit system has created positive impact in case of total research expenditure to Net Sales and capital expenses on research to Net sales in three out of seven companies. Management Audit has

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impacted recurring expenses on research to Net Sales on two out of seven companies. Further analyses indicate implementation of Management Audit has impacted capital expenses on research to Net profit on one out of seven companies, which indicates the least impact. The above analysis indicates the Management Audit System has impacted total expenditure to net sales and recurring expenditure to net profit. (Annexure Table-9) < Vertical analysis indicates Implementation of Management Audit System has createdpositive impact in the case of all ratios selected i.e Total research expenditure to Net profit, Total research expenditure to net sales, capital expenses on research to net profit, capital expenses on research to Net sales and Recurring expenditure to Net sales reveal two out of seven companies having been impacted af ter theimplementation of Management Audit System. (Annexure Table10) < The vertical analysis indicates implementation of audit system has created positive impact on EPS, nine out of ten public sector companies. In the case of capital employed to net worth, interest coverage ratio, profit before interest and tax to Net sales and Debt-Equity ratio, the positive impact is eight out of ten public sector companies selected. Similarly in the case with Net profit to Net worth, where Management Audit has impacted seven out of ten companies. Further analysis indicate the least impact is seen in the net sales to capital employed, Profit before interest and tax to Net Sales, Current ratio on five out of tem companies. The above analysis indicates the Management Audit System has impacted significantly on earnings per share to other variables. (Annexure Table-11) < Vertical analysis indicates implementation of Management Audit System has created positive impact in the case of net sales to capital employed, Capital employed to Net worth and interest coverage ratio in six out of ten companies.

Similarly, in the case of profit before interest and tax to Net sales, net profit to Net worth, Debt-Equity ratio, current ratio and earnings per share, there is positive impact in five out of ten companies. Further, analysis indicates that profit before interest and tax to capital employed has shown the least impact compared to other ratio. (Annexure Table-12) 9. SCOPE FOR FURTHER RESEARCH Further research shall be looked into measuring the organizational effectiveness on implementation of Management Audit System with pre-determined measurable Financial and Non-financial parameters. The study can be extended to service sectors like Educational Institutions , IT Companies, Health care, Law and Order and Government Organizations.

CONCLUSION The present study noted that the Management Audit System is still at the infancy stage in India, because not even one company out of twenty sample companies have implemented Management Audit System fully. The process of liberalization and globalization has gained momentum in India, hence, foreign investors, non-resident Indians and multi-national companies are showing keen interest in establishing joint venture, independent enterprises and investments through capital market. Today, the changes that take place in the Organizations reflect only the attitudes and perspectives of the individuals who make isolated decisions. How the decision will affect the organizations overall performance is not assessed, very few Organizations having foreign collaborations have attempted to implement Management Audit System. It is high time that Management Audit System is used for assessing the managerial efficiency and thereby enhancing the Organisational Effectiveness.

As such, the authors conclude that the parameters such as management process which consists of objectives, planning,

organization, control, systems and procedures and functional activities relating to production, marketing, research and development, accounting and finance, human resource management and information technology are to be thoroughly examined under Management Audit System and its impact should be measured through effectiveness of Organization. It was found that there is a positive impact of Management Audit System on Organizational Effectiveness in both public and private sector companies, but it is not significant. When the implementation of Management Audit System is compared among public and private sector companies, public sector companies are better. Further the impact of implementation of Management Audit System is seen on the functional activities except on research and development in both public and private sector companies. Authors conclude by suggesting Management Audit System helps in evaluating managerial decisions which have a strong impact on the performance of business organizations. Companies have to implement this system for their success and to compete in the global market.

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18 IFIM International Journal of Management | FOCUS October 2014 - March 2015

FOCUS Research Papers

A STUDY OF THE PERFORMANCE MEASUREMENT TOOLS IN SOCIAL ENTERPRISES WITH SPECIAL REFERENCE TO BLENDED VALUE ACCOUNTING Aparna R Hawaldar*

ABSTRACT Over the past five to ten years, there has been an explosion of interest around social entrepreneurship, strategic philanthropy, sustainable development, corporate social responsibility, socially responsible investing, and other social investing. Scores of organizations have been launched to advance these issues, many business articles addressing these topics have been published, and new programs have been cropping up at conferences, business schools and universities. All these efforts have in common the pursuit of more than simple economic value and more than basic social impact. They all are advancing what may be viewed as a shared agenda of simultaneously valuing social equity, environmental sustainability and economic development.

This paper presents an exploratory analysis of the emergent performance reporting practices used by social entrepreneurs in terms of their institutional settings and strategic objectives.

These reporting practices not only account for financial performance but also disclose more nuanced and contingent social and environmental impacts and outcomes. Furthermore, they act as symbolic objects expressing the market orientation of many socially entrepreneurial organizations in that they aim to provide more complete and transparent disclosure of a variety of performance impacts. Conceptually, this paper draws upon approaches developed within the sociology of accounting as institutional practice.

Keywords: social impact, blended value accounting, social enterprises

Dr. Manita D Shah**

INTRODUCTION In the present global scenario, the investors are divided between doing well and doing good. They invest in either for-profit organisations or not-for-profit organisations.

In reality, the core nature of investment and return is not a tradeoff between social and financial interest but rather the pursuit of an embedded value proposition composed of both (Emerson, 2003).

One of the unique features of Social Entrepreneurs is that they are a diverse group. Most of them may be involved in tackling any comprehendible issue in any country in the world. Their pioneering ideas often make them cross the divide between traditional disciplines, and the solutions that they nurture are habitually unique to the culture and circumstances of the communities in which they work.

The funders of social enterprises also adopt an assortment of approaches: while some funders invest only in debt or equity, others use charitable grants. Some funders support the Social Entrepreneur as an individual at her earliest stages of experimentation, while others concentrate more on the growth and efficiency of the organization at later stages of development.

Despite this diversity, there is a shared viewpoint that differentiates the field of Social Entrepreneurship from other approaches to philanthropy and evaluation. The funders of social enterprises think in a different way. Unlike a corporate

*Research Scholar, Tumkur University, Email: Aparna.hawaldar@alliance.edu.in, Ph. 94484 66953 **Professor, Alliance School of Business, Alliance University

IFIM International Journal of Management | FOCUS October 2014 - March 2015

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investor who is interested in rate of financial return, the social investor seems to focus more on social impact and returns.

Social Impact Measurement Tools There are around thirty contemporary social impact measurement methods used worldwide. These methods have been developed to meet the changing needs of management information because of the increased awareness in socially responsible activities worldwide.

Similar to financial accounting methods, the social accounting methods intend to measure the impact of corporate activities on society. In majority of the cases, social impact is not expressed by the market, hence do not have a market value and are consequently ignored by corporations (Elkington 1999, Schaltegger and Burritt 2000, Lamberton 2005). However, accounting methods provide crucial information for managerial decision-making and for internal and external reporting (Zimmerman 2009).

Conventionally, it is understood that value can either be economic or social.

The Triple Bottom Line (TBL) concept focuses on value creation across the three dimensions of sustainability; the economic, social and environmental dimensions. Although this concept has been widely used, the interpretation of value creation differs among users; some interpret TBL as a zero-sum game while others interpret TBL as an optimisation game of blended value (Emerson 2003). The idea behind the blended value is that all corporations, whether for-profit or not, create value that consist of economic, social and environmental value components; and this value is itself non-divisible and, therefore, a blend of these three elements (Ann et al. 1999, Elkington et al. 2006).

Therefore, the task for any organisation, whether non-profit, nongovernmental or for-profit, is to optimize the impacts on several dimensions rather than maximizing impacts against any one dimension. At this point, it becomes important to note that the involvement of varied constituents within the corporation does not promise socially responsible behaviour.

Regardless of the standpoint, it is realistic to assume that organisations are interested in social impact measurement for reporting and decision making purposes.

Defining of social impact There is no consensus on the definition of social impact which is causing confusion. Major dissimilarities are in the usage of

19 IFIM International Journal of Management | FOCUS October 2014 - March 2015

words such as ‘impact’, ‘output’, ‘effect’ and ‘outcome’.

Furthermore, the term social impact is often interchanged by terms such as ‘social value creation’ (Emerson et al. 2000) and ‘social return’ (Clark et al. 2004).

Burdge and Vanclay (1996) have defined social impact as “By social impacts we mean the consequences to human populations of any public or private actions that alter the ways in which people live, work, play, relate to one another, organise to meet their needs and generally act as a member of society.”

Latane (1981) defines social impact as “By social impact, we mean any of the great variety of changes in physiological states and subjective feelings, motives and emotions, cognitions and beliefs, values and behaviour, that occur in an individual, human or animal, as a result of the real, implied, or imagined presence or actions of other individuals”. According to Emerson et al (2000) “Social value is created when resources, inputs, processes or policies are combined to generate improvements in the lives of individuals or society as a whole”.

Freudenburg (1986) defines social impact as” Social impact refers to impacts (or effects, or consequences) that are likely to be experienced by an equally broad range of social groups as a result of some course of action”.

Developments in performance measurement From an economic viewpoint, the aim of economic behaviour is understood to be the maximisation of wealth or profit, which is realized by the efficient management of scarce resources. Thus, managers always to seek to achieve efficient outcomes.

The traditional performance measurement is often based on the goal-attainment approach and usually do not consider social or environmental questions. One of the assumption that lie beneath the goal-attainment approach is that the goals of an organisation are identifiable and unambiguous (Forbes 1998).

The effectiveness of an organisation is measured by the progress made towards the attainment of these goals. Conventional performance measures are used to measure this progress.

However, including the other dimensions of environmental and social impact becomes slightly complicated.

To develop an integrated blended value outlook, the traditional accounting methods will have to integrate all three dimensionseconomic, social and environmental. In 1991, Eccles (1991) predicted the beginning of a change in performance measurement and predicted that ‘within the next five years, every corporation will have to redesign how it measures its business performance’ (p. 131). Corporations have habitually relied always on financial measures of performance. The present newer competitive

FOCUS Research Papers realities mandate new measurement systems for integrating social dimensions of corporate performance.

Generally the corporations assess their success or failure on the basis of targets achieved â&#x20AC;&#x201C; the amount of money invested, quantity of products distributed, and so on â&#x20AC;&#x201C; rather than on how their economic activities have impacted the society and environment. Such impacts can be measured at the individual level, the corporation level, and the societal level. An innovative and interdisciplinary approach is needed for the integration of social impact into the processes of management.

Measurement of Social impact - an overview of methods Many methods have been developed to measure social impact since the 1990s. the literature research and internet search have resulted in thirty quantitative (social) impact measurement methods. These have been listed in Table 2. Quantitative

methods are more apt for the corporations to make the intangible results more tangible and to use social impact measurement for decision-making and control issues.

There are several methods have been developed by, or for, non profit or governmental corporations like the SROI, OASIS, SCBA, and LEM while there are other methods which are mainly developed for, and used by, for-profit corporations like SRA, ACAFI, TBL, MIF, and BACO. Even though a method may have firstly been developed for a certain kind of organisation, the method can be adapted by other kinds of organisations. The SROI method is a good example of this phenomenon. SROI was developed primarily for non-profit organisation but is currently very popular among profit corporations.

(Social) Impact measurement methods 1.

Acumen Scorecard

16.

Poverty Social Impact Assessment (PSIA)

2.

Atkinsson Compass Assessment for Investors (ACAFI)

17.

Public Value Scorecard (PVSc)

3.

Balanced Scorecard (BSc)

18.

Robin Hood Foundation Benefit-Cost Ratio

4.

Best Available Charitable Option (BACO)

19.

Social Compatibility Analysis (SCA)

5.

BoP Impact Assessment Framework

20.

Social Costs - Benefit Analysis (SCBA)

6.

Center for High Impact Philanthropy Cost per Impact

21.

Social Cost- Effectiveness Analysis ( SCEA)

7.

Charity Assessment Method of Performanc e (CHAMP)

22.

Social e - valuator

8.

Foundation Investment Bubble Chart

23.

Social Footprint

9.

Hewlett Foundation Expected Return

24.

Social Impact Assessment (SIA)

10.

Local Economic Multiplier (LEM)

25.

Social return Assessment (SRA)

11.

Measuring Impact Framework (MIF)

26.

Social return on Investment (SROI)

12.

Millennium Development Goal scan (MDG- scan)

27.

Socio-Economic Assessment Toolbox (SEAT)

28.

Stakeholder Value Added (SVA)

13.

Measuring Impacts Toolkit

29.

Toolbox for Analysing Sustainable Ventures in

14.

Ongoing Assessment of Social Impacts (OAS IS)

15.

Participatory Impact Assessment

Developing Countries 30.

Wellventure Monitor

Table 1: Overview of social impact measurement methods

The measurement methods have been developed based on the diverse purposes for which they are used and also depending on what they are intended to measure.

IFIM International Journal of Management | FOCUS October 2014 - March 2015

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DESCRIPTION OF SOCIAL IMPACT MEASUREMENT METHODS 1.

Acumen Scorecard Developed in 2001 by: Acumen Fund in association with McKinsey, a non-profit enterprise that invests in and grants to both non-profit and for-profit ventures in its portfolio.

'The system was developed to assist both for profit businesses, and not-for-profit corporations focus on actions that deliver both immediate results and improve an corporations long term competitive positioning in changing and dynamic marketplaces.’

'The system assesses the social ventures investments in Acumen's portfolio of for-profit and non-profit corporations. It entails tracking progress on short- and long term outcomes, which is assessed in terms of outcome milestones and benchmarks.’

2.

Atkisson Compass Assessment for Investors (ACAFI) This system is developed by AtKisson Inc.in 2000. 'This method builds on AtKisson's Compass Index of Sustainability, a tool for assessment of the sustainability of communities. The framework for investors is designed to integrate with the reporting guidelines of major CSR standards, particularly the Global Reporting Initiative (GRI) and the Dow Jones Sustainability Index (DJSI), as a venture matures. The method incorporates a structure with five key areas: N = nature (environmental benefits and impacts) S = society (community impacts and involvement) E = economy (financial health and economic influence), and W = well-being (effect on individual quality of life), and a fifth element, + = Synergy (links between the other four areas and networking), and includes a point-scale rating system on each of the five areas. Each area has several indicators each of which has specific criteria. The method has been peer reviewed by corporate executives, economic academicians, and investment professionals.’

3.

Balanced Scorecard (BSc) The Balanced Score Card is developed by Robert Kaplan and David Norton in 1992.

'The Balanced Scorecard proposes that corporations measure operational performance in terms of financial, customer, business process, and learning-and-growth outcomes, rather than exclusively by financial measures, to arrive at a more powerful view of near term and future performance. It advocates integration of these outcomes into corporations' strategic planning processes. The scorecard is a framework for

23 IFIM International Journal of Management | FOCUS October 2014 - March 2015

collecting and integrating the range of metrics along the Impact Value Chain, and is adaptable to an organisation's stage. It helps coordinate evaluation, internal operations metrics, and external benchmarks, but is not a substitute for them. Recently Kaplan has adapted the Balanced Scorecard for nonprofits, suggesting that such institutions adopt strategic performance measures that focus on user satisfaction (Clark et al. 2004).’

4.

Best Available Charitable Option (BACO) This system is developed by Acumen Fund in 2006. 'Rather than seek an absolute standard for social return across an extremely diverse portfolio, Acumen Fund looks to quantify an investment's social impact and compare it to the universe of existing charitable options for that explicit social issue.

Specifically, this tool BACO helps inform investors where their philanthropic capital will be most effective—answering “For each dollar invested, how much social output will this generate over the life of the investment relative to the best available charitable option?” The BACO ratio (for best available charitable option), must be seen as a starting point for assessing the social impact and cost-effectiveness of investments. The point of the analysis is to inform our portfolio decision-making with a quantifiable indication of whether our social investment will “outperform” a plausible alternative.’

5.

BoP Impact Assessment Framework The Bottom of the Pyramid Impact Assessment Framework is developed by Ted London in 2007. 'The aim of the BoP Impact Assessment Framework is to understand who at the base of the pyramid is impacted by BoP ventures and how they are affected.

The framework is developed to evaluate and articulate impacts, to guide strategy and to enable better investment decisions.

Next to this the system contributes to a deeper knowledge of the relationship between profits and poverty alleviation and to recognize the poverty alleviation implications of different types of ventures. It builds upon the different well-being constructs as developed by 1998 Nobel Prize winner Amartya Sen.’ 6.

Center for High Impact Philanthropy Cost per Impact This tool is developed by the Center for High Impacts Philanthropy from the University of Pennsylvania in 2007.

High impact philanthropy means getting the most good for your philanthropic buck. It is the process by which a philanthropist makes the biggest difference possible, given the amount of capital invested. In order to assess cost per impact, philanthropists must be able to assess, to the extent possible, its two components: 1) social impact, as measured by specific, objective criteria for success; and 2) cost, as measured by the investments made by philanthropists or other sources to realise

FOCUS Research Papers the impact. Assessment requires objective, reliable information on what's effective, what's not, and how much capital is required to achieve a given impact. The Center for High Impact Philanthropy aims to deliver the information and analytic tools required to answer these questions.’

7.

Charity Assessment Method of Performance (CHAMP) The CHAMP method is developed by the Dutch charities test (nationale goede doelen test) in 2006. 'The performance of charity's ADT are determined by effectiveness - What did we achieve? - And efficiency - how fast and in a cost-effective way?

Effectiveness and efficiency can be measured on five distinct levels: 1. Impact on society: how is society is affected by the effect of the charity on their target group?

2. Impact on the public: in what way is the situation of the target group demonstrably improved by the output of the charity?

3. Output: what concrete results are produced by the core activities of the charity using the input factors (money, volunteers, etc.)?

4. Activities: how effective are the core activities of the charity?

5. Input: how effective and efficient are the activities related to the input factors such as fundraising and recruiting volunteers?'

'The CHAMP method provides indicators to measure the performance on all different levels. This tool is developed to help donators, and volunteers to choose between a wide range of non- profit corporations.’

8.

Foundation Investment Bubble Chart 'This form of analysis is more of a visualization tool that plots the quantifiable impact on the x-axis, the percentage of implementation on the y-axis, and the relative size of a foundation's grant in a given field. This results in an easy comparison of the performance of corporations across a portfolio and can have different variables for the x-axis, y-axis and bubble relativity for flexible data display. Foundation board of directors and senior management teams could use the bubble chart to assess the relative performance and cumulative foundation investment (or total philanthropic investment) against the indices of performance they care about most. The analyses can be used to discuss performance, explore why one program or a group of programs are positioned where they are, and inform future investments.'

9.

Hewlett Foundation Expected Return This tool is developed by the William and Flora Hewlett Foundation. This foundation was founded in 1966 to solve

social and environmental problems at home and around the world.

'The method calculates the expected return of investments and is developed to enable foundations To ask and answer the right questions for every investment portfolio: what's the goal? How much good can it do? Is it a good choice? How much difference will we make? What's the price tag? The method is purely prospective. The expected return provides a systematic, consistent, quantitative process for evaluating potential charitable investments, and is based heavily on costeffectiveness analysis and cost-benefit analysis.’

10.

Local Economic Multiplier (LEM) “The Economic Multiplier is an central concept in Keynesian and post-Keynesian economics. A multiplier is a factor of proportionality that measures how much an endogenous variable changes in response to a change in some exogenous variable.”

“The local economic multiplier is based on the idea that dollars spend in locally-owned stores will impact the local economy two or three times more in comparison to dollars spend in national retailers. The basics of the local multiplier methodology are the identification of income in three rounds.

The first round measures direct income of the study group, the second round measures indirect income, i.e. local spending of the study group, the third round measures induced income, i.e., local spending by local recipients of study group spending. The local multiplier is the sum of direct, indirect and induced income divided by direct income.'

11.

Measuring Impact Framework (MIF) The Measuring Impact Framework is developed in 2008 by the World Business Council for Sustainable Development. The Measuring Impact Frameworkis designed to help corporations understand their contribution to society and use this understanding to inform their operational and long-term investment decisions and have better-informed conversations with stakeholders. The framework is based on a four-step methodology that attempts to merge the business perspectives of its contribution to development with the societal perspectives of what is important where that business operates.

Step one, set boundaries: determine the scope and depth of the overall assessment in terms of geographical boundary (local versus regional) and types of business activities to be assessed.

Step two, measure direct and indirect impacts: Identify and measure the direct and indirect impacts arising from the corporation's activities, mapping out what impacts are within the control of the corporation and what it can influence

IFIM International Journal of Management | FOCUS October 2014 - March 2015

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through its business activities. Step three, assess contribution to development. Assess to what extent the corporation's impacts contribute to the development priorities in the assessment areas. Step four, prioritise management response: based on steps two and three extract the key risks and opportunities relative to the corporation's societal impact, and based on this, develop an appropriate management response. There is no “one size fits all” way to use this methodology. In order to appropriately tailor the methodology to the business and its operating context, as well as ensure follow-up actions are taken, corporations are encouraged to make the assessment as participative as possible, consulting people both within and if possible external to the corporation.’

12.

Millennium Development Goal scan (MDG-scan) The MDG-scan is developed in 2009 by the Dutch National Committee for International Cooperation and Sustainable Development (NCDO) and Dutch Sustainability Research (DSR). 'The MDG Scan is a tool designed for corporations to measure the positive contribution tot the Millennium Development Goals (MDGs) and demonstrate their role in the global initiative to reach these eight MDGs. The MDG Scan measures each corporation's MDG impact by entering key data in a secured environment. Once the corporation approves the publication of its results, they will be visible for everyone. The MDG Scan is a practical tool for corporations. Without spending much time or effort, corporations can gain insight in their MDG Footprint. Based on key data on core business and community investment activities that can be entered after registering, the MDG scan estimates your corporation's contribution to each of the MDGs. Real time results generation quickly provides easy-to-understand insights, globally, per country or per sector / industry. Each corporation can download a personalized MDG impact results report, which facilitates internal discussions and in-depth analysis of its MDG impact.’

13.

Volunteering Impact Assessment Toolkit 'The Volunteering Impact Assessment Toolkit was developed in 2004 by the Institute of Volunteering Research (IVR) with input from the London School of Economics, The University of East London and Roehampton University. It is widely recognised that volunteers make a difference to the work of many social economy corporations, but this is mainly supported by anecdotal evidence. The Toolkit is a way of changing this. It is easy to use, comprehensive and adaptable. It allows corporations to look at the impact of volunteering on the volunteer, the service user, the corporation and the wider community. It can help corporations gain a greater understanding of how and why volunteering works in the

24 IFIM International Journal of Management | FOCUS October 2014 - March 2015

corporation as well as gather evidence to support funding bids.'

‘This new toolkit will enable corporations to assess the impact of volunteering on all key stakeholders: the volunteers, the corporation, the beneficiaries, and the broader community.

Results over time can be compared. Corporations will be able to use it to assess a wide range of impacts, from the skills development of volunteers to the economic value of volunteering corporations. Positive and negative results, intended and unintended impacts can be explored.’

14.

Ongoing Assessment of Social Impacts (OASIS) Developed in 1999 by REDF (formerly The Roberts Enterprise Development Fund) a nonprofit enterprise that creates job opportunities through support of social enterprises that help people gain the skills to help themselves.

'REDF developed this system for its internal use and that of the nonprofit agencies in its portfolio to assess the social outputs and outcomes of the agencies overall, including the social enterprises they each operate. The system is a customised, comprehensive, ongoing social management information system (MIS). It entails both designing an information management system that integrates with the agency's information tracking practices and needs, and then implementing the tracking process to track progress on short- to medium term (two years) outcomes.’

15.

Participatory Impact Assessment ‘The Feinstein International Center has been developing and adapting participatory approaches to measure the impact of livelihoods based interventions since the early nineties.

Participatory Impact Assessment (PIA) takes the participatory methodology of these processes and applies it to the original corporational objectives in asking the critical questions “what difference are we making?” PIA offers not only a useful tool for discovering what change has occurred, but also a way of understanding why it has occurred. The framework does not aim to provide a rigid or detailed step by step formula, or set of tools to carry out project impact assessments, but describes an eight stage approach, and presents examples of tools which may be adapted to different contexts. A guide for practitioners is available to demonstrate how PIA can be used to overcome some of the inherent weaknesses in conventional humanitarian monitoring evaluation and impact assessment approaches, such as; the emphasis on measuring process as opposed to real impact, the emphasis on external as opposed to community based indicators of impact, and how to overcome the issue of weak or non-existent baselines.’

16.

Poverty Social Impact Assessment (PSIA) This system has been developed by the World Bank in 2000.

FOCUS Research Papers 'PSIA is a systematic analytic approach to “the analysis of the distributional impact of policy reforms on the well-being of different stakeholder groups, with a particular focus on the poor and vulnerable…” (PSIA User's Guide). It is not a tool for impact assessment in and of itself, but is rather a process for developing a systematic impact assessment for a given project.

Its components are not new, but PSIA has been formally articulated as a systematic approach by the World Bank in 2003.

The method emphasises the importance of setting up the analysis by identifying the assumptions on which the program is based, the transmission channels through which program effects will occur, and the relevant stakeholders and institutional structures. Then program impacts are estimated, and the attending social risks are assessed, using analytical techniques that are adapted to the project under study.'17 Public Value Scorecard (PVSc) The Public Value Scorecard is developed in 2003 by Prof. M.H. Moore, Director of the Hauser Center for Non-profit Corporations at the John F. Kennedy School of Government at Harvard University.

‘The Public Value Scorecard is based on the concept of the Balanced Scorecard. All the basics of the Balanced Scorecard– that non-financial measures are important, that process measures are important as well as outcome measures, that a measurement system ought to support the execution of an agreed upon strategy – are used but put to work through the use of strategic concept that seems more appropriate to nonprofits.

The ultimate goal of non-profits is not to capture and seize value for themselves, but to give away their capabilities to achieve the largest impact on social conditions that they can, and to find ways to leverage their capabilities with those of others. There are three crucial differences between the BSc and the PVSc. First, in the public value scorecard, the ultimate value to be produced by the organisation is measured in non-financial terms. Second, the public value scorecard focuses attention not just on those customers who pay for the service, or the clients who benefit from the organisation's operations; it focuses as well on the third party payers. Third, the public value scorecard focuses attention on productive capabilities for achieving large social results outside the boundary of the organisation itself.’

18.

Robin Hood Foundation Benefit-Cost Ratio The Robin Hood benefit-cost ratio was developed by the Robin Hood Foundation in 2004.

'In 2004, we determined that for truly effective grant making, we needed to know the value of similar and dissimilar programs.

For example, is a certain job training program a better

investment than a particular education program? To answer this question, Robin Hood developed an innovative methodology of evaluation, or metrics. First, a common measure of success for programs of all types is applied: how much the program boosts the future earnings (or, more generally, living standards) of poor families above that which they would have earned in the absence of Robin Hood's help. Second, a benefit/cost ratio is calculated for the program—dividing the estimated total earnings boost by the size of Robin Hood's grant. The ratio for each grant measures the value it delivers to poor people per dollar of cost to Robin Hood—comparable to the commercial world's rate of return.’

19.

Social Compatibility Analysis (SCA) This tool has been developed in 2003 by the Institute for Sustainable Development at the Zurich University of Applied Sciences Winterthur (ZHW), Switzerland.

'The Social Compatibility Analysis (SCA). This method defines objective criteria according to which social compatibility is evaluated. First, the user of the SCA-tool divides a system into a number of subsystems, i.e. a product could be divided into subsystems according to the life cycle phases preproduction, production, use and disposal. Second, relevant evaluation criteria are selected. Finally, subsystems should be assigned to classes A (highly relevant social problems), B (of medium relevance), C (of low relevance) or 'not relevant' for all the chosen criteria. The SCA is useful when the social dimension of a project is concerned, when the clarification of differing stakeholder opinions is needed or when sets of solutions are to be negotiated.’

20.

Social Costs-Benefit Analysis (SCBA) This is a general economic tool for performance measurement.

Since the 1990s the traditional cost-benefit analysis has been extended to include impacts upon the society.

‘Social cost-benefit analysis is a type of economic analysis in which the costs and social impacts of an investment are expressed in monetary terms and then assessed according to one or more of three measures: (1) net present value (the aggregate value of all costs, revenues, and social impacts, discounted to reflect the same accounting period; (2) benefitcost ratio (the discounted value of revenues and positive impacts divided by discounted value of costs and negative impacts); and (3) internal rate of return (the net value of revenues plus impacts expressed as an annual percentage return on the total costs of the investment.’

21.

Social Cost-Effectiveness Analysis (SCEA) The term cost-effectiveness analysis refers to the economic

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analysis of an intervention. This is a general economic tool for performance measurement. Since the 1990s the traditional cost-effectiveness analysis has been extended to include impacts upon the society.

'For example, one measure of cost-effectiveness is the cost per HIV infection averted. This is affected by many factors: intervention cost, number of people reached, their risk behaviors and HIV incidence, and the effectiveness of the intervention in changing behavior. The purpose of costeffectiveness analysis is to quantify how these factors combine to determine the overall value of a program. Cost-effectiveness analysis can determine if an intervention is cost-saving (cost per HIV infection averted is less than the lifetime cost of providing HIV/AIDS treatment and care) or cost-effective (cost per HIV infection averted compares favorably to other health care services such as smoking cessation or diabetes detection).’

Cost-effectiveness analyses also break down the costs and resources needed to implement interventions—personnel, training, supplies, transportation, rent, overhead, volunteer services, etc.

22.

Social e-valuator The social e-valuator is developed in 2007 by the d.o.b.

Foundation and the Noaber Foundation and Scholten Franssen, a Dutch consultancy corporation. The social evaluator is a web-tool based on the SROI methodology.

23.

Social Footprint 'The social footprint is a measurement and reporting method that corporations can use to manage, measure and report the sustainability of their impacts on people and society in a broad range of areas. It is a context-based measurement tool that takes actual human and social conditions in the world into account as a basis for measuring the social sustainability performance of corporations. The Social Footprint might be seen as an adaptation of the concept of ecological footprint. Both footprints are alike in the sense that both are about measuring gaps, but the similarity ends there. In the case of the Ecological Footprint, the gaps of interest to us are between resources we need and resources we are stuck with; in the case of the Social Footprint, the gaps of interest to us are between resources we need and resources we have decided to produce. Ecological resources are fixed and limited, social resources are not. The sustainability metrics make it possible to measure non-financial organisational performance (e.g., the triple bottom line) against standards of performance. Numerators express actual impacts on vital capitals in the world, and denominators express norms for what such impacts ought to be in order to ensure human well-being.’

26 IFIM International Journal of Management | FOCUS October 2014 - March 2015

24.

Social Impact Assessment (SIA) 'The concept of SIA is understood to include adaptive management of impacts, projects and policies (as well as prediction, mitigation and monitoring) and therefore needs to be involved (at least considered) in the planning of the project or policy from inception. The SIA process can be applied to a wide range of interventions, and undertaken at the behest of a wide range of actors, and not just within a regulatory framework. It is implicit that social and biophysical impacts (and the human and biophysical environments) are interconnected. The overall purpose of all impact assessment is to bring about a more sustainable world, and that issues of social sustainability and ecological sustainability need to be considered in partnership. SIA is also understood to be an umbrella or overarching framework that embodies all human impacts including aesthetic impacts (landscape analysis), archaeological (heritage) impacts, community impacts, cultural impacts, demographic impacts, development impacts, economic and fiscal impacts, gender assessment, health impacts, indigenous rights, infrastructural impacts, institutional impacts, political impacts (human rights, governance, democratisation etc), poverty assessment, psychological impacts, resource issues (access and ownership of resources), tourism impacts, and other impacts on societies.’

25.

Social return Assessment (SRA) This system was developed in 2000 by Pacific Community Ventures (PCV), a nonprofit organisation that manages two forprofit investment funds that invest in corporations that provide jobs, role models, and on-the-job training for low-income people, and that are located in disadvantaged communities in California.

‘PCV developed the method for its own use in assessing the social return of each investor and of its portfolio overall. The system entails tracking progress specifically on the number and quality of jobs created by PCV's portfolio corporations. It helps the fund target and improve its services to its investors and to a group of corporations to which it provides business advisory services. The method is separate from financial performance assessment.’

26.

Social return on Investment (SROI) Developed in 1996 by REDF (formerly The Roberts Enterprise Development Fund) a nonprofit enterprise that creates job opportunities through support of social enterprises that help people gain the skills to help themselves.

‘REDF developed social return on investment (SROI) analysis to place a dollar value on ventures in its portfolio with social as

FOCUS Research Papers well as market objectives. The approach combines the tools of benefit-cost analysis, the method economists use to assess nonprofit projects and programs, and the tools of financial analysis used in the private sector. Conceptually, the approach differs from these established types of analysis, notably in what is considered a “social” benefit. Practically, it is more accessible to a broad range of users, substituting readily understood terms and methods for technical jargon and complicated techniques.’

sustainable ventures including donor programmes, award schemes, private and public investors, professional education programs and policy makers. They can use the tools to systematically identify, evaluate, advice, and promote sustainable ventures. The tools respond to three questions that appear over and again in the process of building and managing a sustainable venture: <

27.

Socio-Economic Assessment Toolbox (SEAT) The Socio-Economic Assessment Toolbox was first launched in 2003 by Anglo American plc. 'The toolbox builds on several steps. (1) profiling our own operations and our host community, (2) identifying and engaging with key stakeholders, (3) assessing the impacts of our operations – both positive and negative – and the community's key socio-economic development needs, (4) developing a management plan to mitigate any negative aspects of our presence and to make the most of the benefits our operations bring, (5) working with stakeholders and communities to help address some of their broader development challenges they would face even without our presence, (6) producing a report with stakeholders to form the basis for ongoing engagement with and support for the community.’

28.

Stakeholder Value Added (SVA) 'Stakeholder value analysis is based on the stakeholder approach or standard-setting and strategic management of corporations, which is used to analyse relations between stakeholders (interest groups) and corporations. Measuring the contribution to corporation value due to stakeholder relations (stakeholder value) is done in four steps. In the first two steps, the return on stakeholder (RoSt) is calculated for the corporation in question and the reference corporation (e.g.market average). The RoSt represents the stakeholder's relative contribution to the value of the corporation. In the third step the RoSt of the reference corporation is subtracted from the RoSt of the corporation in view. In the final step this is multiplied by the corporation's stakeholder costs to obtain the stakeholder value added.’

29.

Toolbox for Analysing Sustainable Ventures in Developing Countries The toolbox for analysing sustainable ventures in Developing Countries is developed by UNEP (United Nations Environmental Programme) in 2009.

'The toolbox is developed to answer questions related to the identification of opportunities, the understanding of the determinants of success and the assessment of costs and benefits appear repeatedly. It addresses initiatives that support

< <

Where are opportunities to create value by meeting needs better and more efficiently?

What factors determine the success of the venture?

What are costs and benefits of the venture for the business, society and the environment?”

30.

Wellventure Monitor™ The Wellventure Monitor™ is developed in 2006 by the Fortis Foundation Netherlands (FFN) and the Erasmus University Rotterdam (EUR). 'The Wellventure Monitor™ measures the effects of community investment on several aspects. It makes clear what the target group benefits from the project.

Blended value and SROI The idea of blended value is credited to Jed Emerson (Emerson, 2004). The blended value approach extends the idea of economic value to combined social and economic value created by an organisation or activity. Social Return on Investment (SROI) was also devised by Jed Emerson and is a way of measuring this blended value.

Blended value accounting Conventional wisdom and legal definitions clearly separated “doing well” from “doing good.” Corporations were for-profit entities that sought to maximize economic value, while public interest groups were nonprofits that sought to maximize social or environmental value. It is clear, however, that nonprofit organizations create economic value and for-profit companies have social impact and worth. Consider, for example, the economic value of 170 million boxes of Girl Scout cookies sales or the social impact of Wal-Mart providing employment for 1.4 million people. While not the primary purpose of these organizations, a growing group of practitioners, investors and philanthropists are advancing strategies that intentionally blend social, environmental and economic value.

Organizations operating in this middle ground of commercial and social enterprise (regardless of their legal status) have differing aspects of both social and commercial value creation.

There were many reasons such as these cited as to why it is more difficult to successfully function in this middle ground, but the

IFIM International Journal of Management | FOCUS October 2014 - March 2015

27

most pervasive responses either had to do with issues of accountability or the lack of a supporting capital market and policy environment infrastructure for creating and investing in blended value.

While there are accepted models regarding value creation in the for-profit marketplace, many organizations in the nonprofit sector do not articulate or track their social outcome goals, let alone hold themselves accountable to particular performance objectives. Creating and investing in blended value presents unique challenges for practitioners and investors alike. The inefficiency of raising capital, the lack of accountability and the current policy and tax structure all present barriers to pursuing blended value. The research suggests that there is promising work being done to address these issues, but that more needs to occur.

there are a range of reporting practices available to managers that can be used creatively and adaptively in different contexts and to different strategic ends. From this perspective, the function and value of such reporting is fluid, contingent, and dynamic: but not passive or unstrategic. This emphasis on diversity and contingency is in contrast to the institutionalization of many reporting practices across all three sectors of society that are static and resistant to reform. Given the recent history of standardized accounting systems proving unfit for purpose as risk management/control systems in finance either at the micro- (the Enron scandal of 2001) or macro-levels (the global financial crisis), introducing increased diversity of reporting systems into organizations seems an urgent objective (Power, 2007) The use of SROI by corporations such as Philips in the Netherlands demonstrates the broader applications of reporting practices first developed in the social sector

Conclusion The research presented here has provided a theoretical analysis of social impact reporting in social entrepreneurship. It has suggested that social entrepreneurs use social impact reporting in a number of strategic ways to enhance their performance, access resources, and build organizational legitimacy. A new conceptual model of social impact reporting has been established â&#x20AC;&#x201C; the Blended Value Accounting spectrum. The Blended Value Accounting spectrum explicitly suggests that

We hope that the research presented here constitutes the start of a larger project to both understand the field-level reality of social impact reporting innovation and to learn wider lessons from the social entrepreneurs that are pushing forward the boundaries of such action. The 'moral obligation' to use reporting practices strategically to drive improved internal performance and better external accountability surely applies to all organizations social, commercial, and public sector.

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Clark C, Rosenzweig W, Long D and Olsen S 2004, Double bottom line project report: Assessing social impact in double bottom line ventures; methods catalog, viewed 28 may 2010, <http://www.shidler.hawaii.edu/Portals/1/resources/DoubleBottomLine.pdf>.Conner KR 1991, 'A historical comparison of resource-based theory and five schools of thought within industrial organization economics: Do we have a new theory of the firm?', Journal of Management, vol. 17, no. 1, pp.121-154. de Bakker FGA, Groenewegen P and den Hond F 2005, 'A bibliometric analysis of 30 years of research and theory on corporate social responsibility and corporate social performance', Business and Society, vol. 44, no.3, pp. 283-317.

Dentchev NA 2004, 'Corporate social performance as a business strategy', Journal of Business Ethics, vol. 55, no. 4, pp. 395-410.

Ebrahim A 2005, NGOs and Organizational Change: Discourse, Reporting, and Learning, Cambridge University Press, CambridgeEccles RG 1991, 'The performance measurement manifesto', Harvard Business Review, vol. 69, no. 1, pp. 131-137.

Elkington J 1999, Cannibal with forks, the triple bottom line of 21st century business, Capstone, Oxford.

Elkington J, Emerson J and Beloe S 2006, 'The value palette: a tool for a full spectrum strategy', California Management Review, vol. 48, no.2, pp. 6-28. Emerson J, Wachowicz J and Chun S 2000, Social return on investment: Exploring aspects of value creation in the non-profit sector, The Roberts Foundation, San Francisco.

Emerson J 2003, 'The blended value proposition: Integrating social and financial returns, California Management Review, vol. 45, no. 4, pp. 35-51. Epstein MJ 2008, Making sustainability work: Best practices in managing and measuring corporate social, environmental, and economic impacts, Greenleaf Publishing Limited, Sheffield.Forbes, DP

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Freudenburg WR 1986, 'Social impact assessment', Annual Review of Sociology, vol. 12, pp. 451-478.Friedman, M 1970, 'The social responsibility of business is to increase its profits', The New York Times Magazine, 13 September, p. 32-33, 122, 126.

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Zimmerman, JL 2009, Accounting For Decision Making And Control, McGraw-Hill Education, New York. corporation, the employees, and the social organisation gains from it. The Wellventure Monitor™ provides insight into the effects of a specific project. But more importantly; it is also possible to see the sum of the different projects. This way, the long-term benefits of community investment become visible. With the tool, corporations and corporations can create a survey after finishing a project and send it to those involved at the corporation, employees of the organisation, and to the target group. The surveys are processed automatically. The tool can be used to view, analyze, and present the results. Per project, or over a longer period of time.’ http://www.wellventuremonitor.nl

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FOCUS Research Papers

IMPACT ON CUSTOMER SATISFACTION THROUGH CRM AT BIGBAZAAR (MPM MALL) -An empirical study

DR. Y. Vinodhini *

INTRODUCTION “CRM Guru”, explains the definition of CRM: in big business, even if it consists of only several persons, there is no collective mind till all information is not saved by different media; and having saved it, it should be presented to “appropriate people” “at appropriate time”.

Customer relationship management (CRM) can help to select the most useful clients for an enterprise. Enterprises most frequently feel who their main customers are, but only some use systematized media of customers’ stimulation, loyalty development. Collected data about consumers later become knowledge, and the latter determines profit for an enterprise.

However the enterprise’s activity can be based on such knowledge only when the data are processed and on their basis motivated decisions to attract or sustain customers are taken. Of course, it is necessary to possess special media, by means of which it is possible to perform the mentioned actions and which simplify the very decision-making. At present most organizations recognize evident benefit of CRM and almost every enterprise either use certain CRM technologies, supporting their business, or evaluate specific benefit of CRM technology and plan its future realization.

*Professor & Principal, Al-Qurmoshi Institute of Business Management, Hyderabad, Email: vinodhini.raju@gmail.com 30 IFIM International Journal of Management | FOCUS October 2014 - March 2015

FOCUS Research Papers

Key Customer Focus

CRM Organization

CRM Knowledge Management

Technology -based CRM

Research Methodology Research design: The type of research is a descriptive research where we are trying to describe the levels of satisfaction of customers of Big Bazaar, and also to identify various factors which play important role in

1.23 Sample size Our sample size was 100 people

deciding the level of satisfaction of customers of Big Bazaar.

1.24 Sampling technique

Research design is a framework or blueprint for conducting the

Our sampling technique is convenience sampling, which was

market research project. It specifies the details of the procedures

that we took into consideration the customers we were willing to

necessary for obtaining the information needed to structure

respond easily. Sampling technique is used for this project is

and /or solve marketing research problem.

non probability sampling because of time and resource available

Research design is descriptive for this project which comes under conclusive research design. Conclusive research design is to assist the decision maker in determining, evaluating and

for the project is limited. So, convenience sampling is used Data collection

selecting the best course of action to take in a given situation.

Data collection instrument:

And a descriptive research has its major objectives the

Research instrument was questionnaires with structured set of

description of something- usually market characteristics or functions. It is used to determine the perceptions of people

questions which were to measure satisfaction levels of customers on various terms as if like on brands purchased, quality, price

toward product.

etc.

1.2 Sample Design

Data sources

1.21 Sampling Area

The sources of data used mainly primary, with help of

Big Bazaar MPM store , Abids, Greater Hyderabad city is the

questionnaires.

sampling area.

Data analysis

1.22 Sample population:

Demographic analysis

Research mainly subjected to customers visiting Big Bazaar,

The technique has been used for summarization of some useful

which were including all middle and lower middle class people.

data to meet the objectives.

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Factor analysis This technique is usually used for the data summarization. With the help of this technique we can arrange some correlated sets of variables under one factor. This helps in saving time and cost. here factor analysis technique has been used to identify the prominent factors responsible for the satisfaction level towards the customer relationship management of insurance industry.

Chi-square analysis: Chi square technique is usually used to find the dependency of different variables or in other words we can say that it is used to

which the store is defined in the shopper's mind; partly by its

find out the whether there exist a relationship between two

functional qualities and partly by an aura of psychological

variables or not.

attributes.” Later on, defined it as:“ an image is more than the sum of its parts…..it represents interaction among characteristics and excludes extraneous elements… It has some

REVIEW OF LITERATURE Keng and Ehrenberg, 1984 specified that Since the origin of organized retail itself is very ne win India, there is not enough literature, which studies the factors that govern consumer choice of retail outlets and their relative positions. However, studies in the west have found out that though consumers buy products from the same supermarket in multiple occasions, they are not 100% loyal i.e., they buy similar products form other

emotional contents… a combination of factual and emotional material.”

Ditcher 1985 emphasized on the image being something complete.“It describes not individual traits or qualities, but the total impression an entity makes on the minds of others… an image is not anchored in just objective e data and details. It is the configuration of the whole field of the object.”

All over the world there has been a considerable amount of

outlets in different occasions Although most literature has

research to find out retail store image. However, most of the

found out that consumer choice of retail outlets follow a non-

studies can be divided into three different categories based on

hierarchical process.

the methodology used which are semantic differential scales,

Fotheringham , 1988 studied that consumer choice may follow

multidimensional scaling and qualitative techniques.

a hierarchical model at times. Most studies have focused on the

Dodd's et al., 1991 & Rao and Monroe, 1989 specified that

relation between store choice and price formats.

most of the research on controllable cues has focused on price,

Tang, Bell and Ho, 2001 specified in their study that Price formats have an impact on store choice. There have been studies which found out that store choice is also related to perceive ed shopping utility which may depend on Service Quality (Parking space, friendliness of employees, billing time), Assortment of products (popular brands), Purchase Flexibility etc. (Tang, Bell and Ho, 2001) Lastly, unplanned time spend in store and unplanned purchases have been found to be linked with factors like perceived quality, variety, specials and value for money.

Oxenfeldt

brand name, store name and level of advertising). However, the focus has been almost exclusively on the perceived price-quality relationship, even though it has been demonstrated that the availability of other cues typically reduces the importance of price as a cue (Bonner and Nelson, 1985; Dodd's et al., 1991).

Based on Monroe and Krishnan (1985), a positive relation between the perceived price and perceived quality can be pricesensitive, it is expected that price play a very important role in determining the quality of the merchandise. In order to avoid confounding the price and value constructs, price perceptions

(1974) and Martineau (1958). Mentioned that

were operational zed as perception of price within the range of

various definitions about a retail store image have been given by

known prices of equivalent products in the product category.

scholars form time to time. The oldest and most basic one can

Hence it can be posited that: “There exist a positive relationship

be credited to who defined a store's personality as:…. the way in

between relative price and goods quality.”

32 IFIM International Journal of Management | FOCUS October 2014 - March 2015

FOCUS Research Papers Smith and Barclay, 1997 mentioned that Satisfaction with the

(customers) characteristics, management of knowledge/data

relationship is regarded as an important outcome of

(information about customers), CRM structure (organisation

buyer0seller relationships). We define relationship satisfaction

structure, organisation obligations, sources, human resources,

as “a consumer's affective state resulting from an overall

etc.) and CRM substantiation by IT technologies.

appraisal of his relationship with a retailer” .

Anderson and Narks, 1984 in business as well as consumer

Jason(2004), According to each customer is a unique personality, thus it is necessary to analyze his or her needs and

markets customers tend to be more satisfied with sellers who

features. It means that it is necessary to accumulate at least little

make deliberate efforts towards them. Consequently, we posit

information about a customer, to possess his or her contact

the following hypothesis:“A higher level of customer retention

information, work profile and main wishes he also assumes that

orientation of the retailer leads to a higher level of relationship

certain reorganization of an enterprise is necessary. If the level

satisfaction.

of customer service is not developed sufficiently, customer

Yim(2005); it presents four elements groups consumers

relationship cannot be managed effectively.

Data analysis and interpretation Factor Analysis: KMO and Bartlett's Test

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34 IFIM International Journal of Management | FOCUS October 2014 - March 2015

FOCUS Research Papers Extraction Method: Principal Component Analysis.

Interpretation : According to above table we can see that,out of the total variance,695 of the variance is explained by 5 factors,20.885%,17.713%,11.602%,10.084%,9.653.

Extraction Method: Principal Component Analysis.

Factor 3(monetary requirements)

Rotation Method: Varimax with Kaiser Normalization.a.

Billing procedures

Rotation converged in 11 iterations.

Cards acceptance

Interpretation:

Offer schemes/discounts)

Out of the total factors above the factors can be divided into 5 factors namely,

Service

Factor 1(physical characteristics of the store)

Employee behaviors

Physical facilities

Home brands quality

Factor analysis 4(Store's support)

Presentation

Price/quality justification in case of home brands

Store layout

Factor 5(store reputation(quality)

Factor 2(hygiene)

Brands available sufficient or not

Cleanliness

Product availability

Hygiene

Quality of product

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36 IFIM International Journal of Management | FOCUS October 2014 - March 2015

FOCUS Research Papers

Interpretation: From cross tabulation we can see that in food bazaar quality stated by maximum of our respondents is stated as highly statisfied, and in non food section it is also highly statisfied,as per our table we can see there were only 9 & 5 respondents in big bazaar who sopped electronic or furniture respectively from big bazaar and most of them stated quality as highly dissatisfactory ,So , it is adviced to the management to increase the quality of products in electronic and furniture section to increase sales there

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Interpretation: We can see from the table itself that in food bazaar there is high satisfaction level in customers as per as brands availability is concerned, but in, electronic and furniture section the more frequency is in highly dissatisfied (6)and dissatisfied(3)respectively, and for clothes(7)highly dissatisfied So, according to the research if Big Bazaar wants to increase its sales and level of satisfaction in customers in electronic clothes and furniture section go on increasing brands or no. of brand Cross tabulation( income group and overall satisfaction)

38 IFIM International Journal of Management | FOCUS October 2014 - March 2015

FOCUS Research Papers

Interpretations We can infer from above data that in low income groups such as>10,000 or say 10,000-20,000 satisfaction level is highest 5 in highly and 19 in highly satisfied again respectively , while in high such as 30,0000-40,000 and >40,000 the satisfaction level is 3 in dissatisfied and 4 in dissatisfied respectively so we can infer there is relationship or association between income group and satisfaction level.

Interpretation We can infer since the value of chi square is less than 0.05 therefore the H0 hypothesis is rejected hence we can say that there is association in income and overall satisfaction, and how we have seen in above cross tabulation Hence it is suggested the management that yes, though the lower income groups are more satisfied from big bazaar , but to increase the overall profitability we have to target high income groups because they are dissatisfied , hence we cans say that from the one before the previous cross tabulation ,that to make high income group satisfied increase brands in furniture ,electronic section. And target high income groups.

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Cross tabulation (distance from the store and frequency of visits) Case Processing Summary

40 IFIM International Journal of Management | FOCUS October 2014 - March 2015

FOCUS Research Papers Interpretation We can directly see that if distance is less 0-5 example say kms then frequency of visit is highest in >4times(59) and if distance more >20 it is most in once a month(5) And as, the chi square coefficient is less than our level of significance so,H0 rejected hence, there is association between frequency of visit and distance from the store i.e inversely proportional.

Interpretation The pie chart shows that out of our 100 samples 6%,13%,19%,20%,42% are highly satisfied, satisfied neutral, dissatisfied ,highly dissatisfied Hence management should increase the employee support and knowledge to increase customers satisfaction ,and thereby sales.

Interpretation The chart shows that out of 100 samples ,15%,25%,26%,9,25% say brands available as highly satisfied , satisfied , neutral, dissatisfied ,highly dissatisfied respectively so to increase customer satisfaction and we know that is from higher income groups management should increase brands in all sections.

Interpretation Out of total 66%,18%,7%,6% and 3% are highly dissatisfied, dissatisfied, neutral, satisfied , highly satisfied.

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CONCLUSIONS Customer relationship management (CRM) is first of all it is business strategy meant for development of customer relationship; and its results optimize profitability, income and meeting the needs of customers 1.

Summarizing the functionalism and validity of researched elements of different models, it would be possible to highlight that in order to successfully implement CRM, it is necessary for Big Bazaar store that they must balance and integrate technologies, processes and people. These elements are closely related to enterprise's strategy, processes of technologies, and processes of integration of overlapping functions as well as orientation to basic customers.

2.

Model's formation has to appeal to certain continuity of actions (a situation is evaluated, CRM strategy is formulated, investments are determined, anticipated profit is calculated), and creation of the system can be successful when the following elements of the system are analyzed and related: customers, relationship interaction, information sources and data bases, processes and employees.

3.

Customer relationship management cannot be only the illustration of the relationship, it is much more important to understand the management and development of relationship. CRM integrates new strategic initiatives of communication with customers or their groups, it creates common platform of communication with customers. Thus the Big Bazaar store managers must consider the above mentioned factors in order to effectively implement the CRM.

4.

In the end we conclude from our analysis that though the overall satisfaction level as mentioned by the customers was low in Big Bazaar but there are several ways also to increase their satisfaction level and hence sales of select 5 Big bazaar stores .The customers had less confidence on quality of products, authenticity of billing procedures i.e all went wrong every time, their schemes were not updated at cash counters or even at the different sections too. So, the managers should take some strict and constructive measures to ensure all such modifications to be done correctly by time.

5.

Customers also wanted more brands in different section especially in electronic section for they relied less on products or brands sold by Big Bazaar stores currently at that time. They should also improve quality of their brands as stated by the customers as almost dissafactory.

6.

These could also some methods to increase customers foot fall and sales in different or specially electronic or clothes section of Big Bazaar as per our research and findings.

7.

Employees behaviors and support was also not satisfactory as per the customers so managers should take some serious training methods for the store sales force. Lastly, higher income groups were less satisfied from the store which signaled the store management to target higher groups with some appropriate kind of strategy. Promotional activities as carried during the study has provided a good way success which increased the overall foot fall in the store day by day. Hence in the end we can state though overall customer stated their satisfaction level as dissatisfactory but yet there are ways to make them satisfied as well as loyal customers of Big Bazaar

RECOMMENDATIONS .

Diversity of CRM model and its structure shows that CRM as system is forming and thus preparation of typical model, which would enable its successful implementation, is possible.

.

Though gifts like bags, magazines were good to attract customers but more good offers should be inculcated to increase customer buying activities.

.

The store should increase its product line and for this it should contact to many distributors so they can provide a huge amount of products so that they can find every product according to their need.

.

The space should be increased in the store for the customers to move to find every products of their choice. The employees should be trained in this way so that they can answer the questions of the customers regarding their problems in services efficiently.

.

Number of brands in various sections specially clothes and clothes to be increased especially the quality of Home brands to be improved.

.

Employees should be given proper training about knowledge and support to customers and billing softwares to be updated and improved.

42 IFIM International Journal of Management | FOCUS October 2014 - March 2015

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43

FOCUS Research Papers

Implications of IFRS implementation in India

A Perceptual study

Dr. P.PARAMSHIVAIAH*

Mr. PUTTASWAMY**

Ms. RAMYA S.K.***

STATEMENT OF ORIGINALITY We the authors of the present paper hereby affirm and declare that the research paper entitled â&#x20AC;&#x153;Implications of IFRS implementation in India: A Perceptual studyâ&#x20AC;? is our original research paper. No part of the information in the body of the text has been reproduced from any of the other source without prior permission. We also declare that the present research paper has not been presented / published anywhere before this submission.

With Regards: Dr. P. PARAMASHIVAIAH, Prof. PUTTASWAMY, Ms.RAMYA. K.S

ABSTRACT: Financial reporting is an information system of business and it

INTRODUCTION: Accounting is considered as the language of business. Financial

should be presented in an understandable language to all the

reporting is the medium through which the language is

stakeholders. In the era of globalization, India has become an

communicated to the parties interested in business

economic force. To be a leader globally, India has to adopt many

information. Accounting and financial reporting are regulated

changes required to interface the stakeholders of India and of

by Generally Accepted Accounting Principles (GAAPs)

abroad and also comply with financial reporting standard. In

comprising of accounting standards, company law, stock market

this backdrop a uniform international accounting system

regulations, and so on. The global GAAPs that is seeking to

(International Financial Reporting Standards) has emerged.

harmonize accounting and financial reporting world is the

Many countries have adopted IFRS and India, planned to

International Financial Reporting Standards (IFRS) issued by

implement in phased manner to bring about accounting quality

the International Accounting Standards (IASs; International

improvement through uniform standards. However, accounting

Financial Reporting Standards (IFRSs); Standing

quality is a function of the firm's institutional setting within the

Interpretations Committee (SICs) pronouncements; and

legal and political system of the economy in which it exists. IFRS

International Financial Reporting Interpretations Committee

implementation involves technical complexities and legal

(IFRICs) guidelines. Accounting Framework has been shaped

hurdles.

by International Financial Reporting Standards (IFRS) to

This paper aims to understand the complexities and issues concerned with the delay in implementation process. The primary data from 198 respondents from academicians, professionals and business people, was collected with five point Likert scale and factor analysis, Kruskal Wallis tests were applied after the validation test.

The test results that there is no significant difference in the

provide for recognition, measurement, presentation and disclosure requirements relating to transactions and events that are reflected in the financial statements. IFRS was developed in the year 2001 by the International Accounting Standard Board (IASB) to facilitate a single set of high quality, understandable and uniform accounting standards. Users of financial statement would require sound understanding of financial statement but this can only be made possible if there is General

perception of the respondents. It was found that the experts

Accepted Accounting Practice (GAAP). With globalization of

view is to implement and make necessary changes for adoption

finance the unified GAAPs enable the world to exchange

and gain its benefits. The paper suggests training and removing

financial information with more meaningful and credible.

legal hurdles soon.

Investors from all over the world rely upon financial statements before taking decisions while different countries adopt

Key words: IFRS, India, implementation, Implications *Dean & professor, Department of studies and Research in commerce, Tumkur University, TUMKUR, Mobile:- 94485 33326, E-mail:- paramashivaiah@gmail.com **Assistant professor of commerce & Research Scholar, Governement First Grade College HIRISAVE, HASSAN-573211, Mobile:- 9741836197.,E-mail:swamisure@gmail.com ***Assistant Professor of Commerce, Govt.Womens College Holenarasipura, HASSAN

44 IFIM International Journal of Management | FOCUS October 2014 - March 2015

accounting treatments and disclosure practices in respect of the

China, Canada, and Australia. US is considering moving from

same economic event. This certainly makes the investors

US GAAP to IFRS. India is one of the few countries in the world

confused and puzzled while interpreting financial statements.

which has yet to adopt IFRS. BRICS countries have also

Therefore, to have uniformity in a presentation of financial

implemented the IFRS- China (some years back), Brazil (in

results and position of business entity almost all the countries

2008) and Russia (in 2012). Japan is one of the few developed

have agreed upon to adopt one single common accounting

countries that have not yet implemented IFRS. The whole

language i.e. IFRS. Precisely, “Convergence can be considered

Europe is already in the IFRS mode. India has not yet converged

to design and maintain national accounting standards in way

even after three years of its announcement. FICCI was

that financial statements prepared in accordance with National

apprehensive about India's ability to adopt IFRS in 2011 and

Accounting standards drawn unreserved statement to

opined it was highly unfair and impractical due to shortest

compliance with IFRS”. The convergence with IFRS in India is

possible time frame. There is good number of examples of

perceived to be a milestone decision leading to significant

benefits perceived for gaining advantages of international

benefits to Indian corporate in terms of easier access to

accounting. Many research studies also have discussed the

international capital markets, lower cost of capital, improved

important issues and challenges of adopting IFRS in India.

comparability, elimination of complexities of multiple

India is not going to adopt altogether IFRS. In fact India is

reporting and many others.

about to converge Indian GAAPS with IFRS. While IFRS is

1.1.

What is IFRS?

IFRS can be defined as “A single set of high quality, understandable and enforceable global accounting standards that require high quality, transparent and comparable information in financial statements and other financial reporting to help participants in the world's capital markets and other users make economic decisions” The difficulty in converging Indian Accounting Standards with

still not compulsory in India, a few companies have already adopted it, such as Bharti Airtel, Dabur, Infosys and Noida Toll Bridge.

The debate amongst the experts and practitioners is on as to why it is delayed up till 2015. The most important question that arises during this debate is that why India is cut a sorry figure when it announced the date, but did not make itself ready to implement the same in 2011? Under this rationality the researcher made an attempt to understand the perception on

IFRS requires the preparers and practitioners to understand the

the implications of implementing the convergence of Indian

magnitude and complexity.

GAAPS to IFRS soon. It was thought considerably relevant to study the views of professionals and academicians and business

1.2.

RATIONALE OF THE STUDY

India originally decided to implement IFRS from 1st April 2011 in a phased manner but it was postponed. The Ministry of Corporate Affairs (MCA), in January 2013, sought the opinion of ICAI about the time of implementing IFRS convergence.

ICAI gave its recommendations in February 2013 suggesting that companies with net worth above Rs 1000 Crore should implement IFRS from 1st April 2015; those with Rs 500 Crore to Rs 1000 Crore by 1st April 2016 and all others by 1st April

community on the issue. We limit the scope of present study to understand the perception of professionals-who actually practice with converged standards; Academicians-who deal with education and training in accounting and reporting standards; Business people-whose business is affected due to implementation of IFRS. Thus, the statement of the problem is recognized as “Implications of IFRS implementation in India: A Perceptual study” I.

LITERATURE REVIEW

2017. ICAI has not recommended a time frame for banking and insurance companies to embrace IFRS. However, experts are of

Considerably a good number of research studies thrown light

the view that the banking and insurance companies also should

on the various issues with respect to IFRS adoption across the

start converging IFRS from 1st April 2015. It is argued that IFRS

globe.

is not a new concept now and no additional time is required to adjust to IFRS. MCA has not made any announcement as regards the recommendations of ICAI up till now.

More than 100 countries have already adopted IFRS, including

Joseph (2000) has studied the importance of the uniformity in reporting in an environment of technology up-gradation and political reorganization of nations across the globe. He identifies that consistency in reporting enables to attract global

IFIM International Journal of Management | FOCUS October 2014 - March 2015

45

FOCUS Research Papers entrepreneurs and investors by increasing the rate of investment

relevance of accounting numbers. The study also found that the

and also lead to the integration of individual economy to the

firms applying IAS/IFRS experienced an improvement in

international economy.

accounting quality between the pre-adoption and post

Kannan (2003) conducted a study regarding international

adoption.

standards with respect to banking operations and importance of

Jeanjeana and Herve stolowya (2008) analyzed whether

corporate financial reporting in corporate governance and

mandatory introduction of IFRS standards had an impact on

documentation of the changes occurred in corporate reporting

earnings quality, and more precisely on earnings management

practices. He has given justifiable suggestions for their gradual

and concluded that frequency of earnings management did not

introduction in the Indian Banking sector.

decline after the introduction of IFRS.

Dangwal and Singh (2005) in his study observed some

Capkun et al. (2008) has analyzed the impact of mandatory

interesting issues with regard to the financial reporting of

change in financial reporting standards in European union and

banking companies in India and finds that the quality of

found that the transition from local GAAP to IFRS had a small

financial reporting enables the banks to capitalize their

but statistically significant impact on total assets, equity, total

underlying strengths, disclosure practices and social viability.

liabilities and among assets the most pronounced impact on

Tokar (2005) focuses on the impact of convergence on auditing

intangible assets and property and equipment.

firms and concludes that achieving true convergence of

Armstrong C. (2008) analyzed the development of reporting

accounting standards is a costly and time-consuming objective,

standards for both financial reporting and for corporate social

and will require a huge investment of money and a significant

responsibility (CSR) reporting. It aims to argue that both

change in the training of accounting students in the near future.

Chand & White (2007) studied the convergence of Domestic Accounting Standards and IFRS and also exhibits that influence of Multinational Enterprises and large international accounting firms can lead to transfer of economic resources in their favor, wherein the public interests are usually ignored Goncharov and Zimmermann (2007) find that the level of earnings management for firms that report their results under US GAAP is significantly lower, while the level of earnings management under German GAAP and IAS is roughly equal.

Based on the evidence, they concluded that the different accounting choices embedded in different accounting standards influence the level of earning management.

Graeme Wines, Ron Dagwell, Carolyn Windsor (2007) critically examined the change in accounting treatment for goodwill pursuant to international financial reporting standards (IFRSs) by reference to the Australian reporting regime.

Barth et al (2008) undertook a study of financial data in 21 countries and examined whether application of IAS/IFRS is associated with higher accounting quality and the findings of the study confirmed that firms applying IAS/IFRS evidence less earnings management, more timely loss recognition and more

International Financial Reporting Standards and US Generally Accepted Accounting Principles are vehicles of colonial exploitation and cannot be sustainable. This can be contrasted with the voluntary approach to the development of CSR reporting standards.

Lantto & Sahlstrom (2007) (2009) examines whether IFRS improved the usefulness of accounting information in a code law country that has a strong system of legal enforcement and high quality domestic accounting standards. They found that IFRS have improved the relevance of accounting information in Finland but they also highlighted the concern about reliability of those items of financial statement that are prepared using judgment.

They aslo undertook study of key financial rations of companies of Finland and later found that the adoption of IFRS changes the magnitude of the key accounting ratios and also showed that the adoption of Fair Value Accounting rules and stricter requirements on certain Accounting issues are the reasons for the changes observed in Accounting Figures and Financial ratios.

Epstein (2009) studied Economic effects of IFRS adoption by emphasizing on the fact that universal financial reporting standards will increase market liquidity, decreases transaction costs for investors, lower cost of capital and facilitate international capital flows.

46 IFIM International Journal of Management | FOCUS October 2014 - March 2015

Alfred Wagenhofer (2009) analyzed the challenges that arise

countries that have adopted IFRS have higher degree of

from political influences and from the pressure to sustain a

integration among them after their IFRS adoption as compared

successful path in the development of standards. It considers

to the period before the adoption.

two strategies for future growth which the International Accounting Standards Board (IASB) follows the work on fundamental issues and diversification to private entities.

Chen et al (2010) carried out a study of financial data of publicly listed companies in 15 member states of European Union before and after the full adoption of IFRS in 2005, thereafter

Dennis W. Taylor (2009) compared the costs to financial

found that the majority of Accounting Quality indicators

statement prepares of making the transition to International

improved after IFRS adoption in the EU and after there is loss

Financial Reporting Standards (IFRSs) relative to the benefits

of managing earning towards a target, a lower magnitude of

to financial statement users from receiving “higher quality”

absolute discretionary accruals and higher accruals quality.

IFRS-based information (measured as incremental value-

They also proved that the improved accounting quality is

relevance for listed companies in the UK, Hong Kong and

attributable to IFRS, rather than changes in managerial

Singapore). These countries had different approaches to

incentives, institutional features of capital markets and general

harmonization leading up to IFRS adoption.

business environment.

Rudy A. Jacob, Christian N. Madu (2009) examined the

.2.1.

academic literature on the quality of International Financial Reporting Standards (IFRS), formerly International Accounting Standards (IAS), which are poised to be the universal accounting language to be adopted by all companies regardless of their place of domicile.

RESEARCH GAP

As evident from the literature review, good number of studies carried out in different countries in different perspectives. They have highlighted the benefits of having single set of financial reporting standards across the globe.

Most of the above

mentioned studies are post-convergence period researches. In

Robyn Pilcher, Graeme Dean (2009) determined the impact

India IFRS still not implemented, post adoption impact and

financial reporting obligations and, in particular, the

implications cannot be studied. However, a few research studies

International Financial Reporting Standards (IFRS) have on

have been carried out recently in India, on conceptual basis.

local government management decision making. In turn, this

Most of the studies explain advantages, issues and challenges on

will lead to observations and conclusions regarding the research

theoretical background. Hence the research gap exists in India

question: “Does reporting under the IFRS regime add value to

and no research works studied the perception of Professionals,

the management of local government?”

academicians and business people. Furthermore, since the

Susana Callao, Cristina Ferrer, Jose I. Jarne, Jose A. Lainez (2009) discovered the quantitative impact of International Financial Reporting Standards (IFRS) on financial reporting of European countries and evaluate if this impact is connected

government has not adopted IFRS yet, studies on post implementation impact and implication would be controversial and irrational. Therefore we have carried out perceptual study on issues and challenges of implementation of IFRS in India.

with the traditional accounting system in which each country is

The major utility of this study is that it signals the major issues

classified, either the Anglo-Saxon or the continental-European

and practical vulnerability in the process of IFRS

accounting system.

Siqi Li (2010) carried out a study on 1084 European Union firms during the period of 1995-2006. He concludes that on an average, the IFRS mandate significantly reduces the cost of equity for mandatory adopters and reduction is present only in countries with strong legal enforcement. He also concludes that

implementation. It will also guide the policy makers to take necessary precautions and to calibrate legal framework that suits the compatibility of IFRS in corporate reporting practices.

2.2.

1.

increased disclosures and enhanced information comparability

markets and summarized that the capital markets of the

To study the perception of professionals, academicians and business people on IFRS implementation

are two mechanisms behind the cost of equity reduction.

Cai & Wong (2010) conducted a survey of global capital

OBJECTIVES OF THE STUDY

2.

To identify the major contributing factors on issues and challenges in IFRS implementation

IFIM International Journal of Management | FOCUS October 2014 - March 2015

47

FOCUS Research Papers 3.

To know whether there is an association between different groups of respondents

4.

To offer pertinent suggestions based on the research findings

2.3.

3.3

TOOLS OF ANALYSIS

Data collected, edited, codified and analyzed by applying SPSS version 16. Factor analysis was applied. The data failed to test the normality assumption. However, the data fulfills the homogeneity test. Hence, Krsuskal-Wallis test was adopted for

Hypothesis:

testing the hypothesis.

H01: there is no significant difference in the perception of respondents H11: there is a significant difference between the mean perceptions of respondents

III.

RESULTS AND ANALYSIS

The table 1 shows the demographic details of the population considered for survey. Of the total 230 respondents 87 were academicians, 95 were accounting and finance professionals-

II.

RESEARCH METHODOLOGY

3.1.

DATA

practicing Chartered Accountants, and 48 were Business people.

This study is exploratory in nature. It also yields empirical results. The study relied both on primary data and secondary source of information. The primary data consists of socioeconomical status as well as qualitative information consists of perceptions of three category of respondents- chartered accountants and finance professionals, academicians who teach both graduate and post-graduates students in the relevant subject, and also business people. The secondary source consists of published information from journals, books, compendiums of ICAI, research papers, thesis and government records, and

All these respondents are considered as preparers and

extensive literature survey. The primary data was collected by

practitioners. Among the academicians 49 percent are educated

distributing structured questionnaire.

up to post graduation and 46 percent of the academicians have doctoral degrees, and only 4.6 percent have professional

3.2.

SAMPLING

degrees. Majority of the professionals have professional degree

We identified the respondents by multi-stage random sampling method and also adopted judgmental random sampling and Purposive sampling method for data collection. In the first stage, the registered chartered Accountants in the southern region were identified from the directory of members of chartered accountants.

There are 192513 chartered

accountants are the members of all the regions in India as per the directory, as on 1st April 2012 out of which 18700 are practicing chartered accountants from southern region.

Purposive sampling method was followed to collect data from

and more than 50 percent of the business people are studied up to post graduation and doctoral degree. The table shows that more than 60 percent of the respondents have up to 30 years of experience in their respective field. Age-wise analysis shows that more than 50 percent of the population aged below 40 years and the rest aged above 40 years. The respondents considered for survey have enough experience and practice in their relevant field of accounting and reporting and obviously more suitable sample for data collection.

4.1.

TESTING THE VALIDITY

Business people and college teachers and university teachers.

Questionnaires were distributed through e-mails to 70 members

For data analysis and testing the hypothesis, we have tested the

in each group, totally 210 structured questionnaires were sent to

reliability through Cronbach's Alpha (Table 2). The value more

the population in Mysore, Bangalore, Belgaum, Chennai and

than 0.50 which is considered to be reliable and value of the

Thrissur. Judgment sampling method was adopted. In all 198

data in the present study is 0.577, which is more than 0.50,

completed questionnaires were finally considered for the study.

shows the homogeneity of items.

48 IFIM International Journal of Management | FOCUS October 2014 - March 2015

which explained 69.311 percent of the variance with the loss of only 30.681 percent of information. The extracted factors were then rotated using 4.2.

FACTOR ANALYSIS Variance maximizing method (Varimax). These rotated factors

Factor analysis through which various factors of statements

with their variable constituents and factor loadings are given in

asked to the respondents are reduced to find out the important

Table 5. Of the 10 factors identified adoptability is the first

factors determine the issues and challenges as perceived by the

factor emerged as an important component with the highest

respondents. Before that, Kaiser-Meyer-Olkin measure of

factor scoring and the total variance of 12.45 percent, the

sampling and Bartlett's test of Sphericity (Table3 ) was applied.

second factor is understandability with the total variance of

Bartlett's test of sphericity was significant, supporting the

11.48 percent, then follow preparedness, flexibility, problem of

factorability of the correlation matrix and the associated

reporting, transitional problems, reliance, Technological issues,

significance level was extremely small (0.000). A high value

regulatory issues. However, inferential ambiguity as scored more

which is above 0.5 to 1.0 generally indicates that a factor analysis

than 80 percent and emerged as

may be useful with the data. As here KMO value is 0.659 on factors of issues and challenges perceived is more than 0.50, we found that the results of factor analysis are useful with the present data.

COMPONENTS

Test Statisticsa,b

Technological issues, regulatory issues. However, inferential ambiguity as scored more than 80 percent and emerged as a vital component though the total variance is 3.17. Answers to the questions with five point Likert scale was analyzed with factor analysis. Majority of the respondents are of the view that proper training to the preparers, practitioners and users is the very important thing that should happen before we go for

A factor analysis was conducted to develop constructs that will

convergence.

help to evaluate factors that are identified as key issues and challenges of IFRS implementation. 10 factors were generated,

TABLE 4: FACTOR ANALYSIS AND KRUSKAL WALLIS TEST

IFIM International Journal of Management | FOCUS October 2014 - March 2015

49

FOCUS Research Papers

a. Kruskal Wallis Test, b. Grouping Variable: OCCUPATION

Regulatory bodies need to streamline the legal issues concerned with taxation and disclosure norms to the corporations on the basis of total turnover or total capital as the case may be. The experts view is that the recent companies Bill 2012 should have been postponed or the compulsory rotation of auditors should have been delayed until the IFRS issues are properly settled down. Unless we are prepared internally for the convergence, unless the ambiguities are wiped out, without any clarity in the norms it is highly difficult to converge, even in a phased manner, in the country like India filled with too many Laws and Acts. It will also be difficult on the part of the users of accounting information to read and understand and take decisions based on the financial reporting unless there is awareness among all the parties.

4.3.

TESTING OF HYPOTHESIS

4.3.3

Hypothesis (H01)

frequencies of the responses we calculated mean, standard deviation, Chi-Square Test for testing another null Hypothesis (H01) which states that there is no association between the perceptions about the supportive functions. Table (8) below shows the mean and standard deviation of the perception among the three groups of population- professionals, academicians, and Business people.

I.

SUGGESTIONS AND CONCLUSION

Since IFRS is principle-based approach and have limited implementation and application guidelines, it requires the preparers; especially, initial period learning and subsequent revisions form the implementation. There are technical complexities, manual work stress, management problems. As the time frame for implementation of IFRS has been changed there arose a great amount of debate among the people as to what complexities involved IFRS implementation. In the light of repeated postponement of IFRS convergence process it was thought necessary to understand the reasons behind the delay.

Initiatives and preparedness on the part of regulatory bodies

To understand the issues and challenges concerned with the

ICAI and advisory Committees for the IFRS implementation is

IFRS implementation in India as perceived by the appropriate

much necessary. It builds confidence of the preparers and users

groups of the population we served questionnaires to respond

of IFRS reporting system through its supportive function. In

to the statements prepared on the basis of widely available

the light of this the statements were included in the data

literature and conceptual background about the Indian GAAPs

instrument about the said supportive functions. Based on the

and IFRS. The data was tested and found valid. Factor analysis

50 IFIM International Journal of Management | FOCUS October 2014 - March 2015

resulted in ten dimensions and the most important issues

the advisory committees towards the speedy process of

concerned with this phenomenon is adoptability,

convergence is not much sufficient. Only thing required is that

understandability and preparedness. Majority of the

highly influential new company law Bill must clear the obstacles

respondents strongly agree that there is a talent crunch and

and the compulsory rotation of auditors must be delayed until

speedy academic training and professional guidance is sought

the convergence process completes and everything is settled.

among the practitioners. And also the expert view is that there

Moreover, the academic inputs to the professional regions are

are transitional issues to be tackled with the necessary changes

not at all satisfactory. A sound theoretical and practical training

in the legal environment that is compatible to the taxation and

in the light of international GAAPs, industry-academia

other relevant interdisciplinary issues.

integration is very much necessary. The results suggest that the

The problem of flexibility and inferential ambiguity between the preparers and users, particularly investors share value measurement and dividend issues are quite unique in the country. Hypothesis testing shows that there is no significant difference in the perception among the population. But as the respondents believe the steps taken by the governing body and

accounting and finance professionals, academicians and business people more or less carry the same perception towards IFRS convergence. With this background we conclude that practitioners and experts view it necessary to converge Indian GAAPs with IFRS by arranging necessary rooms for universal adoptability.

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IFIM International Journal of Management | FOCUS October 2014 - March 2015

51

FOCUS Research Papers

Applicability of the Linear CVP Model in the Indian Cement Sector Mihir Dash* ABSTRACT The Cost-Volume-Profit (CVP) model is a model for analyzing a firm's cost and revenue structure, and it is widely used in practice to examine the possible impacts of a range of strategic

market expansions/contractions, outsourcing, plant utilization, and so on (Brealey and Myers, 1991; Horngren et al, 1994).

The simple linear CVP model has several inadequacies. The

decisions. In spite of its theoretical appeal, however, the CVP

model assumed linear cost and revenue functions, which

model has had very little application empirically.

prevented it from capturing some significant nonlinear

This study examines the applicability of the CVP model empirically for the Indian cement sector using linear regression.

The results of the study indicate that though the simple CVP model with linear cost and revenue functions does offer some interesting insights, there are anomalies in several cases. Thus, the CVP model with nonlinear cost and revenue functions may be more appropriate in explaining the cost and revenue structure for companies in the Indian cement sector.

phenomena, such as the range of profitability and the optimal point. Several studies have incorporated nonlinear costs and revenues in the CVP model (Guidry et al, 1998). Also, the CVP model was a deterministic model, and was thus not effective in the case of decision-making under uncertainty. Several extensions to the CVP model were proposed to include uncertainty conditions (Jaedicke and Robichek, 1964; Hilliard and Leicth, 1975); and Adar et al (1977) and Kottas et al (1978) proposed general models for CVP analysis under uncertainty.

Keywords: Cost-Volume-Profit (CVP) model, cost and revenue

Further, Kottas and Lau (1978) applied simulation techniques

structure, linear regression.

for stochastic CVP analysis. Also, the CVP model was essentially

INTRODUCTION

product or a fixed product mix. Gonzรกlez (2001) proposed an

a single-variable model, applicable only in the case of a single The Cost-Volume-Profit (CVP) model is a model for analyzing a firm's cost and revenue structure, summarizing the consequence of changes in sales volume on the firm's costs, revenues, and profits. The simple CVP model was introduced by Hess (1903) and Mann (1903-07), with linear cost and revenue functions.

Even though it is relatively simplistic, it is a very versatile

extension of the CVP model for multiproduct firms. Some other extensions of the CVP model are: learning effects (McIntyre, 1977), capital structure (Guidry et al, 1998; Kee, 2007; Prihadyanti, 2011), cost stickiness (Banker et al, 2013), and several others.

In spite of its theoretical appeal and its several extensions, the

technique for profit planning, and it is extensively used in

CVP model has had very little application empirically. Xishuan

practice to examine the possible consequences of a range of

and Huifang (2008) employed a linear regression model to

strategic decisions, including pricing policies, product mixes,

empirically test the CVP model, with profit as the dependent

*Alliance University Bangalore, India

52 IFIM International Journal of Management | FOCUS October 2014 - March 2015

variable, and sales volume, variable costs, and fixed costs as the independent variables; however, this specification clearly suffers from multicollinearity. The present study analyses the applicability of the linear CVP model empirically for the Indian cement sector using linear regression.

Methodology The objective of the study is to explore the applicability of the linear CVP model as discussed in the preceding section in explaining the cost and revenue structure in the Indian cement sector. The data for the study was collected for a sample of

Model Specification

twenty-two large cement companies and seven small/medium

The study considers the simple CVP model with linear cost and revenue functions. The model assumes a linear cost function TC=FC+vx and a linear revenue function TC=px. The viability condition for the firm (i.e. the condition for the firm to be profitable at some level of production) is that P>V, and, under this assumption, the break-even point is given by BEP= A simple sustitution yields the equation TC=

cement companies from the Capitaline1 database, based on data availability. The sample companies were further classified into region (North and South India). The study period was 20032012. The data pertaining to the costs and revenues for each company was obtained from the income statement. The costs included raw materials costs, power & fuel costs, employee costs, other manufacturing expenses, selling & administrative expenses, and miscellaneous expenses, while the revenues included the sales turnover.

implying a linear relationship of TR on TC, with a negative intercept, and, under the assumption of viability, a slope greater

The cost-revenue relationship was analysed using linear

than one. On the other hand, a similar substitution yields the

regression in accordance with the models specified in the

equation

preceding section. The regression results are presented in Table

also implying a linear

relationship of TC on TR, with positive intercept, and, under

1. The regression coefficients were used to compare the

the assumption of viability, a slope lying in the unit interval, i.e.

profitability performance of North and South India based companies as well as large and small/medium companies using

between zero and one.

two-way ANOVA without interaction. The results of the twoIn particular, the regression coefficients above are linked with

way ANOVA tests are presented in Tables 2 and 3.

the percentage contribution margin, 1 - v/p, which is equivalent to the rate of change of contribution margin with respect to total revenue, and thus would be closely related with profitability.

The regression coefficients can thus be used as a basis for comparison of profitability performance between companies in the same industry, and between different sub-segments of an industry.

Findings The results in Table 1 show that all of the regressions were statistically significant, with a coefficient of determination of at least 85%, except for Cement Corporation of India, with a coefficient of determination of 61.0%.

Table : results of regression of TR on TC and TC on TR

1

www.capitaline.com IFIM International Journal of Management | FOCUS October 2014 - March 2015

53

FOCUS Research Papers First considering the linear regressions of total revenues on total

Similarly for the linear regressions of total costs on total

costs, it was found that all of the regression coefficients were

revenues, it was found that all of the regression coefficients were

greater than one, except for Kalyanpur Cements and Sainik

less than one, except for Kalyanpur Cements and Sainik

Finance & Industries, both of which had incurred losses during

Finance & Industries, and were relatively high (greater than

the study period. The regression coefficients of Barak Valley

0.90) for Barak Valley Cements, Gangotri Cement, and Prism

Cements, Gangotri Cement, and Prism Cement were relatively

Cement, corresponding with the linear regressions of total

low, less than 1.10, indicating that these companies may be at

revenues on total costs. Once again, the regression constants

risk of loss. On the other hand, the regression coefficients of JK

were positive for only thirteen of the sample companies, and

Lakshmi Cement and Chettinad Cement Corporation were

significant for three of these; for the remaining sixteen of the

relatively high, greater than 1.70, indicating higher profitability.

However, the regression constants were negative only for ten of the sample companies, and significant only for Gangotri

sample companies, the regression constants were negative, and significant for three of these.

In summary, the linear CVP model seems to be appropriate only

Cement; for the remaining nineteen sample companies, the

for the following sample companies (i.e. only fourteen of the

regression constants were positive, and significant for six of

twenty-nine sample companies): Burnpur Cement, Gujarat

these. This could have resulted from the slump in demand in

Sidhee Cement, JK Cements, Madras Cements, Mangalam

the construction sector during the study period. Another

Cement, Prism Cement, Shree Cement, Shree Digvijay

possibility could be that some of the sample companies have

Cement, Ultra Tech Cement, Gangotri Cement, Barak Valley

undertaken expansion strategies, which could increase the fixed

Cements, Sainik Finance & Industries, Anjani Portland

costs without an immediate increase in sales.

Cement, and Bheema Cements.

The results of the ANOVA tests indicate that South India based

section of companies in the cement sector, and there are

cement companies were significantly more profitable than

anomalies in several cases. The results of the study suggest that

North India based cement companies, and that large cement

nonlinear cost and revenue functions may be more appropriate

companies were significantly more profitable than

than the simple linear CVP model in explaining the cost and

small/medium cement companies.

revenue structure of cement sector. This may be investigated

Discussion The results of the study indicate that the simple CVP model with linear cost and revenue functions is applicable for only a

54 IFIM International Journal of Management | FOCUS October 2014 - March 2015

further by considering quadratic cost and revenue functions, extending the simple CVP model.

Despite the anomalies, the regression coefficients were found to be in conformance with CVP theory. In particular, the

regression coefficients from the model can be used to compare

There are some limitations inherent in the study. The sample

company profitability performance within the sector, and

size used for the study was limited, and based on data

between sub-segments of the sector. Of course, the relationship

availability. Thus, the results of the study may not be

of the regression coefficients with company profitability needs

generalisable for the entire cement sector, particularly for small,

to be empirically validated.

The results of the study indicate that South India based cement companies were significantly more profitable than their North Indian counterparts. This could be due to cost efficiencies of the South Indian cement companies, particularly in terms of lower distribution costs. This needs to be investigated further.

The results of the study also indicate that large cement companies were significantly more profitable than small/medium cement companies. This could reflect an economy of scale, with larger companies perhaps having a more efficient distribution network. This also needs to be analysed

regional players. The study period also poses some difficulties, mainly due to unfavorable market conditions during the global financial crisis of 2008-09; on the other hand, there is a need to study the applicability of the CVP under these unfavorable market conditions. Another limitation is that the models used in the study assume a constant product mix.

There is great scope for further research in this area. Broader models can be developed, bringing in additional variables, including the product mix. The analysis can also be performed in other sectors. Also, specific models can be developed for CVP analysis for service sectors.

further.

References .

Adar, Z., Barnea, A. and Lev, B. (1977), “A Comprehensive Cost-Volume-Profit Analysis under Uncertainty,” The Accounting Review 52(1), 137-149.

.

Banker, R.D., Basu, S., Byzalov, D., and Chen, J.Y.S. (2013), “Asymmetries in Cost-Volume-Profit Relation: Cost Stickiness and Conditional C o n s e r v a t i s m , ” S S R N

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Basu, O.N. and Conrad, E.J. (1994), “Cost-Volume-Profit Analysis: Uses and Complexities in a Bank,” The Journal of Bank Cost & Management

Working Paper Series, available at SSRN: http://ssrn.com/abstract=2312179 or http://dx.doi.org/10.2139/ssrn.2312179.

Accounting 7(2). .

Brealey, R.A. and Myers, S.C. (1991), Principles of Corporate Finance, 4th ed., New York: McGraw-Hill

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González, L. (2001), “Multiproduct CVP analysis based on contribution rules,” International Journal of Production Economics 73(3), 273 284.

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Guidry, F., O'Horrigan, J., and Craycraft, C. (1998), “CVP Analysis: A New Look,” Journal of Managerial Issues 10.

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Hess, H. (1903), “Manufacturing: Capital, Cost, Profit and Dividends,” Engineering Magazine, 892–898.

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Hilliard, J.E. and Leitch, R.A. (1975), “Cost-Volume-Profit Analysis under Uncertainty: A Log Normal Approach,” The Accounting Review 50(1), 69-80.

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Horngren, C.T., Foster, G., and Datar, S.M. (1994), Cost Accounting: A Managerial Emphasis, 8th ed., Englewood Cliffs, NT: Prentice-Hall

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Jaedicke, R.K. and Robichek, A.A. (1964), “Cost-Volume-Profit Analysis under Conditions of Uncertainty,” The Accounting Review 39(4), 917–926.

.

Kee, R. (2007), “Cost-Volume-Profit Analysis Incorporating the Cost of Capital,” Journal of Managerial Issues 19(4), 478-493.

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Kottas, J.F. and Lau, H.-S. (1978), “Direct Simulation in Stochastic CVP Analysis,” The Accounting Review 53(3), 698-707.

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Kottas, J.F., Lau, A.H.-L., and Lau, H.-S. (1978), “A General Approach to Stochastic Management Planning Models: An Overview,” The Accounting Review 53(2), 389-401.

.

Mann, J. (1903-07), “On cost or expenses,” in Encyclopedia of Accounting 5, 199-225, G. Lisle, ed., Edinburgh: William Green & Sons.

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McIntyre, E.V. (1977), “Cost-Volume-Profit Analysis Adjusted for Learning,” Management Science 24(2), 149-160.

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Prihadyanti, D. (2011), “CVP Analysis incorporating the Cost of Capital on R&D Investment,” International Journal of Engineering Science and Technology 3(4), 34463449.

.

Xishuan, Z. and Huifang, C. (2008), “Empirical Study on Company Financial Performance with CVP Analysis,” presented at International Conference on Management Science and Engineering at California State University, Long Beach, California, USA.

IFIM International Journal of Management | FOCUS October 2014 - March 2015

55

Predictors of Work-Family Conflict & Family-Work Conflict

WORK-FAMILY

FOCUS Research Papers

An exploratory study among officers of defence manufacturing companies in India Nita Choudhary*

Shikha Ojha**

ABSTRACT Work-Family conflict (WFC) occurs when work-role activities interfere with family responsibilities and family-work conflict (FWC) occurs when family-role responsibilities impacts performance at work. The purpose of the paper is to explore how work demands like impact the family domain and home demands like impact work domain. The role of support type in the form of spousal support and self management in the relationship between work demands and work-family conflict was also investigated. The study is carried out in a different sector – defence Central Public Sector Enterprises (CPSEs) as limited study has been conducted in this sector. The sample was comprised of 338 respondents from three public defence manufacturing companies and all of them were officers at various levels. The research instrument was a questionnaire comprising five parts. The variables were measured under four categories – work demands, self management, individual use of company support policies and work-family conflict & familywork conflict. The findings showed that work demands, self management, number of dependents and total experience were significant predictors of work-family conflict. Multiple regression analysis showed that support type in the form of spousal support and self management did not show any

Niranjan Kumar Singh***

Keywords: Work demands, Central Public Sector Enterprises (CPSEs), Work-family conflict (WFC), Family-work conflict (FWC), Stressors INTRODUCTION

Traditionally balancing of work and family roles was focused on

conflicts or interference between these roles (Eby et al, 2005).

The mutual interference of work and family domains has been identified as one of the major stressors in the workplace. Work-

family conflict occurs when pressures from the work and family

domains are mutually incompatible in some respect (Greenhaus and Beutell, 1985). Different types of stress models have been studied that have negative impact on both work and family outcomes like work stressors (eg. no. of hours worked, work deadlines), non-work stressors (eg. no. of dependent children/ dependent parents, strain in marital relationships) and

interaction between work and family (eg. inter-role conflict), (Greenhaus and Parasuraman, 1986; Frone, Yardley and

Markel, 1997). Work constraints may force employee to work longer and harder to make up for inadequate supply of work resources like information, training, manpower and equipment, thus augmenting work-family conflict (Lu et al., 2010).

moderator or mediator effect between work demands and work-

Thus Greenhaus and Beutell, (1985) defined work-family

family conflict.

conflict as “A form of interrole conflict in which the role

*Research Scholar, CMS Business School, Jain University, Bangalore, India, E-mail: xiss12@gmail.com **Faculty, CMS Business School, Jain University, Bangalore, India, E-mail: shikha.a.mehta@gmail.com ***Research Scholar, CMS Business School, Jain University, Bangalore, India, E-mail: niju98@gmail.com 56 IFIM International Journal of Management | FOCUS October 2014 - March 2015

FAMILY-WOR

pressures from the work and family domains are mutually

healthcare, academics, banking and finance. But very few

incompatible in some respect” and divided work-family conflict

studies on work-family conflict have been conducted on defence

into three categories: time-based, strain based and behavior

sector in India. In India there is a general perception among

based. Literature is enriched by Gutek et al. (1991); Frone,

people that employees of defence CPSEs, state and central

Russell & Cooper (1992), who stated that work-family conflict is

government usually have balanced life. But results of this study

bidirectional and found that work stress increased work-to-

shows that even in CPSE, officers work for longer hours, face

family conflict, while family stress increased family-to-work

tight deadlines, weekend work, work pressures etc. The study

conflict. Both work-to-family conflict and family-to-work

also aims to find whether spousal support and self management

conflict contributes to stress for employees. Rothbard (2001)

moderates the relationship between work demands and work-

reported that participating in multiple roles can be detrimental

family conflict. In literature the beneficial nature of spousal

and working parents and dual family earners are negatively

support and self management is studied as separate entities but

affected by simultaneously handling work and family roles.

not as a moderator or mediator. Also stringent security

Grant-Vallone and Donaldson (2001) stated that work-family

guidelines in these companies impart a very different paradigm

conflict is not restricted to employees with traditional

for any researcher to conduct a survey investigating the work life

responsibilities but extends to higher level positions and

of employees of defence CPSEs.

employees with all types of family circumstances experience high levels of work-family conflict.

Combining work and family is the major challenge for the

Theoretical background and hypothesis Variables predicting WFC/FWC

current generation of workers today (Halpern, 2005). This has

Several variables will be related to WFC and FWC as per the

given rise to different types of work-family conflicts: “Work –

model proposed like: work demands, total experience, marital

Family Conflict” (WFC) and “Family – Work Conflict”, (FWC)

status, age and number of children, number of dependents and

(Frone, Yardley and Markel, 1997; Netemeyer et al., 1996;

individual use of company support policies. Literature provides

Byron, 2005). Work-Family Conflict (WFC) occurs when work-

evidence that experience of work-family conflict is more

role activities interfere with family responsibilities (eg. long

prevalent than family-work conflict (Pleck, 1977; Greenhaus

working hours interfering with home roles). Family-Work

and Beutell, 1985; Gutek et al., 1991). As per Pleck (1977), work

Conflict (FWC) occurs when family-role responsibilities

is permitted to interfere with family domain to a greater degree

impacts performance at work (eg. attending a sick child on a

than family is allowed to interfere with work domain. Based on

busy work day). Although many researchers have recognised the

this motive, the present study aims to study work-family conflict

bidirectional influences and have assigned similar processes to

among officers of defence manufacturing companies in

family-work conflict, but the greatest amount of focus has been

Bangalore.

given to work-family conflict (Eby et al;, 2005).

H1: Work-family conflict (WFC) is more prevalent than FamilyThis study is designed to investigate the presence of work-family conflict and family-work conflict among officers of defence

work conflict (FWC) among the officers.

manufacturing companies in Bangalore and the variables

Work demands. Literature has confirmed negative impact of

associated with them. The aim of the study is to examine the

work-stressors like no. of hours worked, work deadlines and

common predictors of WFC and FWC in a different

overload on both work and non-work domains (Greenhaus and

occupational setting – public defence CPUs. The study will also

Parasuraman, 1986; Frone, Yardley and Markel, 1997). Work

examine the moderating or mediating role of support type

demands are the strongest predictor of work-family conflict and

(Spousal support and self management) in the relationship

are an important factor in exacerbating WFC. Research showed

between work demands and work-family conflict.

that work demands like number of hours worked per week,

Need of the study

related to WFC (Burke and Greenglass, 1999; Voydanoff, 1988;

The majority of research on work-family conflict has been conducted on various occupational sectors like IT/ITES, BPOs,

work overload, work schedule and overtime work were positively

Duxbury and Higgins, 2003; Hammer, et al., 2005; Yildirim and Aycan, 2008). Work constraints may force employee to

work for longer, irregular hours and harder to make up for

IFIM International Journal of Management | FOCUS October 2014 - March 2015

57

WORK-FAM

FOCUS Research Papers inadequate supply of work resources like information, training,

determinant of work-family conflict for working parents (Lewis

manpower and equipment, thus augmenting work-family

and Cooper, 1998; Lundberg, Mardberg and Frankenhaeuser,

conflict (Lu et al., 2010).Working for longer hours, weekends

1994; Grzywacz and Marks, 1999; Quick et al., 2004; Cinamon

and holidays restricts the time that an individual has allotted for

and Rich, 2002; Eby et al., 2005; Cohen and Liani, 2009; Mjoli

fulfilling family responsibilities. In the current study, the

et al., 2013). Moreover Mjoli et al. (2013) found that parents

researcher is expecting that higher work demands in the form of

with children under the age of six had the highest levels of work-

longer work hours per week and working on weekends/holidays

family conflict, followed by parents with school-age children.

would be associated with higher work-family conflict among the

The number of children living at home increases the difficulty

officers.

of meeting work and family demands and therefore decreases

H1a: A higher level of work demands will be positively related to WFC.

satisfaction with work-family balance (Grandey and Cropanzano, 1999; Valcour, 2007). Those who are having more children under 18 have to devote more time to family rather

Total experience. With experience a person acquire skills and strategies to cope with the conflicting demands. Experience in job helps to juggle effectively between work and home demands

than career success. Thus, Goff, Mount and Jamison (1990)

advocate that supportive supervision and satisfaction with child care arrangements (regardless of location) result in less work-

(Cohen and Liani, 2009).

family conflict.

H1b: Total experience in job will be related to WFC. Longer

H1di – Children under the age of 5 will be related to higher

experience will reduce WFC. Marital status. Literature provide evidence that work demands

levels of FWC.

H1dii – Number of children will be related to higher levels of

can undermine marital quality and family responsibilities can

FWC.

undermine job satisfaction (Frone, Russell & Cooper, 1992;

Number of dependents. There are basically three groups of

Parasuraman et al., 1996). A study conducted by Byron (2005), Yildirim and Aycan, (2008); Mjoli et al. (2013) revealed that marital status is weakly related to work interference with family (WIF) and family interference with work (FIW), thereby suggesting that marital status alone is poor predictor of workfamily conflict. A study conducted by Cohen and Liani (2009) on female employees of hospitals found that marital status is not related to any of the conflict variables, thereby concluding that being married does not automatically add to more work demands. Moreover marital status and quality is an important buffer for work-related stress, especially for men because of more resources to draw upon ie. spouse and more financial resources (Barnett, Marshall, and Pleck, 1992; Grzywacz and Marks, 1999; Grandey and Cropanzano, 1999 and O'Neil and Greenberger,

dependents in the family exacerbate work-family conflict and

family-work conflict. Literature has confirmed that with the increase in family size and complexity with children/ elders or

with sick children/elders, the work-family conflict increases (Quick et al., 2004). People who are single and those with smaller families and/or with grown children experience less

work – family tensions than those who are married, have larger families and young children or elder care. Increase in the number of children or elderly persons lead to more competition for resources at home in the form of medical care and financial security (Preston, 1984).

H1e: Number of dependents will be related to higher levels of

1994).

H1c: Being married will be related to higher levels of FWC. Age and number of children.

dependents – children, adults with disabilities and elders.

Home demands like lack of spousal support and presence of

Parental role is the most

demanding non-work role demanding commitment and time (Gutek et al., 1991). Age of the oldest child is an important predictor of the work-family experience (Voydanoff, 1988).Young, dependent and number of children still living at home (in contrast to having no children) is the primary

58 IFIM International Journal of Management | FOCUS October 2014 - March 2015

FWC.

Individual use of company support policies. There are various

types of family-friendly workplace supports provided by the

organizations. Neal et al. (1993) categorizes family-friendly workplace supports into three types – policies (eg. flexitime, job sharing), services (eg. resources and information about

dependent care and benefits (eg. childcare care options). For an

employee these family-friendly supports are meant to mitigate

FAMILY-WOR

the difficulty faced in balancing multiple life roles. Only mere

component of social support. Spousal support is defined as the

implementation of workplace support policies is not important,

help, advice, mutual understanding that spouses give each

but its actual utilization is important. Though literature has

other. There are two components of spousal support â&#x20AC;&#x201C;

confirmed that use of such supports by the employees will be

emotional and instrumental (Frone, Yardley and Markel, 1997).

associated with reduced work-family conflict and improved

Emotional support is emphatic understanding, concern,

balance (Kossek and Ozeki, 1998; Thomas and Ganster, 1995;

advice, and affection for well-being of partner whereas

Allen, 2001), little research has been carried to examine this

instrumental support from the partner deals with household

relationship.

chores, child or elderly care (Adams, King and King, 1996;

Only a few studies have studied the impact of actual utilization of workplace supports on work-family conflict (Kossek and Ozeki, 1999; Hammer et al., 2005). Hammer et al. (2005), in their study focused on impact of variety of supports like alternative work arrangements and dependent care supports on individual's work-family conflict. In the light of literature, the present study focus on utilization of only alternative work schedules by the employees. It is expected that use of alternative work schedules will reduce work-family conflict.

H1f: Individual utilization of company support policies will be related to lower levels of WFC and FWC.

Frone, Yardley and Markel, 1997). Instrumental support

mitigates an individual with family responsibilities and enables to devote more time to work. Other researchers opined that spousal support is associated with management of work-family conflict (Adams, King and King, 1996; Perrewe and Hochwater, 1999; Aryee et al., 1999, Burke and Greenglass, 1999; Aycan and Eskin, 2005).

The present study focuses on instrumental support from the spouse as a major moderator. Studies have found that spousal

support was an important component of social support and was effective in lowering levels of WFC (Burke and Greenglass, 1999; Anderson, Coffey and Byerly, 2002). If a person gets

Support type. Every person do not face work demands, family

support from spouse at home after a hectic day at office, then a

obligations and conflict to the same extent. This implies that

person can balance work and family more easily. The

there are factors moderating the effects of work demands and

importance of spousal support is given adequate emphasis in

work-family conflict. Among various factors, the most

literature and it is surely going to help employees in a large way.

important factor that is widely studied is social support. Social support is defined as information leading the subject to believe that he is cared for and loved, esteemed, and a member of a network of mutual obligations (Cobb, 1976). There are four sources of social support: spouse, relatives and friends, organisation and colleagues. Social support emanating from work-related sources plays an important role in reducing occupational stress than does non-work related sources (Daalen, Willemsen and Sanders, 2006). Among non-work related sources the prominent social support comes from family members and family members provide both emotional and instrumental support to individuals outside work environment.

As per the 'buffering hypothesis proposed by Cohen and Wills

Many researchers have tried to link work-family conflict with health outcomes. The moderator role of exercise and leisure activities between work demands and work-family conflict has been neglected in literature. Allen and Armstrong (2006)

studied the relationship between both directions of work-family conflict â&#x20AC;&#x201C; WIF and FIW with health related behaviors like physical activity and diet. Research shows that people who exercise regularly experience less health problems and

psychosomatic symptoms than those who do not exercise (Burke, 1994; Ensel and Lin, 2004). Despite importance of exercise in one's life, individual shouldering work and family roles restrict exercise (Allen and Armstrong, 2006)

(1985), social support has been treated as a buffer between life

Exercise is considered one of the elements of leisure activities

stress and well being (Cobb, 1976). In the light of literature, the

and is often neglected by individuals with both work and non-

current study takes the same theoretical concept and proposes

work roles (Nomaguchi and Bianchi, 2004). Person's overall

that social support in the form of spousal support would

quality of life is determined by sum of the domains of life â&#x20AC;&#x201C;

moderate the relationship between work demands and work-

work, family, community, religion or leisure (Rice, Frone and

family conflict.

The present study considers spousal support as an important

McFarlin, 1992). People often report work schedules and excessive amount of work, time constraints and tiredness to

IFIM International Journal of Management | FOCUS October 2014 - March 2015

59

interfere with leisure activities (Staines and Connor, 1980; Rice, Frone and McFarlin, 1992). The role H1g: Support type in the form of spousal support and self management act as a moderator between work demands and work-family conflict.

The conceptual framework including all the study variables is presented in Fig. 1. Work demands include number of hours worked per week, working on weekends/holidays, partner's employment and length and time of commuting and are expected to be related to work-family conflict. Other variables that are expected to be associated with WFC and FWC are total experience, marital status, age and number of children, number of dependents and individual use of company support policies.

It is also proposed that spousal support and self management moderates the relationship between work demands and workfamily conflict. It is expected that officers who experience higher levels of work demands will face less work-family conflict

WORK-FAM

FOCUS Research Papers

measured by the actual years. Marital status was measured as a

dichotomous variable (0 = single, 1 = married). Partner's

employment was measured as (0 = employed, 1 = not employed).

The variable of age of children was measured by actual years and

number of children was measured by actual number of children.

Number of dependents was measured by actual number of dependents.

WFC/FWC: Data was collected using WFC and FWC scales

developed by Netemeyer, et al., (1996). It is a 10 – item scale with 5 items each under WFC and FWC scales. The instructions that preceded these items are as follows: “The given sets of questions are about your work and non-work lives. The word 'Family' may

include your spouse, children, parents, siblings, grandparents,

in-laws or any combination of these”. All items were measured using a 7-point Likert scale, with 1 meaning strongly disagree and 7 meaning strongly agree. Higher score mean more conflict.

Work demands: Work hours – The total number of hours

when they receive support from their spouses and are involved

worked per week was assessed through one question: “How

in self-management.

many hours in a week do you normally work?”. This variable was

Research Methodology Participants and procedures The sample comprised of 338 officers. The demographic profile of the respondents has been listed in table 1.

measured on a scale: 1 = >60, 2 = 56 – 60, 3 = 51 – 55, 4 = 46 – 50 and 5 = <45.

Working on weekends/holidays: This variable was assessed through one question: “Do you work on weekends/holidays?”.

There were three options to choose from: 3 = No, 0 = Yes and 1 = Sometimes.

The data for this study were collected during February 2013 to June 2014 from officers working full time in manufacturing unit

Carrying work to home: This variable was assessed through one

of three public defence manufacturing CPSE at Bangalore. The

question: “Do you carry office related work at home?”. There

sample respondents were selected by using systematic random

were two options to choose from 3 = No, 0 = Yes and 1 =

sampling. Two days in a week i.e Friday and Saturday was

Sometimes.

dedicated to collect the data in a phased manner. 634 nos. of officers were working in the manufacturing complex of public defence CPSE at Bangalore. Out of 635 questionnaires distributed, 370 were returned, yielding a response rate of 58%.

Among the returned questionnaires 32 of them were discarded due to excessive missing data.

Measures

Length and time of commuting: Two questions were designed to assess commuting of respondents. The questions were “How

far do you stay from your organization's premises?”. This variable was measured on a scale: 1 = More than 20, 2 = 16 – 20,

3 = 11 – 15, 4 = 6 – 10 and 5 = 0 – 5. The other question was “How many hours per day do you spend on commuting (To and fro)?”. This variable was measured on a scale: 1 = others, 2 = 91 – 120 min, 3 = 61 – 90 min, 4 = 31 – 60 min and 5 = 0 – 30 min.

The research instruments comprised of five parts. The first part consists of questions pertaining to demography of respondents

Individual use of company support policies: Two questions

like gender, age, managerial level, total experience, marital

were designed to assess this variable. The questions were “Does

status, partner's employment, number and age of children,

your company take any measures to balance work life?. This

number of dependents and education.

question has two options a) Yes & b) No.

Demographic variables under study: Total experience was

The other question was “Do you utilize measures taken by your

60 IFIM International Journal of Management | FOCUS October 2014 - March 2015

FAMILY-WOR

company to balance work and family?”. There were two options

demands and work-family conflict was not supported by the

to choose from 3 = Yes, 0 = No.

data, thus rejecting hypothesis H1g. Finally the main hypothesis

Support type: There are two types of supports:-

– H1, which expected that Work-family conflict (WFC) is more prevalent than Family-work conflict (FWC) among the officers,

Spousal support:. One question was designed to assess the

is supported by the data. Table 4a, b; 5a and 6 provide evidence

spousal support. The question was “Does your spouse help you

to this hypothesis.

in household chores/ child or elderly care?”. There were two options to choose from 3 = Yes, 0 = No. Self management: Two questions were designed to assess this variable. “Do you exercise?. There were three options to choose from: 3 = Yes, 0 = No and 1 = Sometimes and “Are you involved in any leisure activities?”. There were two options to choose

While correlation analysis provided adequate support for the hypothesis, regression analysis is more suitable to quantify the dependent variables of the given hypothesis.

Regression Analysis: Work-Family Conflict versus Work Demands.

from 3 = Yes, 0 = No.

The regression equation is

Results

Work Family Conflict = 32.76 - 0.7736 Work Demands

Table 2 & 3 presents descriptive statistics and intercorrelations

The regression analysis between work-family conflict and work

among all respective study variables. The correlation matrix

demands in table 7 showed that these two variables are strongly

showed some significant relationship between WFC/FWC and

related, thus supporting H1a.

study variables. Work demands were strongly related to both WFC and FWC, thus supporting hypothesis H1a. Total

Regression Analysis: Work-Family Conflict versus Self

experience was positively related to WFC but not related to

Management.

FWC, thus contradicting previous findings. The result of H1b, showed that as experience in job increases, WFC also increases.

This finding of H1b was not expected in this study. H1c, which expected that being married would increase the levels of FWC, was not supported by the data. Instead FWC did not depend on marital status, as evident from table 4 a, b and 5 a, b. In case of

The regression equation is

Work Family Conflict = 23.31 - 0.7693 Self Management

Regression analysis in table 8 showed positive relationship between work-family conflict and self management.

H1c, WFC was more significant among married officers than

Regression Analysis: Work Family Conflict versus Support

FWC. This means that work-role activities interfere with family

type, Work Demands

responsibilities.

H1di, which expected that children under the age of 5 would increase the levels of FWC, was supported by the data. For H1dii, the data did not support hypothesis. The number of

Regression Equation.

Work Family Conflict = 33.74 - 0.422 Self Management - 0.682 Work Demands

children is not related to either WFC or FWC that contradicts previous findings. H1e, which expected that number of dependents would increase the levels of FWC, was supported by

- 0.0151 Self Management*Work Demands

the data. Number of dependents was positively related to both

H1g, which expected that support type in the form of spousal

FWC and WFC i.e. as number of dependents increases both

support and self management act as a moderator between work

FWC and WFC increases.

H1f, which expected that individual utilization of company support policies will be related to lower levels of WFC and FWC, was not supported by the data. Individual utilization of company support policies was not related to either WFC or FWC. The moderating effect of support type between work

demands and work-family conflict, was not supported by the

data as in table 9. Spousal support was not related to either WFC or FWC as per correlation analysis. Self management was related to WFC as per both correlation and regression analysis.

But the role of support type as a moderator between work demands and work-family conflict was not supported by

multiple simultaneous regression analysis. Thus buffering

IFIM International Journal of Management | FOCUS October 2014 - March 2015

61

WORK-FAM

FOCUS Research Papers hypothesis, H1g was rejected by the data of study. Support type

al. (2013). The lack of significant relationship between the

is not the moderator between work demand and WFC. Support

number of children and FWC contradicted previous findings

type is not the moderator between work demand and WFC.

Discussion and conclusion

that there exists stronger relationship between the two. Grandey

and Cropanzano, (1999); Valcour, (2007). Number of

dependents is significantly related to both WFC and FWC. This

The findings of the study supported the conclusion of Pleck,

signifies that increase in the number of children or elderly

(1977); Greenhaus and Beutell, (1985) and Gutek et al., 1991

persons lead to more competition for resources at home.

that experience of work-family conflict is more prevalent than family-work conflict among the officers. Work interference into family domain to a greater extent than family is allowed to interfere into work domain. The model tested here explained a significant amount of variance in the two conflict variables. The model explained that variance of WFC is more (61%) than the FWC (38%), supporting the distinctiveness of the two conflict variables in the study.

Other findings of the study are worth mentioning. Work demands in the form of hours worked per week, working on weekends/holidays, carrying work to home, length and time of commuting and partner's employment were the strongest predictor of work-family conflict and are an important factor in exacerbating WFC. In this study work demands were positively related to both WFC and FWC and confirmed the studies done

by Burke and Greenglass, (1999); Voydanoff, (1988); Duxbury and Higgins, (2003); Hammer, et al., (2005); Yildirim and Aycan, (2008). As for the relationship between total experience and WFC, it seems that as experience in job increases, WFC

The insignificant relationship of individual utilization of company support policies with either WFC or FWC

contradicted previous findings that actual utilization of workplace supports reduces work-family conflict (Kossek and Ozeki, 1999; Hammer et al., 2005). This finding emanate from a study conducted among Israeli teachers that found no

relationship between non-work organizational support and the two conflict variables (Cohen et al, 2007).

The present study hypothesized that support type would moderate the relationship between work demands and work-

family conflict. However multiple regression analysis did not

provide evidence to the moderating effect of support type.

Thus, buffering hypothesis was rejected by the data of this study.

This finding echoed from another study conducted on nurses that found supervisory support to play no moderating role between work demands and work-family conflict (Yildirim and

Aycan, (2008). Future research should examine the direct effect of support type on work-family conflict.

also increases. This finding contradicts the findings of Cohen

The study has some practical implications for human resource

and Liani, (2009). This unexpected finding may be due to fact

professionals. The findings showed that both work and non-

that experience add on more responsibilities and complexities

work roles are more strongly related to WFC rather than FWC.

to job.

It is necessary for employers to assist employees in coping better

With regard to home roles, being married was not associated with higher levels of FWC. Instead married officers were facing more WFC. That means work demands was interfering with family responsibilities for married respondents. Barnett, Marshall, and Pleck, 1992; Grzywacz and Marks, 1999; Grandey and Cropanzano, 1999 and O'Neil and Greenberger, 1994).

Their finding concluded that marital quality is an important buffer work related stress due to more resources to draw upon.

Children under the age of 5 were related to higher levels of FWC. This relationship support the contention that more time one spends in one role, the more likely he/she perceives the other role to interfere with the first (Byron, 2005; Pleck, 1977).

This finding was in coherence with the findings of Quick et al., (2004); Cinamon and Rich, (2002); Eby et al., (2005); Mjoli et

62 IFIM International Journal of Management | FOCUS October 2014 - March 2015

with pressures from work and family. It is inevitable to create positive attitudes among employees regarding their job and

work environment, to reduce WFC and FWC. This strategy would be more effective than investing in support policies for coping with work and family pressures.

Limitations of study

Finally limitations of this study need to be mentioned. First, the study is based on a sample from one occupation i.e. defence

manufacturing consisting of officers working in three defence

CPSEs in Bangalore. In these public sector enterprises, everybody is assigned to work for six days in a week for eight hours daily. Here employees get extra remuneration or leave benefits for working overtime, but officers are deprived of such

benefits. Thus the findings cannot be generalized to other

FAMILY-WOR

occupations or to private sector where people have different

defence and the data are kept very confidential. Even the

work settings and culture. Second, the female constitute a small

employees working in these companies are restricted to carry

percentage of the sample (15.4%). Thus, the study could not

laptops, pen drives and mobile phones inside the companies.

compare findings from gender point of view as the proportion

Any external visiting or conducting research on these

of female was too low to have any comparison. Third, in India

companies has to relinquish all electronic gadgets at the

conducting research on defence PSUs is quite difficult due to

reception and all the documents are thoroughly checked on

security issues. These companies come under Ministry of

entering and leaving the premises.

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64 IFIM International Journal of Management | FOCUS October 2014 - March 2015

Table 1

Table 4a

Table 4b

Table 5a

Table 5b

Table 6

Table 2

Table 7

Table 8

Table 3

Table 8

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List of tables

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66 IFIM International Journal of Management | FOCUS October 2014 - March 2015

Questionnaire

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List of Figures

FOCUS Research Papers

Creative Accounting Concept, Practices and Measures Poonam Dugar* ABSTRACT Accounting, though known as a science, can be considered to be an art more than a science. An art in which creativity flourishes.

It would not be wrong to say that accounting starts when science

Neha Desai**

by the intention to curb manipulations in financial reporting must take into account the circumstances that allow its expression under close supervision.

The paper focuses on nature and incidence of creative

meets art where accountants use their flair to be creative.

accounting practices in financial reporting, the causes and

Accounting, for the choices it offers, often gives companies the

motivations behind their application, and the consequences of

frill of deviating from the stated rules when it is not practical to

creative accounting practices in corporations. The study also

stick to the rule of law. Creative Accounting refers to the use of

highlights the incidences of Indian companies indulging in

accounting knowledge to influence the reported figures, while

creative accounting practices. It also identifies various measures

remaining within the jurisdiction of accounting rules and laws,

to prevent the practice of creative accounting in financial

so that instead of showing the actual performance or position of

reporting by companies.

the company, they reflect what the management wants to tell the stakeholders.

Creative accounting practices resulting into major accounting frauds are evidence to the fact that “the science of conduct is swayed in large by human greed, ambition, hunger for power, money, fame and glory.” The devastating effects of creative accounting practices on the truthfulness and fairness of financial reports pose a serious threat to the accounting and

INTRODUCTION: Quoting Griffiths' assertion “Every company in the country is fiddling its profits. Every set of published accounts is based on books which have been gently cooked or completely roasted.

The figures which are fed twice a year to the investing public have all been changed in order to protect the guilty.”

A company's financial statements publishing the accounting

auditing profession. In turn, the users of accounting

information, providing information on the financial position,

information and their investment decision-making

performance and cash flows of a company, widely affect the

effectiveness are also affected adversely.

economic decisions of the users of financial statements.

In support stands an organizational ecosystem as a checkpoint

The published accounts have an angle of information

which includes the auditors, analysts, and regulators to measure

perspective. It is presumed that the accounting disclosures

whether the departure from rules was within the permissible

provide an information content that is of value to stakeholders.

limits. The accounting and auditing professionals hence, driven

But often, the privileged management for various reasons

*Lecturer, Department of Accountancy, ADDRESS FOR CORRESPONDENCE: 36, Green Park, Gokuldham, Near Shantipura Circle, Sanand Road, Ahmedabad-380009 CONTACT: 91-9825000940, EMAIL: poonam.dugar@ahduni.edu.in **Lecturer, Department of Accountancy, ADDRESS FOR CORRESPONDENCE:16, Rajpath Row Houses, Opp. Rajpath Club, Ahmedabad -380015.

CONTACT: 91-9227290686, EMAIL: neha.desai@ahduni.edu.in, AFFILLIATION: H.L. Institute of Commerce, Amrut Mody School of Management, Ahmedabad University OFFICE ADDRESS: H.L. Campus, Prin. S. V. Desai Road, Navrangpura, Ahmedabad- 380009

IFIM International Journal of Management | FOCUS October 2014 - March 2015

67

misleads the remote body of stakeholders by creating information asymmetry.

Companies and managers are tempted to resort to nifty methods, often debatable, in order to improve the presentation of financial statements. Overall, there is a trend and a fierce desire to perform certain activities so as to manipulate the

financial events and transactions are presented. While the tention may be good, this flexibility provides opportunities for manipulation, deceit and misrepresentation. These activities as negatively practiced by the less scrupulous elements of the accounting profession are popularly referred to as creative accounting (Jameson, 1988).

figures, financial statements and performance reports, to distort

The act is characterized by excessive complication and the use of

the true image (â&#x20AC;&#x153;true and fair viewâ&#x20AC;?). Consequences and

novel ways of characterizing income, assets, or liabilities

negative impact come quickly, first on investors who are misled

(Ghosh, 2010) with the intent to influence readers towards the

about the true overall situation of the company, as well as on

interpretations which are desired by the authors of the reports.

companies that actually carry out the economic activities.

Though called creative accounting in the UK, it is known as

The assault on a company's bottom line in such cases is harsh

Earnings management in the USA.

and unrelenting. The devastating effects of creative accounting

Creative Accounting refers to the use of accounting knowledge

practices on the truthfulness and fairness of financial reports

to influence the reported figures, while remaining within the

and hence the users of accounting information and their

jurisdiction of accounting rules and laws, so that instead of

investment decision-making effectiveness pose a serious threat

showing the actual performance or position of the company,

to the accounting and auditing profession. It is important for

they reflect what the management wants to tell the stakeholders.

the accountants and auditors to closely supervise the circumstances that enable manipulations in financial reporting.

The paper discusses >

Nature and incidence of creative accounting practices in financial reporting

>

Creative accounting practices cover a wide range of areas, especially premature recognition of and over- or underestimation of revenue, aggressive capitalization and extended amortization policies, misreporting of assets and liabilities, and getting creative with the income statement and cash flow reporting. If an organization wishes to practice

Reasons that drive the managers to indulge in these

creative accounting, there is plenty of scope for the

practices

manipulation of accounting information. Such manipulation may well leave external or other interested parties confused as to

>

>

Highlights the incidences of Indian companies

what is real or unreal, or true or false, in a published set of

indulging in creative accounting practices

financial statements. This may lead to unnecessary risk taking

Identifies various measures to prevent the practice of creative accounting in financial reporting by companies

Concept of Creative Accounting Financial accounting reports are produced to show the true and fair state of affairs of business entities so that stakeholders and other users of such information can take informed decisions. In

or wrong decision-making on part of various stakeholders, posing a threat to the long-lasting healthy relation between them.

Drivers / Motivations to Practice Creative Accounting Playing the number game is often and widely practiced by the managers of corporations for a variety of expected rewards.

order to ensure uniformity in preparation and presentation of

Companies having weak internal controls; or a family

such reports, Generally Acceptable Accounting Practices

relationship between directors and officers; or BOD dominated

(GAAP) are prescribed within the accounting profession.

Accounting Standards leave room for discretionary judgments by the accountant. This involves resolving conflicts between competing approaches to the manner in which results of

68 IFIM International Journal of Management | FOCUS October 2014 - March 2015

by individuals with substantial equity stakes or inadequate experience; or absence of audit committee often indulge in reporting the financial statements creatively.

FOCUS Research Papers

Avenues / Opportunities to practice Creative Accounting

Figure1: Factors facilitating 'creativity' within company's accounts (Adapted from [13])

The incentives for fraud are similar to that of creative accounting, but they are more extreme. It can be said that where the managers trying to use flexibility provided by the accounting to increase its assets or increase its profits, we can speak of creative accounting, while what goes beyond accounting flexibilities can be transformed into fraud.

Hence, creative accounting involves working within the regulatory framework, fraud involves working outside it.

IFIM International Journal of Management | FOCUS October 2014 - March 2015

69

Idris, et al. in a study in 2012 under the title â&#x20AC;&#x153;The Nature, Techniques and Prevention of Creative Accounting: Empirical Evidence from Nigeriaâ&#x20AC;? have done an exploratory research from both primary and secondary information. Under primary research the expert opinion survey method was used whereby the views of the experts in the accountancy profession were sought on 10 identified variables as the reasons for creative accounting practices. The responses indicated the level of importance attached to each variable.

Exploiting the Loopholes Accounting standards cannot cover every aspect of business transactions. These standards offer choice of methods for various accounting treatments where the discretion on the choice of method lies with the management. E.g. there is more than one method of valuation of inventory or method of depreciation. This provides ample opportunities to companies to play within the legal ring. Although GAAP requires consistency in the adoption of an accounting method, some

The top five variables which received the highest ranking

companies may exploit the opportunity to use more than one

according to the study are summarised below:

over the years.

1.

Tweaking accounting numbers to personal advantage

Whether creative accounting practices result in fraudulent

using the existing rules

financial reporting depends on the intentions of the managers.

2.

Gap in the GAAP promotes creativity

3.

Exceptional Rewards motive of management

4.

Misleading stakeholders for personal gains

5.

To adjust to the economic condition of the country

70 IFIM International Journal of Management | FOCUS October 2014 - March 2015

Although not all creative accounting practices amount to fraud, it is sometimes hard to distinguish between fraud and creative window-dressing in financial statements.

The practices of creative accounting can be summarized under five main categories, as shown in Table:

FOCUS Research Papers

Practicing Creative Accounting

head of investment bank Espirito Santos, offers an explanation.

In good times, high profits keep all stakeholders happy, and in

says. “Aggressive accounting is often a way for companies to

bad times, accounting policy tweaks come to the rescue. Today's business environment is uncertain, because input prices are

“Analysts like a company to show steady growth in profits,” he hide any unexpected bumps in that trend.”

high, interest costs are ballooning and demand is slowing.

So some companies spread a huge gain over several accounting

Keeping profitability intact, then, is a challenge. Some

periods, put off recognising losses for as long as legally possible

companies are responding by passing up the best practices in

and, in some cases, selectively ignore accounting conventions

favour of more convenient options under India's Generally

that might show their numbers in a less rosy light.

Accepted Accounting Principles.

What motivates this behaviour? Nick Paulson Ellis, country

Creative Accounting Application Study 1: Creatively handling Rupee vulnerability using High Court's approval for the terms of amalgamation: IFIM International Journal of Management | FOCUS October 2014 - March 2015

71

Companies are getting creative in using the Company's Act and

Mumbai, the Company has withdrawn from General Reserve

Accounting Standards to avoid the loss inclined impact of

III and credited to the Profit and Loss Account Rs 4,464.57

foreign currency fluctuations on their Profit and Loss

crore in respect of loss on account of change in foreign exchange

Statement. In 2008-09, the rupee depreciated over 25 %, and

rate

corporate India's external debt went up by 20 %. Within the

Precautionary Measure:

legal ring the depreciation losses could either be charged to the profit and loss account or spread it over a few years, but then the balance sheets would have looked vulnerable. Reliance Communications (RCom) chose the former option. But through another entry, it neutralised the adverse effect on its profit by transferring an equal amount from its General Reserve (accumulated profits earned in past years).

In the following year when the exchange rate appreciated RCom gained, and that increased its profits directly.

Setting off exchange losses against the General Reserve is by no means allowed; the General Reserve also includes other

company were used to adjust the losses of another. This is an

used a much-loved clause in the Companies Act — get an approval from a High Court for all the terms of amalgamation.

loans/liabilities.

(SEBI) now wants listed companies seeking court approval for M&A transactions to get an auditor's certificate that the proposed accounting complies with standards (does not apply to unlisted companies).

Creative Accounting Application Study 2: Treatment of IPO Expenses differently: Following are the three possible options to treat IPO expenses in the financial statements of the company: 1.

Charge the expenses to the Share Premium Account – No effect on profitability

2.

Amortise them equally over five years – Marginally affects bottom line

accounting standards violation.

So how did RCom manage to get past its auditors? The company

to

Market regulator Securities and Exchange Board of India

restricted reserves, in particular, those that have been created by the purchase of another group company. The profits of one

relating

3.

Setting off against current year's profits – Reducing current year's profit

Bajaj Corporation, in late 2010, when floated its Rs.297 crore

Companies often use this route to slip in accounting changes

IPO, was considering the appropriate treatment of its Rs.20

that would otherwise earn the disapproval of its auditor.

crore IPO expenses in the books. Given the slowdown in the

Companies often use amalgamations that have been approved by the court to write off losses against reserves or the share premium account. The practice has vexed the ICAI because in the end it exposes accounting standards to abuse. “The ICAI has been crying itself hoarse about this kind of abuse for years,” says Y.H. Malegam, 2013, former chairman of the National Committee for Accounting Standards.

When questioned, RCom said that it was in compliance with

domestic economy and the sluggish stock market, the first option seemed the best. Bajaj Corp's stock, which debuted in August 2010 at Rs 800 per share - the offer price was Rs 665 - was already showing signs of weakness. The Board was in favour of the third option as it would save on taxes and improve liquidity within the company. Amortisation would yield similar results, but over five years. By January 2011, Bajaj Corp's stock had dipped to around Rs 500, down almost 40 per cent from its debut. The Sensex actually gained two per cent in the same

the applicable accounting standards, as well as the provisions of

period. Had Bajaj charged its IPO expenses to the share

the Companies Act. “The company, in compliance with

premium account, profits for 2010/11 would have crossed Rs

relevant accounting standard, viz., Accounting Standard 5,

100 crore, and the stock would almost certainly have

charges all expenses to its statement of profit and loss in order to

outperformed the Sensex.

arrive at net profits for the reporting year and does not directly charge any operating losses against its 'General Reserve'.”

In another case, Indosolar, a Delhi-based solar cell manufacturer, which had a Rs 357-crore IPO about a month

Excer pt from the auditor's repor t in Reliance

after Bajaj Corp's issue the company already had a policy of

Communication's annual report of 2008-09

amortising preliminary expenses. Some of the preliminary

...as approved by the Hon'ble High Court of Judicature at

expenses already stood outstanding at the time of IPO. But

72 IFIM International Journal of Management | FOCUS October 2014 - March 2015

FOCUS Research Papers post the IPO the company decided to change its accounting policy and decided to charge the Rs.33.58 crore IPO expenses to Share Premium account. This resulted in increasing outstanding expenses to be set off in the Balance Sheet without affecting the Profit and Loss Account of the current year. The company was neck-deep in losses (Rs 57 crore in March 2011).

making a provision for it was difficult.

“But Suzlon's share price was a sixth of its redemption value then,” says an expert. “It was likely that bondholders would choose to redeem.”

“The general practice of treating redemption premium as a

The decision to charge IPO expenses to the share premium

contingent liability cannot be justified,” says Malegam. “As long

account prevented losses of a few more crores from going on the

as the bond is convertible at the option of the holder, the

books.

Chameleon-like policies make a company's accounts harder to understand, and confuse investors and shareholders.

Creative Accounting Application Study 3: Creatively smoothing the income:

company must still treat it as a redeemable bond and provide for the redemption premium.”

Suzlon says that if the bonds are called for redemption, it has adequate share premium reserve to cover payments. Analysts say given the company's finances, it would have been inclined to present a favourable debt-equity ratio. A company

Biocon, an Indian bio-pharma company, received upfront

spokesperson denied this, saying, “We are of the firm view that

payments from Pfizer when the deal between them was called

a degree of leverage does not — and should not — lead to a

off. Instead of showing the amount as a one-time gain in its P/L

substantially different accounting practice”.

Account, Biocon sought to capitalise it. Biocon justified this choice mentioning that the sum received was for long term development and that the clinical trials of the drug would still continue. The company points out that deferring revenue recognition is a permitted accounting practise.

Espirito Santo raised a red flag pointing out that actually, when this shall be used to set off their R&D costs in future, R&D costs shall be removed from P/L Statement which will smooth

From the auditor's report in Suzlon's annual report of 2010-11 The Phase I, Phase II, Phase I New, Phase II New, and Phase III bonds are redeemable subject to satisfaction of certain conditions.... The Company has not provided for the proportionate premium... aggregating Rs 579.21 crore (Rs 377.22 crore)...

Measures preventing Creative Accounting (CA) practises:

Biocom's earnings over the next three to four years and inflate

The major threats of practising Creative Accounting (PCA) is

the earnings to that extent. Ideally, keeping in mind the

that the financial records become deceitful and over a long run

Matching principle of recording transactions, such revenue

the management of the company may feel competent enough to

must be recognised in year 1 as a one-off revenue item, as

commit a financial fraud successfully. So, the organisations

revenue from a terminated deal should not be matched against

must have an urgency approach to curb it at an early stage. If an

costs of other deal/activity.

attempt is made to eliminate the factors facilitating / pressuring

Creative Accounting Application Study 4: Treatment of Debenture Redemption Premium Sometimes, though, the rules allow certain departures; the redemption premium to be paid on debentures can be set off

the managers to indulge in such activities, measures of preventing them can be thought of and put into practice.

1.

Mandatory reporting of Cash Flow Statements:

It is well understood that to carry out recording of the

against the share premium account. The treatment vexes

transactions creatively, accounting entries are played with

analysts but cannot be technically faulted.

staying within the legal territory, but this does not enable the

But companies stretch that technicality. In 2011, Suzlon did not provide for the redemption premium on its Foreign Currency Convertible Bonds (FCCB) that were to mature in 2012 (the company eventually defaulted). It treated it as a contingent liability (off the balance sheet). The company's argument was that since it wasn't clear how many bondholders would convert,

practitioners to juggle the cash of the organisation. Therefore, the financial statements should always include the Cash Flow Statement. Such inclusion must be made mandatory for all organisations, irrespective of their size, scope, and turnover. If the revenues are properly recognised, the cash flow should closely follow the revenue recognition patterns. So any CA

IFIM International Journal of Management | FOCUS October 2014 - March 2015

73

technique practiced can be detected from the discrepancy

than the legal form of transactions determines their accounting

observed here.

substance.

2.

5.

Consistency Principle and Mandatory Reporting of

the Effects of Changes:

Timing of Genuine Transactions:

The timing of genuine transactions is clearly a matter of

Simultaneously, there must be heavy emphasis on following the

discretion of management. However, the scope to use this can

Consistency Principle of Accounting. This shall ensure that the

be limited by requiring regular revaluations of items in the

areas where CA can be implemented are kept well-checked.

accounts so that gains or losses on value changes are identified

Valuation methods, revenue recognition norms etc. must be

in the accounts each year as they occur, rather than only

consistently followed for a reasonably long period of time.

appearing in total in the year that a disposal occurs.

Frequent switch over of methods must not be allowed by the management/auditors. Proper reasoning and retrospective

6.

effect along with explanations on how will such a change affect

There is a very thin line of margin between practising CA and

the numbers should be a made a mandatory disclosure.

3.

Reducing

the Scope for choice of accounting

methods :

Three Pronged Approach:

committing a financial fraud. Successfully PCA for a consistently long duration may encourage practitioners' to take the next step ahead and enter into the world of frauds.

Therefore, it is essential to alertly detect and prevent such

The scope of choice of accounting methods can be reduced by

practises. We propose a three pronged approach to deal with

reducing the number of permitted accounting methods or by

CAP to achieve transparency and trustworthy financial

specifying circumstances in which each method should be used.

reporting. It is only with combined efforts of the Government,

Requiring consistency of use of methods also helps here, since a

Professional bodies and the Management of the organisation

company choosing a method which produces the desired

that a near full-proof environment ensuring that CA is not

picture in one year will then be forced to use the same method in

implemented can be developed.

future circumstances where the result may be less favourable.

4.

Substance Over Form:

Artificial transactions can be tackled by invoking the concept of 'substance over form', whereby the economic substance rather

Figure 3: Three Pronged Approach

74 IFIM International Journal of Management | FOCUS October 2014 - March 2015

FOCUS Research Papers i.

Government and Regulatory bodies must try and

limit the choice and options made available to the organisations for valuation processes and tighten the disclosure requirements.

A bad accounting policy can devastate a company, as the cases of Enron, WorldCom, and Satyam have shown. By being proactive regulatory body SEBI did investors a favour by making it mandatory for listed companies to announce fourth quarter results along with audited annual results. Some companies had been conveniently filing only annual results, and not fourth quarter results - an unhealthy practice that makes it harder for investors to gauge quarter-to-quarter performance. ii.

Professional bodies imparting education must lay

Conclusion: The deadly combination of the complex and diverse nature of the business transactions along with the latitude available in the accounting standards make it difficult to handle the issue of creative accounting. Creative accounting practises are not always wrong. It is the intent and magnitude of disclosures which determine its true nature and justification.

Creative Accounting respects the words of Law and Accounting Standards but not their spirit. Fight against Creative Accounting is actually a fight for true and fair view of the company's state of affairs and for this the accountants should

heavy weightage on the importance of following the ethical code

pledge to perform without fear and favour.

of conduct within the accounting profession. This approach

Since creative accounting techniques are often operated on the

shall strengthen the ethical bend of young professionals.

Professional bodies of Chartered Accountants must train their auditors to have a sharp eye in reading the financial statements

threshold of frauds, there is a risk of them extending to a degree wherein they become accounting frauds.

for detection of techniques of CA implemented. The legally permissible route of deceitfully recording transaction is to obtain the high court's permission. This route can be drastically narrowed if the High Court refuses to grant permissions until it receives a detailed report and a green signal from the team of

To conclude we suggest that creative and fraudulent accounting can be reduced by: ü

auditors. iii.

Introducing forensic accounting for white collar fraud detection and fraud prevention;

From the Company's management, the internal

ü

control system of the company must be so designed that it automatically reduces the scope of implementing CA. The

Reducing the alternative choices of accounting treatment in accounting standards;

ü

Enhancing the quality of corporate governance;

ü

Enforcing strong regulation, and

the use of CA.

ü

Increasing the effectiveness of audit.

The corporate culture plays a major role in shaping the mind-set

When times are good people steal, when times are bad, people

of the employees. The culture must be loud and clear about its

steal more!

pressure from Top Level Management to have favourable balance sheets must not exists/or not be allowed to penetrate down the employees which is one of the major factors inducing

stand on practising these techniques.

Refrences: 1.

2.

3.

4.

5.

6.

7.

8.

9.

10.

11.

12.

13.

14.

Adhikari, A. (2011, September 18). Camouflage accounting Edition: September 18, 2011. Business Today. Retrieved from http://businesstoday.intoday.in/story/india-accountingstandards-auditors/1/18354.html Amat, O., & Gowthorpe, C. (n.d.). Creative Accounting: Nature, Incidence and Ethical Issues. Journal of Economic Literature.

Dr.Bhasin, M. (2013). CORPORATE ACCOUNTING SCANDAL AT SATYAM: a CASE STUDY OF INDIA'S ENRON. European Journal of Business and Social Sciences, Vol. 1(No. 12), pp 25–47.

Gherai1, D. S., & Balaciu2, D. E. (2011). FROM CREATIVE ACCOUNTING PRACTICES AND ENRON PHENOMENON TO THE CURRENT FINANCIAL CRISIS. Annales Universitatis Apulensis Series Oeconomica, 1(13).

Idris, A. A., Kehinde, J. S., Ajemunigbohun, S. S. A., & Gabriel, J. M. O. (2012). THE NATURE, TECHNIQUES AND PREVENTION OF CREATIVE ACCOUNTING: EMPIRICAL EVIDENCE FROM NIGERIA. eCanadian Journal of Accounting and Finance, 1(1), Pp.26–31.

Madumere, I., & Harcourt, P. (2013). Forensic Accounting: a Relief to Corporate Fraud. Research Journal of Finance and Accounting, Vol.4(No.14), 43.

Mathews, A. C. (2013, March 14). Accounting Jugglery - Companies are being creative with numbers to suit their purposes. Is anyone looking? Business World. Retrieved from http://www.businessworld.in/news/finance/markets/accounting-jugglery/806030/page-1.html OKOYE, E. . ., & ALAO, B. B. (2008). THE ETHIOS OF OREATIVE ACCOUNTING IN FINANCIAL REPORTING:THE Challenges OF REGULATORY AGENCIES IN NIGERIA. The Certified National Accountant, VOLUME 16(NO.1).

SABÃU, L. I. (n.d.). CREATIVE ACCOUNTING - THE RESULT OF PRESSURES FROM USERS, 636–641.

Sanusi, Z. M., & Mat-Isa, Y. (n.d.). Creative Accounting: Auditors' Roles in the Detection of Financial Fraud. Q Finance. Retrieved from http://www.qfinance.com Shah, S. Z. A., & Tariq, Y. B. (2011). Use or Abuse of Creative Accounting Techniques. International Journal of Trade, Economics and Finance, Vol. 2(No. 6).

Yadav, B. (2013). Creative Accounting: A Literature Review. The Standard International Journals, Vol. 1(No. 5), 181–193.

Moldovan, R. L., Achim, S. A., & Bota-Avram, C. (2010). Fighting The Enemy Of Fair View Principle–Getting To Know Creative Accounting. Scientific Annals of the “Alexandru Ioan Cuza” University of Iasi, Economic Sciences Section, Special Issue, 52-55.

Jones, M. J. (2010). Creative Accounting, Fraud and International Accounting Scandals. John Wiley & Sons.

IFIM International Journal of Management | FOCUS October 2014 - March 2015

75

A Study on Rural Youth's Shopping Preferences towards Mobile Phones and Personal Computers Kavitha R Gowda* ABSTRACT A major portion of India that lives in villages has undergone a remarkable incremental change in many areas like, improved literacy rates, infrastructure, transportation, increased industrialization, reformed government policies to enhance status and livelihood of villagers. As a result of this, even villager's purchasing power has increased, which can be noticed from success stories of FMCG providers for the target rural market. With many technological innovations that have been noticed in the mobile manufacturer and service provider and a need for computer in urban areas, rural youth is not an exception. This study is an attempt to understand the need for computer and mobile phones in rural youth and thus conclude on prospective market for the shopping goods.

1.

INTRODUCTION:

Government agencies from IRDA & NCAER define 'Rural' as

Dr.Soney Mathews**

The rural consumer is evolving from the poverty-stricken, illiterate stereotype, with a fear of change and reluctance to spend. Today's rural consumer is value driven. A product is worth purchasing if it enhances his life in a meaningful way.

Either it should add to his earning capability or it should enhance his status (like readymade clothing). Literacy is rising, and exposure to the same commercials as urban consumers has created a demand for typically urban products and services.

Villagers are willing to adopt new products or services if they can clearly see the benefits that accrue. Better road infrastructure has led to increased mobility; with people travelling, more often further a field in search of entertainment in the form of cinema, and not just for visiting family or pilgrimages.

The change has been greatest amongst the rural youth. They are most educated and most savvy of all rural consumers, emulating their urban cousins and demanding the same high quality in the products and services they require. They are the key drivers for

â&#x20AC;&#x153;a village with a population of less than 5,000 with 75% of the

expenditure on two wheelers, computers, personal care items

male population engaged in agriculture etc.â&#x20AC;?1

and education in rural areas, leading to an improved quality of life.

The Census of India defines any habitation with a population density less than 400 per sq.km, where at least 75 per cent of

A survey by the National Council for Applied Economic

male working population is engaged in agriculture and where

Research (NCAER), India's premier economic research entity,

there exists no municipality or board, as a rural habitation.

recently confirmed that rise in rural incomes is keeping pace with urban incomes. From 55 to 58 per cent of the average

Keywords: Mobile Phones, Personal computer, Purchase decision, Rural market, Youth market. *Research Scholar, Jain University, Asst. Professor, Centre For Management Studies Business School, Bangalore, profkavithargowda@gmail.com, 9845511074 **Ex-HOD Centre For Management Studies, Jain University, Associate Professor, Faculty of Business Communication and Law, INTI International UniversityLaureate International University, Malaysia, soney.haris@gmail.com, 8861116710

76 IFIM International Journal of Management | FOCUS October 2014 - March 2015

FOCUS Research Papers urban income in 1994-95, the average rural income has gone up

and affordability are the important words that define the

to 63 to 64 per cent by 2001-02 and touched almost 66 per cent

provision of ensuring a ''phone in each village''. The availability

in 2004-05. The rural middle class is growing at 12 per cent

of mobile phone would cut the role of middlemen and

against the 13 per cent growth of its urban counter- part. The

gatekeepers so that villagers or farmers can enjoy a better

rural consumers search for value in their products as well. As

earnings, computerization as a tool to eliminate corruption and

described by Adi Godrej, Chairman, Godrej Group “the rural

thus connecting urban-rural India at better pace of

consumer is discerning and the rural market is vibrant. At the

development in many areas.

current growth, it will soon outstrip the urban market. The rural market is no longer sleeping but we are”.

Rural incomes are growing, and consumers are buying

2.3 Mahavir Sehrawet and Subhash C. Kundu, 2007, in their study titled: Buying behaviour of rural and urban consumers in India suggested that rural and urban consumers vary

discretionary goods and lifestyle products, including mobile

significantly in various aspects of packaging. The rural

phones, television sets and two-wheelers.

consumers have a stronger opinion on packaging, say better the

In 2009, the number of subscribers for mobile services across the country has increased to 391.76 million in the quarter ended March 2009, up by 50 percent from 261 million in the same quarter last year, according to TRAI data.

However, competition and tariff cuts have brought down the average revenue per user, S.K. Gupta, advisor at TRAI, said on Tuesday. ARPU has been going down in India since 2003.

Indian mobile service providers are focusing on value added

packaging, better the quality of the product although they give less importance to labelling. This study was carried with just one aspect of product, say packaging which is beneficial to my current study on 4Ps for rural area with reference to marketing mix.

2.4

From the study conducted by Jamie Anderson based on

interview with Gurdeep Singh, Operations Director, UP, Hutch India, in 2008, paper titled “Developing a route to market strategy for mobile communications in rural India”, suggested

services, including applications to boost revenue, Gartner's

that managers need to go beyond traditional approaches to

Bhatia said.

serving the rural market in India. Jamie, based on the interview

2. LITERATURE REVIEW

higher the business.

2.1 In a study conducted by Shashi Prabha Singh, 2005, it is

3. OBJECTIVES OF THE STUDY:

of Gurdeep Singh further suggested that higher the population,

observed that the information and communication has a vital role to educate Indians in various territories to become an

Primary objective: to understand the need and preference for

information society. According to Cawkell (1987, p. 2), an

mobile phone and personal computer in rural youth.

information society can be defined as a society in which ultimately most of the people are engaged in “brain work” rather than “physical work”. In such society, more attention is paid on

Secondary objectives: >

phones in rural youth.

information activities (such as acquisition, processing, generation, recording, transmission, dissemination and management of information) and more expenditure is incurred

>

connected. This research study is focussed more on the need for

To analyse the need and preference for personal computers in rural youth.

on information. This study further stated the importance of information in cellular services as an opportunity to be

To understand the need and preference for mobile

>

To suggest the marketers for future growth in rural market.

ICT to be called as a developed India with the co-operation and involvement of government of India, but is not focussed particularly on rural market.

4. RESEARCH METHODOLOGY: This study was conducted in Araleri village during September

2.2 Pradip Thomas, 2007, in his paper titled; Telecom musings:

2014, Malur Taluk, Kolar District, Karnataka, with the objective

public service issues in India, has suggested that in India access

of exploring the dynamics of youth buyer behavior towards mobile phone.

IFIM International Journal of Management | FOCUS October 2014 - March 2015

77

The study was conducted through sample survey using structured questionnaire/scheduling supported by interview technique and observation.

4.1 Research sight:

Sources of data This study has utilized data from both the primary and secondary source. >

The primary data was collected by interviewing rural

Malur is at a distance of 43 km from Bangalore City. The places

youth with the help of questionnaire. A sample size of

near Malur are Whitefield, Hoskote, Hosur etc. As of 2001

approximately 123 was considered for the study, of which only

India census, Malur had a population of 27,791. Males

86 belonged to the age group of 25-34 yrs was considered. The

constitute 51% of the population and females 49%. Malur has

research was conducted on 25-34 yrs, preferably youth with the

an average literacy rate of 67%, higher than the national average

focus on few shopping goods, under personal use; personal

of 59.5%: male literacy is 73%, and female literacy is 61%. In

computer and mobile phones was considered.

Malur, 13% of the population is under 6 years of age. The economy of Malur is primarily dependent on agriculture, famous for clay tile-and-brick industry and some small scale industries. Araleri is a target village around 7 kms from Malur.

4.2 RESEARCH POPULATION AND SAMPLING To select the samples, a non-probability sampling technique was used. Non-probability sampling is also known by different

>

Secondary data: Since the study is focused at rural

consumers, also due to the availability of several research studies conducted on rural consumers, several journals have been referred for finalizing the topic and framing of hypothesis.

5. ANALYSIS AND FINDINGS A total population of 123 was surveyed, out of which 86

names such as deliberate sampling, purposive sampling and

belonged to the age group under study.

judgement sampling. In this sampling, items for the sample are

With reference to the objectives under study, it becomes very

selected deliberately by the researcher; his/her choice concerning the items remains supreme (Kothari2011:59).i.e., the small mass that is chosen will be a typical representative of the whole. The respondents for the questionnaire were selected from Araleri village with two different age group, but preferably youth. Educated or uneducated, married or unmarried were not the main focus but youth with purchase preference for shopping

important to know rural youth, their awareness on mobile phones and personal computer, its importance in their life and their willingness to purchase them/own them and thus concluding if the rural market is open to buy mobile phones and personal computer, thus a potential market for shopping goods under study.

goods were considered. The population of Araleri Village is

This research was conducted for bigger size with chi square test

approximately around 2000, with youth totalling to around

as a research scholar. For the journal, the analysis(250 pages) would have been too big, thus, a simple average method for the

250.

4.3

Sample Size: respondent size of 86 between the age

topic related to original research was considered.

group 25-34 yrs was considered.

5.1) To know the occupation of the respondents

4.4 DATA COLLECTION

Table 5.1: Occupation of respondents

There are several ways of collecting data, particularly in surveys and descriptive researches. Important ones being:

Respondent

Response

Student

49

observation method, through questionnaire, schedules, pantry

37 Married and House wife

audits, mechanical devices, depth interviews, and few more.

With reference to the research objectives, the data was collected

Total

86

with the help of a structured questionnaire. A questionnaire comprises of several questions printed or typed in a particular

5.1 Interpretation:

form supporting the objectives of the research study. It helps in collecting the qualitative response also.

>

57% of the respondents in this age group surveyed

were students while 43% were married and housewife/home

78 IFIM International Journal of Management | FOCUS October 2014 - March 2015

FOCUS Research Papers maker.

5.3. Interpretation:

5.1 Inference: >

>

Good percentage of students and women were

100% of respondents own a mobile phone, while

none own a personal computer

surveyed.

5.3. Inference:

5.2) To know the family income of the respondents

>

The above table shows that all own a mobile phone

and none owns a personal computer.

Table 5.2: Income per Month

5.4)

Income

per Respondents

computers: Table 5.4: reasons for using a mobile phone

month

>

To know the reasons for using mobile phones and

Rs.5,001 â&#x20AC;&#x201C; 8,000

57

Rs.8,001-11,000

29

Total

86

57 on 86, i.e., 66% have monthly income between

Rs.5,001 to Rs.8,000., while 43%

have monthly income

between Rs.8,000 to 11,000.

5.2 Inference: >

Few of the respondents own Nilgiri plantation, few

mango plantation, few own cows/livestock . Nilgiri plantation which is cut after a minimum period of time fetches them lakhs together, selling cow's milk fetched good money, while few of them worked in brick and tiles factory near to the village. Thus, any of the above income category, is a potential rural respondent.

5.4 Interpretation: >

It can be noticed that only 3.5% of the respondents

use the phone for education purpose, 3.5% for internet, while the rest use it for basic purpose like sms, receiving/making calls and capture images.

5.4 Inference:

5.3) To know if mobile phones and personal computers were

>

possessed by rural respondents.

be noticed that respondents do not have exposure to other

Table 5.3:Ownership of mobile phone and personal computers

Since only 7% use for education and internet, it can

useful benefits like knowing about what is happening in the world, to be in par with the urban youth. >

Marketers should educate the respondents about the

online market, online complaints, and many more advantages for using mobile phones in a much more better way. This could be value added service and hence the potential market for smartphones.

5.5) To know the kind of brand of mobile phones possessed (not applicable to computers since none owns it).

Table 5.5: Brand of mobile phones possessed.

IFIM International Journal of Management | FOCUS October 2014 - March 2015

79

5.7.a) To know the price of the mobile phones possessed by Mobile

Number

of Mobile Brand

Number

Brand

respondents

Samsung

8

Lava

13

Nokia

23

Micromax

7

Karbonn

29

Others

6

of

the respondents?

respondents

Total

Table 5.7.a: to know the price of the mobile phones

Price Range

86

No. of

No. of

respondents

respond ents

Between

Between Rs.5,001-6,000

9

BetweenRs.6001-Rs.7,000

7

Above Rs.7,000

7

Rs.2,001-3,000

5.5 Interpretation: >

27

BetweenRs.3,00 18

34% own Karbonn, 27% own Nokia,15% own Lava,

9% own Samsung, 8% own Micromax, while the rest 7% own

1â&#x20AC;&#x201C; 4,000 Between

18

Rs.4,001-5,000 Total

other brands.

5.5 Inference:

86

5.7.a Interpretation: 31% had mobile phones between the

It can be noticed that Karbonn sells the most followed

price Rs.2,001 to Rs,3,000, 21% had mobile phone priced

by Nokia, Lava, Samsung and Micromax and a few of the rest of

between Rs.3,001 to Rs.4,000, 21% owned mobile phone

the brands.

priced between Rs.4,001 to Rs.5,000,10% owned mobile phone

>

>

Karbonn smart phones are priced relatively low, and

hence sells most in rural market. >

Nokia being a customized product having lifetools

sells due this fact in rural market.

between Rs.5,001 to Rs.6,000. 8% owned between Rs.6,001 to Rs.7,000, while the rest owned mobile phone above Rs.7,000.

5.7. a Inference: For marketers selling mobiles, Araleri is a very potential market, since the minimum affordability itself is between Rs.2,000 to Rs,3000. Since many respondents have

5.6) Criteria for owning a mobile phone:

mobile phone priced between Rs.3,001 to Rs.5,000, it would

Table 5.6: criteria for choosing a mobile phone:

this market.

not be difficult to sell smartphones with customized features for

Criteria

No. of respondents

Based on Brand

9

Based on Price

59

Both Brand and

18

Price Total

86

5.6 Interpretation: 69% preferred mobiles based on price.

10% preferred mobiles based on brand.

5.7.b How much satisfied are you about your mobile phone?

Table 5.7.b: Satisfaction level of respondents on existing mobile phones.

Degree of satisfaction

No. of respondents

Extremely satisfied

10

Very much satisfied

50

Satisfied

12

Not very much

14

satisfied Total

86

21% preferred mobile phones based on both options.

5.6 Inference: The youth belonging to this category, preferred buying mobile phone based on price more than a brand. Thus, they were price sensitive.

80 IFIM International Journal of Management | FOCUS October 2014 - March 2015

5.7.c To understand the preference in mobile phone due to dissatisfaction in the existing mobile phone .

Table 5.7.c: Preference due to dissatisfaction of existing mobile phone.

FOCUS Research Papers 5.9 Interpretation: 100% of the respondents gave the reason to Preference in

No. of respondents

mobile phone

Preference in mobile

No. of respondents

phone ----

Samsung

10

Nokia

Lava

----

Karbonn

----

Micromax

----

others

----

be no encouragement and unconvinced parents to buy a computer.

5.9 Inference: if awareness is created by the manufacturer of personal computers through awareness programmes in schools and colleges, supported by teachers/faculties, computers can

5.7.d To understand the source of awareness and major

probably be sold in this village.

influencer in decision-making amongst target market 5.10) To understand if respondents are willing to buy a better Table 5.7.d: To understand source of awareness and

mobile phone or a computer on EMI.

influencer in decision-making.

Table 5.10: Response to EMI option

About personal computers in continuation with the 5.3 and 5.4 observations: 5.8) To understand if the respondents wish to have a personal computer.

5.10 Interpretation:

Table 5.8: If you do not own a personal computer, would you wish to have one?

>

12% of the total respondents were open to the EMI

option

Preference to own a

>

computer

were open to EMI option.

Yes

14

No

72

5.8 Interpretation: 16% wished to have a personal computer at

57% on a total of 14 who wished to have a computer

5.10 Inference: >

In spite of possessing a mobile phone few were willing

to have a different one with EMI option. This indicates that

home.

rural market is prospective market for smartphones.

5.8 Inference:

this village under study, Araleri, can be a

prospective market for computers. It can be also noticed that in

>

Even if the demand for computers is comparatively

villages, WOM acts as a biggest influencer. If the few who buy,

lesser when compared to the demand for mobile phones, it can

are satisfied, that may generate more sales.

be inferred that through WOM, marketers can benefit if EMI option is provided.

5.9 To understand the reason for not having a PC in spite of wishing to have one.

6.

CONCLUSION AND RECOMMENDATIONS:

Table 5.9: Hurdles in having a computer at home.

Araleri is a village rich in power supply compared to many villages. Since it is just 7 Kms away and well connected by road from Malur, transportation for marketers will not be a problem.

From the above ten tables we can conclude that: >

All had mobile phones.

IFIM International Journal of Management | FOCUS October 2014 - March 2015

81

>

Rural youth is price sensitive, since a majority prefer

spending Rs.2,000 â&#x20AC;&#x201C; Rs.3000 on mobile phones. Thus, price can be considered as a factor influencing purchase decisionmaking. >

helping them use it better through retailers or through self-help easy procedure in mobile phone, can generate good sales. >

Mobile phones designed for 25-34 yrs will be more

productive since all 100% had mobile phones and wished to go Most of them had Karbonn, 69% preferred buying a

for buying Samsung due to its benefits. Due to the presence of

mobile phone based on price, rest based on price and brand as

too many retailers (from observation)selling mobile phones in

well.

Malur , the retailers can be encouraged to sell more by offering

>

31% had mobile in the range Rs.2,000 to Rs.3,000,

21% had between the price Rs.3,001 to Rs.4,000, 21% between Rs.4,001 to Rs.5,000, 10% had between Rs.5,001 to rs.6,000,8% between Rs.6,001 to rs.7,000, and

few above

good commission to the retailers and training to their salesperson. Since entire population was not covered in the research, due to the observation it can be predicted to be a prospective market for mobile phones.

Rs.7,000. The statistics show that it is a potential market for

>

smartphones for this age group.

children's future and wellbeing can be focused by marketers to

>

Since from the table 5.10, it is clear that EMI options

acceptable among rural youth, marketers can customize the features in the mobile phones and computers to price between Rs.4, 000 to Rs.6, 000 and Rs.15,000 respectively. EMI options can also be customized for phones and computers. ¡

Few from the age group 25-34 yrs preferred owning a

computer. May be due to parents in this category, for the children's education they were prepared to buy a computer.

Parents of India being more concerned about their

sell more of computers. Since institutions have computers, companies should tie up with schools/colleges/government to create awareness of computer and internet connectivity. They can convince the schools/colleges to provide their center as a venue to conduct a training programme to show the benefits to be connected to external world and thus create empowerment.

Educating on computer with internet benefits can be taken as a CSR initiative also. >

Previous studies carried out in various parts of Indian

RECOMMENDATIONS:

rural markets have addressed in common the following:

Advantages to marketers:

o

Rural market is price sensitive

>

o

They also prefer brands with the kind of affordability

Since Malur has literacy rate 67% higher than

national average according to 2001statistics, Araleri being closer to it, with both the segments showing students (and many were educated) rate high, will be an effective market to design promotion mix.

they have o

They are influenced through relatives, friends and

neighbor The same was noticed in Araleri. India may vary in geography,

>

Well-connected roads.

>

Good electric/power supply

>

Many factories like tiles, brick, fabrication,

computers existing in Araleri, it can be suggested for marketers

engineering are located in Malur to which many from Araleri

to have customized marketing mix programme to enhance retail

travel to work, thus is an indicator for purchasing /disposable

opportunities for shopping goods.

income. Malur also has Honda and Volvo plant in Malur taluk, providing employment to many and opportunities for ancillary industries/entrepreneur.

Recommendations based on research findings: >

Since Araleri is a potential market for mobile phones,

incorporating value added services to the mobile phones and

82 IFIM International Journal of Management | FOCUS October 2014 - March 2015

socio-cultural reasons, but are finally the same on above lines.

Thus, due to the need for mobile phones and personal

7.

LIMITATIONS

>

Even when a questionnaire was constructed in

Kannada, all the respondents opted to answer verbally. >

Had to spend 15 minutes per respondent while

collecting data thus time consuming.

FOCUS Research Papers >

3 to 4 days was spent in travelling and reaching

respondents. >

Few were asked questions through telephone, thus

8.

RESEARCH GAP:

>

The study can be further carried out to the entire rural

population or can be categorized into different age group for

lack of observations.

overall or better understanding of the respondents.

>

Few of them showed fear while answering

>

>

Questionnaire being too long, taking photocopies of

it was expensive. >

Since one village was considered, the response may

not be valid for entire Kolar District.

The study can further be carried out for different

products under shopping goods. >

The study can further be carried out at different

villages in the same district and the state for further customizing marketing mix for Karnataka region.

6.

REFERENCES:

1.

Jamie Anderson, (2008), “Developing a route to market strategy for mobile communications in rural India”, International Journal of Emerging Markets Vol. 3 No. 4, 2008 pp. 339-347 q Emerald Group Publishing Limited.

2.

Sushil Vachani, and N. Craig Smith, 2008, University of California, Berkeley vol. 50, no. 2 winter , cmr.berkeley.edu. http://www.pcworld.com/article/168354/article.html

3.

,India's Rural Mobile Phone Users Hit 100 Million, Jul 13, 2009 10:50 PM

4.

Ajith Paninchukunnath, (2010), “3P framework: Rural Marketing in India”, SCMS Journal of Indian Management, January – March.

5. 6.

Praveen K. Kopalle, Donald R. Lehmann, John U. Farley, 2010, Consumer expectations and culture: the effect of belief in karma in India, Journal of consumer research, vol. 37, august 2010

7.

Rajesh K. Aithal, 2011, Marketing channel length in rural India, Influence of the external environment and rural retailer buyer behaviour, International Journal of Retail & Distribution Management Vol. 40 No. 3, 2012

8.

C. Samuel Craig and Susan P. Douglas, (2011), “Empowering rural consumers in emerging markets”, International Journal of Emerging Markets , Vol. 6 No. 4,

9.

Falguni Vasavada-Oza, Aparna Nagraj and Yamini Krishna(2012) , “Marketing to Rural Women: How Various Leading Brands Are Doing It?” The IUP Journal of Brand Management, Vol. IX, No. 2.

10.

Ali, Thumiki and Khan,2012,Factors Influencing Purchase of FMCG by Rural Consumers in South India, International Journal of Business Research and Development, ISSN 1929- 0977 Vol. 1 No. 1, pp. 48- 57 , 2012

11.

Dr.Ashfaque Ahmed, (2013), “Rural Marketing Strategies for Selling Products & Services:Issues & Challenges” , Journal of Business Management & Social Sciences Research, Volume 2, No.1, January. http://www.assocham.org

12.

Sunday, January 27, 2013, With rural push, FMCG sector set to witness robust growth, says ASSOCHAM EcoPulsestudy . http://www.rediff.com/money/report/indias-rural-markets-are-a-powerful-economic-engine/20130711.htm

13.

India's rural markets are a powerful economic engine', July 11, 2013 http://www.ibef.org/industry/indian-rural-market.aspx

14.

Indian Rural Market, IBEF, November 2013

15.

1 http://www.bms.co.in/rural-marketing-notes/,4th June 2014.

IFIM International Journal of Management | FOCUS October 2014 - March 2015

83

FOCUS Research Papers

Use of Social Networking Websites as an Emerging Marcom Tool Charu Bharti* ABSTRACT It is no exaggeration to say that that marketing is undergoing a paradigm shift, in large part, to the Internet and social media and social networks. The evidence is everywhere, for example, many consumers no longer look up items in the Yellow pages; they search for them on the Internet.

Using Social Networking Websites, as marketing tool, is more than just marketing because it includes requires the development of relationships based on shared interests.

We are still in early stages of the transformation social media

This Paper analyses the opinion of potential consumer who are the internet users, on their attitude towards Social Networking Websites (SNWs) to be used as a Marcom tool (Marketing Communication tool). As the SNWs are the upcoming platforms that people have started using, to build networks.

How can the marketers take the use of these Internet based platforms, as the tool for 'Customer engagement, viral marketing, Word of the mouth promotion, etc'.

The Study is based on Survey conducted where the opinions of the “Internet users” have been collected, with a Sample Size of approx. 300, using 'Questionnaire' as a Research Tool. The

and social networking is having on marketing. Traditional

Findings are expected to give the conclusion for the marketers,

marketing is undergoing a transformation due, in large part, to

to look the SNWs as an emerging marcom platform. The

the Internet and social networks and social media.

recommendations have been given on the basis of Findings.

While social networking has gone on almost as long as societies

INTRODUCTION

themselves have existed, the unparalleled potential of the Internet to promote such connections is only now being fully recognized and exploited, through Web-based groups established for that purpose.

A survey commissioned by the American Marketing Association reveals a positive outlook for likelihood of ecommerce on social networking sites, in that 47% of consumers said they would visit social networking sites to search for and

With two thirds of the world's internet population visiting a

discuss holiday gift ideas, and 29% said they would buy

social network or blogging website, and the sector now

products there (Horovitz 2006).

accounting for over 10% of all internet time, websites such as Facebook, LinkedIn and Twitter are channels that marketers can really tap into.

Social networks have geared up to provide shopping services.

Facebook added a shopping application that enables users to search for products they want to buy, and then share their

Social networking can be an excellent way to acquire new

opinions of those products with other Facebook members

customers and retain existing ones. The real value is the way

(Forbes 2007).

marketers can engage with their audience on a personal level.

Instead of simply 'sell sell sell', social networking is about the kind of two-way communication which helps to build a long term relationship. Of course, this form of interaction may not be suitable for all brands, but many organizations are benefiting from making their brand more personable.

Keywords: Marcom (Marketing Communication), Promotion, Social Networking Websites (SNWs)

It is no exaggeration to say that that marketing is undergoing a paradigm shift, in large part, to the Internet and social media and social networks. The evidence is everywhere, for example, many consumers no longer look up items in the Yellow pages; they search for them on the Internet.

“Social Network Marketing is the use of social media software to create or maintain connections.”

*Research Scholar, Haryana School of Business, Guru Jambheshwar University of Science and Technology, Hissar, Haryana. charu.bharti31@gmail.com

84 IFIM International Journal of Management | FOCUS October 2014 - March 2015

It is more than just marketing because it includes requires the

social networking is about the kind of two-way communication

development of relationships based on shared interests.

which helps to build a long term relationship. Of course, this

“Social network marketing is the practice of expanding the number of one's business and/or social contacts by making connections through individuals.”

form of interaction may not be suitable for all brands, but many organizations are benefiting from making their brand more personable. Social networking is opening up exciting new ways of communicating with audiences; like some marketers like

It can be undoubtedly said that the Social Media are the

Make my Trip, Yatra etc., have recently used Twitter in

emerging tool for an effective marketing. It has been rightly said

conjunction with their website to document their clients' travels

by Matt Dickman, that “Social media is not an island.

to many domestic and foreign locations, and gained many new fans/followers along the way. There is no doubt that the further

It's a high-power engine on the larger marketing ship.”

According

to

the

recent

research

development could be seen in this arena in the near future, and by

www.internetworldstats.com, the total numbers of users on Facebook, as on June 30, 2011, worldwide are 6,930,055,154, with a penetration of 10.3%. That is a huge figure. Ready-to-

it would be surprising to see just how much of a benefit social networking can be to so many organizations.

2. Objectives of the study

consume free information in the form of age, likes, email, is

“A study without objectives is like a tree without roots”. In any

available before the marketer. However, thinking out-of-the box

area of study, the first and the foremost task is to define the

requires, for leaving a trail of the so-called Word-of-mouth

objectives of the research i.e. the reason why the research study

promotion i.e. the Viral part of the marketing. For instance the

need to be conducted.

song “Why this Kolaveri Di.”, is the recent example of effective social media marketing. The Kolaveri number has taken in people, especially youngsters and though they do not know the exact meaning and whether they follow the lyrics (which the promoters of the Video have done in scrolls in English)...the

A research study may have many objectives but all these objectives revolve around one major objective which is the focus of the study. In this study, the focus is the use of the Social Networking Websites (SNWs) as a marketing tool.

number is on the lips of all these youngsters and that speaks

The Social networking is an innovative marketing tool which is

volume of its acceptance amongst youngsters converging from

being adopted by so many marketers now-a-days. And so this

different states. Yes, it is the Viral part that help spread the

study will be based on studying the emergence of Social

leaked video like anything, with the help of Social Media like

Networking Sites as an efficient marketing tool.

Youtube & Facebook.

Social Networking Sites are emerging as a boom for the marketers. It is being used as an innovative marketing strategy.

Social media has become a platform that is easily accessible to

The following are the objectives of this research study:1. To study the use of the Social Networking Sites as an innovative marketing strategy.

anyone with internet access, opening doors for organizations to

2. To study the reactions of potential customers about

increase their brand awareness and facilitate conversations with

marketing through SNWs

the customer. Therefore, the Social networking sites, not initially formed with these objectives, would help marketers to achieve objectives like better customer understanding, knowledge sharing, informing about and promoting products.

Social networks and social media are part of a phenomenon that is changing the way we communicate with our members and potential members. Consumers are using online tools to take charge of their own experience and connect with others. They are using blogs, wikis, pod casts and YouTube, to name only a few. The real value is the way marketers can engage with their audience on a personal level. Instead of simply 'sell sell sell',

3. Review of Literature Research suggests that consumers rely on two different sets of values in making their shopping decisions: hedonic and utilitarian (Babin and Darden 1995; Babin, Darden, and Griffin 1994). Batra and Ahtola (1990) define these values as follows: "(1) consummatory affective (hedonic) gratification from sensory attributes, and (2) instrumental, utilitarian reasons.”

Online shopping services lack multisensory attributes. The

IFIM International Journal of Management | FOCUS October 2014 - March 2015

85

FOCUS Research Papers primary utilitarian values that online shoppers seek include the convenience of locating and comparing merchants, evaluating price/quality ratios, and conserving temporal and psychological resources (Grewal et al. 2003; Mathwick, Malhotra, and Rigdon 2001).

Internet, discussions, etc.

4.1.2

Research Approach: The Research study was

'Exploratory' in nature. The study was based on taking out insights and ideas into the problem i.e. analyzing the marketing opportunities on the social networking sites.

Godes and Mayzlin (2004) suggest that online conversations (e.g., Usenet posts) can offer an easy and cost-effective way to measure Word of Mouth. Online conversations offer the firm an attractive opportunity to learn about its environment by

4.1.3

Data Collection Tools : The tool that was used for the

data collection was Structured Questionnaire 4.2 Sample Design of the study

directly observing the flow of interpersonal communication. By looking at activity across different online communities, firms

The Sample design include the decision of the sample i.e. the

are able to infer measures of social structure.

respondents who represent the whole population. The Sample Design included:

Online social networks are platforms, which allow individuals to connect and communicate with others with common

4.2.1

interests termed as friends (Boyd and Ellison, 2007). According

are the members of one or more Social Networking Websites

to Urstadt (2008), social networking is the fastest growing

like Facebook, Tweeter, LinkedIn, etc.

activities on the new user centered Internet, Web2.0, which has spread to sites of all sizes, and are increasingly intertwined as platforms open.

A recent US study (Corporate Executive Board, 2008) categorized five key objectives of social networking strategies,

4.2.2

Sample Unit : The sample units were the people who

Sample Size : The Sample Size for this research study

comprised of 300 respondents.

4.2.3

Sample Area : The data was collected from the Delhi

and NCR regions, in India.

namely (i) improve customer understanding, (ii) promote issues

4.2.4

of social concern, (iii) promote products and services, (iv)

the basis of Probability Sampling technique i.e. Random

facilitate internal knowledge sharing, and (v) increase brand

Sampling.

awareness. Leading companies such as Unilever, Xerox, P&G, Virgin, Toyota, JP Morgan, CISCO, IBM, Burger King and Honda had successfully utilized social networking websites.

Michael Trusov, Randolph E. Bucklin, & Koen Pauwels (2009)

Sample Technique : The respondents were selected on

5. Analysis The following is the analysis of the data collected from 300 respondents:-

explained that â&#x20AC;ŚBecause social network sites record the

5.1. Are you aware of any websites where you can make friends

electronic invitations from existing members, outbound Word

and socialize (Social Network Websites)? A

of Mouth can be precisely tracked. Along with traditional marketing, Word of Mouth can then be linked to the number of

Table 5.1

Chart 5.1

new members subsequently joining the site (sign-ups).

4. Research Methodology 4.1 Research Design of the study 4.1.1 Data Sources: o

Primary Data Sources : The primary data i.e. the first

hand data was collected from the people who are the member of one or more Social Networking Website(SNW). o

Secondary Data Sources : The second hand data was

collected from the sources like Books, Journal, Newspapers,

86 IFIM International Journal of Management | FOCUS October 2014 - March 2015

5.2. Do you have a profile on any Social Networking Website(SNW)?

Table 5.2 Chart 5.2

5.3. How long have you been using the SNW? Table 5.3

Chart 5.3

5.7. Kindly indicate what information have you included on your Social Network websites?

Table 5.7 Chart 5.7

5.4. Have you ever used SNWs for searching an Internship or Job? Table 5.4 Chart 5.4

5.8. Do you believe companies save money by using SNWs to market their products?

Table 5.8 Chart 5.8

5.5. How many hours do you spend weekly on the SNW? Chart 5.5 Table 5.5

5.9. Do you notice any offers/Advertisement for the Product/ Services on a SNW? Table 5.9 Chart 5.9

5.6. Which SNW(s) are you a member of?

Table 5.6

Chart 5.6

5.10. Do you think that in this busy lifestyle, the information received via advertisements on SNWs regarding the new offers help you keep up-to-date?

Table 5.10

Chart 5.10

IFIM International Journal of Management | FOCUS October 2014 - March 2015

87

FOCUS Research Papers

Table 5.15

5.11. Have you ever purchased any product after collecting the information from any SNWs? Table 5.11

5.16. Have you ever recommended any specific brand to any of your friends etc on SNWs? Table 5.16 5.12. If Yes, What category of product have you purchased ?

Table 5.12

5.16. Have you ever recommended any specific brand to any of your friends etc on SNWs? Table 5.16

5.13. Have you ever switch off from one brand to another after being influenced by the number of â&#x20AC;&#x153;Likesâ&#x20AC;? on a brand?

Table 5.13

5.14. Do you think SNWs are a good way of providing feedback to the company regarding its product/service?

Table 5.14

5.15. Have you ever felt like your privacy was violated through sharing information with marketers on SNWs?

88 IFIM International Journal of Management | FOCUS October 2014 - March 2015

6. FINDINGS After analyzing the collected data, the followings interpretations can be made in the form of Findings:6.1 With advent in the internet revolution, more and more number of people are coming into the access of the same.

6.2 The number of members on various Social Networking Sites is increasing at a very high pace, day by day.

6.3 2 % of the respondents have been accessing the Social Networking Sites from 1-6 months, 37 % of the re respondents have been accessing the Social Networking Sites from 12-24 months, showing that this is a latest trend amongst the people.

6.4 57 % of the respondents access the Social Networking Sites 10-20 hours every week, showing that there is a lot of time for the marketers to act.

6.5 90 % of the respondents are the members of Facebook, 33% of them are the members on the YouTube, 67% of them are the members on the Linkedin and 77% of them are the members on the Twitter, making them most popular Social Networking Websites.

6.6 24 % of the respondents have searched for a job/internship through any SNW, explaining the scope of SNW for HR oriented companies like Recruitment Firms, Consultancies, etc.

6.7 67 % of the respondents have mentioned their Email ID, 26% have mentioned their Phone Numbers, 83% have mentioned their Home Town/City, 38% have

mentioned their Music Interests, 22% have mentioned their Favourite Movies, 33% have mentioned their interests in Books, 77% have mentioned about their Passion areas, 20% have mentioned their Favourite Sport, 29% have mentioned their Interest Activities, 40% have mentioned their favourite T.V. Shows, 76% have mentioned their relationship status and 50% of them have mentioned any other information, on their respective Social Networking Sites.

6.8 63 % of the respondents believe that the companies can save money by using SNWs as a marketing tool.

6.9 55% of the respondents notice any offer/advertisement for any Product/Service that highlights on their Social Network Website.

6.10 30 % of the respondents took purchase decision on the basis of the information that they received on their Social Network Website.

6.11 Out of 89 respondents(30 %) who purchased any product after getting information from SNW, 13% (% of total i.e. 300)purchased FMCG, 9% purchased Daily use item, 3% purchased Jewellery, 1% purchased Insurance Policy, 2% purchased Bank A/C, 2% purchased any other product category item.

6.12 16 % of the respondents agree that they have switch off from one brand to another after being influenced by the number of “Likes” on a brand. Therefore, Information search on SNW plays an important role in consumer decision-making process.

6.13 74 % of the respondents think that SNWs are a good way of providing feedback to the company regarding product/service, stating it clear that SNW are a good source for the marketers to get involved in to “Interactive Marketing”.

6.14 27% of the respondents agree that the advertisements are an intrusion on their privacy.

6.15 61% of the respondents agree that due to their busy lifestyle, advertising on Social Networking Sites can be useful to them in gaining knowledge about interesting offerings, stating it clear that SNW can be a good source specially in Urban areas, where both husband-wife are working.

6.16 30 % of the respondents told that they had recommended a brand to another person, for use, via SNW. Therefore, SNWs are a good source of viral marketing & publicity. The word-of-mouth promotion, which is considered as the best source of promotion, can be held via SNWs. 7. RECOMMENDATIONS Based on the findings, the following are my recommendations to the marketers, who use or would like to use the Social Networking Websites as a part of their marketing strategy, :7.1 The marketers should use Social Networking Sites as the part of their marketing strategies, as using SNWs is a recent

trend amongst the people and more and more number of people are coming into the access of the same.

7.2 There should be strategic planning that should be made before advertising on the Social Networking Sites.

7.3 The users/members mention a large set of their personal information and interests like Music, Passion, Relationship Status, etc. So the marketer should use one-to-one marketing in case of using Social Networking Sites as per the interest areas of the member of the Site.

7.4 The marketer should create their own communities in the name of their Brand or Business and attract the members to join the same.

7.5 A huge quantum of time is being spent by the people on the Social Networking Sites and so marketers should take the advantage of the same.

7.6 Marketers' information or offerings etc. should not prove to be an intrusion to the privacy of the people and so they should be able to provide compact and relevant information.

7.7 Marketers also need to beware of cheting the customers, as the communication via SNWs spreads very fast.

7.8 The Marketer should try to increase their online presence on different SNWs, as the customer prefer it as a good source of information, while taking a purchase decision.

7.9 The access to the information available on the Social Networking Sites regarding the marketers' offerings should be convenient and short on details.

7.10 The marketers can also create their own Blogs, Writeups, and communities etc. to communicate regarding their offerings and also receive feedback.

7.11 The marketers should try to maintain healthy Customer relationship with the help of Social Networking Sites.

7.12 Social Networking Sites cost no or very less to the marketers, but the marketers have to take proper utilization of the huge opportunity available before them. So they have to plan strategically and then act.

7.13 Social media strategies must target certain groups in order for your plan to be successful. The question for your business is how you manage all of your social media accounts.

You want to streamline, consolidate, and analyze your social media marketing plan in the most efficient way possible.

Online businesses have originated over the past five years to do just that.

7.14 With the rapid burgeoning of social media websites, your business needs to find a way to consolidate social media marketing efforts to save money and time. Engage Sciences has developed a platform that allows your business to view messages, comments, and post replies across all of your Facebook and Twitter channels.

IFIM International Journal of Management | FOCUS October 2014 - March 2015

89

FOCUS Research Papers 8. CONCLUSION In conclusion, it can be said that the Today in the era of globalization and internet revolution, the marketing is undergoing a paradigm shift from the conventional marketing practices to the online marketing practices.

Social Networking Sites are a boom for the marketers. It could be used as an innovative marketing strategy. SNWs have become the platforms that are easily accessible to anyone with internet access, opening doors for organizations to increase their brand awareness and facilitate conversations with the customer. Additionally, SNWs serves as a relatively inexpensive platform for organizations to implement marketing campaigns. With two thirds of the world's internet population visiting a social network or blogging website, the Word-of-mouth, which is considered the strongest promoter, is present in case of marketing innovatively through Social Networking Sites. The Viral part of the SNWs make it more interesting for the marketers to use it as a marketing tool.

9. REFERENCES 9.1 Babin, Barry J. and William R. Darden (1995), "Consumer Self Regulation in a Retail Environment," Journal of Retailing, 71 (1), 47-70.

9.2 Batra, Rajeev and Olli T. Ahtola (1990), "Measuring Hedonic and Utilitarian Sources of Consumer Attitudes," Marketing Letters, 2 (2),159-170 9.3 Boyd, D. M., & Ellison, N. B. (2007), “Social Network Sites: Definition, History, and Scholarship.” Journal of Computer-Mediated Communication, 13(1), 210-230.

9.4 Compete.com (2008), “Site Analytics. Profile: MySpace.com and Facebook.com” available at http://siteanalytics.compete.com/facebook.com+myspace.com/ ?metric=uv.

9.5 Forbes (2007), "New Shopping Application Allows Users to Shop Online with Friends," July 20, http://www.forbes.com/businesswire/feeds/businesswire/2007/07/20/businesswire20070720005396r1.html.

9.6 Grewal, Dhruv, Gopalkrishnan R. Iyer, R. Krishnan, and Arun Sharma (2003), "The Internet and the Price Value-Loyalty Chain," Journal of Business Research, 56 (5), 391-398.

9.7 Godes, David and Mayzlin Dina (2004), “Using Online Conversations to Study Word-of-Mouth Communication”, Marketing Science, 23, 545–60.

9.8 Horovitz, Bruce (2006), "Survey: Social Network Sites Could Also Lure Shoppers," USA Today, November 23, http://www.usatoday.com/tech/news/2006-11-23social-shopping_x.htm.

9.9 Market Watch (2008), "Jupiter Research Finds That Social Media Has Emerged as Important Marketing Platform for Retailers During Back-to-School Shopping Season," Market Watch, August 18, http://www.marketwatch.com/news/story/jupiterresearch-finds-social-media-has/story.aspx?guid=%7B5D4FA471-3AB4-453B-A15D7174BD0D3D93%7D&dist=hppr.

9.10 Trusov Michael, Bucklin E. Randolph, & Pauwels Koen (2009), “Effects of Word-of-Mouth Versus Traditional Marketing: Findings from an Internet Social Networking Site” , Journal of Marketing, 73, 90–102.

9.11 Urstadd (2008), “Social Networking Is Not A Business — But It Might Be Soon”, available at: http://www.rimmkaufman.com/rkgblog/2008/07/14/socialnetworking-is-not-a-business-but-it-might-be-soon/.

Copy of the Questionnaire 1) Are you aware of any websites where you can make friends and socialize (Social Network Websites)? a) Yes b) No 2) a) b)

Do you have a profile on any Social Networking Website(SNW)?

Yes No

3) a) b) c) d)

How long have you been using the SNW? Less than 1 month 6-12 months 12-24 months More than 24 months

4) a) b)

Have you ever used SNWs for searching an Internship or Job? Yes No

5) a) b) c) d) e)

How many hours do you spend weekly on the SNW? 0-5 6-10 10-20 20-30 More than 30

6) a) b) c) d) e) f) g)

Which SNW(s) are you a member of?

Facebook LinkedIn My Space Orkut Youtube Twitter Others

7) Kindly indicate what information have you included on your Social Network websites? a) Email b) Phone No. c) Home Town/City d) Music e) Movies f) Books g) Passion h) Sports i) Activities j) TV shows k) Relationship Status l) Others 8) products? a)

Do you believe companies save money by using SNWs to market their Yes

90 IFIM International Journal of Management | FOCUS October 2014 - March 2015

b)

No

9) SNW? a) b)

Yes No

Do you notice any offers/Advertisement for the Product/Services on a

10) Do you think that in this busy lifestyle, the information received via advertisements on SNWs regarding the new offers help you keep up-to-date? a) Strongly Agree b) Agree c) Neither Agree Nor Disagree d) Disagree e) Strongly Disagree 11) Have you ever purchased any product after collecting the information from any SNWs? a) Yes b) No 12) a) b) c) d) e) f)

If Yes, What category of product have you purchased ?

FMCG Daily use necessity items Jewellery Insurance Policy Bank A/C Any other

13) Have you ever switch off from one brand to another after being influenced by the number of “Likes” on a brand? a) Yes b) No 14) Do you think SNWs are a good way of providing feedback to the company regarding its product/service? a) Yes b) No 15) Have you ever felt like your privacy was violated through sharing information with marketers on SNWs? a) Yes b) No 16) on SNWs? a) b)

Have you ever recommended any specific brand to any of your friends etc Yes No

Convergence of AS 14 Amalgamation to IND AS 103 Business Combination and carve outs from IFRS 3.

Vibha Tripathi* ABSTRACT:

INTRODUCTION

With the integrated global economies and cross border mergers

WHAT IS IFRS?

and acquisitions, the uniformity of financial reporting by Indian companies is inevitable for the authenticity of their financial statements worldwide. The emergence of International Financial Reporting Standards (IFRS) marks the biggest revolution in financial reporting, though, not without posing challenges of convergence. In order to harmonise with the Financial Reporting worldwide the ICAI (Institute of Chartered Accountants of India) has issued 35 Ind AS –the converged accounting standards which

IFRS stands for “International Financial Reporting Standards” and includes International Accounting Standards (IASs) until they are replaced by any IFRS and interpretations originated by the International Financial Reporting Interpretations Committee (IFRIC) or its predecessor, the former Standing Interpretations Committee (SIC).

Meaning And The Need Of Convergence To IFRS

are in line with IFRS subject to certain carve outs (differences) due to tax related issues, as notified by the MCA. The paper focuses on

Convergence can be described as “to design and maintain national

one of these converged IND AS 103 Business Combination. At

accounting standards in a way that financial statements prepared in

present in India, though the AS 14 lays out specific treatment for

accordance with national accounting standards draw unreserved

Amalgamation it is not matching the global reporting standards

statement of compliance with IFRSs.” The ICAI (Institute of

requirements, so ICAI has converged the present standard AS 14 to

Chartered Accountant of India) realized that full and immediate

Ind AS 103 Business combination which is in line with IFRS 3. The

adoption of IFRS would be a challenge in the Indian environment

transition to Ind AS as and when it happens is likely to have impact

in view of the conflicting legal and regulatory requirements and the

on the accounts of companies involved in such acquisitions and

technical preparedness of the industry and the accounting

mergers. With reference to this convergence, the study provides an

professionals. Hence India has chosen Convergence to IFRS over

insight on the treatment of goodwill and its impairment, bargain

Adoption to IFRS. This gives the standard setters the scope to

purchase, non controlling interests, reverse acquisitions and

modify accounting standards to better reflect the local economic

identifiable net assets & liabilities at fair value through various

environment and this flexibility has been utilised by the standard

examples. Also, Ind AS 103 is more stringent about the accounting

setters while formulating the Ind ASs. Currently, differences

method to be used. The study also shows the major difference

between IFRS and Ind ASs can be classified into four categories:

between IND AS 103 and As 14 Amalgamation with the help of different case studies. It also focuses on the carves outs of Ind AS 103 from IFRS 3 and its reasons.

(1)

Elimination of options provided under IFRS

(2)

Addition of options not available under IFRS

(3)

Inclusion of additional guidance in Ind AS not found in IFRS and

(4)

Prescription of accounting rules that are different as compared to IFRS

*Lecturer, Department of Accountancy ADDRESS FOR CORRESPONDENCE: 6, Siddhivinayak Appartment, Nr. Opera Upashray, Opp. Vikas Gruh Paldi, Ahmedabad -380007.

CONTACT: 91-9825058739, EMAIL: vibha.tripathi@ahduni.edu.in AFFILLIATION: H.L. Institute of Commerce Amrut Mody School of Management Ahmedabad University OFFICE ADDRESS: H.L. Campus, Prin. S. V. Desai Road, Navrangpura, Ahmedabad- 380009 IFIM International Journal of Management | FOCUS October 2014 - March 2015

91

FOCUS Research Papers IFRS in INDIA: The following are the existing facts about IFRS status in INDIA ü

Convergence to IFRS will be done in a phased manner

from April 1, 2011 as decided by MCA. It will be applicable at different dates for listed and non listed companies, banking and insurance companies, medium and small sized companies (according to their net worth). ü

At present there are two sets of Accounting Standards

1.

IFRS Converged Indian Accounting Standards – Ind AS

2.

Existing Accounting Standards – AS

ü

The effective dates for implementation and applicability

of Ind AS may differ from the dates announced in the original roadmap and is subject to satisfactory resolution of tax issues. ü

The final Ind AS include several 'carve outs' (deviations)

from IFRS as issued by the (IASB).

As on date: Budget 2014 Finance minister Arun Jaitely has, in his Budget 2014-15 speech said that the converged accounting standards will become mandatory from FY 2016-17. However, it can be voluntarily adopted by companies from FY 2015-16. The convergence will improve financial reporting by Indian companies which is critical for attracting foreign capital into the country. "While the details are to be known, the announcement is in line with the ICAI proposal on the revised convergence roadmap and would fulfil India's longstanding commitment to the G 20 nations for convergence w i t h I n t e r n a t i o n a l F i n a n c i a l Re p o r t i n g S t a n d a rd (IFRS),"(Source:Economic times) Need of converged IND AS 103 Business Combination The necessity of a standard on Business Combinations in India assumes importance considering the fact that Indian companies are increasingly stretching their business in foreign countries for best-fit business combinations. With the global mergers and acquisitions of companies like Tata Motors acquiring the Jaguars and Landrovers and Tata steel acquiring the Chorus, the uniformity in accounting standards and the authenticity of the accounting reports is inevitable. The compatibility of Indian accounting standards with the IFRS is challenging but necessary for a true and fair view of the financial statements worldwide. When Vodafone took over Hutchison Essar there were a number of tax related issues in India. Inspite of such complex reporting , it triggered the interest 92 IFIM International Journal of Management | FOCUS October 2014 - March 2015

of small and medium sized companies for such acquisitions.. The present standard does not give specific treatment for complex business combinations. The following difference between As 14 Amalgamation and Ind AS 103 Business combination justifies the convergence and the need to match the global reporting standards.

·

Reverse acquisition takes place when a private entity

wants to become a public entity but does not want to register its equity shares. In such case, private entity approaches a public entity, i.e. the one which is listed, to acquire its (private entity's) equity interests in exchange for the equity interests of the public entity. ·

In a reverse acquisition, the entity issuing equity interests

is legally the acquirer, but for accounting purposes is considered the acquiree. Accounting for business combination is done from the perspective of accounting acquirer and not legal acquirer.

IND AS 103 Business Combination 1.

Objective:

·

Accounting for reverse acquisition are bit complex but

Ind AS 103 deals with reverse acquisitions unlike AS 14 which is silent on treatment of reverse acquisitions

The objective of the Indian Accounting Standard 103 is to improve

Exclusions

the relevance, reliability and comparability of the information that a reporting entity provides in its financial statements about a business combination and its effects. To accomplish that, this Indian Accounting Standard establishes principles and requirements for how the acquirer: ü

recognises and measures in its financial statements the

However, IND AS 103 excludes: 1.

Formation of a joint venture

2.

Acquisition of an asset or group of assets not constituting

a business combination of entities

identifiable assets acquired, the liabilities assumed and any non-

3.

controlling interest in the acquiree

transaction or other event in which an acquirer obtains control of

ü

recognises and measures the goodwill acquired in the

Business combinationA business combination is a

one or more businesses

business combination or a gain from a bargain purchase

Identifying a Business Combination

ü

determines what information to disclose to enable users

If the assets acquired are not a business, the reporting entity shall

of the financial statements to evaluate the nature and financial

account for the transaction or other event as an asset acquisition.

effects of the business combination.

2.

Scope:

Ind AS 103 defines business combination which has a wider scope.

For example, acquisition of a “shell” or “shelf” company is not a business combination because no business is being acquired.

4.

Business:

It includes both amalgamation and acquisition including common

The Standard defines the business as an integrated set of activities

control transactions

and assets from which economic benefits are gained by the investor

Inclusion of Common Control transactions •

or other owners. It also explains that, for determining whether a group of assets and liabilities is a business, one must examine the

Assume M and N are subsidiary companies that are

three ingredients, viz. Inputs, Process and Outputs. In other words

owned by the same parent entity O. Does the transaction constitute

a business consists of inputs and processes applied to those inputs

a business combination within the scope of IFRS 3 and Ind AS 103?

that have the ability to create outputs.

·

5.

Here M and N are under common control of O. Business

combinations involving entities under common control are excluded from the scope of IFRS 3 but in Ind AS 103, Common control transactions are included in the scope Reverse Acquisition

Acquirer

An acquirer is the entity that obtains control of the entity – the acquiree.

6.

Control

IFIM International Journal of Management | FOCUS October 2014 - March 2015

93

FOCUS Research Papers In the above definition control means the power to govern the

the liabilities of the acquiree - the “closing date”. (See CASE

financial and operating policies of an entity so as to obtain benefits

STUDY 2)

from its activities 7.

Acquiree

Step 3 : Identifying and measuring consideration (See CASE STUDY 1)

The business or businesses that the acquirer obtains control of in a

•

business combination

values of:

8.

t h e

Method of Accounting

Under Ind AS 103 only acquisition method is used for business combination. The Standard eliminates the now- optional poolingof-interests method and mandates the Purchase Method in accounting for a Business Combination.

Purchase method requires the Acquiring Company to fair value all

Consideration is the sum of the acquisition-date fair

a s s e t s

t r a n s f e r r e d

–

the liabilities incurred by the acquirer

–

the equity interests issued

•

Acquisition- related costs

Consideration should be measured at fair value.

the identified Assets and Liabilities and also recognise additional

Acquisition-related costs are costs the acquirer incurs to effect a

liabilities if any, at fair values on balance sheet. It requires allocating

business combination. They are as under:

the Purchase Price to all the items on the balance sheet and also off

ü

Finder's fees

10Acquirer has to recognise various components of business

ü

Advisory, legal, accounting, valuation and other

combination like non-controlling interest, consideration and the

professional or consulting fees

the balance sheet i.e. contingent liabilities. Under this method, the

goodwill or bargain purchase on the date of acquisition. ü

General administrative costs, including the costs of

9. Fair value

maintaining an internal acquisitions department

The International Accounting Standards Board (IASB) defines fair

ü

value as "... an amount at which an asset could be exchanged

securities.

Costs of registering and issuing debt and equity

between knowledgeable and willing parties in an arms length transaction".

The acquirer shall account for acquisition-related costs as expenses in the periods in which the costs are incurred and the services are

Steps in acquisition method 10 Step 1: Identifying the acquirer: For each business combination, one of the combining entities shall be identified as the acquirer. The entity that issues equity shares in

received, with one exception. The costs to issue debt or equity securities shall be recognised in accordance with Ind AS 32 and Ind AS 39.

CASE STUDY 1

exchange for the net assets of other entity is usually identified as

Accounting treatment of consideration at fair value, contingent

acquirer

consideration and acquisition related costs

Step 2: Determining the acquisition date Measurement of assets, liabilities, intangible assets, non-controlling interest, recognition of goodwill etc in case of business combination is acquisition-date sensitive. Hence it is very critical to

Entity Manuplastics Ltd. acquired controlling interest in Entity Autoplastics Ltd and issued 2,00,000 shares to its owners as a consideration for the acquisition. The fair value of the shares issued

by Manuplastics Ltd was as follows:

determine acquisition date.

ü

Rs. 8,00,000 as at the date of the acquisition agreement

Acquisition date is the date on which the acquirer obtains effective

ü

Rs. 9,50,000 as at the date of the acquisition as identified

control of the acquiree. Usually, the date on which the acquirer

by the agreement Manuplastics Ltd incurred the following expenses

legally transfers the consideration, acquires the assets, and assumes

in relation with the acquisition:

94 IFIM International Journal of Management | FOCUS October 2014 - March 2015

o

Legal and consulting fees of Rs. 60,000

CASE STUDY 2

o

General administrative costs of Rs. 40,000

Acquisition in two stages (step acquisition) and resulting in

o

Costs related to issuance of equity Rs. 50,000

ü

Entity Manuplastics Ltd also agrees with Entity

goodwill X Ltd acquires Y Ltd in the following two stages:

Autoplastics Ltd that if it meets certain performance based targets

·

within next two years, an additional consideration (in cash) of Rs.

of Y Ltd for Rs. 20 crores

On 1st Feb 2009 it purchased 20% of the equity shares

1,60,000 will be paid to it. · ü

Entity Manuplastics determines the fair value of this

On 1st Dec 2013 X Ltd purchased 50% of shares for Rs.

200 crores As on the acquisition date :

additional consideration as Rs. 1,00,000. Computation of the amount of consideration paid in the above

The carrying amount of net assets is 280 crores and the fair value

transactionParticularsAmt (in Rs.)Fair value of equity issued as at

of identifiable net assets is Rs. 300 crores. The fair value of the

the date of Acquisition9,50,000Fair value of the contingent

original investment of 20% equity shares is Rs.80 crores and the

consideration1,00,000Total consideration paid10,50,000

fair value of remaining 30% non-controlling interest is Rs. 120 crores.

Treatment of acquisition related costs Table 1: Acquisition break up Other expensesAccounting treatmentLegal and consulting fees Rs.60,000To be charged to expenses as incurredGeneral costs of Rs. 40,000To be charged to expenses as incurredCosts related to issuance of equity Rs. 50,000To be recognized in accordance with Ind AS 32 and 39.Exceptions: “The acquirer shall, at the acquisition date, allocate the cost of a business combination by recognising the acquiree's identifiable assets, liabilities and contingent liabilities that satisfy the recognition criteria, at their fair values at that date, except for noncurrent assets (or disposal groups) that are classified as held for sale in accordance with IND AS 105, Non-current Assets Held for Sale and Discontinued Operations, which shall be recognised at fair value less costs to sell.”

Step 4: Recognising and measuring goodwill (Case Study 2-Table 2) Goodwill: An asset representing the future economic benefits arising from the other assets acquired in a business combination that are not individually identified and separately recognised.

Important conclusions and findings of Table 2 ü

The acquisition date is in the year 2013 and not in 2009

ü

Goodwill is identified and measured in a different way

under Ind AS 103 compared to AS 14. Under Ind AS 103, the goodwill of Rs. 100 crores as per first option and Rs.70 crores as per 2nd option is not amortised but tested for impairment on annual basis in accordance with Ind AS 36 ü

If less than 100% of the equity interests of another

entity are acquired in a business combination, non- controlling interest is recognised. (In the above example it is 30%) IFIM International Journal of Management | FOCUS October 2014 - March 2015

95

FOCUS Research Papers Also there is a choice in each business combination to

to make sure that everything is arithmetically correct and no

measure non-controlling interest The following figure shows

mistakes are made in measurement of differentelements as

ü

the effect of using two different options for measuring NCI.

bargain purchase does not arise normally and IND AS 103 requires that the reassessment is done to make sure that no

Option 1 : NCI measured at fair value Goodwill Total charge for goodwill impairment Option 2: NCI measured at proportionate share of net identifiable assets Goodwill Total charge for goodwill impairment

ü

mistakes are made.

The following explanation with case study will clear the treatment of bargain purchase

CASE STUDY 3 (Based on acquisition at one go and resulting in bargain purchase) ·

A pays Rs. 3000 crs to purchase 80% of the shares of B.

·

Fair value of 100% of B's identifiable net assets is Rs.

It is clear from the above figure that if NCIs measured at

4000 crs.

fair value, goodwill and its impairment will be valued higher and if NCI is measured by proportionate share method it shows a downward trend ü

·

Fair value of the non-controlling interest is Rs.1000 crs

Table 3: Treatment of Bargain Purchase

The general measurement principle in the acquisition accounting is fair value

ü

Also, previously held interests are measured at fair value

Bargain purchase (paragraph 36 of IND AS 103) Bargain purchase occurs if the fair value of the identifiable net assets of the acquiree exceeds the aggregate ü

of the consideration transferred

ü

the non-controlling interests and

ü

the fair value of any previously held equity interest.

Gain on bargain purchase or simply bargain purchase may arise because of: ·

Forced sale

·

Recognition or measurement exceptions for particular

items discussed under IFRS 3 ·

Error in the valuation of identifiable assets, non-

controlling interest and/or equity interest.

Conditions to be fulfilled In case if bargain purchase arises, then before this gain is recognized the acquirer must review the calculations

Major carve out of Ind AS 103 Business Combinations from IFRS 3 Carve out: Treatment of bargain purchase As per Ind As 103 Gain on bargain purchase of Rs.200 crores in option 2 is recognised in Other comprehensive income (OCI) and accumulated in equity as capital reserve ü

As per IFRS 3 it is recognized in the profit and loss at

the acquisition date in the books of acquirer.

It is pertinent to note that Ministry of Corporate Affairs has carved out the treatment of bargain purchase, while converging Indian Standards towards IFRS 3. It will create a GAAP difference in which Converged Indian AS 103 will recognise the

96 IFIM International Journal of Management | FOCUS October 2014 - March 2015

bargain purchase in other comprehensive income (OCI) and

ü

Even though IND AS 101 provides exemptions

accumulated in equity as capital reserve if there is a clear evidence

regarding retrospective application of IND AS 103 for the first

of the underlying reason for classification of the business

time adopter, the standard will pose many challenges for the

combination as a bargain purchase; otherwise, the resulting gain

Chartered Accountants.

is recognised directly in equity as capital reserve.

Reasons for such treatment of bargain purchase in IND AS 103 IND AS 103 recognises it in OCI or as capital reserve because recognition of such gains in profit or loss would result into recognition of unrealised gains as the value of net assets is determined on the basis of fair value of net assets acquired. ü

H i g h l i g h t s o f I N DA S 10 3 B U S I N E S S

COMBINATION The following apparent conclusions can be made from the above converged standard Ind AS 103: ü

Ind As 103 requires expensing of acquisition-related

costs whereas the existing practice in India is to capitalize such expenses as cost of investment. ü

Performance-related consideration paid to the

ü

Also IND AS 103 is associated to the measurement of

many other standards like Ind AS 37, 39, 19 individually so, the understanding and applicability in India will require lots of deliberation which need to be weighed in view of facts and circumstances.

17 ü

It adopts a “business fair value” measurement approach

as opposed to the traditional “cost-based” profits under the converged standard.The concept of fair value is debatable and its implementation will question the financial statements results.

Lastly, Indian companies are listed on overseas stock exchanges and have to recast their accounts to be compliant with GAAP requirements of those countries. Foreign companies having subsidiaries in India, are having to recast their accounts to meet

acquiree, known as contingent consideration, is accounted at fair

Indian & overseas reporting requirements which are different.

value under Ind AS 103, with subsequent changes included in the

Also, Foreign Investors will be attracted to economies where IFRS

profit and loss (P&L) account.

compliant financial statements are the norms. So the robust change of converged IND AS which are in line with IFRS is

ü

Ind AS 103 will require disclosure of information to

probably the most complicated issue for the current Indian

assist the users of the financial statements with the understanding

accounting scenario but necessary for the authentic financial

of the nature and financial effect of a business combination

reporting worldwide.

References: 1.

IFRS Convergence in India: Some Progress on Implementation. (2011, March 5).Economic Times, Opinion. Retrieved from http://economictimes.Indiatimes.com/opinion/policy/ifrs-convergence-inIndia-some-progress-on-implementation/articleshow/7631924.cms

2.

Bhattacharyya, A. (2010, February 8). IFRS: transition date will be April 1, 2011. Retrieved from http://www.business-standard.com/India/news/ifrs-transition

3.

http://www.mca.gov.in/Ministry/press/press/press_release_04May2010_06may2010.pdf

date-will-be-april-1-2011/384940/ 4.

Bhattacharyya, A. (2011, July 11). India moves towards IFRS convergence. Retrieved from www.business-standard.com › Home › Economy & Policy

5.

Concept paper on convergence. Retrieved from www.icai.org/resource_file/12436announ1186.pdf

6.

Ind AS-103. http://www.icai.org/post.html?post_id=7543. Retrieved from http://220.227.161.86/23704IndAS-16.pdf

7

Mergers and Acquisitions. Retrieved from http://macabacus.com/accounting/noncontrolling-

8.

statements.h

interesthttp://www.livemint.com/Opinion/CegExu9wCgfqYmpH4dArFO/How-IFRS-will-impact-financial-

IFIM International Journal of Management | FOCUS October 2014 - March 2015

97

FOCUS Case Study

Shoe Polish Dr. Pankaj Jain* Mr. Saura Panigrahi, a post graduate in mass communication,

Prof. (Dr.) V. S. Dahima**

kind of shoes in the market. Fifteen years ago, leather shoes were

has been working as Creative Director of a New Delhi based ad

important parts of a person's attire. But today, there are a lot

agency – Cocoon Ideas. He is contemplating about the ad

more variety available. Apart from the formals, customers have

campaign for wax polish account of Shoe Care Ltd who primarily

evening suedes, nubuck, trekking shoes, sports shoes etc. Indian

operates in Northern India. Its shoe polish brand “Easy Care” is

domestic footwear market is worth around Rs. 15,000 crore and

giving a tough time to him as the advertising campaigns had

has witnessed a growth of 8.8% over the last couple of years.

bring no significant changes in the sales in last five years. For

Men's footwear constitutes almost 50% of the total market,

past five years he has been observing the almost stagnant sales of

whereas women's shoes accounts for around 40% and kids

Easy Care. He knows that a new entrant would find it difficult to

footwear for the remaining. Shoes wearing habits were largely

create brand preference. A company wanting to launch a new

confined to metros and towns in Northern India. In the rural

brand must do a good marketing exercise for at least three years to

areas of the north, shoes were worn generally in the winter. The

create brand preference. Now he has been entrusted for more

domestic market is substantially price driven (See Exhibit1 and

than five years but could not deliver the results. He is worried

Exhibit 2), with branded footwear constituting less than 42

about the flattened sales curve of the brand which may result in

percent of the total market size. While the average spend on the

the loss of the account of Shoe Care Ltd. He knows that

footwear by urban consumers is Rs 240/annum, consumers in

consumers have positive attitude towards wearing polished shoes

rural areas spend just about Rs 100/annum. Despite all this shoe

but their attitude towards polishing shoes was a big concern. He

polish remained a relevant product, since those who wore leather

strongly believes that sales can be increased by improving the

shoes did need to polish them.

attitude towards polishing shoes. But how is he to achieve that?

Industry Background

Consumer Research Panigrahi knew that shoe polish is not very frequently

The shoe polish industry in India is a small industry worth

purchased product and consumer involvement is very low for

around Rs. 110 Crore. It is largely concentrated in Urban India

this category. To gain further consumer insights Panigrahi

contributing around 70% of total sales. Though wax polish

decided to do some research. He went to his friend, Mr. Somnath

constitutes the major share (around 70%) but it is on decline as

Vyas who specialize in consumer research, for help. Vyas agreed

liquid polish picking up sales because of the benefit of

to help him out and together they planned to conduct a quick

convenience it offers to customers. The stagnation in shoe polish

focus group interview. They called up seven participants - two

industry was a global phenomenon. In India, although the

summer training interns pursuing MBA – Deepak Kumar and

category is slow moving, its insensitivity to price allows

Vivek Singh; a male sales executive in late 20s – Paresh Mishra; a

manufactures to tide along profitably. While a small five paisa

branch manager of a bank - Nitin Bansal; An entrepreneur in

increase in the bread price impacted every user immediately, any

Shoe Manufacturing – Dev Shetty; a university professor –

hike in the price of shoe polish goes unnoticed. The

Bhawna Sharma; and a house wife - Samreen Abidi.

manufactures know very well that they are operating in an inelastic price zone and that they can increase the price at will.

That's how they have survived so far.

During the focus group interview, Deepak Kumar commented on enquiring about the usage of shoe polish, “my tin of wax generally lasts around six months to one year as I polish my shoes

Leather shoe and shoe polish are complementary products. As

3 to 4 times a month.” Don't you need to polish your shoe every

leather shoe industry is facing tough competition from other

day?” inquired Vyas. “I do use duster everyday” He replied

*Assistant Professor, Amity Business School, Amity University Rajasthan 98 IFIM International Journal of Management | FOCUS October 2014 - March 2015

**Director – Amity Business School, Amity University Rajasthan

FOCUS Case Study promptly. Paresh Mishra responded to this “I used to polish my

to the research findings. Though research shows positive attitude

shoes every night. Then in the morning I'd take a bus up to the

towards polishing shoes yet the use of show polish is far from

railway station, take a train, have four dozen people stepping on

being a daily routine. However, if a person has a forewarning that

my shoes and by the time I reached my client's office, my shoes

he will come under scrutiny, like during an interview for a job, or

looked like rubbish. So I just gave up polishing.” Dev supported

at a meeting with an international boss, he will certainly polish

this by saying, “Moreover polishing shoe is drudgery. You sit on

his shoes,” said Vivek.

the floor, and then you get a rag, the brush, the tin… A man who drives a fancy car, lives in a well appointed house and wears designer labels will not want to sit on the floor and polish his shoes.” He further added, “People did not even want to bend down to tie their laces so we had to made pump shoes,”

“Yeah…. I remembered those school days where the discipline at the morning assembly was enough to force me into a habit of polishing shoes. But after that college began and, all those pressures were gone. Then one day I was 23 and looking for a job.

Life returned with demands on me to polish my shoes. I was

Panigrahi agreed to this, because that was just why Shoe Care

attending interviews and meeting with people. The mere act of

Ltd. and other manufactures of shoe polishes had come up with

polishing used to remind me of the drudgery of schools days.

the instant shine and liquid wax polish. Observing the

Today my job requires intensive travelling so I use liquid polish or

discussion, Panigrahi thought the real challenge before him was

shoe shiner for quick shine, whenever I have meetings with my

to make the market grow by making people polish their shoes

client. I really like the idea of “handy shine” through a sponge

more often. If the frequency of shoe polishing could be increased

with impregnated silica gel. I need to just dust my shoes and

from once in 12 days to once in seven days, Shoe Care Ltd. could

apply the sponge”, Paresh said.

achieve an 80% jump in sales. One way of doing this was to mount social pressure on existing consumer and use an appropriate communication strategy to convert the users of competitive products. He further focused on the discussion.

“But silica gel evaporated very fast and the shine disappeared with an hour or two. Therefore, the shoe had to be sponged four to five times a day. That is hardly convenient and so this “handy shine” failed to click in the market. Moreover other products that

“I think polishing shoes daily is necessary, both for

offer convenience are not good for shoes like low wax content of

care and as part of overall grooming. Ask a person how he would

liquid polishes does not nourish the lather and the topping the

judge someone on grooming and many would say “by his shoes”.

shine with lacquer is damaging for the shoe. Like anybody who

That's because if a person puts in that kind of effort on his shoes,

invests couple of thousands rupees on shoes, I also want more

it shows that he cares to that level of detail” said Bhawna – a

than just handy shine. I am really concerned with shoe care and

university professor. “Then why many people do not polish their

when it comes to shoe care there is no getting away from the wax

shoes? That's something I just can't understand!” inquired Vyas.

polish and rag routine.” said Nitin.

“One reason could be that shoes figure last in the dressing

Well….we would all agree that when it comes to delivering total

routine. Shoes are worn at the end of your body which is least

shoe care, there is no replacing the dibbi or the tin of polish.

visible or which you have traditionally least cared for. Therefore,

Everything else is only an attempt to give people handles along

it tends to be the most neglected,” Bhawna reasoned. At this

one or two of the attributes while sacrificing the others. And

point, Samreen who was sitting quietly intervened, “but polished

while the liquid polish had found some acceptance and even

shoes do evoke certain desirable responses. You would all agree

usage, the dibbi or tin is still preferable for those looking for total

that polishing shoes is a good habit. When I see my son polishing

shoe care. And despite the fact that polishing shoes is considered

his shoes, I feel reassured that he is forming good habits. I would

good habit and wearing polished shoes generates positive feeling,

say that it is the ultimate indicator of good habits – discipline.”

it is an irony that people buy a shoe polish tin once in six months

Bhawna supported, “yes…research had proved that a person who

or a year. Sometime they don't even know when the polish has

polishes his shoes felt happy, confident, encouraged and

finished.

cheerful. On the other hand, a person who didn't polish his shoes felt defensive, guilty and withered.”

The whole discussion revolved around these issues for some time.

“But the response of the wax polish market is totally paradoxical

IFIM International Journal of Management | FOCUS October 2014 - March 2015

99

Discussion on Message Strategy After the focus group discussion, Panigrahi and Vyas decided to discuss the message strategy. Panigrahi told Vyas that for last five years he has tried on the opportunities that a well polished shoe offers. But it seems just not enough to convert consumer habits. He also told him that this time he is thinking trying the guilt route like showing a man caught unawares on a public place or social gathering with unpolished shoes….. “That moment of discovery, when a man finds his shoes are unpolished, would be the highlight of that ad” exclaimed Panigrahi.

“You need to look at the urban and rural markets differently.

While the liquid polish is more an urban product, it is in small tin that is relevant to the rural market. That is exactly how the shampoo sachets cracked open the market, got people to use the product and served as a bridging pack to get people into the mainstream purchasing habit”, said Vyas.

“I am not sure if the strategy would work. I think instead of being able to pioneer a change in the consumer attitudes, the shoe care industry had become a victim of people's habits. Consumers spend their lives falling between stools getting their shoes polished at the railway station, or outside the office by a shoe shine boy. And sometimes they simply run a cloth over their shoes.

The industry has not been able to pull people back to a

Exhibit 1

Exhibit 2

100 IFIM International Journal of Management | FOCUS October 2014 - March 2015

regimented shoe care habit by giving them strong enough propositions. That's despite the fact that they had so many emotions to play on competence, guilt, encouragement, good grooming…even some advertisements have tried the usually successful sex appeal”, said Panigrahi. He further added, “Moreover since the category is inherently slow moving, any new communication strategy had to run consistently for a long period of time for it to pay off. And I am afraid of losing the Shoe Care Ltd. account if I did not produce results by the end of three, or maximum six months.” If sales do not go up within this time period, I will surely lose this account,” “Your ad campaign need not trigger off an immediate purchase.

For this product, purchase is on the basis of need. No one even gets excited for trial or discount deals. Trials are painfully slow in this category. Trials in a Coke or a Kit Kat can enable a market penetration of 60% within two months. But in shoe polish, to penetrate 60% of the market you would take much longer period”, commented Vyas.

By this time, Panigrahi were clear on two major challenges faced by the shoe polish market. Firstly, there was a general lack of interest in polishing among consumers. Secondly, convenience polishes did not offer total shoe care. He was sure that consumption had to be increased by improving the attitude to polishing. But how is he going to achieve that?

In FOCUS Interview

A selfmade marketing professional Mr. Ramachandran R.V

Profile Study of Mr. Ramachandran R.V Headâ&#x20AC;&#x201C;Marketing, Communications & Customer Care, Tyco India Interviewer Dr. Hari Krishna Maram IFIM International Journal of Management | FOCUS October 2014 - March 2015

101

In FOCUS Interview

What is your experience with Tyco India as Head Marketing, Communications and Customer Care?

It has been a great learning journey for me in Tyco. My present assignment gives me a 360 degree preview of marketing and has immensely helped me moving towards becoming a complete marketing professional. The experience& exposure I have gained here helps me understand the industrial and commercial B2B industry space and industrial marketing in depth like customer decision making, Tender processes, key players in decision making and how to ensure your brand reaches the key personnel / target group. Security is a very sensitive subject and one needs to be very thoughtful when you place details in advertisements or marketing materials. One important thing I learnt over the years in my marketing career is to be very strong in fundamentals and ensure you personally check the details. The marketing essentials always remain the same, but the tone, tenor and pace differs from industry to industry.

How your past marketing experience in other organisations helped you to understand the need of your current role, and bring in the results quickly?

I have been fortunate to work across industry segments. Starting my career in pharma industry way back in 1997 with Novartis and later moved to a startup marketing Food Grade Plastic containers â&#x20AC;&#x201C; Rubbermaid, even before food grade plastics were fashionable or norm, before progressing to Godrej with Real Good Chicken brand. All of my initial organisations helped me enormously as I learnt the market both urban and rural, understood about consumer behavior across industries and helped me as I moved ahead in my career. Pharma industry exposed me to various selling techniques both direct & indirect. It gave me insights in to a salesman's mind when he meets his customer. I also learnt the role of distribution channel (both urban and rural) in marketing. To succeed in FMCG marketing you will have to be quick and think on your feet. You need to be on your toes to exploit every opportunity to showcase your product/brandto the consumer. It taught me the importance of placement and positioning both in ATL and BTL segments, especially shop floor. I was able to enhance my knowledge of shopper preferences and choices. As a marketer of food products I learnt about the tastes and preferences of the Indian consumer and how customers make their choices. My assignment with Sony was all about the brand and how technology plays a very important role in getting a market premium especially in a fiercely competitive consumer durable industry. I had a great team to work with and wonderful leaders who not only guided us but opened us to newer aspects of enhancing our work efficiency. I was guided in my present assignment more from my earlier relationships be it marketing collaterals, PR, setting up customer care etc. Being Industry connected helped me bring quick results in getting market coverage, helping set up quick events and facilitating projection as â&#x20AC;&#x153;Thought leadersâ&#x20AC;? by bring

102 IFIM International Journal of Management | FOCUS October 2014 - March 2015

technology and global profile to the Indian market space. Getting to the consumer be it any industry is very important and maintaining the customer connect is a very important aspect of how I enhance efficiency of our works.

What were the challenges and opportunities in a new industry as you changed organisations?

When you change organisations, the fundamental challenge is to understand the organisation's philosophy, vision and markets they operate. Then comes the product and market dynamics i.e.

1) In depth understanding of the products & brands belonging to new organisation 2) Customer perceptions about the brand and its products 3) Key stakeholders in the decision making process 4) Building a top-notch team of business partners who would provide support in all marketing activities The key opportunitiesI have had are 1) Setting up customer tough points to enhancing Customer experiences 2) Bringing in International standards in marketing project execution 3) Bringing down costs and enhancing efficiency 4) helping expanding the geographical presence 5) helping build a great team of partners who are willing to go an extra mile to ensure your team is successful under any conditions

What is the role of your family in your career growth?

Family support and guidance plays a very important role in your career growth. In my formative years I had the opportunity to interact with world class leaders thanks to my family's pharma background. I was fortunate to interact with people who were always ready to guide and help me become a better individual, wanted me to set higher goals and work towards it. Without family support and guidance from my father I would not have made it this far. I started my career in pharma thanks to my father's guidance and later moved up the ladder thanks to his constructive criticism and inputs on how I can do better. When I started my career, he had asked me to look at a few leaders and be inspired by their growth story and how they have made it big in corporate world. I learnt a lot from my Father, the most important being hard work and honesty that goes a long way in establishing you as an Individual and builds your brand.

IFIM International Journal of Management | FOCUS October 2014 - March 2015

103

How different is to operate in India in comparison with rest of the world?

In my view, marketing or sales in India and rest of the world is no different. The audience is different but the strategy remains the same. The end goal is making the name on the top of the mind of the customers. Having said that there are a few priority items when one looks at the Indian market. India as a market truly defines â&#x20AC;&#x153;Unity in Diversityâ&#x20AC;?. India is a land of ample opportunities and you have to be careful to choose what you want and work towards that with confidence. You can be easily distracted by the enormous opportunities you have in this country and spread thin and be a part of each or be a leader in your chosen industry and make a mark. The market is a varied mix of different cultures, tastes, preferences and aspirations. One needs to be extremely sensitive to the local influences when we design a marketing campaign for Indian markets. You need to be sure you cater to the local tastes and are able to ensure you communication reaches them in the manner required to ensure your objective is met.

Each market has to be treated individually within your overall brand ambit and care to be taken to ensure communication is customised accordingly. Technology is developing fast and you can reach out to customers across any spectrum in quick time.

We are learning from our global counter parts all the time on enhancing efficiency, bringing in global quality and adopting to latest processes.

How you are able to continuously monitor and assess the ever changing customers' needs and satisfy them to achieve sustainable growth?

Customer's needs changes with changing times and the situation they are in. Proactive customer engagement and interactions help us getting key insights into their requirements and aspirations. Customer feedbacks, channel feedbacks and sales teams' inputs have to be viewed seriously and understood within the given framework and responded to at the earliest possible avenue. By being in constant touch with your Sales staff and channel partners, By keeping your eyes and ears open to the competition and being present in forums/events relevant to the Industryyou can monitor the market and customer needs continuously. With changing technology, you have a plethora of ways to stay in touch with the customer without being intrusive.

What are your major accomplishments in your corporate career?

With hands on experience in various industries, I am sure; I am able to make a mark in all the responsibilities I have taken in my career. Be it Pharma, FMCG, Lifestyle Electronics and now B2B marketing, I have given my best and able to meet the organisational objectives. I had the wonderful opportunity to build teams, develop marketing organisations and build careers for my team members. Some highlights

104 IFIM International Journal of Management | FOCUS October 2014 - March 2015

include being part of the brand team awarded the outstanding brand award in Godrej, led the team to Outstanding Team award in Sony and being awarded the â&#x20AC;&#x153;Outstanding Support & Development awardâ&#x20AC;? for two consecutive years for my contribution to marketing, brand building and sales support in Tyco. The best accomplishment is to see your team members grow up and lead other teams in their chosen organisations.

What is your view on CSR activities?

It is a very important part of the corporate life. You have an organised way of giving back to the society in which you are living and helping in community development. In India still the same is not very prevalent in an organised way, but the new initiative of the government of India will help it in a big way.

What is your advise to MBA students?

To succeed in marketing today you will have to learn to adapt to changes quickly.

Change is happening around you every day. Your ability to drive the change and deliver better customer experiences will take you a long way up the corporate ladder. Also be a good collaborator, expand your skill sets continuously,and look for innovative solutions. Always be a good student, learn from your surroundings and bring the learning on board with your knowledge and objective, it will guide you in your way ahead.

MBA is a challenge. On completion of your MBA, you will become the face of your organisation in the market place. Selling and marketing gives you more satisfaction as you will be dealing with a brand or service. Your success is the success of the brand in the market place.

What is your advise to B-Schools?

The great books in the library help us develop a good foundation, but by developing a curriculum that is contemporary, relevant to todays and foreseeable future industry's needs will help students develop their knowledge accordingly It is important to enhance industry interaction and update students on their expectation from Industry and vice versa. Inculcate more of case studies rather than regular studies. Case Studies will make students understand the market dynamics and they will understand the competitive ness in the market place.

Interviewer Dr. Hari Krishna Maram, Director- PR, IFIM Business School, #8P & 9p, KIADB Industrial Area, Electronics City 1st Phase, Bangalore-560100, Karnataka, India.

Email: drmaram@ifimbschool.com, Phone:- 080-41432871, Mob: 9845382308 IFIM International Journal of Management | FOCUS October 2014 - March 2015

105

In FOCUS Book Review

JUGAAD INNOVATION

Think Frugal, Be Flexible, Generate Breakthrough Growth

Navi Radjou, Jaideep Prabhu, Simone Ahuja Publisher: Random House India, 2012 ISBN-13: 9788184002058

“Jugaad”….the word is often used by Indian in many situations. Some time it is used and appreciated as a positive solution in troublesome situation where as it is also used to refer improper way for getting things done such as bribing and yes….there also exists a vehicle with the name Jugaad where an engine is fixed on to a cart to create an affordable motorized transport.

However, in this book written by Navi Radjou, Jaideep Prabhu & Simone Ahuja, the word Jugaad is used all in positive way. Authors define the word Jugaad as "gutsy art of improvising an ingenious solution." The three co-authors, Navi Radjou, Jaideep Prabhu and Simone Ahuja have diverse backgrounds in innovation, leadership and strategy consulting and two teach business at University of Cambridge. Unlike most other books on Innovation, which more or less revolves around business process re-engineering, this book for sure has a different perspective for Innovation.

106 IFIM International Journal of Management | FOCUS October 2014 - March 2015

Think Frugal, Be Flexible, Generate Breakthrough Growth

JUGAAD INNOVATION

The book challenges the status quo of traditional way of systematic innovation as practiced in organizations. The authors argue the need of the time is a frugal and flexible approach to innovation rather spending mindlessly on R&D to succeed in hypercompetitive market places. They criticize the tradition innovation process labeling it as “industrialized”, “standardized”, “homogenized”, “expensive”, “insular”, “resource-consuming” and “elitist”.

They claim that Jugaad Innovation is the most fitting reply to the five realisms i.e. scarcity, diversity, inter-connectivity, velocity, and breakneck globalization which business leader across the world are facing today.

They strongly advocate in favor of Jugaad Innovation citing multiple case studies from India, China, Brazil, Kenya and a whole lot of other places, focusing on six principle of Jugaad Innovation. These are i. ii. iii. iv. v. vi.

Seek opportunity in adversity Do more with less Think and act flexibly Keep it simple Include the margin Follow your heart

To show the applicability of these principles the book has featured many cases from SMEs to fortune 500 companies. There are examples from Renault – Nissan, Facebook, Siemens, Google, Philips, 3M, Apple, Yes Bank, Nokia, P&G and Tata Nano among many others as practitioners of Jugaad Innovation.

The book is forwarded by Kevin Roberts, CEO of Saatchi & Saatchi. First chapter is devoted to the need and glorifying Jugaad Innovation. Thereafter each of the six principles of Innovation has been demystified in six different chapters. Each chapter opens up with a real world example of the principle in operation with descriptions of elements of the principle.

Further authors have also prescribed Do's and Don'ts of Jugaad Innovation emphasizing that it can't be done in a systematic top down fashion. Multiple solutions are proposed on how to implement the Jugaad principle and a successful Western implementation is featured with a conclusion.

As nothing is perfect, this book also has certain limitations. First, Some opinions and assumptions are presented as facts such as “people in general are worse off than they were in the prior decades”. In this way, there are other claims with which avid readers may not agree.

Second, as this book has been contributed by many authors, the writing style is different in different chapters. Some chapters have been written in 3rd person and others in 2nd person.

Third, many readers would find that inferences from certain cases are either “notconvincing” or “not-apt”. Fourth, if while reading this review, you find the word “Jugaad” being overused, for sure, while reading book, this word would irritate you. Fifth and the last, if you consider a new book as innovation, composing and marketing of this book for sure doesn't represent “Jugaad Innovation” rather traditional way of innovation.

Despite all these limitations, this book offers a different perspective for innovation and worth reading once by those who are responsible for managing and fostering innovation.

Dr. Pankaj Jain Assistant Professor – Amity Business School Amity University Rajasthan

IFIM International Journal of Management | FOCUS October 2014 - March 2015

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Articles in Journals: Beardsley, T, 1995, 'For Whom the Bell Curve Really Tolls', Scientific American, Vol 272, No 1, Jan, pp 14-17

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IFIM International Journal of Management | FOCUS October 2014 - March 2015

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RNI No. MAG/(2) CR/PRB/102/02/05-06KARENG/03083/10/1/04-TCEXCEPT/CO/NO-7&8

IFIM Business School, Bangalore was founded in 1995 with its first batch of students graduating in 1997. It is an AICTE approved institution which today finds its place among the Top 20 from amongst the 500+ Business Schools that were started post 1990 in the private sector. Today students from across the country have come to IFIM to go on to graduate as one of the fine managers at corporate India.

IFIM Business School offers 4 distinct PGDM programs: 1. Two year full time Post Graduate Diploma in Management (PGDM) program 2. Two year full time Post Graduate Diploma in Management- Finance program 3. Two year full time Post Graduate Diploma in Management- International Business program 4. Two year full time Post Graduate Diploma in Management (PGDM) program for working professionals IFIM Business School has acquired a unique â&#x20AC;&#x2DC;institutional equityâ&#x20AC;&#x2122; with all its incumbent attributes: excellent Curriculum and Faculty inputs, Infrastructure, Industry Internship Program, Academia-Industry interface and Placements. IFIM Business School is persistent in its endeavour to be the best and therefore has taken many bold and progressive initiatives to include collaboration with leading academic, research and corporate bodies for conducting Continuing Education programs, Research, Corporate Training, Consultancy and offering a Ph. D program in Management.

IFIM Business School has achieved a unique distinction. It has probably become the first management institute in the country to make sports and wellness a compulsory activity for its students. A certified fitness trainer monitors the progress of the students. This is supported with a Centre for personality development which works in the holistic development of the students. Overall, IFIM provides a three pronged platform for its students to excel. The two year full time Post Graduate Diploma in Management (PGDM) program for working professionals being offered by IFIM is a unique program. This allows the working professional to continue with their respective jobs whilst they study for a full time PGDM degree at IFIM Business School. The program is designed to accommodate the job environment of the professional. The program is designed in a manner in which the working professional can aim to move up the echelons of management.

The Centre for Developmental Education, under the aegis of which IFIM Business School operates, has a new memberIFIM College. IFIM College was started in year 2010 and is successfully imparting graduate programs in the areas of Commerce, Management and Computer Applications. These programs are approved by the Bangalore University.

IFIM Campus is located in the IT hub of Bangalore- Electronics City. With an environment-friendly campus situated among the top blue chip companies, IFIM has made a steady progress. The placement record of the college has been very impressive and the students have carved a niche for themselves in the corporate world. The B-School has a strong alumni network and the illustrious alumni look up to their alma mater for the sound management foundation they have received.

IFIM Business School

An ISO accredited Institution #8P & 9P, KIADB Industrial Area, Electronics City 1st Phase, Bangalore-560 100 Tel: 91-80-41432888 41102820/ 21/ 22/ 23 Direct: 41432825 Fax: 91-80-41432844 www.ifimbschool.com

Published by Dr. R. Satish Kumar on behalf of Institute of Finance and International Management, No-8 (P) & 9 (P),KIADB Industrial Area,Ist Phase, Electronics City, Bangalore - 560100.