Samvid 2.0 June 2013 by Nilotpal Ray

STUDENTS’ MANAGEMENT JOURNAL

VOLUME 2 | ISSUE 1 | JUNE 2013

RESEARCH PAPERS Relationship between Work-Family Balance, Role Ambiguity, Autonomy & Job Stress and its Impact on Employee Performance in Indian IT Context Musheer Ahmad, Vivian Emmanuel, Niharika Jain, Vikrant Chaplot, XLRI Jamshedpur Corporate Hedging Strategies: Evaluating the Case for India Kanika Ghocha, Vaatsal Tandon, Amritha Krishnan, SPJIMR Mumbai Enhancing Post-purchase and Product Return Experience of Customer from Online Apparel Retailers Arun Narayanan, Biswarup Saha, Chandra Shekhar Satpathy, IIM Kozhikode

CASE STUDIES Wrigley's Acquisition of Joyco: A 'Gum'ptious Move? Kamalika Gangoly, Amritha Mohanty, Anubhuti Gupta, IIM Kozhikode Sanitary Napkin in Rural India: Test of Sustainability Victoria D'souza, Kedar Kulkarni, Hanish Dhume, SPJIMR Mumbai

LEADERS SPEAK Mr. Ramraj Pai, President (Ratings), CRISIL Limited Mr. Rajiv Kumar, Global Head, HR, TCS Financial Solutions On life, leadership and the way forward…

Our Inspiration

“The essential spring of all growth is within you. All that you can get from without is some food - material or spiritual - with which to build your own organism, and some stimulus to spur you to activity. What is really essential in your development, you must do for yourself.” - Alfred North Whitehead

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Samvid An initiative of the Research & Publications Committee, SPJIMR

AIM & SCOPE

Aim & Scope

ABOUT Samvid is the in-house student driven management journal of S.P. Jain Institute of Management and Research (SPJIMR), Mumbai, aimed at disseminating relevant and contemporary management thinking. The journal aims to serve students, academicians and practitioners with a blend of opinion and research aimed at adding to the body of management knowledge and influencing practice. Samvid is edited by a board of students from SPJIMR based on an independent and blindfold review process under an esteemed review panel comprising of national and international faculty. VISION To promote student driven research and influence practices in the body of management knowledge. MISSION To act as a platform for relevant, topical and insightful research, opinion and features on management practices with a view to encourage a healthy debate in academia and among businesses.

REVIEW PANEL ! Dr. Rodolfo Helg, Full Professor, L'UniversitĂ Carlo Cattaneo, Italy. ! Dr. Anindya Sen, Dean (Academic), IIM, Calcutta, India. ! Dr. Stephen Murdoch, Associate Dean, International, IESEG School of Management, France. ! Prof. Suraj Commuri, Associate Professor, School of Business, University of Albany, USA. ! Prof. Dr. N R Prabhala, University of Maryland, College Park; USA. ! Dr. R. Sesha Iyer, Director, S.P. Jain Institute of Management & Research, India.

FACULTY ADVISORY BOARD ! Dr. Debasis Mallik ! Prof. Jiban Mukhopadhyay ! Dr. K. G. Karmakar ! Dr. Sajeev George ! Prof. Vasant Sivaraman ! Dr. Uma Narain

EDITORIAL TEAM Chief Editor ! Nilotpal Ray Editors ! Chandan Agarwal ! Chhanda Barman ! Chitra Chatterjee ! Prashant Srivastava ! Prathyusha Sistu

ADMINISTRATIVE TEAM ! Maneesh Tiwari ! Neha Bhalla ! Nirmal Thangaiya R ! Tanya Sharma CREATIVE TEAM ! Hansa Narula ! Sampada Satam

DISCLAIMER All data reported herein are solely representative of the research work done by the authors. Opinions and perspectives expressed may not represent the views of the editorial board of Samvid or of SPJIMR.

t gives me great pleasure and honour to present to you the second edition of Samvid (Samvid 2.0), the student driven management journal of S.P. Jain Institute of Management & Research (SPJIMR), Mumbai. SPJIMR, founded in 1981 on the twin pillars of 'influencing practice' and 'promoting value based growth', has grown to be one of the premier B-Schools of India. Student driven management research is one of the most important components of the institute's function and pedagogy and a natural extension of its motto of influencing practice. The journal aims to be a compendium of contemporary management thinking among the students of the country by showcasing them through an eclectic mix of research papers, case studies, articles and book reviews. The rich quality of entries published in this issue of Samvid is indicative of the diversity of thought leadership among the student fraternity of India in the discipline of business management.

Indian confectionary industry in the early 2000's. The case ctudy: 'Sanitary napkin in rural India: A test of sustainability' by Victoria D'souza, Kedar Kulkarni et al., describes in detail how UNICEF and an NGO named 'Sacred' worked for the improvement in rural livelihood by addressing menstrual hygiene management in villages of Jalna district, Maharashtra. Finally the case study: 'Change management: Building blocks of e-Governance in rural India' by Rajas Abhyankar, Niranjan Sane et al., studies the importance of an integrated data collection and reporting system for a better e-governance module in the Indian rural context. In the 'Articulate' section, Aditya Mathur's article speaks about the possibilities of reviving the Brazilian economy through the 2014 Brazil FIFA World Cup and 2016 Rio Olympics. Nikhil Kuchroo talks about success of 'Comic-Con Mumbai 2012' by implementation of integrated marketing communication strategies. The article on financial inclusion by Mohit Saini and Nitin Malik explores the possibilities of mobile technology to cater to the same. The 'Book Review' section finds Lipta Mahapatra reviewing the book 'The Difficulty of Being Good' by Gurcharan Das and Rekha Rane reviewing the book 'Contemporary Banking in India' by Naina Lal Kidwai.

The paper on 'Relationship between work-family balance, role ambiguity, autonomy and job stress and its impact on employee performance in Indian IT context' by Musheer Ahmad, Vivian Emmanuel et al.,studies the interrelations of the factors through mediation analysis. The paper on 'Corporate hedging strategies: Evaluating the case for India' by Kanika Gocha, Vaatsal Tandon et al., throws light on the various corporate hedging strategies in the Indian Financial Sector and tries to analyze its role in risk mitigation and sustainability. The paper on 'Enhancing post-purchase and product return experience of customer from online apparel retailers' by Arun Narayanan, Biswarup Saha et al., focuses on 'after sales service' as a strategy of pull marketing in the Indian retail industry.

I look forward to your feedback and suggestions. Happy Reading !

The case study: 'Wrigley's acquisition of Joyco: A 'gum'ptious move?' by Kamalika Gangoly, Amritha Mohanty et al., talks about the historic acquisition of Joyco by Wrigleys' in the wake of consolidation of the

Nilotpal Ray

In the 'Leaders Speak' section, we were honoured to have Mr. Ramraj Pai (President, Ratings; CRISIL Limited) and Mr. Rajiv Kumar (Global HR Head, TCS Financial Solutions) expressing their views on Leadership. The 'Featuresâ&#x20AC;&#x2122; section on corporate governance sponsored by NFCG (National Foundation for Corporate Governance) presents an essay by Shweta Shankar on whistleblower policy.

Chief Editor: Samvid 2.0

EDITORIAL

Editorial

ACKNOWLEDGEMENT

Acknowledgement

We express our sincere gratitude to the Faculty Advisory Board of S.P. Jain Institute of Management & Research (SPJIMR), Mumbai for their guidance and support for Samvid 2.0. Our special thanks to:

Dr. M. L. Shrikant, Dean, SPJIMR, for always being an inspiration to us and for his guidance and support in our endeavour to take Samvid 2.0 global.

Prof. Vasant Sivaraman for guiding us in the process of critically editing all the entries and take the Journal to a new level.

Dr. R. Sesha Iyer, Director, SPJIMR, for his guidance and mentorship with his rich knowledge base and experience in the field of Management Research.

Dr. K. G. Karmakar for sharing his rich knowledge and expertise which helped us to improve upon the content of the Journal.

Dr. Uma Narain for her guidance and constant support for 'Samvid' right from its inception.

Dr. Sajeev Abharam George for his classical views and suggestions on standardizing the format and quality of the Journal.

Dr. Debasis Mallik for his active involvement in the cause, and closely guiding us across both Editorial and Administrative issues.

Mr. Jagdish Rattanani, our institute Editor for mentoring us with the editorial tasks.

Prof. Jiban Mukhopadhyay for his constructive feedback to improve the quality of the Journal.

We would also like to extend our gratitude to the editorial, administrative and creative team of the last year’s issue of Samvid (Samvid 1.0), for sharing with us their experience and knowledge, which helped us come up with innovative ideas for Samvid 2.0. Finally, our heartiest thanks to the PGDM 2012-2014 Batch, SPJIMR, for their constant support, participation and inspiration all along the journey of ‘Samvid 2.0’. Sincerely, TEAM SAMVID 2.0 June 2013

Contents

1. RESEARCH PAPERS 1.1 Relationship between Work-family Balance, Role ambiguity, Autonomy and Job Stress and its impact on Employee Performance in Indian IT Context

Studies pertaining to increasing impact of job stress in India reveal that there are some factors that have a major impact on both triggering and relieving job stress. This paper studies the impact of role conflict/ambiguity in triggering job stress and work-family balance in relieving job stress through Factor Analysis Modelling. Musheer Ahmad, Vivian Emmanuel, Niharika Jain, Vikrant Chaplot , Xavierâ&#x20AC;&#x2122;s Labour Relations Institute (XLRI)- Jamshedpur

1.2 Corporate Hedging Strategies: Evaluating the case for India

Considering the current state of development of capital markets, regulations and legislations in India, this paper makes an attempt to evaluate the various corporate hedging strategies with respect to the Indian Financial Markets. By studying companies across various sectors of industry, the paper tries to analyse the various derivative instruments for hedging strategies used by Organisations . Kanika Ghocha, Vaatsal Tandon, Amritha Krishnan, S.P. Jain Institute of Management & Research (SPJIMR), Mumbai

1.3 Enhancing post-purchase and product return experience of customer from online apparel retailers

Most retailers focus on pre-purchase activities for customer acquisition. Post purchase and product return is an essential part of the overall purchase experience. This paper explores the need and wants of customers with respect to post purchase and product return and the level of service expected from online retailers. Arun Narayanan, Biswarup Saha, Chandra Shekhar Satpathy, Indian Institute of Management (IIM-K), Kozhikode

2. CASE STUDIES 2.1 "Wrigley's Acquisition of Joyco: A 'gum'ptious move?â&#x20AC;? The rise of the Indian sugar confectionary market has been driven by two multinational players Perfetti and Joyco - who have turned around a low value, low margin and fragmented industry into a global phenomenon. This case analyses the strategy and possible impacts of Wrigley's decision to acquire their biggest competitor in India, Joyco by analyzing the culture, synergy and market forces leading to this acquisition. Kamalika Gangoly, Amritha Mohanty, Anubhuti Gupta, Indian Institute of Management (IIM-K), Kozhikode

2.2 Sanitary Napkin in Rural India: Test of Sustainibility

The case describes in detail how UNICEF and NGO SACRED worked for the improvement in rural livelihood by addressing menstrual hygiene management in villages of Jalna district, Maharashtra. The case revolves around the protagonist, Mr. Jayant Deshpande who is the secretary of NGO SACRED and highlights the dilemmas and strategic issues faced by him while executing this project. Victoria D'souza, Kedar Kulkarni, Hanish Dhume, S.P. Jain Institute of Management & Research (SPJIMR), Mumbai

2.3 Change Management: Building blocks of e-governance systems in Rural India

Change management would be the primary factor affecting the feasibility and sustainability of the e-Governance system in rural context. The case analyses the method of implementation of IT systems against a backdrop of poor educational levels and lack of basic infrastructure. It proposes the Kotter's Change Management Methodology tuned to the rural context and PPP as an enabler of change and proposes actionable steps in this direction. Rajas Abhyankar, Niranjan Sane, Nimesh Singhal, Ankita Pant, S.P. Jain Institute of Management & Research (SPJIMR), Mumbai

3. ARTICULATE 3.1 2014 Brazil FIFA World Cup & 2016 Rio Olympics: Opportunities to revive Brazilian Economy

Aditya Mathur, S.P. Jain Institute of Management & Research (SPJIMR), Mumbai

3.2 Integrated Marketing Communication: Comic Con, Mumbai 2012

Nikhil Kuchroo, Welingkar School of Management,Mumbai

3.3 Achieving Financial Inclusion: By leveraging Mobile Technology to Bank the Unbanked

Nitin Malik, Mohit Saini, Institute of Rural Management (IRMA), Anand

4. FEATURES Whistle blower Policy - a means to better Corporate Governance The whistle blower policy has been recognized as one of the basic norms of Corporate Governance by most countries across the world. This essay deals with how whistle blowing is incorporated into Corporate Governance Policies, talks about some major whistle blowing incidents and discusses some initiatives that can be taken to enhance the effectiveness of whistle blowing stratigies. Shweta Shankar, Symbiosis Center for Management and Human Resource Development (SCMHRD), Pune

5. LEADERS SPEAK 5.1 Mr. Ramraj Pai - President (Ratings), CRISIL Limited

5.2 Mr. Rajiv Kumar - Global Head , HR; TCS Financial Solutions

6. BOOK REVIEWS 6.1 ‘The Difficulty of Being Good – On the subtle art of Dharma’ by Gurcharan Das

101

Lipta Mahapatra, S.P. Jain Institute of Management & Research (SPJIMR), Mumbai

6.2 ‘Contemporary Banking in India’ by Naina Lal Kidwai Rekha Rane, Mudra Institute of Communications (MICA), Ahmedabad

103

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Musheer Ahmad, Vivian Emmanuel, Niharika Jain, Vikrant Chaplot, XLRI - Jamshedpur KEYWORDS Work-family balance Role conflict/ ambiguity Job Stress Employee Performance

ABSTRACT Studies pertaining to increasing impact of job stress in India reveal that there are some factors that have a major impact on both triggering and relieving job stress. Our present research studies the impact of role conflict/ambiguity in triggering job stress and workfamily balance in relieving job stress. The resulting impact of job stress on employee performance is studied with job stress acting as mediating variable between role ambiguity and employee performance. We have introduced autonomy as situational moderator between role ambiguity and job stress. Data collected from 156 IT professionals was subjected to mediation analysis. The results established that role ambiguity is statistically significant predictor of employee performance and that job stress is an important mediator in transmitting the effect of the independent variables to the dependent variables. Whereas job stress does not acts as a mediator for work-family balance and employee performance. However, we have found that work-family balance directly influences employee performance. Also we have found out significance of autonomy as a moderator between role ambiguity and job stress.

1.0 INTRODUCTION he impact of Western culture in India has given rise to a mixed culture where the Indian value and family systems meet the modern working conditions. The Indian employee has to balance between his work and family life. We started with the premise that : if a person is not able to maintain work-family balance then it might result in undue job stress that is detrimental to effective functioning of employee in both family and work life. Jackson and Maslach (1982) studied this growing trend and found that in addition to the symptoms felt by the employee himself, the family suffers. Apart from being less involved with colleagues, the stressed employee is also less involved with family and tends to spend his non-work time away from home. On the other hand, an employee who is able to manage his work and family would be able to perform relatively well. The increasing work and family problems today, arise from the lack of a work-family balance and extreme orientation towards the materialistic culture. The research intends to determine the effect of Work-family Balance on Job Stress and Employee Performance. But it was found in the course of research that though workfamily balance impacts employee performance but its mediation through job stress was not significant.

Another aspect in Indian Organization today is a plethora of roles that an employee is expected to play which in turn is dynamic in nature causing increasing conflict and ambiguity in different roles. The inter-role ambiguity/conflict often results as individuals find it

more and more difficult to successfully complete duties of each of their roles because of limited resources or the incompatibility among different roles (Kahn, Wolfe, Quinn, Snoek, & Rosenthal, 1964). The conflicts and ambiguity in turn leads to uncertainty and Job Stress that are not creative in nature leading to Employee Performance problems. This research aims to empirically examine these theoretical premises in the context of Indian Organizations. The rest of the report is organized as follows: the next section reviews the literature and generates a number of hypotheses on the relationship between the constructs studied. The third section describes the methodology used in the study and the fourth section presents the results of the analysis. The discussion and conclusion are presented in the fifth section. 2.0 LITERATURE REVIEW AND HYPOTHESIS GENERATION Job stress happens when requirements exceed capabilities, while work-related strains are results or implications from the stress (Westman, 2005). A major outcome of role theory is that simultaneously doing multiple roles is likely to be associated with increased stress and hence strain. In the recent years stress is coming forth as a major problem in the organization. Stress is a state of mental, physical or emotional strain. Selye (1936) first initiated the concept of stress as the tension experienced by a body on application of force or

RESEARCH PAPER

Relationship between Work-family Balance, Role ambiguity, Autonomy and Job Stress and its impact on Employee Performance in Indian IT Context

pressure which it resists to sustain in its original state. As suggested by Anderson (2002) work-life conflict is also a precedent which leads to job stress in the employees. Job stress makes the individual dysfunctional and results in an abnormal or unhealthy interpersonal behavior with the colleagues. In fact stress is also viewed as a stimulus from the external environment to a person (Kahn et al., 1964). (Palmer, Cooper, Thomas, 2001) define stress as an unwanted reaction from people who are faced with tremendous pressures, adversities or some expectations placed on them. It arises when people are not able to meet these demands. Stress can be positive to an extent and is known as 'eustress' i.e. pleasant or curative stress. (This term was first coined by endocrinologist Hans Selye, 1974). Pressure helps in improving one's performance as a certain amount of it helps in motivating to achieve the target, as would be supported by various athletes or actors. However, if the frequency of such pressure increases to a high level without enough time to recover, stress can prove very harmful. Stress can be thus understood as a condition when one feels pressurized to cope up with the demands of the situation which seem to be beyond their recognition of what they can handle. In today's business environment competitors, technology, legislation and regulations are constantly changing which lead to very high job stress, faced by the employees. As per Mc Cubbin and Figley, (1983) job related stress can be paralyzing because of its effects on family life as well as the employee's performance. It is a cause for difference between demand from families and the capability to take care for them. Loghan and Ganster (2005) stated that various key factors like work culture, supervisor support, amount of work determine the stress levels which impacts employees' physical and psychological health which would in the end effect his job performance. Many forces have been identified by researchers that are predecessors to stress faced by an individual. High workload: excessive or disproportionate workload which is outside one's capacity (Russek, Zohman, 1958). Career progression related stress is caused due to job insecurity, status dissimilarity, and peer pressure, let down ambition (Brook 1973). The degree to which one has control over decisions pertinent to one's job is another source of stress and was named as participation by Kasl (Kasl, 1973). Recent impactful events: Uncertain sources of stress are the life altering events like death of a loved one, failure in personal life.(Adams, 1980). According to our hypothesis job stress has a negative relation with respect to job performance, that is when there is high stress, the performance minimizes while if there is optimal stress then the employee's performance boosts. Same thing is advocated by Ivancevich and Donnelly (1975) who discuss how job stress and 10

performance are inversely proportional to each other which results in their negative correlation. High job stress can cause physical and mental problems and result in poor performance of employees. Organizations from time to time have taken steps to relieve employees of job stress. Chen, Lin, Wang, Hou (2009) indicated that factors like rewards, work culture and job satisfaction can help in reducing job stress. Walker, Churchill, Ford (1977) created a model which demonstrates the impact of role stressors on job performance, commitment to the organization and satisfaction with the job. Kahn et al. (1964) developed a scale to measure the effect of stress on conflicts in workplace, resource inadequacy, and role ambiguity. It demonstrated employees' view of job stress using fifteen questions about the likelihood of stressful incidents and the extent of role burden. This method assesses psychological measures of stress, like feeling of being overburdened with work, not having the necessary capability to reach the target, and typically not being able to handle the work. In many studies, the items have been used to form sub scales for role uncertainty, role overload, and resources deficiency. Rose (2003) studied that the stress de-motivates the employees, hampering their intention to work better and improve their performance. It demoralizes the employees and eventually decreases their productivity. It is inarguable that some stress is required to improve the performance but only upto a certain limit. The employees may perform their job regularly but workloads and time constraints reduce their performance. The study determines the effect of work-family balance and role conflict on job stress and employee performance. Work-life balance is the limit to which people are equally involved in with-their work life and family life (Green haus & Singh, 2003). Work-life balance includes financial issues, sex, career choices, time management and other factors. In India, we generally find three types of family structures: Joint family, closely knit families sharing a common kitchen and living together; nuclear family consisting of husband, wife and children, and the family in which one person lives near office for some time and away from the community home, because the distance is too great to travel daily. This allows parents to manage work opportunities and at the same time connect to their local roots for family life. The tension between work and family is also due to different perceptions of the ethics related to work and family. The quality of care is not dependent on time spent; in contrast work is (Brannen, 2005). In places where there is a crunch of time for family, the concept of quality of time is used (Brannen, 2005; Hochs child, 1997). Work-life balance can be achieved by organizational

support programs which refer to initiatives to improve work-life balance and/or provide support to employees outside workplace (Kelly, Kossek, Hammer, Durham, Bray, Chermack, Murphy, and Kaskubar 2008). Examples of such initiatives can be more leaves, result-only work environment, flexi timings, management support (Higgins & Duxbury, 2008; Kelly et al., 2008). Organizations have finally begun to appreciate how important the work-life balance is to the success of their human resource. More proactive employers have started providing compulsory leave, roof on maximum working hours and foster an environment that values smart workers. This model examines how the ease in achieving work–family balance can relieve an employee of job stress and how the difficulty in achieving work-family balance can lead to job stress. Previous researches (Frone, 2003; Grover and Crooker, 1995) have given much evidence suggesting that experiences where work and family roles interfere with each other can lead to negative effects on the employees as well as their organizations. Frone (2003) has indicated that these results have caused companies to address workers' wishes for family responsive workplaces, by assisting through various work–family schemes to help employees strike a balance between the two roles. Organizational schemes meant to help employees in balancing work and family can enhance the ability of individuals to achieve organizational as well as personal goals. Common schemes used to balance work–family include not only the formal policies and benefits available to employees, but also more informal, emotional support, such as the workplace being supportive of the use of these types of policies, as well as an individual's supervisor demonstrating family supportive behaviors. For instance, Lapierre and Allen (2006) found family supportive supervision to increase levels of employee well-being. Kossek, Pichler, Bodner, and Hammer (2011) found family supportive supervision to have a stronger correlation with work–family balance as compared to general supervisor support. Accordingly, informal work–family support received from supervisors may play an important role in decreasing work–family conflict, as well as facilitating work–family enrichment and subsequent positive outcomes. Research (Dikkers, Geurts, Dulk, Peper and Taris, 2007) shows that culture of sharing in the work place positively affected selfreported job performance and decreased work related stress, found an organizational culture that is perceived as work–family supportive and does not hinder career opportunities, promoted the use of work-home arrangements which in turn reduced work related stress. So it can be said that, not only are benefits and supervisor support important to employees, but so is the overall work–family organizational support.

Role conflict and role ambiguity are regarded as important variables affecting organizational behavior which in turn is related to employee performance (House & Rizzo, 1972). Role Ambiguity: Unclear job descriptions with ambiguity concerning roles, responsibilities, authority and duties (French & Caplan, 1972). Role Conflict: Contradictory demands posed by various stakeholders, say Supervisors and subordinates causing conflict (Beehr, T.A., 1976). Role conflict is a state of conflict that takes place when one is forced to take on two different and incompatible roles at the same time and a related term role ambiguity occurs when two people are given roles that are overlapping or not clearly defined. In various attempts to study the impact of job stress on employee performance across various professions like nurses, bank employees, employees in IT, manufacturing, athletic trainers etc. the antecedents of job stress were deemed to be role ambiguity, complexity and conflicts. Several factors are frequently suggested as major causes of job stress in past research literature. One factor is role complexity caused due to differing expectations, multiple changes in work due to dynamism in environment, heavy work load (Franch and Caplan, 1972; Russek and Zohman, 1958). Another factor is role ambiguity which is the degree of mismatch between authority to perform one's role effectively and responsibly (French and Caplan, 1972; Kahn et al, 1964). Role Conflict: Supervisors or subordinates place conflicting demands on the individual or the roles have conflicting demands and the incumbent selected for role has differing beliefs, attitude and personality with that of the role. (Beehr, T.A., 1976; Caplan, Cobb, French, Van Harrison and Pinneau, 1975; Kahn et al, 1964) have been repeatedly cited. The most commonly used and extensive model of occupational stress (Caplan, et al, 1975) includes work demands that symbolize responsibility for persons, role conflict and uncertainty as potent stressors. A substantial body of empirical research on role stress has shown that high levels of role conflict and role ambiguity result in unfavorable outcomes for both the individual and the organization (House & Rizzo, 1972; Kahn et al, 1964; Morris, Steers, & Koch, 1979). Role conflict has been defined as the incongruity of expectations associated with a role (Kahn et al, 1964). Role ambiguity has been defined as the degree to which information is lacking regarding expectations of methods for fulfilling, or consequences of, various roles (Kahn et al., 1964). House and Rizzo (1972) separated role conflict and role ambiguity by defining role conflict in terms of “congruency-incongruence”. In contrast, role ambiguity is defined in terms of “deficiencies”. The research on role dynamics has suggested that, as a predictor of performance outcomes, role ambiguity is more impacting than role conflict (House & Rizzo, 1972;

Rizzo, House & Lirtz man, 1970). In a study (Chen, Hui Chen, Tsai &Yueh Lo, 2004) on nurses, impact of role stress on job satisfaction was established. After controlling for personality traits, role stress variables predicted 24.8% of the variance in job satisfaction. Role ambiguity (P < .001) and role overload (P < .01) were the best predictors amongst the job stress factors which clearly show the impact of them on job stress. The paper focused on role ambiguity and complexity and reinforced that they result in job stress. Brumels & Beach (2008) pointed out the percentage share of no. of respondents that cited role ambiguity and role complexity/overload as significant factors of job stress. Tang and Chang (2010) carried a similar research on Taiwanese companies and

is in-line with a different mechanism proposed by Cohen (1980) where an employee dedicates more cognitive resources with increasing stress. The role conflicts have major effects in the demanding environments of few jobs like customer service jobs. Customer service executives may take their jobs home with them, creating conflicts in families that lead to additional stress at work, finally affecting their performance and customers' evaluations. Other important stressors referred are WFC and familyâ&#x20AC;&#x201C;work conflict (FWC); the former is a form of interrole conflict in which the demands are created by the job interfere with the performance of family-related responsibilities, and the latter is a form of interrole conflict in which the

Figure 1: Path Model Work-family Balance

H1 (-) Job Stress

Role conflict/ ambiguity

H2 (+)

revealed a direct and positive link of role ambiguity and complexity on job stress, thus creating a negative impact on job performance and creativity. Role conflict and role ambiguity are known to influence job related output parameters such as job stress and performance (Netemeyer, Brashear-Alejandro & Boles, 2004), job satisfaction (Bettencourt & Brown, 2003), job burnout (Bhanugopan & Fish, 2006), work-family conflict (Foley & Hang-Yue, 2005). Specifically the domain of professional selling is influenced extensively by exploration of stresses resulting from conflicting work roles (Behrman & Perreault, 1984). The impact of role ambiguity/conflict on job performance is supported theoretically by the role-episode model (Kahn et al. 1964). Kahn et al. posit that (1) interface spanners (e.g. salespeople) interact with different role senders (e.g. fellow workers, boss) in many situations (e.g. evaluation & feedback, visits to customers) to gather various details, orders, help, and direction; (2) expectations of role sender's (e.g. boss, customers) can result in stress when the interface spanner believes in existence of ambiguity or conflict; (3) perceived role stressors are related to a person's characteristics like dispositional, psychological and sociological; and (4) prolonged exposure to role stressors can undermine a person's outcomes (e.g. job performance, satisfaction, commitment). This sequence

H3 (-)

Employee Performance

Autonomy

demands are created by the family interfere with the perfor mance of work-related responsibilities (Netemeyer, Boles, & McMurrian 1996). This interrole conflict theory suggests that job stress is practiced if a person is harassed to meet the demands of a role. To date, there is little evidence of the effects of WFC and FWC on employee performance and customer outcomes. A study by Netemeyer et al (2005) reports that Job stress affected both aspects of performance, in-role performance and customer directed extra-role performance. Job stress may directly affect customer purchase intent (CPI) by inhibiting the service employee from offering a stirring role performance when interacting with customers. Customers may sense this and give low CPI ratings. Since the psychological needs of employees can be critical in determining how they respond to their work context, when individuals have a strong need for personal accomplishment, learning, and development they may attempt to initiate behaviors that will lead to creative performance, even when the work context is not supportive (Shalley, Gilson, Blum, 2009). While, Indartono and Chen(2010) studied that employee performance was more related to employee's capability and competency fit on the job and related to individual characteristics such as sex, age, work experiences, and level of education than other factors. Further a study by Pryor, Pryor, Taneja, Humphreys (2010) suggests that

putting formal mechanisms in place and removing barriers won't necessarily make employees feel safe enough to offer ideas for improving products, processes or performance. Instead, to get employees to offer ideas for improvement, that company (and many other organizations) would have to develop significant cultural changes to reduce the fear in the workplace, decrease job stress and increase fun in workplace. This research, have tried to relate the constructs of role ambiguity, work life balance and stress to job performance. Job performance has been defined as the productivity level of an individual employee when compared to peers, on different job-related behaviors and outcomes (Babin & Boles, 1998, p. 82). Two other factors related to employee performance are in-role and extra-role (Brief & Motowidlo, 1986). Job performance is a generally used, yet even this concept is poorly defined. Performance is an important criterion which affects the organizational success. Autonomy is authority to carry out work freely and is linked to both objective and subjective performance ratings. Autonomy has been shown to have a positive relation with work-life balance. It has been shown that people with more amount of autonomy at the work-place reported far less imbalance (David E. Guest, 2001). Interestingly, other factors like family-friendly features at the work-place had a far less impact on work-life balance than autonomy did. Creating a fair amount of autonomy for every level is now gaining ground and is used by modern HR practitioners. It has been shown that Autonomy is not just directly, but also indirectly linked with Work-Life balance through the variable JobSatisfaction. However, the flip side to this, according to some of the work of Hochschild (1997) is the possibility that the use of progressive human resource practices as this one, can risk making work almost too attractive. Autonomy has also been linked to job-stress. However, this relation is negatively correlated. Higher the autonomy, lower the job-stress. When studying the effect of Job Stressors (constraints, conflict and justice) on the phenomenon of Counterproductive Work Behavior (CWB) (Fox, Spector and Miles, 2001) taking autonomy as one of the moderator variables between stressors and CWB, the value of alpha obtained, after repeated tests,

corrected to approximately p<.01. Autonomy can be linked to Employee Performance as well via job empowerment. The more the autonomy the more the employees are empowered to make decisions independently and take the reins in their own hands and more often than not, it leads to higher productivity. (Light, 2004) The three hypotheses for study shown schematically in the path model shown in Figure 1 are: H1: Work-family Balance has a significant negative influence on Job Stress i.e. more the work-family balance, lesser the impact of job stress. H2: Role conflict/ambiguity has a significant positive influence on Job Stress i.e. more the role conflict/ambiguity, the more the job stress. H3: Job Stress has a significant negative influence on Employee Performance i.e. more the job stress, lesser the employee performance. H4: Autonomy is a situational moderator for role ambiguity and Job Stress i.e. if Autonomy is higher Role Ambiguity is not mediated by Job Stress. 3.0 METHODOLOGY 3.1 Sample For the study, 156 IT professionals from different organizations were surveyed. The survey consisted of 33 questions related to the variables under consideration measured on a 5 point unforced and balanced Likert scale. The reason for study was disclosed to the participants but no additional information was given on the questionnaire or otherwise that would possibly bias the responses. Demographics of the respondents 1. All the respondents were married and had atleast 10 months of relevant work experience 2. The average age of respondents was around 27 years. 3. The average work experience of respondents was around 46 months. For a comprehensive summary on the respondents to the questionnaire, refer to Exhibit 1 to Exhibit 4.

3.2 MEASURES Table1: Constructs and items used Name to negatively worded items

Scale

Source

No Of Items

Work Life Balance

5 Point Likert Scale

Organizational stress: studies in role conflict and ambiguity by Robert Louis Kahn

All

WLB1_Re, WLB2_Re, WLB3_Re, WLB4_Re, WLB5_Re, WLB6_Re, WLB7_Re, WLB8_Re, WLB9_Re, WLB10_Re

Job Stress

5 Point Likert Scale

Organizational stress: studies in role conflict and ambiguity by Robert Louis Kahn

Js10

JS10_Re

Role Ambiguity

5 Point Likert Scale

Organizational stress: studies in role conflict and ambiguity by Robert Louis Kahn

Ra1

RA1_Re

Employee Performance

5 Point Likert Scale

Organizational stress: studies in role conflict and ambiguity by Robert Louis Kahn

Ep7

EP7_Re

5 Point Likert Scale

'Perceived Situational Moderators of the Relationship Between

None

Construct

Autonomy

Negative Worded Items

Subjective Role Ambiguity and Role Strain' by Terry A. Beehr Journal of Applied Psychology 1976, Vol. 61, No. 1, 35-40

All the negatively worded items in each construct are recoded. A factor analysis is performed on the responses collected from each construct (after duly recoding the negatively worded items in the original scale Table 2: Factor Analysis Results Construct

No. of items submitted for factor analysis

No. of items finally retained

Work Life Balance

All

Job Stress

All

Role Ambiguity

RA1, RA3, RA4, RA5, RA6, RA7

Employee Performance

EP1, EP2, EP3, EP4, EP5, EP6

Autonomy

All

Table 3: KMO, No. of dimensions extracted, % of variance extracted for each dimension (factor) obtained. Construct

KMO

No. of dimensions

% of variance extracted

items retained

Work Life Balance

0.890

67.188

All

Job Stress

0.830

56.108

All

Role Ambiguity

0.730

42.012, 31.447

RA1, RA3, RA4, RA5, RA6, RA7

Employee Performance

0.856

67.442

EP1, EP2, EP3, EP4, EP5, EP6

Autonomy

0.806

77.946

All

Table 4: Reliability coefficient computed for each dimension: Construct

Dimensions

Variable in Dimension

Reliability Coefficient

Name of the Dimension extracted

Work Life Balance

Dimension1

WLB1 â&#x20AC;&#x201C; WALB10

0.944

Job Stress

Dimension1

JS1 â&#x20AC;&#x201C; JS9

0.900

Role Ambiguity

Dimension 1

RA3, RA4, RA5, RA6

0.810

Role Conflict

Dimension 2

RA1_Re, RA7

0.858

Role Ambiguity

Employee Performance

Dimension1

EP1-EP6

0.902

Autonomy

Dimension1

A1-A4

0.904

4.0 DATA ANALYSIS TECHNIQUE The SPSS 10.0 was used to analyze the data. The analysis includes factor analysis, reliability analysis, and mediation analysis. Since the reliabilities of the study variables were all greater than the inter-variable correlations, it could be concluded that they represented distinct constructs. All the test results can be viewed in the tables given above. 4.1 Mediation Analysis Result For Job Stress As A Mediator Between Work-family Balance And Employee Performance

between work-life balance and employee performance and the indirect links between work-life balance and Job stress and Job stress and employee performance. However, since the correlation between work-life balance and employee performance has opposite signs, hence it can be said mediation has not been achieved. 4.2 Mediation Analysis Result For Job Stress As A Mediator Between Role-ambiguity And Employee Performance Figure 3 Job Stress

Figure 2 Job Stress -.726 (0.027)/-0.906*

1.119 (0.053)/0.861* -0.767 (.073)/-1.1* Role Ambiguity

Work Life Balance

-0.407 (0.06)/-0.583*

0.389(0.32)/0.696* -0.168(0.058)/-0.3*

Employee Performance

Discussion When trying to establish the link between work-life balance and employee performance using the above model, it was found that statistical significance was achieved for all the three linkages: The direct path

0.713(0.045)/-0.786* 0.258(0.078)/-0.284*

Employee Performance

Discussion When trying to establish the link between role-ambiguity and employee performance using the above model, it was found that statistical significance was achieved for all the three linkages: The direct path between role ambiguity and employee performance and the indirect links between role-ambiguity and Job stress and Job stress and employee performance. 15

Also, the correlation between role-ambiguity and employee performance has similar signs, hence it can be said that mediation has been achieved. 4.3 Mediation Analysis Result For Job Stress As A Mediator Between Role Ambiguity And Employee Performance Under Moderation Effect Of Autonomy

achieved for all the three linkages: The direct path between work-life balance and employee performance and the indirect links between work-life balance and Job stress and Job stress and employee performance. Also, the correlation between work-life balance and employee performance has similar signs; hence it can be said that mediation has been achieved.

Figure 4

4.5 Summated Mediation Analysis Results ! It was found out that Job Stress was not a mediator and Work Family Balance significantly impacts employee performance positively

Job Stress .389 (0.082)/0.447*

-0.063 (0.123)/-.059

! It was also found that Job Stress was a partial mediator

when Autonomy was less than median with a strength of 0.502 Role Ambiguity

-0.225(.095)/-0.242* -0.200(0.107)/-0.215

! It was found out that Job Stress was not a mediator

Employee Performance

The above figure holds for summated Autonomy values more than median value 16. Discussion When trying to find the mediation analysis for chain 2 taking the moderation effect of autonomy under consideration, it was found that one of the indirect linkages: the one between job stress and employee performance is not statistically significant, hence it was established that mediation has not occurred. 4.4 Mediation Analysis Result For Job Stress As A Mediator Between Work-family Balance And Employee Performance Under Moderation Effect Of Autonomy Figure 5 Job Stress 1.309 (0.074)/0.914*

Work Life Balance

-0.453 (0.61)/-.680*

0.873(.048)/-0.916* 0.281(0.088)/-0.295

Employee Performance

The above relation holds true for summated Autonomy values less than median value 16. The outcome of the mediation strength was about 0.502. Discussion When trying to establish the mediation analysis between work-life balance and employee performance using the above model, this time under the moderation effect of autonomy, it was found that statistical significance was

when Autonomy was more than median 5.0 FINDINGS 5.1 Emergent Model On the basis of the above results, the model that was hypothesized at the beginning of the research has been modified. The emergent model can be found in Figure 6 below: Figure 6 Work-family Balance

H1 (-)

Job Stress

Role conflict/ ambiguity

H2 (+)

H3 (-)

Employee Performance

Autonomy

5.2 Discussion The results of the above mediation analysis has not been able to justify the acceptance of the first hypothesis that is work-family balance has a significant negative influence on job stress i.e. more the work-family balance, lesser the impact of job stress and lesser the work-family balance, more the impact of job stress. The reason behind the rejection of the hypothesis can prove to be a further scope of study. The second hypothesis that role conflict/ambiguity has a significant positive influence on job stress, has been accepted as per the analysis. The implication of this finding is important in today's organizations because people might not be aware of the fact that certain conflicts and ambiguities are causing stress. The role conflicts may involve interpersonal dynamics that are covert in nature and hence difficult to understand or point out. People may find themselves in role conflict/ambiguity situations but might not even be aware of the fact that it is the description or expectations of their roles that is causing the problem.

HR managers have to be aware of the fact that though they are expecting the workforce to be dynamic and handle multiple roles, it might lead to undue conflicts and stress in the organization. Special care should be taken while designing job descriptions such that roles are clearly defined and do not conflict with other roles. HR managers should also hold counseling sessions to determine if any such roles are present that could be affected so that rectification can be done. Especially the managerial positions should be free of role conflicts and ambiguity not only considering the undue stress but also the affect on employee performance and business. An employee in such cases loses interest in work and tends to be more involved in avenging the role conflict and if this happens regularly then it would mean a less motivated workforce that is not coordinating and aligned to the organization goals. As far as role-conflict and ambiguity are concerned, it is the HR and line manager's responsibility to ensure that the roles are clearly defined, documented and assigned with clear accountability for each. Even if employees need to perform multiple or cross-functional roles, these should be limited in scope and clearly defined so that there is no conflict or ambiguity later. HR manages should be all ears for ongoing conflicts in organizations and determine the nature of these conflicts. If the conflicts are related to role jurisdiction then there is a probability that either the part of the role is not clearly defined, or ambiguous, or is not on paper. Avoiding or resolving such conflicts can go a long way in improving the coordination and cooperation amongst the workforce, thereby improving the productivity. HR managers have to be in constant touch with the top management because HR alone may not be able to resolve role conflicts that are in the upper tiers and will need support from the top management to sort things out. Another perspective is that some roles are by nature such that there cannot be a clear line drawn and some ambiguity or conflict may occur. In case a particular pair of managers is having problems with their roles, then the HR has to transfer the managers or restructure the roles such that the problem pair doesn't have to work together in the problem area. The HR thus has to play the employee champion and change agent role to improve the workforce productivity. The third hypothesis, job stress has a significant negative influence on employee performance i.e. if job stress increases beyond a limit, it reduces employee performance, has also been found to be consistent with the findings. This has been established in many studies. From a HR point of view, it is important that the structure and manpower planning be such that there is an optimum workload on each person or depending on the ability of the person to handle the stress. This would

mean that a eustress level is attained that lies between no stress and stressful state which would mean optimum performance by employees. Though this might sound impractical, the HR should take steps in this regard and only then he will be able to determine the extent to which this can be made possible. The fourth hypothesis, Autonomy is a situational moderator for Role Ambiguity and Job Stress i.e. if Autonomy is higher, Role Ambiguity is not mediated by Job Stress is also found to be consistent with the results. Most of the firms now-a-days are moving towards a paradigm wherein they are emphasizing on providing greater amount of autonomy at the workplace in most of the daily decisions. This also proves helpful to manage the everyday job stress arising out of role ambiguity. Also, in case of any ambiguity/conflict arising in the minds of the employees, if he is able to take decisions on his own, he isn't affected that much and hence his job-stress significantly reduces. This finding has major implications for organisations that tend to emphasize on a more dynamic work-environment to foster productivity. For such organisations, providing a bit more autonomy to the employees might prove helpful in reducing their stress levels and may ultimately aid in getting the desired level of output required by the organisation. Finally, as a whole the HR has to consider the effects of both work-life balance and role conflict on job stress and employee performance and in no case would/should both be allowed to get out of hand because it would mean excessive stress and lowered performance. HR has to be proactive in handling it and work with the line managers to effectively eliminate it in order to ensure smooth functioning and productive workforce. 6.0 CONCLUSION 6.1 Limitations of the study The sample size could have been larger and a longitudinal study would have provided a more accurate picture than the present cross-sectional study. Providing clarity on the questionnaire in case the respondents had any doubts while filling was not considered. Most importantly, work-family balance was a significant predictor of Job Stress in the literature that had been reviewed, but in the research were needed to be found out the causes of deviation from the expected output. 6.2 Future scope of research The present study considered the impact of work-family balance on job stress in the Indian context. First, further research may consider the impact of the same in a Western context where the difference in orientation towards work and job may provide different results. Further role conflict/ambiguity were considered as one variable as both have similar characteristics. It may happen that roles are well defined in many organizations 17

but there is more of role conflict as employees are expected to manage more than one role. Role conflict and ambiguity can be considered separately in determining the extent to which each impacts job stress. Third, the

research may be carried out at different levels of management as the results may differ at the executive level and lower management levels where the roles differ in number and impact.

7.0 EXHIBITS Exhibit 1

Age Distribution of Respondents 50 45 40 35 30 25 20 15 10 5 0

No Of Respondents

22 23 24 25 26 27 28 29 30 31 32 33 35 37 38 43 45 48 52 53

Exhibit 2

Work Experience of Respondents 16 14 12 10 8

No Of Respondents

6 4 2

Exhibit 3

384

240

196

108

Exhibit 4

Gender Distribution of Respondents

Seniority level of Respondents 7%

Male 37% Female 63%

44% 49%

Junior Middle Senior

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Kanika Ghocha, Vaatsal Tandon, Amritha Krishnan, SPJIMR KEYWORDS Hedging, Derivatives, Risk Management, Swaps

ABSTRACT This paper evaluates the various corporate hedging strategies applied in India; considering the current state of development of capital markets, regulations and legislations. Also, not every company strategizes on minimizing its foreign exchange exposure risk; hence, the need for currency risk management is highlighted. Various companies in various sectors have been studied on parameters like â&#x20AC;&#x201C; industry, foreign exchange exposure, foreign exchange strategies; to undertake the qualitative research, which reflects that as derivative instruments, futures, forwards and options are preferred in the short-run, while different kinds of swaps and options are used in the long term. Data of listed companies has been researched upon using various statistical methods; to understand what kind of companies really go for corporate hedging, whereas there are some which believe in the traditional methods. The available literature helps in broadening our views on framework for risk management & its regulation per se. It concludes by pressing for the need of stronger corporate hedging strategies in India and the need for reforming and developing our capital markets; also the fact that SEBI and RBI- the regulators have a major role to play. The recommendations outline the findings, and the behavioural aspect of corporate firms in India.

1.0 FOREIGN EXCHANGE RISK MANAGEMENT: PROCESS & NECESSITY he global market for derivatives has grown substantially in the recent years. The Foreign Exchange and Derivatives Market Activity survey conducted by Bank for International Settlements (BIS) points to this increased activity (Exhibits 1 & 2).

Firms dealing in multiple currencies face the risk of volatility in the exchange rate market which can adversely affect their business; this is referred to as exposure to foreign exchange risk. The process of identifying the risks faced by a firm and implementation of a process of protection from these risks by financial or operating hedging is called foreign exchange risk management. 1.1 EVOLUTION OF THE FOREIGN EXCHANGE DERIVATIVES MARKET IN INDIA In India, the economic liberalization in the early nineties provided the economic rationale for the introduction of FX derivatives. In the pre-liberalisation era, marked by State dominated, tightly regulated foreign exchange regime, the only risk management tool available for corporate enterprises was, 'lobbying for government intervention'. With the advent of LERMS (Liberalised Exchange Rate Mechanism System) in India, the unified exchange rate phase has witnessed improvement in informational and operational efficiency of the foreign

RESEARCH PAPER

Corporate Hedging Strategies: Evaluating the case for India

exchange market, though at a halting pace. The spurts in foreign investments in India have led to substantial increase in the quantum of inflows and outflows in different currencies, with varying maturities. Corporate enterprises have had to face the challenges of the shift from low risk to high risk operations involving foreign exchange. Earlier, the Indian companies had been entering into forward contracts with banks, which were the Authorised Dealers (AD) in foreign exchange, but many firms preferred to keep their risk exposures unhedged as they found the forward contracts to be very costly. In the current formative phase of the development of the foreign exchange market, it will be worthwhile to take stock of the initiatives taken by corporate enterprises in identifying and managing risk. 1.2 INSTRUMENTS FOR FOREIGN EXCHANGE HEDGING Forwards: A forward is a made-to-measure agreement between two parties to buy/sell a specified amount of a currency at a specified rate on a particular date in the future. Futures: A futures contract is similar to the forward contract but is more liquid because it is traded in an organized exchange i.e. the futures market. Options: A currency Option is a contract giving the right, not the obligation, to buy or sell a specific quantity of one foreign currency in exchange for another at a fixed price; called the Exercise Price or Strike Price. Swaps: A swap is a 21

foreign currency contract whereby the buyer and seller exchange equal initial principal amounts of two different currencies at the spot rate. Foreign Debt: Foreign debt can be used to hedge foreign exchange exposure by taking advantage of the International Fischer Effect relationship. 2.0 CONTEMPORARY ANALYSIS “Global and domestic outlook has worsened since the time of publication of the previous FSR. The Euro area sovereign debt problem is continuing to weigh on global recovery. Although slowing global growth has dampened commodity prices, heightened risk aversion and the resultant slowing of capital flows are likely to adversely impact emerging and developing economies (EDEs)”RBI's Financial stability Report, June 2012. According to a survey conducted by RBI, the various systemic risks perceived by the market participants, for 2010-11, were the highest due to market volatility (Exhibit 3). The rising economic shocks - structural and cyclical, have lowered the confidence of the global investor. The Banking Sector Stability Index (BSI) is witnessing a decline and this view is further strengthened by the JPoD (Joint Probability of distress- a measure of the probability of the distress of the entire banking sector of India), which has been showing an upward trend in the mid-term. Overall, our banking system has been much appreciated, for its efforts to keep us protected from the withering effects of the sub-prime crises. Over time, the efficiency of the banking sector has increased; their nonperforming assets have decreased, and return on assets, return on equity can be seen rising. Financial stability is its implicit objective, under the RBI Act, 1934; several measures have been taken to ensure it, like management of Capital Account and systemic interconnectedness (conservative limits on aggregate inter-banking liabilities, as a proportion of the bank's net worth), restrictions and regulations on uncollateralized lending, banks' exposure to NBFC's etc. In India, the driver for the plummet in overall inflation is decline in food inflation. The WPI, generally, moves in line with the expectations formed by the household. In December 2012, where the world is looking up to the emerging economies, comes the relief of policy action by the Parliament, putting into place FDI in multi-brand retail, amendments into the Land Acquisition Bill. Indian economy is seen to go through the bottom of the recovery phase, with a stagnated GDP growth rate at 5.3% (projected); IIP giving its own scary numbers; inflation witnessing a slump; exports shrinking due to world market outlook. There even came a situation when we were about to lose 22

our BRICS investment grade status; due to our ineffective public policy making and implementation. Talking about the kinds of risks faced which have dampened the investment sentiments for India; include monsoon deficit, the ousting due to power shortage (which blackened 20 out of the 28 states in India), the risk of contagion due to the Euro Crisis, the US fiscal cliff, cut in rating by S&P. S&P had cut its growth rate estimate of countries like China, Japan & Singapore by 50 basis points, however it cut India's forecast by 100 basis points, in September 2012. Amidst all these forecasts, comes the question, “Where are we heading to and what is required to achieve our objective?” Our financial sector needs continuous evolution and policy reforms. The counter-cyclical policy measures by the RBI are now acknowledged globally. Commercial banks are becoming hesitant in lending to the infrastructure companies due to the tenure and the default risk associated, and given the current market economy status, ECB (European Commercial borrowings) have dried up, scope of borrowing via FCCBs (Foreign currency convertible bond) has further decreased. Development of this market will lower down the costs of debt and will increase transparency and efficiency in capital markets. 3.0 INTER SECTIONAL ANALYSIS: CORPORATE HEDGING STRATEGIES A detailed study of the financial statements of several companies from varying industry sectors was conducted and their investment and hedging behaviour was studied. Strides Archolab, Tech Mahindra, Tata Steel were the companies analysed as shown in Exhibit 4 and their forex exposure was mapped with their hedging strategy to find out a pattern. Exhibit 5 (A) depicts the total foreign exchange earnings as a percentage of the total revenue. The four companies analyzed here have a very high dependence on other countries for their revenues, with the average being around 85%. Since the percentage is so high, a slight drop in the exchange rate may result in huge losses for the companies. Since most of the companies are export oriented, they hedge their risk by entering into derivative contracts with the respective counter parties based upon their underlying assets. Exhibit 5 (B) depicts the relationship of companies who have high foreign currency earnings with the interest earned on their debts. The companies in India generally do not raise debts in the international market and hence are protected against any risk arising thereby. However, this is not encouraged since companies can enter into forward contracts with international banks with relative ease. 3.1 TOURISM & HOSPITALITY SECTOR Importance of foreign exchange management in this

sector can't be neglected. The foreign tourists arrival (FTAs) in October 2012 was 5.76 lakh over 5.6 lakh in 2011 (y-o-y basis), and growth of 2.9%. This sector suffers from seasonality and finding a trend for this data was not possible. The data exhibits seasonality and irregularity; however the highest percentage of VAR (value-at-risk), in terms of foreign exchange earnings from tourism, show 49.2% VAR, i.e. INR 1,681 crores in January 2012. (Source: Ministry of Tourism). The industry has been doing well despite the world economic meltdown and is expected to be doing good in the near term; however fear shall thrive when the trend of slow industrial growth will bottom it out. And in terms of behavioural finance, reluctance is seen to hedge and manage their foreign exchange exposure. 3.2 BANKING SECTOR Our financial sector as discussed in the previous section needs to be prepared strategically, because of the interdependence between economies. The percentage of foreign bills purchased and discounted over total bank credit has been as high as 81.69%, which is subjected to the global economic cycle. (Exhibit 6) 3.3 IT INDUSTRY: DETAILED ANALYSIS OF TCS, INFOSYS AND WIPRO The Indian IT has slowly become a global force to reckon with for its IT Prowess (Exhibit 7). Since almost 60% of the income comes in foreign currency these firms feel a strong need to hedge them against the foreign exchange risk exposure. In the current scenario it is becoming extremely difficult for IT Companies to sustain their growth momentum. With increasing pressure on the Obama Administration to cut down on the outsourcing to India and increase jobs locally the revenues of Indian IT companies is facing the heat. TCS, Infosys and Wipro etc have large bench strengths of almost 3,75,000 employees resulting in low utilization rates which further affect bottom lines. This is another reason why IT Companies are getting into hedging big time in order to sustain their high growth rates in times of high volatility in business and exchange rates.

Wild swings in the value of the rupee against the US dollar are making domestic software outsourcing companies go for shorter duration currency hedge. Lower predictability of rupee movement in long-term hedges, IT firms have begun taking shorter term view on currency hedging to pin down foreign exchange (foreign exchange) or hedging losses. The hedging periods range from 1 to 3 quarter. Some analysts say every 1% appreciation in the rupee impacts an IT company's margin by 40-50 basis points (bps). The paper qualitatively discusses the different hedging strategies of the 'Big 3' IT Companies in India: TCS, Infosys and Wipro; in the last couple of years. It studies how these companies manage their exposure to the foreign exchange risks as well as strategic hedging decisions taken by each of the companies. The results are discussed in Exhibit 8. TCS - TCS gets over 90% of its total revenue from exports. Major exposures exists in the $/INR domains. The table (Exhibit 9) shows the volume of foreign exchange transactions at TCS in the last year. TCS had 33 USD Forwards and Options in the year 2011 which indicates that the high volatility in the US Markets may have led to this stand by the firm. TCS hedges both revenue and balance sheet, mainly receivables. It does not use any discretion in hedging receivables (protects 100% of receivables) Infosys - Infosys gets over 98% of its total revenue from exports. As of March 31, 2012, Infosys had outstanding forward contracts of U.S. $677 million, Euro 20 million, United Kingdom Pound Sterling 20 million and Australian dollar 23 million and options of U.S. $50 million .While their current hedge ratio (30.08%) is significantly lower than their historical average, the impact of currency movement can be judged by a statement in their annual report - 'Every 1% movement in the Rupee against dollar has an impact of approximately 40bps in operating margin'. (Exhibit 10)

3. Liquidity and profitability – High liquidity means lesser exposure

Wipro - Hedging for Wipro is a crucial strategy considering their diversified investment profile. Wipro has a consistent hedging policy, designed to minimize the impact of volatility in foreign exchange fluctuations on the earnings. They mitigate exchange rate exposure arising from these transactions and enter into foreign currency derivative contracts. They follow established risk management policies, including the use of derivatives like foreign exchange forward / option contracts to hedge forecasted cash flows denominated in foreign currency. Its foreign exchange gains / (losses), net for the years ended March 31, 2011 and 2012 were INR 445 million and INR 3,278 million respectively (Exhibit 11).

4. Sales growth – Firms having high sales should hedge freely since they do not have debt on their books.

Looking at the trend till the last year, Wipro seems the most balanced of the 3 companies under analysis:-

The amount of foreign exchange risk exposure a company faces and the degree of hedging it should undertake depends on a number of factors. 1. Firm size – Large firms have economies of scale and hence their hedging costs get greatly reduced .They also have a large risk appetite. 2. Leverage – Firms which are highly leveraged have more incentive to leverage.

! Wipro has steadily reduced its hedge outstanding to

quarterly revenues from Yr. 2009 to Yr. 2011. Infosys is following a very safe strategy of having low hedging activity which is fine during this time of economic uncertainty but is not a long term strategy. TCS does not seem to have a very steady strategy. ! Except during cases of large losses, hedging strategies

are not near-term stock price movers. In the longer term, hedging decisions do affect the EPS of a company. However, it is important to hedge foreign currency exposure as far as possible as that should not really be the business manager's focus area. Also, in the long term, if the INR is moving consistently in one direction, all one can do is to postpone the impact, but managers then get more time to manage the impact of foreign exchange. Wipro, TCS and Infosys have different strategies to hedge their foreign exchange exposure (Exhibit 12). TCS hedges both revenue and balance sheet, mainly receivables. It does not use any discretion in hedging receivables (protects 100% of receivables), but does use discretion while protecting revenue. They take cover mainly in USD, EUR and GBP. Infosys, on the other hand, hedges just the receivables. Infosys however does not hedge significantly above 100% of its net receivables. Wipro's approach is similar to that of TCS. It usually covers 50-75% of its net inflows over the following four quarters (which is usually 40-50% of revenue) and never exceeds 100% of net inflows. It covers 75-125% of its balance sheet exposure, mainly receivables. There is no clear factor which can suggest whether forwards or options are better. Suppose the INR is depreciating. Especially forwards guarantee a certain exchange rate but limits upside if the INR were to depreciate beyond the forward rate. Buying a put option would be idealâ&#x20AC;&#x201D;it would guarantee a rate and provide participation in the upside; however, the cost of the option and the liquidity does not make this a practical alternative. The third approach, which the companies usually use, is a range-forwardâ&#x20AC;&#x201D;buying a put and selling a call. This provides a range unlike a single value that a forward provides. Also, the range forward can be structured such that the cost is zero. TCS largely uses options (range forwards). Infosys usually uses forwards. They used options when the volatility in the rupee was low and even then they used range options to cover itself within an INR range. Wipro predominantly uses forwards. It does use options at times, and uses zero-cost range forwards.

3.4 ACCOUNTING NUANCES AND P&L IMPLICATIONS 3.4.1 P&L impact Companies use 'non-designated' and 'designated' hedges. The mark-to-market impact of non-designated hedges is reflected in the P&L at the end of each quarter. The impact on the designated hedges is carried forward to the balance sheet and reflected in the P&L when the cash flow associated with that particular hedge actually occurs. The effect of both types of hedges will be reflected in the P&L, the impact in case of designated hedges will be deferred if the tenure extends to over two or more quarters. It is extremely difficult to predict the impact of hedging on the P&L for any given quarter, as factors such as exact hedge book, expiry periods and rates at which hedges are booked are unknown. If a company uses only nondesignated hedges, some back-of-the envelope calculations can be made. Wipro uses a different accounting approach. Wipro nets its losses on its hedges against revenue while reporting its financials while TCS and Infosys report revenue and EBIT on the actual exchange rate and net off losses below the EBIT line. We understand that the reason Wipro has done so historically has been a SEC requirement that suggests that the hedged items need to be considered as part of revenue. However, both the methods result in the same EPS ultimately but Wipro's accounting approach usually tends to suppress reported margins when the INR is depreciating. 3.4.2 Realised rate versus average rate It must be noted that the realised rate for the company may be quite different from the exchange rate, if the currency movement from the quarter is not uniform. First, the revenue booking is not uniform across the three months of the quarter and is usually skewed slightly towards the last month. Second, companies have different mechanisms to convert revenue booked to the INR. For example, TCS converts the revenue as and when booked. Infosys books it at monthly average rates. Wipro has 3 exchange rates that on the 1st, 11th and 21st of the month, i.e., revenue booked between the 1st and 10th get converted using the exchange rate on the 11th. In addition, Wipro's realised rate will differ significantly from the average rate due to the way it accounts for revenue (net of hedge losses/gains). 3.5 Inter-Sector Analysis: BSE-30 Companies In the current scenario, the Indian companies having a very high market capitalization (large cap) have definite hedging strategies in place. They are generally exposed to two types of risks on their receivables and payables. Forwards are the most convenient hedging instruments

that these companies use to hedge this risk. To take an example, the steel companies in India (like Jindal Steel) are dependent upon South-Asian countries for their coal requirements. So in order to avoid any undue consequences of currency rate variation, the Indian companies take long positions (buying contracts at a later date) in case they fear depreciation of the Indian Rupee versus the currency of the country from which the raw material is sourced. Similarly, major software companies are dependent upon other countries (especially US) for their income. A depreciation of the Indian rupee boosts the revenues of these companies. Thus, hedging against their receivables becomes imperative for these companies and options are the commonly used instrument. However, depending upon the requirements of firms, they adopt an appropriate strategy. The BSE-30 companies were taken as a starting point to analyse the hedging strategies adopted by the top firms in India. A sector wise trend was observed and the correlation between the exposure of foreign currency and the annualized returns of the stocks of BSE-30 companies was analysed. The major industries analysed were: 1) Automobile and Motor Vehicles 2) Software 3) Steel, Metals and Mining 4) Pharmaceutical 5) Power 6) Petroleum & Gas The variables used to analyse the trends in the industry are as follows: 1) Total Forex Earnings / Total Revenue 2) Raw Material Imports / Total Imports 3) FCCBs / Total Borrowings The total earnings in foreign currency were taken as a proxy for the receivables of a company, the raw material imports were the proxy for the receivables and the FCCB represents the external debt of a company. Based upon the above parameters a number of trends were observed.

The Steel, Metals and Mining industry (Exhibit 15) is highly dependent upon the import of raw materials and they have hedge reserves for Copper, Gold, Silver and other metals in a number of currencies like USD, EUR, CHF, BRL, and YEN. The Pharmaceuticals sector (Exhibit 16) is characterized by high payments for technology and high external debt financing because pharmaceutical companies like Cipla, Sun Pharmaceuticals find raising debt in the countries of their vendors cheaper. 4.0 EXPLANATION OF MODEL A univariate analysis was conducted which was conjectured by a random effects panel regression. The random effects panel regression assumes that there are no individual returns on panel data. In the univariate analysis, the variable considered was the total annualized returns; the market being a forward looking market, time lags were studied to know the variation explained. Here, stock market annualized returns are regressed as forward indicators on forex related variables. After the data collection, the data was organized and compiled, followed by smoothening. Since Rupee suffers from volatility and US Dollar is the vehicle currency; all the data points were converted into USD, by using average currency rates. As a way to remove the outliers in the model, the companies whose data was not available even for a single time period were excluded. To replace such companies, data points were drawn of companies which are present in the BSE 200; in a decreasing order of their market capitalization. (Author remarks: Difficulties were faced during data collection. Researchers and readers are advised to leave banking sector companies, for the analysis) The banking sector and IT sector companies behave differently as compared to other companies in the BSE 30. For IT companies, contradictory data points were found on CMIE Prowess, which led to their elimination from the analysis. Also, since the banking sector suffers from heavy regulations and has reserve requirements to meet, its data points were excluded.

The automobile sector had limited earnings from abroad (Exhibit 13); however they borrowed heavily from the foreign markets. This could be attributed to M&A activities that most of the Indian automobile companies have done in the recent past and are exposed to the global market. Additionally, major companies like Mahindra & Mahindra and Maruti Suzuki have entered currency swap agreements to streamline their cash flows.

Dependent Variable: Annualized total returns.

Software companies (Exhibit 14) in India are primarily dependent upon foreign currency. They seem to go in for options and are seen taking put options primarily as they anticipate the Indian currency to depreciate further than its current levels.

Independent variables: FCCB/ Total borrowing (%), Raw material imports/Total raw material purchases (in % terms), total forex earnings/total income (%), net revenue in forex (USD million), net forex flows (USD million), total net forex earnings (USD million)

Hypothesis: The forex risk of a company for the current time period (T) depends upon the annualized stock returns for the previous time period (T-1) Total returns (period T) are a function of its lagged values, starting from period (T-1)â&#x20AC;Ś till (T-n)th period.

ART= 0.004048+ 0.023569 (FCCB Ratio) -0.01227 (imports ratio) -0.26104 (AR (T-1)) The regression analysis was conducted using the software-Eviews. The output (Table 1) is as below:

An important finding which is related to the field of finance and research methodology was that even the R-squared is not the last measure to know the explanation power of a regression. Even though the R-squared value for our analysis is lower, it does not degrade the explanation given by the model.

Table 1:Eviews Regression Analysis Output

Variable

Coefficient

Std. error

t-statistic

Probability

Constant

0.004048

0.00344

1.176774

0.2413

FCCB Ratio

0.023569

0.006692

3.521885

0.0006

FX Earnings Ratio

0.00718

0.007688

0.933972

0.3519

Imports Ratio

-0.01227

0.006087

-2.0163

0.0456

Annual Returns

-0.26104

0.07984

-3.26959

0.0014

Here the independent variables that were found significant were the FCCB Ratio, imports ratio and the lagged value of total returns. The below graph (Figure 1) explains the regression analysis and the line of fit:

Reason: In the field of financial management, a paper written by Dr. Tarun Khanna and M. Palipu, related to foreign exchange risk management has laid down the foundation of the quantitative modelling here. In their paper, they have proved that despite a low R-squared; the theory is derived from a particular panel regression model. Also, R2 is not the only measure on which we should rely to know the regression model. Probabilities for Fisher tests in the Excel sheet are computed using an asymptotic Chi-square distribution. All other tests assume asymptotic normality. 5.0 KEY FINDINGS & INSIGHTS 1) Large Cap are already hedging their forex risk well, while Small and Mid Cap companies need to adopt appropriate strategies. 2) The dependence of companies on external debt as a source of financing has been gradually decreasing over the years.

Figure 1: Regression Analysis Line of Fit The normality stands at 1%. When the residuals were studied to know in case of any autocorrelation, by using tests like Jarque Bera Test, panel unit root test, it was found that there was no autocorrelation (Figure 2). 20

Series: Standardized Residuals Sample 2007 2012 Observations 147

Mean -6.14e-19 Median 2.26e-05 Maximum 0.057869 Minimum -0.068462 Std. Dev. 0.022244 Skewness -0.279624 3.911285 Kurtosis

12 8 4

Jarque-Bera 7.002097 Probability 0.030166

0 -0.06 -0.04

-0.02

-0.00

0.02

0.04

0.06

Figure 2: JarqueBera Test output 26

3) Stock returns are positively correlated to external debt financing and negatively correlated to the import of raw materials. 6.0 CONCLUSIONS 1) Forwards and Options Contracts are preferred for short-term hedging while Currency Swaps and futures are used for long-term hedging. 2) Change in regulations has helped Indian companies write option contracts including call, put, cross currency and range-barrier options. 3) Study of combination of size of organization and non-hedged exposure of firms reveals that foreign borrowings on Capital Account acts as a damper for companies.

800,000,000 700,000,000 600,000,000 500,000,000 400,000,000 300,000,000 200,000,000 100,000,000 0

! RBI is pondering over Full Capital Account

Convertibility. It says, “It is not an event, but a process”, it shall take its due course depending on the development of financial markets. So the corporate firms should watch out for the same. ! Indian software companies which are hugely

dependent on foreign income for their revenues should enter into forward contracts. ! Capital intensive companies like those in the

petroleum and mining sectors that are hugely dependent upon import of raw materials should raise external debt through FCCBs from the countries in which they source their goods.

2008-2009

2009-2010

7) For large cap companies, the concern is higher for the Revenue Account than the Capital Account. 7.0 RECOMMENDATIONS ! Small and Mid-Cap companies should adopt derivative instruments to hedge their foreign currency risks as they increase the reach of the scope of their operations.

Currency Futures Currency Options

2010-2011

6) The small & mid-cap companies have not been able to benefit and have high un-hedged exposure.

Exhibit 1: Number of contracts in Derivative Market

2011-2012

5) The problem is faced by mid-cap companies majorly like Sesa Goa & Suzlon Energy.

8.0 EXHIBITS

2012-2013

4) The large cap companies in India are tied over exchange rate volatility despite FCCB borrowing because they are deep pocket companies.

Exhibit 2: Systemic Risks perceived by Market Participants: (Source: CMIE Prowess) Risk from infrastructure sector Regulatory risk Corporate risk Capital flow Interest rate risk Perceived slowdown in policy reforms Domestic slowdown Funding risk High current A/c deficit High inflation Fiscal risk Global risk Asset quality Market volatility Others

Exhibit 3: Break-up of Foreign Exchange Reserves: A sign of market volatility

! Interest rate and currency rate swaps should be used by

should be documented so as to guide and keep the managers aware of their objective at all times.

290000

300000

280000

250000

270000

200000 260000 150000 100000

250000

50000

240000

230000

SDR’s Gold Foreign Current Asset

r/ 1 Ju 1 n/ Au 11 g/ 1 O 1 ct / D 11 ec /1 Fe 1 b/ 1 Ap 2 r/ 12 Ju n/ Au 12 g/ 1 O 2 ct /1 2

! Documentation of forex policy- The forex policy

350000

export oriented companies since it is the most costeffective instrument for hedging foreign debt risk. Similar to the Greenwich Framework for a sustainable forex management policy, we would like to suggest a framework which will help in appropriate risk hedging.

! Forecast forex exposure- Forex exposures should be

forecasted for every term and the actual exposure found should then be compared. The disturbance term should be thoroughly analysed to identify a pattern if any, which shall help in understanding the market behaviour. ! Competitive trading of

derivatives and use of automated systems to understand derivatives.

! Prudential accounting for counter-party risk should be

done.

Exhibit 4: Inter-sector Analysis: Company Strides Archolab

Tech Mahindra

(INR mm)

2011-12

2010-11

2011-12

2010-11

2011-12

2010-11

Debt Portion of FCCB

5,854

4,382

27,828

24,391

Loan Funds

25,664

20,098

11,266

11,827

214,188

246,481

Debt / Loan Funds (%)

22.8%

21.8%

13.0%

9.9%

Non-Hedged Reserve

11,372

11,802

7,074

6,183

INR 416,633

390,858

Reserves and Surplus

13,103

12,230

39,234

32,254

INR 420,497

344,270

Net Investment Hedge/ Reserves and Surplus (%)

86.8%

96.5%

18.0%

19.2%

99.1%

113.5%

Foreign earnings FOBs

6,326

4,552

Expense in Foreign Currency

20,834

17,616

INR 9,672

9,561

Revenue in Foreign Currency

24,351

16,377

47,074

42,087

INR 18,156

22,606

Total Revenue

25,772

17,611

55,879

52,690

INR 339,335

293,964

Earning FOBs/ Revenue (%)

24.5%

25.8%

Expense/ Revenue (%)

37.3%

33.4%

2.9%

3.3%

Revenue in Foreign Currency/ Revenue (%)

94.5%

93.0%

84.2%

79.9%

5.4%

7.7%

Forward & Derivative Contracts/ Options

Exposure to foreign currency risk

- USD - 92- Sell - INR(F)

- GBP - 279 - Buy - INR(F)

- USD - 527 - Buy - INR(F)

- EUR - 0.6 - Buy - AUD(F)

- GBP - 12 - Buy - INR(O)

- USD - 20 - Sell - INR(F)

- USD - 67 - Sell - INR(D)

- USD - 840 - Sell - INR(F)

- USD - 1,207 - Buy - INR(E)

- USD - 87 - Sell - INR(O)

- USD â&#x20AC;&#x201C; 335 - Sell - INR(D)

- Significant revenue coming from overseas constituting nearly 80% of the total revenues

- FCCB's taken with a conversion price of INR 730.5188

- Debt availed in foreign currency - Net investments in subsidiaries and joint ventures that are in foreign currencies - Exposure arising from transactions relating to purchases, revenues, expenses in foreign currencies

- Exposure to foreign currency translations (which account for nearly 25% of the entire interest expense)

- Monetary assets and liabilities denominated in foreign currency - Exchange rate differences arising on reporting of longter m foreign cur rency monetary

Currencies used for hedging

USD, AUD, EUR, CHF, ZAR, CAD, GBP, BRL, JPY, SGD

USD, GBP

USD, EUR, GBP

Strategies to hedge foreign currency risk

- Foreign currency forward contracts

- Forward Contracts and Currency Option Contracts

- Forward Contracts and Currency Option Contracts - Derivative contracts including interest rate swaps

- Derivative contracts in the nature of foreign currency swaps, currency options, forward contracts Comments

Tech Mahindra

Strides' derives over 90% of its revenue in foreign currency, exposing it to fluctuations in currency movements

Company had forward contracts worth INR 6,993 million as of March 2012 to ensure it is protected against currency movements

Increase in other expenses is primarily due to foreign exchange losses which needs to be hedged in key markets including Middle East, South Africa, Europe, China, Korea, SE Asia, SAARC countries

Exhibit 5.A: Total Foreign Earnings as a Percentage of Total Revenue 100% 90% 80% 70% 60% 50% 40% 30% 20% 10% 0%

99%

95% 94% 83% 86%

83% 87%

96% 79%

80%

99%

95%

74%

94%

Exhibit 8: Business Geographies for TCS, Infosys and Wipro

TCS

99%

80%

74%

65%

61%

USD

EUR GBP

59%

16%

AUD 2007

A D F Foods Ltd.

2008

2009

F C S Software Solutions Ltd.

2010

INR 8%

JR S Software (India) Ltd.

Jayant Agro-Organics Ltd.

Others

Exhibit 5.B:ForeignInterest Earned / Total foreign exchange earnings (%) 8% 7% 6% 5% 4% 3% 2% 1% 0%

Infosys 7%

5% 5% 3%

3% 3%

USD

EUR

7% 2007

2008

Alps Industries Ltd.

2009

Hi-Tech Gears Ltd.

2010

73%

2011

AUD

S Kumars Nationwide Ltd.

I C S A (India) Ltd.

GBP

INR

Exhibit 6: Growth in assets of SCBs (scheduled commercial banks): 20 18 16 14 12 10 8 6 4 2 0

Wipro

90.00%

80.00%

10%

70.00%

USD

60.00% 50.00% 40.00% 30.00% 20.00% 10.00%

Foreign Bills purchased and discounted

EUR

Total Bank Credit % of foreign credit over total bank credit

GBP 12%

0.00%

59%

AUD

Ja n/ 1 Fe 2 b/ M 12 ar /1 O 2 ct / M 12 ay /1 Ju 2 n/ 12 Ju n/ 1 Au 2 g/ 1 Se 2 p/ 1 O 2 ct /1 2 N ov 12

INR 9%

Others

Exhibit 7: Main markets for Indian IT Companies

Sales 13%

2% US

UK 18%

60%

Asia Pacific Continental Europe Rest of the World

Exhibit 9: Forex Deals of TCS: Outstanding Currency Options Contract 31-12-2011 Foreign Currency

31-03-2011

No of Contracts

Notional Amount of Currency Option contracts

Fair Value (in crores)

No of Contracts

Notional Amount of Currency Option contracts

Fair Value (in crores)

USD

1035

-619.23

145

-39.52

Pound

35.35

8.64

Euro

22.59

149

1.06

Outstanding Currency Forward Contract: 31-12-2011 Foreign Currency USD

31-03-2011

No of Contracts

Notional Amount of Currency Option contracts

Fair Value (in crores)

No of Contracts

Notional Amount of Currency Option contracts

Fair Value (in crores)

-32.21

Exhibit 10: Forex derivative transactions for Infosys 31-12-2011 Forward Contract outstanding

31-03-2011

in Million

in Rscrore

in Million

in Rscrore

in USD

677

3445

500

2230

in EURO

136

127

in GBP

163

in AUD

121

254

Options Contract Outstanding In USD

4119

2475

Exhibit 11: Forex derivative transactions for Wipro As of March 31 2012 (in millions)

2011 (in millions)

Dollars

1081

901

Yen

1474

3026

Australian Dollar

CHF

Euro

24511

Others(Dollars)

262

Euro

Dollars

541

526

GBP

Euro

Australian Dollars

Dollars

555

617

Yen

1997

Cross Currency Swaps(Yen)

7000

Designated cash flow hedging derivative instruments Sell

Net Investment hedges in foreign operations Cross Currency swaps(Yen)

Non Designated Derivative Instruments Sell

Buy

Exhibit 12: Differences in approach Particulars

TCS

Infosys

Wipro

What do Companies Hedge?

100% receivables and net revenues(2 quarters currently)

Net receivables only don't go over 100%

75-125% of receivables, 5-75% of next 4 quarters net inflows, some long term contracts, debts

Who decides the hedging policy?

Risk management committee

Risk management policy is presented to the audit committee

Tenure of hedges

Usually 6 mths

1-2 quarters

Within a year ,immediate quarter maximum hedged

Forwards vs options

Largely options

forwards

Predominantly forwards

Exhibit 13: Forex derivative transactions: Automobile & Motor Vehicles Automobile & Motor Vehicles

10.00

0.60 0.50

8.00

9.0 REFERENCES ! A Siva Kumar & R Sarkar; 2007; “Corporate Hedging for Foreign Exchange Risk in India”; 'http://veetrag.net/veetFiles/VeetragK_IT_Industry _In_India.pdf', accessed as on 12th November 2012

0.40

6.00

0.30 4.00

0.20

2.00

0.10

0.00

0.00 2006

2007

2008

Total forex earnings/Total income (%) FCCB/ Total Borrowing

2009

2010

2011

2012

Raw material imports / Raw material purchases (%)

! Business Standard; http://www.business-

standard.com/india/news/imf-cuts-2012-gdpgrowth-forecast-to-49/489121; accessed on 7th December 2012 ! Capital Markets; December 2012; “India Economic

Review”; “http://capitalmarket.com/ier”; accessed as on 12th December 2012 Exhibit 14: Forex derivative transactions: Software- IT & ITes Software-IT & ITes

100.00

! Clare, Andrew.; September 2010; “Hedging

corporate bonds with Stock Index Futures”; “Journal of Fixed Income”; Vol. 10 Issue 2; pp.25-34

0.30

! Company related data has been sourced from their

75.00

0.20

50.00 0.10

25.00

0.00

0.00 2006

2007

2008

2009

2010

2011

2012

Total forex earnings/Total income (%) Total forex earnings/Total income (%) FCCB/ Total Borrowing

respective websites, CMIE Prowess, Bloomberg, and websites of NSE & BSE. ! D. Sarker, A. Ghosh; September 2007; “A Study of

Market Efficiency and Volatility in the Indian Stock Market, Foreign exchange Market and Bullion Market”; Finance India; 'Business Source Complete, Ipswich, MA, Serial Number: 21(3):987-1002 ! Dr. Jagdish Bhagwati & Dr. Subir Gokarn (former

Exhibit 15: Forex derivative transactions: Steel, metals & construction Steel, Metals & Construction

50.00

0.40

40.00

0.30

30.00

0.20

20.00 0.10

10.00 2006

2007

2008

Total forex earnings/Total income (%)

2009

2010

2011

Made Worse By lack of Effective Hedging Strategies”; Credit Union Journal; 'Business Source Complete, Ipswich, MA, Serial Number: 14(29):22 ! Reserve Bank of India:

2012

Raw material imports / Raw material purchases (%)

FCCB/ Total Borrowing

Exhibit 16: Forex derivative transactions: Pharmaceutical Industry Drug Formulation

30.00 25.00 20.00 15.00 10.00 5.00 2006

2007

2008

2009

2010

2011

2012

Total forex earnings/Total income (%) Raw material imports / Raw material purchases (%) FCCB/ Total Borrowing

! R. Birch.; July 2010; “Corporate's Losing Wager

0.00

Deputy Governor, RBI) ; November 2012; “Developments in the World Trading System: India's Options”; 7th Commencement Day Annual Lecture - Exim Bank

0.80 0.70 0.60 0.50 0.40 0.30 0.20 0.10 0.00

“http://rbi.orgin/scripts/BS_ViewBulleinin.aspx?Id =13830”and “http://rbi.org.in/scripts/BS_SpeechesView.aspx?Id =759”; accessed on 25th December 2012.

Arun Narayanan, Biswarup Saha, Chandra Shekhar Satpathy, IIM - Kozhikode KEYWORDS e-tailing, Show-rooming, Shipment Tracking, Delivery Scheduling

ABSTRACT The Indian online retail industry has been growing at a sturdy pace showing great promise for investors. Online retailers, especially apparel retailers have to ensure an in-person shopping experience. This has led to many innovations like cash-on-delivery, product trial etc. However, most retailers focus on pre-purchase activities for customer acquisition. Post purchase and product return is an essential part of the overall purchase experience. This paper explores the need and wants of customers with respect to post purchase and product return and the level of service expected from online retailers.

1.0 INTRODUCTION Online retail in its second innings, starting from 2007 onward, has made it big in India. The size of the Indian online retailing in 2012 is estimated to be US$10 billion.1 However, online retailing, as a percentage of total retailing is still small compared to other developed and developing countries. Exhibit 1 shows the comparison. Exhibit 1 E-tailing as a percentage of retail, 2011 14

13.2

7.3 3.8

3.4

0.1

0 US

China

Japan

1.1 APPAREL E-TAILING Apparel segment has seen a significant growth in the country. The major reasons attributed to the growth are lack of time, lifestyle change, convenience, etc. In the last two years, apparel e-tailers have secured US$70 million of investment, that is, 40% of the total investment in retailing.4

a) Multi-brand e-tailing â&#x20AC;&#x201C; These e-tailers, sell multiple brands on the web site. These include Myntra.com, Jabong.com, etc.

6 4

Currently, the top 8 metros account for 41% of internet traffic. However, in 2015, it is expected that 37% of the traffic will be derived from cities with a population of less than 0.5 million.3

Apparel retailing takes one of the three prevalent forms in the country:

12 10

RESEARCH PAPER

Enhancing Post-Purchase And Product Return Experience Of Customer From Online Apparel Retailers

Germany France

India

Source: The Economic Times In India, e-tailing represents only 0.1% of total retail compared to 3.8% for China. However, India is poised to grow with the industry size projected to be US$200 billion by 2020 representing 8-9% of total retail in India. Leading this growth is the apparel segment. There are a number of factors which are responsible for the growth of e-tailing in India. Internet penetration has reached 22.39 million connections in December 2011 with estimated users in excess of 121 million.2 Also number of smart phone users in the country is on the rise which is due to availability of cheap hand sets and low data usage cost. Moreover, the benefits of online shopping are being realized by residents of small towns.

b) Branded e-tailers â&#x20AC;&#x201C; They are those which own brands and have physical stores and have now gone online. Examples are Zovi.com, ShoppersStop.com, etc. c) Niche e-tailers â&#x20AC;&#x201C; They sell very specific product for select segments. Example, FirstCry.com (baby products), Cbazaar.com (bridal fashion), etc. The average Indian consumer has been experiencing increasing time-poverty these days. People have been spending more time commuting to and from their offices, on leisure and recreation, on vacations, in grooming and maintaining their well-being, socializing, teaching schoolgoing children etc., leading to limited time availability for shopping and such activities. There is an increasing emphasis on reducing the stress and time taken for routine activities (household chores/ shopping etc.) and maximizing the time spent with families and friends. Convenience in terms of ease and time, information, decision -making, transactions and flexibility have been

major factors in influencing adoption of e-commerce. These factors to a large extent also play out for apparel e-tailing. Increasingly consumers feel stressed to drive to a crowded mall and navigate through it to buy a garment. Rather, they prefer the convenience of shopping at home and getting the goods home-delivered. For them, this allows comparison of designs and prices at their leisure, and in the privacy of their homes, without having to deal with either hovering sales staff or the rush of the stores. The Internet's ubiquity gives online brands the capability to reach all Indians, even those with no access to an online payment facility, as most brands offer Cash-on-Delivery (COD) options, offering them the luxury of seeing the product before making payment for it. Infact, COD has been a one of the big factors for online retailing to take off in its second innings in India (first being in the year 2000). 1.2 CONSUMER BEHAVIOR Indian consumers are very different from consumers of developed countries. The online retail industry has come up with some very innovative practices to tackle these differences in behavior and hence helped the industry grow. When e-tailing began in Indian in the early 2000s, very few people had credit/debit cards. This presented the problem of payment and hence limited the growth. However, when cash-on-delivery was introduced, the industry witnessed an exponential growth. Indian consumers also like to physically inspect the item they want to buy before purchasing it. This is more prevalent and applicable to the apparel segment than any other segment. This has given rise to the phenomenon of show-rooming. In a comScore survey, 12% of the respondents had heard of show-rooming. About 1 in 10 had aided awareness of the phenomenon. Show rooming is the phenomenon in which a customer first visits a brick-and-mortar store to see a product but purchases the product online. Shoppers may intend from the start of their product search to purchase the product online, or may decide to purchase online after viewing the item at the store. In the comScore survey, 35% of the respondents had 1 engaged in show-rooming while 43% of millennials had engaged in the same. 6 in 10 respondents say that they decided to purchase online after visiting a store while 32% do it intentionally. Not surprisingly, 43% of the respondents engaged in show-rooming for apparels, second only to consumer electronics with 60% of the respondents. The major reason cited by the respondents

Exhibit 2 Top reasons for consumer engaging in showrooming 41%

Prices were better online Planned to buy online but wanted to check the item in store first Items were out of stock

26% 14%

Would rather have items shipped to home than take it back with me

10%

Was not convenient to buy in person at at that time

10%

0% 5% 10% 15% 20% 25% 30% 35% 40% 45%

Source: comScore.com (72%) for engaging in show-rooming is that products purchased from online are cheaper. The other major reasons are shown in Exhibit 2. These statistics clearly provide a consumer insight which the apparel e-tailers in India are looking forward to exploit. Multi-brand retailer, Myntra.com recently launched the “Try and Buy” campaign. Zovi.com launched a virtual show room. ShoppersStop.com, Momandme.com and Caratelane.com follow the clickand-mortar format of retailing. The retailers want to give the consumers a “touch and feel” experience. These are their efforts to cash in on the Indian consumer behaviour and show-rooming. Let us briefly examine how these have worked out for the retailers. 1.3 MYNTRA.COM Myntra.com is an online shopping retailer of fashion and casual lifestyle products, headquartered in Bangalore. They started off as sellers of personalized products like tshirts, but now have become a multi-brand apparel and accessories e-tailer. In June 2012, Myntra launched its third campaign “Try and Buy”. It was created by Taproot, the communication emphasizes the benefits of buying online, and is titled 'Real life mein aisa hota hai kya'. Myntra offers free shipping, cash on delivery, 30 day return & 24 hours dispatch.5All these benefits are associated with in-person buying with the incentive of low prices. As a result of this, Myntra.com recorded a substantial increase in daily page views. Figure –1 compares Myntra.com and Jabong.com daily page views (percentage) over a period of two years.

Launch of the â&#x20AC;&#x153;Try & Buyâ&#x20AC;? campaign by Myntra.com

Source: Alexa.com Figure 1 - Estimated percentage of global page views on myntra.com and jabong.com From the above figure we see that the daily page views of Myntra.com increased after the launch of the campaign while that Jabong.com came down rapidly. In the past 3 months, daily page views of myntra.com has increased 6 14.8% while that of jabong.com has come down by 7 11.37%. 1.4 ZOVI.COM Zovi.com, a popular online shopping website in India, currently sells formal & casual shirts, pants, belts, shoes, laptop bags, ladies handbags, jeans, footwear, watches, fashion jewellery, trousers, jackets etc, was launched in July 2011. It sells in-house designed labels. The biggest challenge for Zovi is to differentiate itself from a dime-adozen me-too brands that have cluttered the online space over the last few months.

As we can see from the results, 60% of the 232 respondents believed that it was a great idea. Zovi.com did exactly that and the results are evident from the daily page views. There has been a growth of 13.5% in the last 3 months in page views after the launch of the campaign. The virtual trial room has worked well for Zovi. Monappa Nanlyanda, Zovi's marketing head said, "There has been a jump of over 25% in conversion rates since we launched the virtual trial room," 1.5 SHOPPER'S STOP Shoppers Stop is an Indian departmental store chain promoted by the K Raheja Corp Group (Chandru L Raheja Group), started in the year 1991 with its first store in Andheri, Mumbai.8 In 2011, it had 53 stores across India. It sells a variety of clothing and other accessories. In order to leverage the growing online retail space, it launched its e-store with delivery across major cities in India in 2008. The website retails all the products available at Shoppers Stop stores, including apparel. Figure - 2 shows the steady increase in the online portal of the store. Online jewellery retailer CaratLane, which opened its first offline store in Delhi in April this year, explains that an offline presence helps in building a stronger personal relationship with consumers by giving a human face to the brand.1

In one personal survey, which had 232 responses, the respondents were asked, how important was the concern that one could not physically examine the products you purchase online. 86 of the respondents said that is a very important concern while an equal number said it was somewhat a major concern. Only 10 respondents said that it was absolutely unimportant. Keeping this in mind, they were asked how important a 3D virtual showroom would address the concern of lack of physical evidence of the product being purchased. Exhibit 3 summarizes the result. Exhibit 3 Response to the importance of 3D virtual showroom by online retailer 45 40 35 30 25 20 15 10 5 0

17 4

Very Important

Important

Neutral

Unimportant

Absolutely Unimportant

Source: Alexa.com Figure 2 - Estimated percentage of global page views on ShoppersStop.com Indian consumers, in an in-person purchase from a brickand-mortar shop, have the liberty to return the product if unsatisfied with its performance, or in case of apparels, its fittings. Although many of the retailers have product return policy, there is yet to be an innovation in this regards, like cash-on-delivery, which enhances the online shopping's post purchase and product returns experience of the customers. A primary research was conducted in order to delve into the psyche of the Indian consumers and find a marketable consumer insight which can help online retailers enhance the post purchase experience of the customer. (See Section 2.0) 35

1.6 POST PURCHASE & PRODUCT RETURN Literature suggests, that from the moment a customer decides to buy a product online, his/ her post purchase experience starts. Therefore post purchase experience includes, browsing for more products after a purchase decision, check out, payment, product tracking and subsequent delivery. Product return experience starts when, the customer is not happy with the product and decides to return the product. It includes the decision, the process of returning and subsequent refund/ replacement.

Source: Comscore Figure 3 â&#x20AC;&#x201C; Age distribution of internet users in India

2.0 PRIMARY RESEARCH As mentioned before, a primary research was conducted to enhance customers' post purchase and product return policy. The survey had 102 valid respondents of which 75.25% were male and 24.75% were female. The age distribution is shown in Exhibit 4. The age group of the target audiences is appropriate for research since they are the largest internet users, and in turn online buyers, in the country. Moreover, these age groups are poised to grow in the future as shown in Figure â&#x20AC;&#x201C; 3. The family income distribution of the respondents is shown in Exhibit 5.

Exhibit 4 Age distribution of the respondents (%)

Of the total respondents, 91.15% had made online purchases. Therefore they were asked about certain factors and their importance in enhancing their post purchase experience. 2.1 FACTORS IMPORTANT TO CUSTOMERS DURING POST PURCHASE Multiple factors that influence the level of satisfaction of customers purchasing fashion products online were tested and a comparative study was conducted. The factors obtained were vetted later by discussions with respondents via focus group discussions and in depth interviews. The factors in their perceived degree of importance to the respondents are as mentioned in Exhibit 6. Exhibit 6

100

Post purchase factors important to customers

78.22

80 60

Ability to track the order online

14%

24%

21.78

20 18%

Ease of making returns and exchanges

20-25

26-30

22% 22%

Exhibit 5 Family income distribution of the respondents (%)

Clear return policy mentioned explicitly on the website

Flexibility to choose delivery dates Flexibility to re-route packages to another destination

Thus, respondents rated the given factors in their perceived degree of importance: ! 24% of the respondents felt that being able to track

35.64 30.69

30 20

18.81

their orders online was the most important factor after they had ordered for a product ! 22% felt that a clear returns policy and ease of the

14.85

returns and exchange process was next in the order of importance

10 0 <3 lpa

3-5 lpa

5-10 lpa

>10 lpa

! Flexibility to choose delivery dates was then rated next

in the order of importance by 18% of the respondents ! 14% felt that if items were allowed to be re-routed to

another destination, this would be very convenient

Next, how customers reacted to each of these factors was analyzed. Please note that the figures written on top of the bar charts are in percentages. Factor 1 – Ability to track the order online 97% of the respondents felt this was very important to them after they had placed an order for a product. With very few disagreements, this definitely is something online fashion retailers must be careful about. 60

53.92

50 40 30

30.39

14.7

0 Extremely important

Very important

Somewhat important

Neutral

0.98

Very Not at all Somewhat Unimportant Unimportant important

Factor 2 – Clear return policy mentioned explicitly on the web site In online fashion products purchase, returns were cited as very important to buyers due to possible reasons of size mismatch, the colour and attributes shown on the web not being the same to the delivered item among others. Again about 94% of the respondents felt that clear and explicit returns policy mentioned was important to them and increased the credibility of the retailer. 60 49.02

50 40 30 20

28.43 20.59

3.92

0 Extremely important

Very important

Somewhat important

Neutral

0.98

Very Not at all Somewhat Unimportant Unimportant important

Factor 3 – Ease of making returns and exchanges Consistent with the above finding, around 90% felt that returns process should be easy and hassle free for an overall smooth experience 60 49.02

50 40 30 20 10

5.88

2.94

0 Extremely important

Very important

Somewhat important

Respondents who made such purchases were mainly working professionals and living single. Thus, for them it was important that the order that was to be delivered, to be delivered where they were i.e. either home or office. About 65% of the respondents said that this facility would be very convenient for them. 40.00 35.00 30.00 25.00 20.00 15.00 10.00 5.00 0.00

34.31 21.57 16.67 9.80

4.90 Extremely important

Very important

Somewhat important

Neutral

Very Not at all Somewhat Unimportant Unimportant important

! Gift packing ! Reassuring customer service on call ! Should be able to deliver product after order is placed.

Sometimes after the order is placed, they send regret mails. ! Ability to track and smooth experience ! Timely delivery ! Keeping the user updated when the delivery package changes hands via email, SMS, etc. 2.3 TRACKING OF ORDERS MADE ONLINE Having established, that tracking orders made online are important factors for a customer, from previous literature review, the respondents were given various options of tracking and asked to rate them on the basis of importance.

Exhibit 7 Preferences for tracking of orders made online

23%

32.35

A text message alerting me when my shipment will be delivered E-mail or SMS Tracking notification with a tracking number Ability to track shipment with mobile service

19% 21% 19%

Ability to track shipment directly on the retailer’s website An easy to find customer care number which I can call

12.75

0.00

Very Not at all Somewhat Unimportant Unimportant important

! Choice for mode of payment

18%

81% of the respondents wanted the freedom to choose flexible delivery dates to match their schedule at office. 35.29

Neutral

2.2 OTHER FACTORS THAT RESPONDENTS FELT WERE IMPORTANT Other than the above factors, respondents were asked to list any other factors which they considered important. The responses recorded were:

Factor 4 – Flexibility to choose delivery dates

40.00 35.00 30.00 25.00 20.00 15.00 10.00 5.00 0.00

12.75

Refer to Exhibit 7 for the result

22.55

19.61

Factor 5 – Flexibility to re-route packages to another destination

5.88 0.98 Extremely important

Very important

Somewhat important

Neutral

0.00

Very Not at all Somewhat Unimportant Unimportant important

The following options are stated in the order of convenience to the customer: 37

! 21% of the respondents felt that SMS confirmation of

Extremely Inconvenient

the order or of any delay in the order was the most convenient for them

Very Inconvenient

0.00

Somewhat Inconvenient

0.00

! A tracking identification number of the courier service

Neutral

shipping the item over e-mail/ SMS was rated next in terms of convenience

Somewhat Convenient

! Ability to track the shipment with the convenience of

Extremely Convenient

would call up on the customer care number to know the status of the order. This emerged as the least preferred option. Delving deeper into each of the options following was found: Option 1 – A text message alert when shipment will be delivered

6.86 32.35 36.37

Very Convenient 23.53

0.00

their mobile device or on the retailer's website was deemed next in order of importance ! Finally, as the last option, customers said that they

0.98

5.00

10.00

15.00

20.00

25.00

30.00

35.00

40.00

Option 4 – Ability to track shipment with mobile device With the ever increasing popularity of smart phones, order tracking with the help of mobile phones had a significant level of acceptance, with about 87% of the respondents being positive on this. Extremely Inconvenient 0.00 Very Inconvenient 0.00

Around 93% of the respondents said that an SMS alert is very convenient for them to know about the status of the order.

Somewhat Inconvenient

0.98

Neutral

11.76

Somewhat Convenient

Extremely Inconvenient

0.00

Very Convenient

Very Inconvenient

0.00

Extremely Convenient

Somewhat Inconvenient

1.96

Neutral

24.51 37.25 25.49

0.00

5.00

10.00

15.00

Somewhat Convenient

25.00

30.00

35.00

40.00

16.67 24.51

Very Convenient

51.96

Extremely Convenient 0.00

10.00

20.00

30.00

40.00

50.00

60.00

Option 2 - E- mail or SMS tracking notification with a tracking number The next option that was rated 2nd in terms of importance while tracking the order was that of receiving the tracking number of the shipment with the carrying courier. About 95% of the respondents felt this was a very convenient option.

Option 5 – An easy to find customer care number on which one can call A large percentage of customers found it tedious to contact a customer service agent to know about the status of the order. The major reasons stated were the unavailability of agents and large amount of time taken to respond to the call. Extremely Inconvenient

0.00

Very Inconvenient

0.98 11.76

Somewhat Inconvenient Neutral

Not at all important

0.00

Very Unimportant

0.00

Somewhat Unimportant Neutral Somewhat Important Very Important Extremely Important 0.00

10.78 17.65

Somewhat Convenient

30.39

Very Convenient

28.43

Extremely Convenient

1.96

0.00

2.94

5.00

10.00

15.00

20.00

25.00

30.00

35.00

23.53 31.37 40.20 5.00 10.00 15.00 20.00 25.00 30.00 35.00 40.00 45.00

Option 3 – Ability to track shipment directly on the retailer's website 92% of the respondents surveyed said that being able to see the status of the order on the retailer's website was very convenient for them.

20.00

4.90

2.4 RECOMMENDATIONS ! Post product shipment, the customer's touch point is the courier service provider. Hence the first step of ensuring a better post purchase experience would entail a better understanding between online retailers and the courier service provider. Online retailers should forge a long-term relationship with its courier partners with clear understanding of online retailers' expectations from them.

! The future-proof tracking system would involve the

ability to track parcels real time using GPS. However, this would involve incurring a large cost, both by the courier service provider as well as online retailers, which would ultimately be passed on to the customer. One of the lures of online shopping is the low prices, hence this option is not recommended. ! Considering the change in internet access point, online

Exhibit 8 Preferences of delivery scheduling & routing Scheduling a late delivery (Between 5pm to 8pm)

16%

Giving special delivery instructions (Leave at back door, Leave in garage etc.)

19%

retailers should ensure seamless tracking across multiple platforms (like, laptops, smartphones, etc.)

21% 20%

! Drawing from the findings of the survey, online

retailers must instruct its courier delivery service provider to SMS the customers about the tentative time of delivery on the day promised by online retailers. Customers already know the date of delivery during the purchase. Hence the SMS should inform the time of delivery on the given date. This SMS can be sent by the service provider in the morning of the actual date of delivery.

Rerouting delivery package to another address

24%

Choose “ Leave with neighbour option” Choosing the most economical delivery option even if it means waiting for a longer duration

! Again because of the profile of the majority of the ! shoppers being office goers, they prefer a re-routing of

the package to where they are; they said it would be convenient if they are contacted by the delivery person on the day of delivery and are asked where to deliver

! A large proportion of the respondents (21%) like to

! A new suggestion that was tried out, offering the

continuously track the shipment. Although a tracking number is provided upon processing the order, couriers generally don't update the interim location of the shipment on their websites. It updates only once the parcel is delivered. Online retailers should choose a courier which would ensure continuous updating of shipment location on their website.

option of delivering to neighbors or depositing at some specific place in the absence of the customer at his shipping address was accepted convincingly by respondents

! A customer must generally go to the courier service

provider for tracking their parcel. Once the tracking number is generated the same should be posted next to the order as hyperlink to the courier service provider website. ! Maintaining a customer care department is costly.

Moreover, a minor 18% of the respondents preferred this mode of tracking. Also, customers call a customer representative only when he/she cannot reach the retailer online. In the long run, online retailers should strive to be independent of a physical customer care department. In the short run, online retailers should maintain a minimum number customer care representatives and invest in building a flawless, quick response virtual customer care service. 2.5 OPTION OF FLEXIBILITY IN DELIVERY Having established that customers prefer the flexibility in delivery options, it is imperative to understand what options customers find are most convenient for them. Exhibit 8 illustrates the same which is by the outcome of the conducted survey. ! Given that the majority of online shoppers purchasing

! However, customers turned out to be fewer prices

sensitive and refused to choose the cheapest option if the delivery time was more. Further analysis of the various options yielded the following: Option 1 – Scheduling a late delivery (between 5 pm and 8 pm) About 85% of the respondents said they would prefer a late delivery after their office hours so that it is convenient for them to take delivery. 1% 2% 0% 20%

14%

Extremely Convenient Very Convenient Somewhat Convenient Neutral

27%

Somewhat Inconvenient

36%

Very Inconvenient Extremely Inconvenient

Option 2 – Choosing the most economical delivery option even if it means waiting for a longer duration

fashion products are office goers, they prefer an evening delivery system between 5 p.m. to 8 p.m.

Although around 59% of the respondents agreed to a cheaper delivery option, on the scale of rating it as a preferred option, it got the least significance. 3% 1% 7%

Option 5 – Rerouting delivery package to another address Given that most shoppers are office goers, a substantial 80% of the respondents wanted the delivery person to contact them before delivery so that the desired location could be specified.

Extremely Convenient

15%

Very Convenient

2% 2% 1%

Somewhat Convenient

27%

Neutral

21%

12% 1%

16%

Extremely Convenient

Somewhat Inconvenient

26%

Very Convenient

Very Inconvenient

Somewhat Convenient

Extremely Inconvenient

Neutral

34% 33%

Somewhat Inconvenient Very Inconvenient Extremely Inconvenient

Option 3 – Giving special delivery instructions(e.g. leave at back door, leave in garage, etc.) This was a suggestion that was tried out and a significant 75% of the respondents agreed to this. They were ready to leave items of lower value deposited at garages or other specific places so that they could pick them up once they returned from office.

2.6 RECOMMENDATIONS ! 80% of the respondents would appreciate the flexibility to choose a delivery date while 65% would like to avail of the re-routing facility. This is in line with the fact that majority of shoppers are in the age group 25-35, and are office-goers. ! Online retailers should facilitate communication of

1% 0% 6% Extremely Convenient

13%

Very Convenient

18%

Somewhat Convenient

24%

Neutral Somewhat Inconvenient Very Inconvenient

38%

Extremely Inconvenient

delivery location between the customer and the courier service provider. Within the city of delivery, online retailers should give customers the flexibility of choosing the delivery location, 3 hours before the actual delivery of the shipment by the courier company or before the courier personnel leave their office for delivering, whichever is later. ! Online retailers should take special instruction

Option 4 – Choose “leave with neighbor option” This was a suggestion that was tried out and a significant 68% of the respondents agreed to this. They were ready to leave items of higher value deposited with their neighbors so that they could pick them up once they returned from office.

! Customers are less price sensitive when it comes to

time for delivery. However, any additional cost in delivering should be accounted for in the price of the product and not as additional shipment cost. Customers do not like to pay shipment charges.

2% 1% 6%

regarding delivery time from the customers and communicate the same to the courier. Many courier service providers already have the option of scheduling a shipment. Online retailers should act as an intermediary and advertise the service. As courier companies are already providing the service, no additional cost will be incurred.

11% Extremely Convenient Very Convenient Somewhat Convenient

26% 31%

Neutral Somewhat Inconvenient

23%

Very Inconvenient Extremely Inconvenient

2.7 ANALYZING PREFERENCE OF CUSTOMERS WHILE RETURNING A PRODUCT In the next part of the survey, the product returns experience of the customer was collected. This was done by 14.56% of the respondents who had made purchases online.

Overall perception about the retailer with easy returns policy Option 1 - I would shop more often with that retailer

The options according to their order of importance are shown in the Exhibit 9

100.00 78.57

80.00

2.8 PREFERRED CONVENIENCES DURING PRODUCT RETURNS What factors mitigated to an extent the dissatisfaction of receiving a product that did not match their choices?

60.00 40.00 20.00 0.00

14.29 0.00 Just like me

0.00 Likeme

Somewhat like me

Neutral

7.14

0.00

Not much Not like me Not at all like me like me

Exhibit 9 Measures taken when customer is dissatisfied after receiving the product Automatic refund for purchased once return has been made

About 93% of the respondents said that they would prefer to shop more with the retailer that had easy and user friendly returns policy.

12%

Automatic reimbursement of shipping charges incurred due to refund

17%

An easy to follow procedure for returning the item

12%

Option 2- I would recommend the retailer to a friend 70.00 60.00 50.00 40.00 30.00 20.00 10.00 0.00

64.29

An easy to print return label Multiple options available to ship back to the retailer

21.43 7.14

7.14 0.00 Like me

Somewhat like me

0.00 Neutral

Ability to return to a store in my city/town instead of sending back in a mail/courier

0.00

Not much Not like me Not at all like me like me

Word of mouth being a dominant method of customer dependent promotion, around 73% of the respondents said that they would spread positive word of mouth communication about the retailer who had an easy and user friendly returns policy. Option 4 - I would drop another retailer with less easy returns policy

! The most important factors are instant refund of

money after the item is returned and instant reimbursement of shipping charges incurred by customers. ! A returns label sent with the parcel delivered was

perceived as very convenient when compared to when customers had to print the label from the website ! A simple easy to follow returns policy gained favor

35.71

after this

28.57 21.43

! A new idea of letting the customers deposit the parcel

14.29 0.00 Just like me

0.00 Like me

Somewhat like me

Neutral

0.00

Not much Not like me Not at all like me like me

The next option about dropping another retailer who did not have an easy returns policy secured a more or less neutral response while the quality sensitivity of customers showed no change even if the returns policy was favorable. Option 5 - I would focus less on price and more on their service quality 40.00 35.00 30.00 25.00 20.00 15.00 10.00 5.00 0.00

A return level available right in the parcel delivered

15%

Just like me

40.00 35.00 30.00 25.00 20.00 15.00 10.00 5.00 0.00

17% 12%

at a pick up point in their city was suggested and that was next in the order of preference Looking at how respondents rated the options in detail we go to the next part of our analysis. Option 1 â&#x20AC;&#x201C; Automatic return for a purchase once return has been made

Not at all Important

0.00

Very Unimportant

0.00 7.14

Somewhat Unimportant Neutral

0.00

Somewhat Important

35.71

14.29

28.57

Very Important 14.29

14.29

Extremely Important

7.14 0.00 Just like me

Like me

Somewhat like me

57.14

Neutral

0.00

21.43 10.00

20.00

30.00

40.00

50.00

60.00

Not much Not like me Not at all like me like me

Option 2 – Automatic reimbursement of shipping charges incurred due to product return Not at all Important

0.00

Very Unimportant

0.00

Not at all Important 0.00

Somewhat Unimportant

7.14

Neutral

14.29

Somewhat Important

0.00 42.86

Extremely Important

35.71 05.00 10.00

15.00

0.00

Somewhat Unimportant

7.14 0.00 35.71

Very Important

42.86

50.00

Very Important

14.29

Extremely Important

14.29 10.00

20.00

30.00

40.00

50.00

60.00

Around 78% of the customers were happy with the idea of returning the product to a common collection point in their city/ town instead of sending it back by courier/ mail. Option 6– Multiple options available to ship back to retailer Not at all Important 0.00 Very Unimportant

7.14%

Somewhat Unimportant

7.14% 14.29% 28.57%

Very Important

21.43%

Extremely Important

21.43%

0.00

5.00

10.00

15.00

20.00

25.00

30.00

14.29

Extremely Important 0.00 05.00 10.00

15.00 20.00 35.00

30.00 35.00 40.00

A returns label slid along with the item being delivered is perceived as convenient by around 92% of the respondents. This saves the time and money of otherwise going and taking a printout of the label from the e-tailer's website. Option 4– An easy to follow procedure for returning the item Not at all Important

0.00

Very Unimportant

0.00

Somewhat Unimportant 0.00

14.29

Very Important

50.00

Extremely Important 0.00

21.43

10.00

20.00

Though rated low in importance, about 70% of the respondents still agreed with multiple options being made available to return the product. This was mainly because of certain courier services not being available in their city/ town. 2.9 DIFFICULTIES WHILE RETURNING PRODUCTS ONLINE Finally the respondents were asked what are some the difficulties they faced in returning the product. The responses recorded are as given in Exhibit 10. The figures given in the exhibit are in percentage terms and the total exceeds 100% as a respondent could choose multiple options.

14.29

Somewhat Important

30.00

40.00

50.00

60.00

A simple, easy to follow returns procedure is preferred to a complicated and long drawn out procedure by around 85% of the respondents.

7.14

Somewhat Important

Neutral

7.14

Neutral

0.00

Neutral

Somewhat Unimportant

0.00

Option 3– A return label available right in the parcel

Very Unimportant

7.14

20.00 35.00 30.00 35.00 40.00

As vetted by the degree of importance attached, 93% and 79% of the respondents feel that money must be reimbursed immediately towards the amount paid and of the returns fees borne by the customer. Fashion purchases being significantly high involvement items, they are pretty expensive and customers are thereby very sensitive about the money being refunded to their accounts.

Not at all Important

Very Unimportant

Somewhat Important

Very Important

0.00

Option 5 – Ability to return to a store in my city/town instead of sending back in mail/courier

Consistent with their preferences, the major concern was regarding the delay to get the credit/ refund for the item purchased. Customers were also upset with the fact that they were to pay for the shipping although it was not their fault that a defective item was being shipped to them.

Exhibit 10 Difficulties while returning products purchased online (%)

I couldnâ&#x20AC;&#x2122;t reach a customer service..

7.69 15.38

I had trouble getting the returned item to the...

69.23

It took me too long to get my credit /refund I had to pay a restocking fee

7.69 61.54

I had to pay for return shipping

0.00 10.00 20.00 30.00 40.00 50.00 60.00 70.00 80.00

Recommendations ! Major concern for customer (69% of respondents) after a product return is refund of money. Online retailers should ensure speedy refunds with clear information about any deductions, if made. ! The metro cities and other Tier-1 cities are where the largest percentage of customers resides. Consequently, they are also the locations which see maximum number of product returns. Online retailers should set up collection points as it would be convenient for both online retailers and the customers. ! Customers would not have to go through the hassles

of printing labels and incur cost of shipping it back ! The number of returns would ensure economies

of scale and hence online retailers would not have to incur huge cost in aggregating the returned products. ! The collection points should be located in densely

3.0 FUTURE IMPLICATIONS These days online retailers are striving to give the customers an offline experience while offline retailer want to cash in on the popularity of e-tailing. Experts sound a word of caution on the trend of online retailers going offline. "Online and offline models are as different as chalk and cheese," says Tuteja of KPMG.1 He advises, that retailers need to be very strong in either one of the format to leverage the other. Although growth potential for e-tailing is tremendous, retailers must keep the changing times in mind. Internet access trend will reverse in the near future. One of the foreseeable changes is that by 2015, 72% of internet access will be through mobile devices (see Exhibit 11). Exhibit 11 Users by point of primary access of internet in India (%)

commercial areas, so that customers can drop off products for return while going or coming back from office. ! Alternatively, online retailers can outsource the

collection to either courier companies or Indian Post. Indian Post would have the advantage of large presence in all cities and also cheaper rates. ! In Tier-II and Tier-III cities, the most economical

option available to online retailers is to request the customers to ship the product back. The additional charges should be reimbursed to the customers as many customers (61% of respondents) are not happy paying this amount, especially in Tier-II and Tier-II cities, where customers are very cost conscious.

work (%)

Home (%)

Cybercafe (%)

9 27

Mobile (%)

42 59

2008

2009

2010

2011

19 13

2007

9 16

7 14 6

2012

2013

2014

2015

Source: IAMAI I Cube Report 2011

Another change expected is the change in geographic distribution of internet users. Currently, the top 8 metros account for 41% of internet traffic. However, in 2015, it is expected that 37% of the traffic will be derived from cities with a population of less than 0.5 million. Exhibit 12 shows the changing pattern and the projected patter. Thus, it is recommended to focus on these two emerging trends and introduce smartphone applications of online e-tailing and target the customer segment in tier II and tier III cities aggressively. Exhibit 12 Geographic Distribution of users (%) Top 8 Metros* (%) Other Metros** (%) 0.5-1.0Million (%) Less than 0.5Million (%)

2006

2007

2008

2009

2011

*: Top 8 Metros: Mumbai, Kolkata, Delhi, Chennai, Ahmedabad, Pune, Hyderabad, Bangalore. **: Cities other than Top 8 Metros Source: IAMAI I Cube Report 2011

REFERENCES 1. Singh R; 2012; “Online retailers like Zovi, Myntra offer simulating 'Touch & Feel' comfort to consumers”; URL: 'http://articles.economictimes.indiatimes.com/2012 -11-14/news/35110582_1_myntra-zovi-onlineretailer', accessed as on 23rd November 2012. 2. Telecom Regulatory Authority of India; 2012; “Indian Telecom Services Performance Indicator Report for the Quarter ending December 2011”; URL: 'http://www.trai.gov.in/WriteReadData/PressRealea se/Document/quarterly%20press%20release.pdf', accessed as on 23rd November 2012. 3. Internet & Mobile Association of India (IAMAI) Internet in India (I- Cube) Report, 2011: URL: 'http://www.iamai.in/upload/research/1172011109 1101/icube_3nov11_56.pdf', accessed as on 10th October 2012. 4. Bisen A and Jhulka A; (2012); “Apparel e-tailing In India”. 5. Chopra R; 2012; “Myntra.com drives home benefits of buying online in new campaign”; URL: 'http://www.campaignindia.in/Video/305064,myntr acom-drives-home-benefits-of-buying-online-innew-campaign.aspx', accessed as on 23rd November 2012. 6. Alexa.com; URL: 'http://www.alexa.com/siteinfo/myntra.com', accessed as on 23rd November 2012. 7. Alexa.com; URL: 'http://www.alexa.com/siteinfo/jabong.com', accessed as on 23rd November 2012 8. Bureau Report; 2001; “Shopper's Stop plans Rs. 1000 Cr. turnover by 2004”; URL: 'http://www.financialexpress.com/old/fe20010520/ news2.html', accessed as on 23rd November 2012.

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CASE STUDY

Wrigley's Acquisition of Joyco: A 'gum'ptious move? Kamalika Gangoly, Amritha Mohanty, Anubhuti Gupta, IIM - Kozhikode KEYWORDS Merger & Acquisition, Confectionary, FMCG, Chewing-gum

ABSTRACT Founded in 1891, Wrigley's has focused on the strategic task of boosting its core business while expanding into new geographies. It entered India in 1994 close on the heels of economic liberalization. The Indian market was significantly different from the international markets in the sense that it was a mono-pack market, new to sugar free confectionary and the concept of chewing gum. Although a major player in the global confectionary market, till 2003 Wrigley's lagged behind its competitors Perfetti Van Melle and Candico as a result of these striking market differences. Joyco, the Spanish giant, on the other hand, entered India at about the same time as Wrigleys' but was able to turn around the Indian confectionary market by bringing in innovation upfront and making it vibrant enough to attract new players. This case analyses Joyco's strategy in the Indian market, all the existent competitors in the same segment and discusses the reasons behind and possible impacts of Wrigley's decision to acquire Joyco in the wake of a number of global acquisitions which have consolidated the industry. Can Wrigley and Joyco create enough value through combining their firms to unseat Perfetti and grab market leader position in the Indian confectionary Industry?

s Bill Wrigley stepped out of the boardroom after a long meeting with his senior executives and walked towards his chambers, he began thinking of the challenges and opportunities lying ahead. Although a clear market leader in the US, the largest market for chewing gum and bubble gum, Wrigley's Co. was yet to make an impact in other markets, especially the developing ones which had the highest potential for growth. The position of his company in India particularly concerned him, where despite being a player for nearly ten years, Wrigley just had 4% of the market share. As he sat down at his desk and saw the large pile of reports waiting to be read by him, he began wondering what could be done to change the situation and make Wrigley a significant player in markets such as India. Wrigley like many other multinationals made its foray into India in 1994 in the aftermath of the economic liberalization. It began by establishing a factory in Bangalore, Karnataka. Despite being an early mover and having been in the market for close to a decade, Wrigley was unable to build a major market presence in the country's Rs. 1500 crore confectionery market. Its sales in 2003 were estimated to be just Rs. 15-20 crores, a very small number compared to rival Perfetti Van Melle's Rs. 400 crores and home-grown Candico's Rs. 150 crores. As the world's leading manufacturer of gum, and having been in the business for close to a century, the current situation presented Wrigley with a challenge which it had no option but to overcome in order to maintain its

leadership in the long run. WRIGLEY - THE STORY SO FAR Wrigley was founded by William Wrigley Jr., born in Philadelphia in 1862, the son of a soap manufacturer. As a teenager, he took a full-time job as a soap salesman for his father, but in the spring of 1891, William Wrigley Jr. struck out on his own to run his own business. Starting with a soap business, he switched to the baking powder business. One day in 1892, William got the idea of offering two free packages of chewing gum with each can of baking powder. The offer was a big success and chewing gum seemed to be a more popular product. A year later, he introduced a new gum he called Juicy Fruit. And thus began one of the worlds' most popular and successful chewing gum businesses. Wrigley established its first factory outside US during 1910, in Canada. The product Double Mint was first launched in the US in 1914. Another factory was built in Australia in 1915, followed by Great Britain in 1927 and New Zealand, in 1939. Wrigley introduced a variety of new products such as non-stick, cinnamon and sugar free gums during the 1970s. In 1975, the company introduced Free Dent, the first non-stick alternative and Big Red, its first cinnamon gum. During the year 1984, the company introduced its Extra brand, the sugar-free gum. The company introduced various new brands in 1990s such as, Winter Fresh and 45

Eclipse. It also launched its Airwaves brand in various flavors across Europe in 2000. In the following year, Wrigley introduced the Surpass antacid gum during the spring season, and Orbit sugar-free tab chewing gum in the summer. The company diversified into candies (with the introduction of Orbit Drops) and mint markets in 2003. Wrigley became the world's largest manufacturer and marketer of chewing gum, with global sales of over $3 billion and presence in over 150 countries. During the same period, Wrigley kept a close watch on international acquisitions crucial to their business growth and hence, spent much of the 1990s focused on moving into lucrative Asian and European markets. In 1992, the company opened a Chinese manufacturing facility in Guangzhou. During that year, international sales grew at a faster pace than the company's domestic sales and accounted for 45 percent of overall revenues. By 1993, construction plans were underway for plants in Bangalore, India, and in Poznan, Poland. The firm also began to expand and upgrade its existing facilities in England and France. Wrigley's international efforts proved to be a success. In 1994, international sales outpaced that of domestic sales, accounting for over half of the company's overall revenues for the first time in its history. During 2003, the company was focused on six strategic goals: boosting its core business, expanding into new geographic and distribution areas, domestic diversification, product innovation, delivering high quality at a low cost, and developing a successful workforce. Wrigley's desire for major expansion left some industry observers questioning its strategy. On one hand, an acquisition could catapult the firm into the upper echelon of the food and candy industry. On the other hand, it could spell disaster for a traditionally conservative, family-run firm. GLOBAL CONFECTIONERY MARKET IN 2003 Global confectionery trade was estimated to reach $17 billion in 2004, an increase of 8% from $15.8 billion in the present year. (The projected numbers are shown in Exhibit 1 and 2).This growth could be attributed to the surge in demand for innovative sugar-type candy and gum, and premium chocolate products. Presently, chocolate confectionery accounted for over 60% of sales of the confectionery industry by value. However in terms of sales volume, sugar confectionery held the majority share with 51%. Volumes sales were expected to amount to over 17.8 million tons by 2010. The major raw materials used in this industry included cocoa, sugar, nuts and milk. The United States was the largest producer of chocolate and most of the sugar-type candy by volume, followed by countries like Germany, the United Kingdom, France, Brazil and Japan. Recent 46

developments in this industry indicated that production in the fully developed economies had stagnated, but investment in emerging economies still held a lot of opportunity. The markets for confectionery products could be divided into two, namely - mature markets and emerging markets. Mature markets were those where consumption levels have been largely static in recent years, while emerging markets exhibited strong growth in consumption. Mature markets included Western Europe, North America, Australia, New Zealand and Japan while the emerging markets included Eastern Europe, Latin America, Asia, India, Africa and the Middle East. Sugar confectionery was in high demand in emerging markets while chocolate was the favorite of the mature markets. The expected growth rates in consumption were higher in the emerging markets than in mature markets, however, owing to the fact that the per capita consumption was higher in mature markets; the growth in mature markets could not be neglected. The global confectionery market was also a highly fragmented one with no manufacturer accounting for more than 10 percent of the total confectionery sales. The major players in this market were Mars Inc., Wm. Wrigley Jr. Co., Nestle SA, Hershey Foods Corporation and Cadbury Schweppes Plc. Together, they held around 40% of the market share. There had been a demand for new flavors and varieties especially in chewing gums and mints sector. New product innovation thus remained critical to becoming successful in this industry, and hence many of the world's leading suppliers were investing heavily in this area. INDIAN CONFECTIONERY MARKET Since liberalization in 1991, the Indian economy had undergone a major overhaul. The confectionery sector had been witnessing major investments and entries by a large number of multi-national companies. However, growth had slowed down in the past couple of years and hence companies have tried offsetting this, either by broadening their consumer base from primarily children and teenagers to adults or tried to be more active in marketing to rural India, where penetration remained lower than the average for the country. The Indian confectionery market, despite India's huge population was very small. Valued at close to US $450 million, it was estimated to be only 138,000 Million tonnes. (Refer to Exhibit 3 for the category-wise breakup). Between 1998 and 2003, confectionery retail sales grew by more than 55% in value terms and 46% in volume terms, at an average annual rate of 9.5% and 8% respectively. There existed a clear trend of faster sales growth in value terms, indicating that consumers were

increasingly becoming prepared to pay a premium for higher value products. The organized confectionery segment in India was dominated by the multinational companies; however, domestic players were increasingly finding a prominent position in the market. Cadbury India Ltd. was by far the market leader, followed by Perfetti Van Melle India Ltd. and Nestle India, Ltd. [Exhibit 4] Although, the post-liberalization era had seen the entry of numerous players, they had to adapt to the Indian market which was different from the developed markets. India was primarily a mono-pack market while the market worldwide was a multi-pack market. While the trade and distribution in western countries was mostly organized, in India, retail outlets like pan shops and kirana outlets accounted for the bulk of the sales and organized trade still had only an insignificant share in the overall confectionery sales. Functional products and sugar free confectionery dominated the worldwide market while in India this trend was yet to pick up. The gum confectionery was expected to be the fastest growing category, albeit from a smaller retail base. Exhibit 5 and 6 shows the sales and growth of the Indian confectionary market while Exhibit 7 and 8 show the sales and growth of the Gum confectionary market in the country. In India 50 paisa was the most popular price-point and around 85% of confectionery sales occurred at this price point - but there were some products in the rural markets that were available at 25 paisa. The Re 1 price-point was not very popular. Instead of chewing on paan (betel nut leaf) to freshen one's breath or using spices such as fennel to aid digestion, the local population was increasingly turning to branded confectionery products such as chewing gum and mints. Consuming products such as mint and medicated confectionery conveyed a sophisticated image, which appealed to the young people. Between 1998 and 2003 the per capita consumption of gum in India had sky-rocketed. Each Indian consumer was chewing 64% more chewing gum and 45% more bubble gum. Volume growth was expected to slow, especially in bubble gum, which was being considered a mature product. Nevertheless, value based growth was expected to be 41% in chewing gum and 17% in bubble gum in the medium term. The market was primarily driven by sales of bubble gum which accounted for over 75% of the total value of gum sales in India. Although bubble and chewing gum were growing quite fast, functional gums that addressed specific health issues (e.g. fighting tooth decay and plague, gum disease) were virtually non-existent. The only functional gum that was available in the market was Perfetti's Happy Dent White,

launched in 2001. Unlike many other packaged food trends in India, growth in gum was not limited to the urban upper classes. Gum was considered inexpensive, with an average unit price ranging between Re.1 (US$0.02) and Rs. 10 (US$0.22). Many Indian retailers had limited product space and gum was small therefore it is also easy to store and transport, even in the rural areas. Unlike sugar or chocolate confectionery, there were only few important players in the gum segment. Perfetti Van Melle India was the leader with 45% of the market share; followed by Joyco (31%), Candico (8%) and Wrigley (4%). Perfetti's Big Babool and Joyco's Boomer were the two leading brands in terms of sales with 32% and 30% share respectively. Other popular brands were Center (Perfetti), Loco Poco (Candico), Double mint (Wrigley), Trex (Joyco), and Chlor-Mint (Perfetti). THE BIG TWO OF INDIAN CONFECTIONARY MARKET IN 2003 Both the multinationals Perfetti Van Melle and Joyco entered the Indian sugar confectionery market eight years ago. Perfetti and Joyco, unheard of companies when they entered the market, together accounted for almost half of the sugar confectionery market in India presently. As per internal sources, Perfetti's sales stood at Rs. 400 crores in the last financial year while Joyco had Rs. 180 crores. None of the players in the organized sector, barring Nutrine, had managed to cross Rs. 100 crores despite being in the market for decades. Perfetti and Joyco can be credited for turning around the Indian confectionary market by bringing in innovation up front and making it vibrant enough to attract new players. There was a time when most large companies didn't see a viable business proposition in this low value, low margin, and fragmented industry. The perception that developing the non-existent gum and unorganized candy market would be a daunting task kept the market largely undeveloped during the early 1990s. However, ever since the two MNCs entered the Indian sugar confectionery market, with their research and focus on putting brand marketing machinery to work in an otherwise commodity business, it has resulted in the two companies setting the agenda for most players in the confectionery market. Trying their level best to give some semblance of order and maturity to the Indian sugar confectionary market which did not adhere to the progression seen in the more mature markets - graduating from bubble gums to chewing gums to functional confectionery as they grow up, Joyco and Perfetti started shifting their focus from kids to adults. As Arun Hegde, Managing Director, Joyco put it,"It's all

about single-minded focus. If that's missing, then it is difficult to see a business proposition." A part of their success could also be attributed to their heritage in confectionery, something that most previous players lacked. Driven by what the two companies did, the market had changed beyond recognition. From an estimated 50 odd SKUs (stock keeping units) of confectionery in the organized sector in 1994, there were some 500 today. Similarly, less than 10 brands of sugar confectioneries (excluding chocolates) spent Rs 7-8 crores on TV advertising then, as against 70 brands at present, with a combined spend of Rs 60-70 crores. From a clear distribution driven, pipeline-choking approach, the two have driven home the importance of generating secondary sales. Sampling in schools, amusement parks, promotions at the point of purchase and freebies were a few things that were unheard of previously. However, the two players had started their foray in India through very different paths. Perfetti entered as a fully owned subsidiary with an expat as its head. That hasn't changed over the years. Right from the beginning, Perfetti, a $1.3-billion giant internationally, maintained a flamboyant stance marked by high media spend and visibility. It rapidly rolled out a large portfolio straddling bubble gums, chewing gums, candies, mint and lollipops. Joyco on the other hand was more subdued and calculated. To start with, the â&#x201A;Ź300 million Spanish major chose the joint venture route and entered into a 51:49 partnerships with Dabur. Instead of heavy media spends, Joyco used below-the-line initiatives to drive sales, while focusing on one product at a time. They worked on the principle idea of making a success of one category before they moved further. Perfetti's portfolio expansion strategy was also more aggressive in the beginning as compared to Joyco. Within three years, the company had seven brands in its portfolio in India â&#x20AC;&#x201D; Big Babool, Centerfresh, Brooklyn, Alpenliebe, Chlormint, Mentos and Golia C. During the same period, Joyco introduced two, but soon caught up in the following three years. Setting up distribution was a big challenge for the two companies, given the peculiarities of Indian tax laws, logistics and trade structure. Perfetti didn't have any joint venture partner to piggyback on, but it took a contrarian approach. Throwing all traditional thinking to the winds, it included smaller towns like Tauroo and Rohtak in Haryana, and Bulandshahar in UP in its distribution map even as it rolled out in the larger cities. The company built its distribution coverage using a mix of wholesalers and distributors which today, allows it to sell at upwards of four lakh retail points. Almost 40 per cent of Perfetti's sales come from towns with less than one lakh

population. Joyco proceeded with a strong focus on the metros and large cities and then moved further, in line with its strategy of 'consolidate and move'. It heavily relied on direct distribution and focused on distributors rather than wholesalers. However, distribution was not the only challenge faced by these players. There were other challenges which the two had not experienced in developed markets. The Indian market traditionally was, and continued to be a mono piece market were price points were discrete and low. Also, both Perfetti and Joyco were unknown players which made the task of appointing distributors much more difficult. The answer came through rapid innovation and brand building â&#x20AC;&#x201D; quickly exposing the consumer to never-before-seen quality and products. Perfetti brought in the first liquid filled bubble gum, Centerfresh and deposit candy, Alpenliebe. Joyco introduced the first genuine soft chew, Bonkers and high quality lollipop, PimPom. What began as an effort at differentiation has now become a routine for both the players. While the two companies had a huge global portfolio to draw from, they went a step further. Perfetti Van Melle India, for instance, created a completely Indian formulation, the new coffee candy, Cofitos in 1999 to add to the parent's bouquet. Not to be left behind, Joyco made similar innovations with Coffee Beans and Chimos early that year. Joyco also had a strong culture of product innovation right from its inception. It had a dedicated R&D centre of outstanding capability that was responsible for its continuous new and improved product offerings, suited to the Indian market. The Organizational Structure of Joyco is shown in Exhibit 9. On an average, Perfetti spent over Rs. 17 crores on advertising, followed by Joyco which had a more modest budget of Rs. 7-8 crores. Media visibility and retail merchandising may be misleading, but a visit to their respective offices gave a better sense of the passion with which the two companies nurtured their brands. Joyco had also been actively introducing new promotion schemes through intensive bursts of consumer promotions, tattoo, Walkie Talkie, magic glass etc. that catapulted the brand to phenomenal levels. Then the two turned their attention to the semi-urban and rural markets. Perfetti management believed that at the 50 paisa price point, there were enough takers, but to be sure they did not want to take their eyes off the taste familiarity factor. From 20,000 population towns, Perfetti now wanted to penetrate townships under 5,000 populations. The company planned to press some 400 vans into service for a more comprehensive rural coverage.

Joyco, though conscious of the potential of rural markets, wanted to first evaluate their viability for the trade."We have to understand that the small quantities such townships can generate at this point may not keep the trade interested, so it doesn't make sense," said Hegde. Joyco management was then comfortable focusing on towns with 20,000 populations. Over the last few years, Perfetti and Joyco had intensified their efforts to expand their franchise to young adults and above. While Perfetti had been hammering Alpenliebe's family candy positioning, it had brought in products like HappyDent to address an older audience. Joyco introduced Coffee Beans, Trex chewing gums and planned to push Aqtimint. With the government allowing artificial sweeteners, no-sugar presented a great opportunity for Joyco. GLOBAL ACQUISITIONS The global gum market was dominated by the chewing gum segment, which accounted for 85.7% of the global sales in 2003. Europe remained the largest regional market, accounting for 37.6% of the market. During 1999-2003 the global gum confectionery market had experienced strong growth owing to the growth in the US and European markets. The growing market for healthy forms of gum had led many other companies to invest in product innovation to satisfy these demands and also to increase their brand portfolio. In July 2001, William Wrigley Jr. Co acquired the gum manufacturing assets of GumTech International Inc, a producer of chewing gum. The company also bought Velamints, a brand of breath mints, from Ragold. Wrigley's rival Cadbury was also strengthening its overall position in the confectionary industry. Earlier Cadbury had acquired Orangina and other soft drinks brands from France's Pernod Ricard, as well as high-profile names including Slush Puppie, Snapple, Dr Pepper and 7-Up, which had strengthened the overall position of the company. Also, in 2001 Perfetti acquired 100 percent control of Van Melle for € 966 million. However the two companies had been co-operating in a number of countries since 1979. The newly enlarged company then adopted the name Perfetti Van Melle. The merger with Van Melle provided the new company with total sales of more than € 1 billion. The combined operations also gave the company a particularly strong position in many of the markets in the Asian region, such as China and India, where the company held number one or two positions in several categories. Cadbury Schweppes in 2002 acquired 100% of the branded chewing gum business of Dandy A/S, manufacturer of chewing gum, from the BaggerSorensen family in Denmark for GBP201 million. This

made Cadbury Schweppes the second largest player in the European chewing gum market, with No.1 positions in France, Denmark, Belgium and Switzerland. In March 2003, Cadbury acquired Adams chewing gum business for $4.2bn (£2.5bn, € 3.6bn), making it the largest confectionery business in the world. The acquisition consisted of the principal brands, including Halls, Trident, Dentyne/ Dentyne Ice, the "Bubbas", Clorets, Chiclets and Certs, together with other functional confectionery products, manufacturing facilities and international sales, distribution and support networks. John Sunderland, CEO of Cadbury Schweppes, said, "Adams gives us confectionery market leadership and a unique portfolio with an offering in every confectionery category. It brings powerful brands, access to new geographies and significant scale in the fastest growing confectionery sectors. Cost and revenue synergies, and the opportunity to drive the business within a global confectionery group, will create significant value for our share owners.” Through this acquisition Cadbury Schweppes had intended to broaden its position in the European confectionery market. This increased the intensity of competitive rivalry among US rivals such as Cadbury, Wrigley, PVM, Hershey Foods and Coca-Cola. COMPETITORS The global gum confectionery market reached a value of $8.05 billion in 2003, having grown at a compound annual growth rate (CAGR) of 3.8% in the 1999-2003 periods. The global gum confectionery market was currently dominated by Wrigley, Cadbury Schweppes, and Lotte. Wrigley had a leading position in nearly all the world's major markets, with Japan being the only major world market it had yet to breach. Its success could be attributed to widespread distribution, effective advertising, localized management and reliable quality. Sugarized gum was still the most popular sector in the Asia Pacific region. By marketing sugar-free and medicated gum for health benefits, companies could allow consumers in the region to realize the qualities of these forms of gum, and thus boost their sales in the Asia Pacific region. Cadbury Schweppes Plc. Cadbury Schweppes at that time was the third largest soft drinks company and the fourth largest confectionery company in world. Cadbury Schweppes owned some of the world's best known confectionery brands such as Cadbury and Trebor Bassett. Although based in the UK, the company generated most of its sales in international markets. Cadbury went through a number of acquisitions in order to increase its market share and were also aggressively working to improve the performance of its 49

newly acquired gum brands. The Cadbury brand was synonymous with chocolates in India. The company announced that it will strengthen its position in the confectionery sector and will launch some of their gum brands such as Trident, Dentyne, Bubbas and Chiclets in the near future. Lotte Group Lotte Group was one of the largest companies in Korea, with major interests in food, tourism and technology. The company was particularly well known for biscuits and confectionery, which was the initial focus of the business, and the company, had become a major exporter of chocolate and chewing gum. Their revenue from confectionery business was estimated to be $900 million in 2003. Hershey Foods Corporation Hershey Foods Corporation was an international company specializing in the manufacture, distribution and sale of chocolate and non-chocolate confectionery, grocery products and consumer food products. Operations of Hershey Foods Corporation was concentrated in two divisions: Hershey Chocolate North America and Hershey International, which exported to over 90 countries worldwide. Hershey was the biggest confectioner in the U.S with handful of gum and mint products. Recently, Hershey announced the sale of a group of gum including Fruit Stripe chewing gum, RainBlo gum balls and Super Bubble gum to Farley's & Sathers Candy Co. Inc. This step was considered as a move by Hershey to try and focus on their chocolate products since they had already sold other non-chocolate candy brands in 2002. The major competitor to Hershey in imported segment was Mars. Kraft Foods Kraft Foods was the largest branded food and beverage company in the US and the second largest in the world. Kraft sold its products in over 145 countries, and operated 228 manufacturing facilities around the world. Their best-selling brand was Oreo cookies. The growing trend toward healthier eating was taking a bite out of sales and profits at Kraft Foods and they were looking to do a major restructuring including selling off some brands. Their sugar confectionary brands like Life Savers mints and Altoids were also losing market in the U.S. Perfetti Van Melle Perfetti Van Melle was at $1.5 billion, world's third largest confectionery company. The Indian operations were second only to Italy's operations. A manufacturer and marketer of sugar based confectionery and a leader in the candy and gum segments, it was also the second largest company in the Perfetti group in terms of sales volumes world-wide.

Parle Parle was a leader in manufacturing and marketing of cookies and confectionery in India. It manufactured and marketed cookies, sugar boiled confectionery, and cocoa and milk based toffees. Parle had 15% market share in the total confectionery industry. Its brands were targeted at the lower and middle price segment. Parle had a strong distribution network with 1500 wholesalers, catering to 425,000 retail outlets directly and indirectly. Its confectionery business continued to remain a low growth segment as the focus was more on the cookies business. ITC ITC Limited (ITCL) was the flagship company of the ITC conglomerate. ITC was India's largest manufacturer of cigarettes and tobacco products with an Agricommodity business and interests in greetings, gifting and stationery products, safety matches and essence sticks, hotels, paper board and specialty papers, packaging, information technology, lifestyle retailing and foods. During 2002, ITCL set-up a separate division for its foods business called ITC Foods. During 2002, ITC's Foods rolled out its maiden confectionery brand- MintO, which it had acquired from the Delhi-based Candico India Limited. During 2003, ITC Foods launched Candyman which targeted the less than 12 children segment. ITCL had strengths in terms of distribution of confectionery and was using its vast network of pan, cigarettes and beedi shops in India. Hindustan Lever Limited Hindustan Lever Limited (HLL) was India's leading Fast Moving Consumer Goods (FMCG) company manufacturing and marketing soaps, detergents, household and personal care products, foods and chemicals, fertilizers and animal feed. HLL brand range included hard-boiled candies, toffees, mint candies and crackling candy, such as ChocoMax, MaxCream, MaxMint and MaxCrackler. All their products were priced at 25p, 50p and Rs. 2 and sold under the brand Max. HLL had plans to take its confectionery business to 400,000 outlets by the end of 2004 and was developing its exclusive distribution system for the confectionery business. Candico India Candico India Limited was the only Indian MNC in this sector. It was the only company in India that manufactured all four categories of confectionery candies, toffees, lozenges and gums - a strength it was using for serving the demands of national and international markets. It owned brands like FruttiTutti, Jucie Mango and Lacto in Confectionery, Big Bubble Gum, Time Bomb in gums, Elaichi Roll, Koffi Toffi in Toffees.

Speculations were rife, with the industry experts feeling that the acquisition would help in consolidating the Indian confectionery market, which remained a fragmented, high-volume, low-margin business. Since the confectionery trade was driven by distribution and trade margins, survival in the market was tough. If however this acquisition did take place, a major concern faced by the management would be the asset heavy nature of the integrated business as compared to their turnover. Since no immediate synergies in

While having great faith in Waters' counsel, Bill Wrigley Jr., Chairman, President and CEO, Wrigley, reflected, "The key drivers of acquisitions for the Wrigley Company are a strategic fit and hold potential for significant value creation. Can we achieve it with Joyco'sacquisition?â&#x20AC;?

To request Detailed Teaching Note pertaining to this Case Study, feel free to write to samvid@spjimr.org with your full credentials & purpose. EXHIBITS Exhibit 1: Sales and Growth Gum market by Value 20

World Confectionery Trade Value and Growth, 1999-2004 30%

20%

10%

Year-to-year Growth

In the Indian context the acquisition could be viewed as a move that would spur the Rs. 1500 crores Indian confectionery market. With Joyco's Rs 180 crores sales coming from popular brands like Boomer and PimPom added to its own, Wrigley could pole-vault to No. 2 position in India, ahead of Candico besides bagging Joyco's network of 1,900 distributors and four lakh outlets.

Some of the insiders however felt that the Joyco acquisition globally, would be the right move for Wrigley. "As with any acquisition we pursue, our intent is to support our existing strategies and focus on growth synergies," commented Ron Waters, Chief Operating Officer of Wrigley. "To that end, the talent, technologies, brands and distribution networks of Joyco will help accelerate our plans to expand Wrigley's participation in the broader confectionery arena."

Value Growth

-10% 1999

2000

2001

2002

2003

2004F

Source: Global Trade Atlas, reported exports from 54 countries as of 3/20/05; Forecast:FAS

Exhibit 2: Sales and Growth Gum market by Volume 6

World Confectionery Trade Volume and Growth, 1999-2004 10%

2 0

2% 1999

2000

2001

2002

2003

2004F

Year-to-year Growth

A second decision that Wrigley would have to take if they acquired Joyco was whether to acquire Joyco in just the Indian market or go ahead and seek a transaction that could involve Joyco's operations in China, France, Italy, Poland and Spain as well. As per the reports prepared by the accounting team looking at this possibility, the global acquisition of Joyco including the one-time charges was expected to have a slight negative impact on company earnings in the current year (less than $0.05 per share). However, it was expected to contribute positively to Wrigley's profitability in 2005.

Also, in case of India and keeping in mind the current market leadership position, a peculiar case if the acquisition went through, would be the fact that the Wrigley team who were the acquirers would have to be absorbed by the so called acquired company, posing a huge HR dilemma for the Wrigley management.

Value ($Billion)

The management was looking into the possibilities of acquiring Joyco in India. Also, the acquisition of Joyco would help Wrigley win in the non-gum sector, which made it an important reason for going for a company like Joyco. The world had been carved by manufacturers in the gum segment and it was difficult for Wrigley to beat Cadbury in traditionally strong markets and win â&#x20AC;&#x201C; South America, parts of the US and some markets in Africa. Non-gum was thus deemed to be a way to grow in the business.

technology were possible, spare capacity in the Bangalore Wrigley factory could not be leveraged in the short term to reduce the asset burden.

Volume (Million tons)

THE DECISION The decisions to be taken by Wrigley management were challenging. A way ahead for the company to gain market leadership in the Indian confectionary market was through acquisitions. Two of Wrigley's biggest competitors had already taken the acquisition route with Perfetti acquiring Van Melle earlier and this had made the company stronger, and Cadbury acquiring Adams. Wrigley needed to make a decision fast or might just end up lagging way behind its competitors. Being one of the biggest players in the confectionary market in the global arena, Wrigley had the required capital and commanding position to acquire one of the market leaders in the Indian confectionary market.

Volume Growth

Source: Global Trade Atlas, reported exports from 54 countries as of 3/20/05; Forecast:FAS

Exhibit 3: Category wise break-up for Indian Confectionery Market

(in%) 17% 2% 50%

10%

Candies & Toffees Chocolates Breath Fresheners Bubble Gum Chewing Gum Other Categories

16%

Exhibit 4: Market share of major players Company Cadbury India Ltd.

2001 2002 (% retail value) 30

29.6

Perfetti Van Melle India Ltd.

14.2

14.4

Nestle India Ltd.

9.8

10.2

Nutrine Confectionary Co. Ltd.

7.5

7.4

Joyco India Ltd.

5.7

5.8

Parle Products Ltd.

4.7

4.6

Parry's Confectionery Ltd.

4.6

4.5

Ravalgaon Sugar Farms Ltd.

2.1

Hindustan Lever Ltd.

1.7

Gujrat Co-op Milk Marketing Federation Ltd.

1.4

1.5

Warner-Lambert India Pvt. Ltd.

1.2

Candico India Ltd.

1.1

0.9

Wrigley India Pvt. Ltd.

0.4

Agro Tech Foods Ltd.

0.2

Ferrero SpA

0.1

Private Label

0.6

Others

14.8

14.6

Total

100

Exhibit 5: Sales of Confectionary Products India

b) Volume 140

120

20 Gum Sugar Confectionary Chocolate Confectionary

15 10

Thousand MIT

Billion Rs.

A) Value 30

100

Gum Sugar Confectionary Chocolate Confectionary

60 40 20 0

0 1998

1999

2000

2001

1998

12002 2003

Source: Euromonitor

1999

2000

2001 2002

2003

Source: Euromonitor

Exhibit 6: Growth of Confectionary Products India

A) Average Annual Growth

B) Total Growth

8 Chewing Gum Bubble Gum Gum Confectionary

6 4

Percentage

50 Chewing Gum Bubble Gum Gum Confectionary

40 30 20 10

0 Value

Value

Volume

Source: Euromonitor

Volume

Source: Euromonitor

Exhibit 7: Sale of Gum Confectionary in India

b) Volume

a) Value 3.5

Chewing Gum Bubble Gum

1.5 1

0.5 0 1998

1999

Source: Euromonitor

2000

2001

2002

2003

Thousand MT

Billion Rs.

3 2.5

20 18 16 14 12 10 8 6 4 2 0

Chewing Gum Bubble Gum

1998

1999

2000

2001

2002

2003

Source: Euromonitor

Exhibit 8: Growth of Gum Confectionary in India

b) Total Growth 70

60 Percentage

Percentage

a) Average Annual Growth 12

8 Chewing Gum Bubble Gum Gum

6 4

50 40

Chewing Gum Bubble Gum Gum

30 20

10 0

0 Value

Value

Volume

Source: Euromonitor

Volume

Source: Euromonitor

Exhibit 9: Organizational structure of Joyco India

Country Head

Sales

Marketing

Brand Managers

Finance

Production

Regional Manager Linear organizational structure with 250 employees in 2003. Area Sales Manager

In addition front-line sales people and laborers were outsourced.

Sales Officer

REFERENCES “Wrigley stuck on Joyco Group.” breakingnews.ie. Thomas Crosbie Media, 8 January 1991.Web. 13 November, 2012. Sahad P.V. “Wrigley want to chomp.” archives.digitaltoday.in. Living Media India, 4 January 2004. Web. 12 November, 2012. “Lotte India Corporation Limited.” indiainfoline.com. India Infoline Ltd. Web. 12 November, 2012.

Research

CASE STUDY

Sanitary Napkin In Rural India: Test Of Sustainability Victoria D'souza, Kedar Kulkarni, Hanish Dhume, SPJIMR - Mumbai KEYWORDS Sustainability, Menstrual Hygiene Management, Self-Help-Group, Sanitary Napkin.

ABSTRACT The case describes in detail how UNICEF and NGO SACRED worked for the improvement in rural livelihood by addressing Menstrual Hygiene Management in villages of Jalna district, Maharashtra. The Case talks about how the office of SACRED in Aurangabad developed a plan to distribute “Nirmal” sanitary napkins in the villages coming under the Bhokardan Taluka. The case revolves around the protagonist, Mr. Jayant Deshpande who is the secretary of NGO SACRED and highlights the dilemmas faced by him in executing this project.'Deepshikha's were village women mostly in the age group of 15 to 25 years, some of whom were married, with no prior selling experience apart from creating awareness in the villages about menstrual hygiene. The Case showcases how they played a major role in a business model which not only included dealing with the customer at a very personal level and selling the sanitary napkins, but also included educating them about the usage of the same. The Case also talks about how a sanitary napkin production unit was set up by the women self-help group (SHG) of Kedarkheda village to provide employment to the people in that area and a pilot project was launched to test the sustainability of the designed business model.

INTRODUCTION Mr. Jayant Deshpande sat in the office of SACRED in Aurangabad on April 2, 2012 looking at the plan laid out before him. It was a very elegant plan developed to distribute “Nirmal” sanitary napkins in the villages coming under the Bhokardan taluka. During his tenure at SACRED as secretary, never before had he had the slightest doubt about implementing a project. SACRED, which stands for Society for Action in Creative Education & Development, had implemented various projects since its inception in 1982. Being an NGO, it was always difficult to gather funds for its operations. Its tie up with UNICEF fourteen years ago had been fruitful. Both of them together could implement the project efficiently with the funding from UNICEF & effective implementation strategies of SACRED. Today, Jayant thought about the Deepshikha project started one and half years back at the Bhokardan taluka office. The project was aimed at improving rural livelihood by creating awareness about menstrual hygiene in the villages, abolishing child marriages, abolishing child labor and promoting child education. The plan that lay down before him would now form a part of this project. All projects were handled by the NGO staff with minimum support by the villagers, mostly when it involved creating awareness. The plan of distributing sanitary napkins banked totally on the Deepshikhas. Deepshikhas were village women mostly in the age group of 15 to 25 years, some of whom were married. With no

prior selling experience apart from creating awareness in the villages about menstrual hygiene, they were now going to play a major role in a business model which included dealing with the customer and selling the sanitary napkin. Though this was a major concern, Mr. Jayant thought about the effect that this project could have on the business model. The outcome of the selling exercise would be used to analyze the feasibility of setting up a sanitary napkin production unit in Kedarkheda village. The production unit would be set up by the women’s self-help group of Kedarkheda village and would provide employment to people in the area. SACRED would be responsible to create awareness of the product and distribute the sanitary napkin to the Deepshikhas under this project. The self help group operating the production unit would also sell the sanitary napkins through commercial and institutional outlets. Most importantly, the pilot project banked on the quality of the sanitary napkins that were hand made by the women working in the Solapur sanitary napkin production unit. Mr. Jayant wondered, “Was the customer aware about the sanitary napkin? Will the customer accept the quality of the product? Is Deepshikha ready to accept this challenge? Can the model sustain with Deepshikha as the backbone? If the pilot project is a success, will the Kedarkheda sanitary napkin production unit be competent enough to supply this demand?”From his years of experience in the field of rural livelihood, Mr. Jayant knew that he had to move

quickly as the project and improvement in the self sanitation practices of rural women banked on his decisions. ABOUT THE ORGANIZATION UNICEF (United Nations International Children's Emergency Fund) has been working with the Government of India since 1949. It is the largest UN organization in the country. Following are its goals:1. Eradicate extreme poverty and hunger 2. Achieve universal primary education 3. Promote gender equality and empower women 4. Reduce child mortality 5. Improve maternal health 6. Combat HIV/AIDS, malaria and other diseases 7. Ensure environmental sustainability 8. Develop a global partnership for development UNICEF's presence in India is unique. It has a network of 13 state offices that enables the organization to focus attention on the poorest and most disadvantaged communities, alongside its work at the national level. UNICEF relies on contributions from governments and private donors. Under the guidance of UNICEF different NGOs work in different blocks of various districts of Maharashtra as partners of UNICEF. SACRED is one such organization working in Bhokardan block in Jalna district. SACRED (Society For Action In Creative Education & Development) is an educational, developmental & service Non-Governmental Organization (NGO) registered under the Societies Registration Act (XXI) of 1860, The Bombay Public Trusts Act 1950 and the Foreign Contribution Regulation Act 1976. The NGO's headquarter is in Aurangabad and Dr. L. J. Aherwadkar is its President.Its genesis is the founding of Institute of Management & Research (IMTR) on January 10, 1975 at Aurangabad which itself was a registered organization. However, due to expansion of activities of various types, SACRED was registered as an independent organization in 1982 of which IMTR became a unit. The various projects carried out by UNICEF & SACRED as partners included: 1. CDD-WATSAN project (Imparting training in safe drinking water, environmental sanitation & personal hygiene to children in primary schools) 2. Micro Planning of villages 3. Total Sanitation Campaign in villages 4. Rural Entrepreneurship Development Project (REDP) 5. Jalswarajya Project 6. Village Development Programme 7. AplePani (Our own water) Project

8. Farmers clubs 9. Deepshikha Program (A recent program undertaken to empower adolescent girls and women in villages). Other donors of SACRED included NABARD and MISEREOR (Germany). Mr. Jayant Deshpande had been the Secretary of SACRED since its inception and had played a major role in the NGO operations in the Aurangabad, Jalna and Beed districts of Maharashtra. SANITARY NAPKIN INDUSTRY Function Sanitary napkins are designed to absorb and retain menstrual fluid discharges. When used they are applied inside an undergarment with a press-on adhesive fixing strip. Main functions/key elements of sanitary napkins are to absorb and retain menstrual fluid, isolate fluids from the body, no leakage, no unaesthetic appearance, no odor, stay in place, comfortable to wear. The key criteria for success are hygiene, performance, comfort, convenience and aesthetics. Different types of Sanitary napkins available in market with details are as follows. Product designs, full size pads:This type of pad have 3 main sub parts, the top sheet is of non woven type or an aperture film type. The absorbent core has a pulp which makes it thick core which can be classified as fluff core with SAP or air laid core with SAP. The back sheet is a thin film acting as a covering. Product designs, Ultra-thin pad:This type of pad is manufactured in refined manner with 5 main sub parts. The top sheet is of nonwoven type or an aperture film type. The next portion is a transfer layer which acts as a film between top sheet and absorbent layer. The absorbent layer and absorbent core form the crux of the pad and they are usually thin in nature. The absorbent core has a pulp which makes it thick core which can be classified as fluff core with SAP or air laid core with SAP. The back sheet is a thin film acting as a covering. Product shape could be either flat or curved with/without wings to secure the pad in place and add additional leak protection. It is available in various pattern designs with perfume (deodorant) added to cover or absorb odor. Packaging is done either folded or single wrapped or packed flat and unwrapped. Although India has had a high population, the awareness and usage of sanitary napkins amongst women is very low (See Exhibit 1 for country wise per capita consumption). The penetration of sanitary napkins in rural India especially has been very low. Only 12% of total 355 million menstruating women in India use sanitary napkins. 75 percent of the women respondents were not psychologically prepared for menstruation and

68% of Indian rural women cannot afford sanitary napkins hence they ended up following unhygienic sanitary practices like cloths, sand and ash which made them vulnerable to infections and diseases. The scenario was severe in eastern parts of India where the percentage of non-affordability increased to 83%. The major players in the market included Johnson & Johnson, Procter & Gamble, Kimberly Clark Lever Ltd., Gufic Bioscience, Dima Products. They served the under tapped market. As seen there was a huge potential especially in rural Indian market but the major problems that these manufacturers were facing was creation of awareness & reach of product to customers and efficient distribution cycle. Considering the major problem of awareness, choosing the sanitary napkin without wings was the better option for UNICEF as then the cost of the product would be low and also additional effort in creation of awareness about the winged pads could be avoided. In order to reach those women and more importantly to create awareness, UNICEF was continuously working with various NGOs in different blocks. Main motive of the Deepshikha program was to make adolescent girls and women aware of self sanitization, motivate them to use better sanitation products like sanitary napkins and be open about this body process. In order to help these women, many production units of localized sanitary napkin brands (e.g.Sakhi, Nirmal etc.) had been started by various agencies like Jalswarajprakalp in association with UNICEF. After the successful running of production unit at Jehur unit in Solapur district (the unit was run by enterprising women of Self help group), UNICEF & SACRED wanted to start a similar kind of unit in Bhokardan block. The unit, if successfully started & efficiently run by selected Self Help Group, would be able to serve the demand created through awareness meetings (mahilamandals, kishorivarg etc.) in 125 villages of Bhokardan as well as act as a production hub to cater to the demands in other blocks where programs of UNICEF were being undertaken and run by different NGOs. The initial task was to select the location for production unit setup and then selecting Self Help Group who would be ready to take this task forward. SELECTION OF PLACE AND SELF HELP GROUP (SHG) Jalna district is basically known for scarcity of water (because of geographic conditions and lack of mountains around). The major requirement for starting a production unit for sanitary napkins is that of water. Kedarkheda is geographically located at 20.27°N

75.77°E and is situated on the banks of confluence of Girija & Khelna Rivers. Also the two public wells usually have had good amount of water. Major crisis was faced during months of May & June during which government and private tankers were the only options. Also, its proximity to highway, proximity to Rajur which is a famous pilgrimage place and one of the biggest markets as well as good connectivity to Bhokardan made it an ideal location as far as production of sanitary napkins was considered. After finalization of place, during visit to Kedarkheda in the month of January, Mr. Jayant held talks with 2 SHGs in order to gauge their interest and ability in undertaking this task of set up & running of production unit. The SHG who would be working with SACRED in this project was “Sant Muktabai Bachatgat”. The SHG had 20 members attached to it. Out of these 20 members 8 members would be working for this production unit. This self help group had all like-minded women who were ready to take challenges and were keen to deliver. Though they did not possess any technical knowledge or domain expertise of the production unit, Mr. Jayant felt that by imparting specific trainings related to work & behavior these women would be able to make the production unit a success. RAW MATERIAL SOURCE The Raw material would be sourced from Coimbatore from the existing supplier who procured material in bulk from US and Canada so as to serve more than 50 similar napkin manufacturing machines that had been installed all over the country. Tie up with a transporter company like Professional courier ( present in Jalna) of Indian Postal office who had recently launched a scheme of bulk transport for business units, needed to be done on priority in order to maintain steady transport of raw material & avoid shortages while also taking care of the hygiene requirements. The cost of transporting the material from Coimbatore to the manufacturing site has been incorporated in the cost calculation as shown in Exhibit 2. Jalna has been predominantly a district known for cotton production & hence locally available cotton could be used for production of pulp but for that to be incorporated the pulp making machinery and technology was needed to be installed. This could be considered depending on demand at a later stage. The local suppliers that had been identified proved to be expensive. Yet alternate raw material sources were being looked into so as to reduce the transportation costs as well as the risk of a single supplier source. (See Exhibit 2 for costing details of the raw materials used for production.)

MACHINERY SOURCE & PRODUCTION SETUP The two options available were: 1. The machinery available in one of the sick units could be obtained from Government with the intervention of UNICEF & SACRED. This would help in discounting the burden of machinery cost & hence SHG would need to pay minimum government rent as per the regulations. But the option would be very time consuming as the government documentation would take at least 10 months to obtain NOC (No Objection Certificate) & transfer of machinery (as per discussion with BDO of Bhokardan). Hence the option did not appear to be lucrative. 2. The second option would be to procure machinery from the known source who had earlier supplied to units. The machinery details have been mentioned in Exhibit 3. PRODUCTION SETUP INVESTMENT The 30 ft X 20 Ft space in Grampanchayat office premises would be taken on rent by SHG group, the lighting connection, water supply connection & interior construction needed to be done on priority. As per initial assessment of the site & discussion with village authorities & local builders, the investment was estimated at around Rs. 30000. This investment would be a part of investment made by SHG. The village authorities would help in pipeline provision under SME (SME: - Small & Medium scale Enterprise) development scheme. It was required to be taken up in regular monthly Gramsabha in order to arrive at consensus. Considering the total expenses, the initial investment for the SHG would be Rs.255861. MANUFACTURING PROCESS The process of manufacturing is given in Exhibit 4. The product must be clean and free from foreign matter due to its use in sensitive areas. The sanitary napkin obtained through the above process would be subjected to sterilization to ensure a germ-free and safe product. This would be done using a UV Sterilizer before packing. Each napkin has standardized dimensions of 20 cm X 6.25 cm X 0.6cm. During the production of Sanitary napkins following care had to be ensured: 1. The napkin manufacturing place should be clean. All work to be done on work table only (like QC, packing, etc.) 2. While making napkins, worker should wear work coat, hand gloves, head cap and mouth closer. 3. No foot wear allowed while making napkins. 4. Visitors would not be allowed (they sneeze or touch the 58

napkins). If necessary, visitors could be allowed in workers uniform. 5. Everyday production would be packed and stored; no napkins would be kept open after production. TEAM COMPOSITION As per analysis & study of Jehur unit the following team composition was needed: 1. One member to take care of purchase & dispatch activity 2. Two members to take care of Quality control at final stage & packing. The product needed to be checked as per the laid down parameters & then only would be passed. 3. Four members to take care of the production. The production to be done as per the laid down machine parameters. 4. One member to take care of administrative needs. That member would preferably be the head of SHG in order to keep the discipline on the shop floor at unit. After final production, the final packing into required lot size(8 packets in one lot) needed to be done by all women in order to avoid the dispatch becoming a bottleneck. As per the study of production unit, in 1 day 180 pads could be produced by working for 6 hours daily. The details of production are mentioned in financials. The financial calculations for first two years based upon the study of Jehur plant & assumed efficiency attained are mentioned in Exhibit 5. OPTIONS FOR FUNDING THE PROJECT OF STARTING THE PRODUCTION UNIT AT KEDARKHEDA NABARD is the major agency which grants loan to the self help groups to start their own business. The self help group would need to register in the panchayat samiti office & should have a registration number allocated to it. The loan facility would be available with various banks also but with a higher interest rate as compared to NABARD. Secondly SACRED could work out the option, with the help of fruitful intervention from UNICEF, of acquiring the machinery lying unused in sick units in Maharashtra & get it rented for the production unit at Kedarkheda. That would help in significant reduction in initial investment and hence boost the confidence level of the self- help group. Till the time the unit would be set up based upon the feasibility, the supply from Jehur unit to SACRED would continue. SACRED office at Bhokardan would act as a distribution hub from where Deepshikhas would be collecting the sanitary napkin packets and would be selling & distributing in their own villages. Details of a

market study in the context of menstruation is given in Exhibit 6. ECONOMIC ENVIRONMENT According to findings of the latest study “Sanitary Protection: Every Woman's Health Right” undertaken by AC Neilson in 2010, the biggest barrier to use sanitary napkins was affordability. Around 70% of the women in India complained that their family could not afford to buy them. The same was reviewed and endorsed by Community Development Organization Plan India. Bhagyashree Dengle, executive director, Plan India said, “This study reveals the dismal state of feminine hygiene care in India and shows rampant unhygienic sanitary practices. In comparison, 100% women in Singapore and Japan, 88% in Indonesia and 64% in China use sanitary napkins." As already stated earlier, only 12% of India's 355 million menstruating women use sanitary napkins (SN). Others resort to alternatives such as cloth, ash and husk sand. This compared to the 96% rate seen in developed countries, like the United States, and India's statistic seems pitiful. Incidents of Reproductive tract infections (RTI) are 70% more common among these women. Inadequate menstrual protection causes girls aged 12 to 18 to miss around 5 days of school per month, or approximately 50 school days per year. Even more startling is that around 23% of the girls drop out of school once they start menstruating. On 15th June 2010, the Union Health and Family Welfare Ministry approved a scheme for providing highly subsidized sanitary napkins to adolescent girls in the rural areas to promote menstrual hygiene. The scheme was to be launched in 150 districts across the country in the first phase. Approved by the Mission Steering Group, the highest decision-making body of the National Rural Health Mission, the scheme envisaged covering 1.5 crore girls in the age group of 10-19 years every month. Of this, the approximate number of Above Poverty Line (APL) girls is 105 lakh while that of the Below Poverty Line (BPL) category is 45 lakh. The napkins would be supplied to the BPL girls at a nominal cost of Rs.1 per pack of six while the APL girls will have to pay Rs.5 per pack. A. Muruganantham had created a sanitary napkin making machine that operates on a small scale. Contrary to a large-scale production model which requires Rs.3.5 crores as initial investment, Muruganantham's sanitary napkin making machine could be made available to a buyer for approximately Rs.75,000. This allowed smaller players to adopt the business model of producing and selling sanitary napkin especially in the rural areas. POLITICAL ENVIRONMENT Bhokardan is a multi-religious taluka with 125 villages.

Gram Panchayat headed by the Sarpanch is the decision making body in these villages and forms the political environment of the village. Mr. Jayant, based on his past experience in implementing projects in rural India, knew that the Panchayat committee would be neutral to any project being implemented in the village. It neither supported nor criticized such projects being implemented by the NGO's. When it was decided that Kedarkheda was chosen for analyzing the feasibility of setting up a sanitary napkin production unit, the Gram Panchayat readily allowed SACRED to use a two room facility for the production unit. However, any Panchayat committee usually got ridden with internal politics which thus hampered the prospects of the village. CONSUMER MARKET Sanitary Napkin Awareness Feminine care was introduced globally over 100 years ago. India claims the lowest usage of feminine hygiene products in the world. Feminine hygiene products can be defined as “hygiene absorbent products engineered to absorb and retain body fluid without causing any leakage. The user should always feel dry and comfortable. It consists of an absorbent pad sandwiched between two sheets of nonwoven fabric.” There are 3 major types of products, (a) Thick sanitary napkins. (b) Ultra thin sanitary napkins. (c) Panty liners being used in the market. The size of each and their content vary from market to market. UNDERSTANDING THE CONSUMER MARKET A survey carried out by leading global information and measurement company AC Nielsen revealed the dismal state of feminine hygiene care in India. The penetration of sanitary napkins in India has been extremely low and there has been tremendous potential for players to gain decent market share. Urban women make up 20% of the country's sanitary napkin market. In 2008, there were 96 million women in urban India and, at that time, it was projected that number would increase by 17% to 1.2 billion women in 2013. With this predicted population growth, the sanitary napkin market could potentially be valued at as much as USD $365m in 2013, up from US $166.1m in 2008. Currently it is estimated to be worth around USD $270m. Some key highlights of the survey were: ü 75 percent rural women lacked adequate knowledge on

menstrual hygiene and care ü 81 percent rural women used unsterilized cloths since

they are cheaper ü 68 per cent could not afford to buy sanitary napkins

available in the market. ü Adolescent girls in rural India were unable to attend up

to 50 days of schooling in a year due to inadequate menstrual care ü 23 per cent (aged 12-18 years) discontinued studies due

to inadequate sanitary facilities in schools CONSUMER SURVEY SACRED conducted a survey in Bhokardan and Nagbid talukas. The sample size for both locations was 120.These females were aged between 14-45 years. With the help of Field coordinators, a questionnaire was prepared in the local Marathi language and women from different villages were surveyed to get an overview of the village mindset. The questionnaire attempted to gauge the financial situation, awareness, hygienic condition, mindset and the openness to use sanitary napkins. An analysis of the data revealed that 79% of the women were not aware of the causes of Menstruation. Cloth users felt that price for a sanitary napkin packet should not exceed Rs. 20 and should be in the range of Rs. 15-18. Sanitary Napkin users did not have an issue with price but quality was a significant criterion since matching brands like Whisper or Stayfree was a tedious task for “Nirmal”. [Refer to Exhibit 6 for charts] POSITIONING OF NIRMAL SANITARY NAPKINS “For Menstruating women “Nirmal” Brand was looked upon an affordable and quality Sanitary Napkin that was easily available in every village through the Deepshikhas because every woman had the right to maintain her hygiene.” [Refer to Exhibit 7 and Exhibit 8 for Perceptual Map and Laddering]. Mr. Jayant felt, making sanitary napkins available to village women through their own member of village (Deepshikha) was their USP (Unique Selling Point) for Nirmal Sanitary Napkins. The personalized selling would take care of efficient distribution of the sanitary napkins. Maximum reach to village women could be achieved. This would be also be very helpful in imparting knowledge of self sanitation to those women and could be achieved in line with the main motto of UNICEF. IN THE FACE OF COMPETITION A variety of brands were available in the market. Apart from the branded ones manufactured by reputed companies, there were a number of local brands too. These were made locally by women through self run enterprises. Thus it could be said that the industry comprised a few organized players and a few unorganized players. Since the focus market for study was rural India, there were a few players that competed on price as the major parameter. [Refer to Exhibit 9 for List of brands available in the rural market]

DEMAND Market Mapping was a way in which the locations and individuals to whom the packets could be sold was identified. They could be sold to Public Health Centers (PHCs), Hospitals, Medical Shops. They could also be sold through Anganwadi workers, Self Help Groups etc. Anganwadi workers provided care for newborn babies as well as ensure that all children below the age of 6 are immunized. They were also expected to provide antenatal care for pregnant women and post natal care to nursing mothers. But Anganwadi women were involved in several other empowerment activities which could be a source of distribution. The Deepshikhas would anyway be a strong unique channel that was not currently used by any other brand for selling. In general, the rural women between the age group of 1544 years in the chosen blocks were the target customers. [Refer to Exhibit 10 for Female Population in the blocks] DISTRIBUTION The local NGO would work as a depot from where the packets would be distributed to the Deepshikhas. Money collected after selling of the packets was to be deposited in the bank once every month by each Deepshikha. Initially, 100 packets would be provided for each village. Based on the demand and sale, 50 additional packets would be further supplied to the Deepshikhas. The commission from the sales would go into the common pool and could not be claimed for a certain period of time decided upon by each Deepshikha. The Deepshikhas could give innovative or inexpensive methods to give update on sales. The time for replenishment would be when the sales hit 50%. UNICEF would draw up a MOU with the two host NGOs. [Refer to Exhibit 11 for figure] PRODUCT COST BIFURCATION ! UNICEF would purchase the sanitary napkins at Rs.

19 per packet of 8 pads + transportation as per actual ! A fixed price had been chosen for the selling cost

instead of a price band to help monitoring and avoid confusion in the market for the particular brand that is going to be sold. That was decided to be Rs. 22 per packet of sanitary napkin. ! The Deepshikha would get commission from the sales

which would be Rs. 2 per packet. ! The local NGO would receive Rs. 1 per packet for

warehousing, stock keeping, accounting and reporting back to UNICEF ! Bulk Selling: In case of selling a customer 50 packets or

more at one time, the packets could be sold at the rate of Rs. 21 If the Deepshikha sold 150 at the end of two months, each Deepshikha group at the village level would have:

! Rs. 2850 as part of their rolling fund

quality and price. Shockingly low level of awareness about menstrual hygiene amongst village women coupled with lack of prior personal selling experience of Deepshikhas was also a major cause of worry. He was also in a dilemma whether the value chain that he had created through this pilot project of selling the sanitary napkins would be sustainable in the longer duration or not. Also the thought of starting the production unit in future in Kedarkheda (based upon the demand generation) would require certain capabilities and financial capacity to be available with Self Help group (SHG) to make it successful, which would be putting a lot of mental stress on him.

! Rs. 300 or less (in case of bulk selling) as part of their

earnings/commission from selling the packets At the end of the two months the facilitating NGO at the block level would have earned the following for their services: ! Rs. 14400 for the NGO of Jalna ! Rs. 16350 for the NGO of Chandrapur

CONCERNS A lot of work being carried out for pilot project related to marketing and selling of sanitary napkins in villages and the starting of production unit were in the offing, Mr. Jayant, sitting in his office, tried to gather the kind of concerns that this project might face. In the past the handmade sanitary napkins produced by similar self help groups had critical quality issues like improper sealing at ends, uneven sized pads being produced and insufficient glue resulting in less adhesion which made the product inferior to product of the competitors both in terms of

Hence Mr. Jayant now was thinking about the role for short term as well as for long term that he might have to play in order to make this project a grand success.

To request Detailed Teaching Note pertaining to this Case Study, feel free to write to samvid@spjimr.org with your full credentials & purpose.

EXHIBITS Exhibit 1: Country wise per capita consumption Country

Population

GDP/ Capita, US $

Consumption Hygiene products/ Capita, US $

Brazil

186.4

4,289

10.5

China

1,293

1,533

Germany

82.7

33,800

24.2

India

1,103

726

0.13

Japan

128.1

35593

Russia

143.2

5,349

8.3

USA

298.2

41,768

Total world

6,465

6,879

N/A

Exhibit 2: Costing details of raw material S. No

Description

Unit

Rate

Total

Core Material

300Kgs

65/kg

19,500

Top Layer

5000mts

1.72/mt

8,600

Back Layer

10kgs

250/kg

2,500

Release Paper

2 Ream

1050/-ream

2,100

Gum

20 Kgs

150/- Kg

3,000

VAT 12.5%

4463

Packing and Handling charges

4,000

Installation and Training Fees

5,000

Total

49,163

Note:- This Material would be sufficient to produce 30000 (3750 packets comprising 8 pads each) Sanitary Napkins making the cost per sanitary napkin to Rs. 1.63. Exhibit 3: Details of machinery & costing details S. No

Description

Unit

Rate

Total

De-fiberation Machine

25525

Soft touch sealing Machine

33695

Pneumatic Core forming Press

48925

Air Compressor

24925

Core Dies

2495

4990

U V Treat Unit

14560

VAT 12.5%

19078

Packing and Handling charges

5,000

Total

176698

Hence initial investment for machinery will be Rs. 1,76,698. Exhibit 4: Sanitary napkin manufacturing process Raw material transported to De-fiberation machinery

De-fiberation of Wood pulp

Measurement of wood pulp (10 Gms)

Pressing of wood pulp

Wrapping & sealing of cores

Glue application & sticker positioning

Packing of napkins

Storage of Sanitary Napkins at dispatch

Exhibit 5: Financial Calculations for first two years Unit Heads

Year 1 (80% efficiency)

Year 2 (100% efficiency)

1.4

11.2

16.2

Pads/woman/day

288

360

Total pads/day

1440

1800

Total packs/day

180

225

Total packs/month

4680

5850

Selling price of pack

Profit/pack

2.8

Total profit per month

13104

16380

Total profit per year

157248

196560

14724.83333

176698

Transportation Cost/Day

100

120

Transportation cost/month

3000

3600

Transportation cost/year

36000

43200

Other Costs

30000

Net Profit

-85450

123360

-10681.25

15420

1 Pad Cost of production Number of pads in pack Pack of 8 pads Total cost of production Packaging + miscellaneous costs Total Cost

Assuming Production demand & bulk ordering of raw material remain the same

Manufacturing No. of women

Machinery cost/ month Machinery cost/year

Net profit per woman

Assuming 1 holiday/ week

20% increase assumed

Buffer

N. B.:- Based upon the experience of first two years, demand sustained & raw material as well as maintenance cost the calculations can be revised. Exhibit 6: Survey results on Menstrual Hygiene among Cloth Users

Why don’t you use Sanitary Napkins?

Usage Pattern

1% 29% 25%

31% 45% 24%

Home Cloth Market Cloth Sanitary Napkin

Can’t Afford Don’t want to change/ no reason Hard to dispose Not Available Not Allowed

44%

For Cloth Users 63

What Is Menstruation

Who guided on Menstruation

20%

10% Don’t Know Miracle Body Process Body Cleaning

58%

23%

50%

7% 10% 6%

Exhibit 7: Perceptual Map

Perceptual Map

High Quality Whisper Stayfree She

Nirmal

Low Price

Mukta

Sakhi

High Price

Low Quality

Exhibit 8: Laddering- “Nirmal” Sanitary Napkins Laddering

Value

Confidence, dignity, sense of pride and empowerment

Emotional Benefit

It will help in avoiding health hazards and instil confidence among women. Also, since it is prepared by self-help group women, it brings in a feeling of togetherness

Functional Benefit

It contains less glue and more wood pulp compared to any standard sanitary napkin. It passes stringent quality tests and is hygienic to use

Attributes

Extremely hygienic compared to alternatives like cloth, ash etc. A very good absorbent that keeps you dry and free from any leakage

Mother Friends Relatives Self Training Others Not Sure

Exhibit 9: Available Brands of low cost Sanitary Napkins initiated by Water Supply and Sanitation Department of Maharashtra Company/ Manufacturer's Name

Name of the Brand She Comfort Select

Royal Hygiene Care Pvt. Ltd.

Kotex Soft and Smooth

Hindustan Unilever

Whisper Choice

P&G J&J

Stayfree Secure cottony soft Stayfree Secure Dry

HLFPPT

Sakhi

Pads in the Packet

Type

Cost

8 pads

Without wings

Rs. 20

8 pads

With wings

Rs. 24

8 pads

Without wings

Rs. 22

8 pads

With wings

Rs. 24

8 pads

Without wings

Rs. 22

8 pads

With wings

Rs. 26

8 pads

With wings

Rs. 22

8 pads

With wings

Rs. 24

6 pads

Without wings

Rs. 15

10 pads

Without wings

Rs. 20

Without wings

Rs. 30

Pune, DRDA; Yashada; SHGs based in various parts of Pune district

Mukta

Exhibit 10: Population of Female between 15-44 years of age group Total population female

Nagbid

Bhokardan

67836

139099

15-19

6893

12712

20-24

6943

12166

25-29

5843

10774

30-34

5247

9459

35-39

4950

9273

40-44

4583

8246

Total Population Female (15-44 years)

34459

62630

Exhibit 11: Product Cost Bifurcation DG - Deepshikha Group SP - Selling Price RF - Revolving Fund

Rs. 2 (DG)

UNICEF Buys@Rs. 19 Per packet

Rs. 22 per packet (SP)

Rs. 1 (NGO)

Rs. 19 (RF)

CASE STUDY

Change Management: Building Blocks Of E-governance Systems In Rural India Rajas Abhyankar, Niranjan Sane, Nimesh Singhal, Ankita Pant, SPJIMR - Mumbai KEYWORDS E-governance, Change Management, IT in public welfare, Public-Private Partnership

ABSTRACT The rural macro environment in India is shackled by policy failure, poverty and economic inequity, social instability, involvement of the majority in unskilled labour and a general lack of education and basic amenities. Along with this, the welfare schemes launched in the district have been severely hampered. For empowerment of villages under the 11th Five Year Plan, the Panchayati Raj system must be aided by an appropriate data reporting system; this case analyses the importance and feasibility of such a system subject to the aforementioned constraints. After considering several options, 'Integrated Data Collection and Reporting System' seems the best option to increase the efficacy of schemes and to reduce data redundancy. The benefits of such a system would be: improved quality and usability of the data, increased accountability, reduced effort and a check on corruption. The system would strengthen the feedback mechanism by aiding Joint Planning and Communication based Monitoring System (CBMS). It would provide end-to-end tracking of data for the target groups and create visibility of this data for the decision makers. Change management would be the primary factor affecting the feasibility and sustainability of the e-Governance system. The case analyses the method of implementation of IT systems against a backdrop of poor educational levels, extensive power cuts, and lack of basic infrastructure. It proposes the Kotter's Change Management Methodology as a possible option of successful change implementation and gives recommendations of how to tune it into rural governance context considering the multiple hindering factors. It proposes PPP as a major enabler of change and paves a path how actionable steps can be taken in this direction.

INTRODUCTION his is a region constantly harped by difficulties. As much as I love the idea of implementing e-Governance, I doubt how much the idea of any new system will be acceptable to the people, who are not able to get over their day-to-day difficulties of survival and the government officials, who are not ready to change. Moreover, there are land mafia, cement and coal lobbyists and Naxalites who create constant hindrance in the functioning of even the long-established government schemes; sabotaging this idea, which is in the formative stages, will be a child's play for them considering their clout and power.

Upendra Pallai, the UNICEF (United Nations Children's Fund) District consultant in Chandrapur commented on his proposal of implementing a new system of data collection and reporting at the village level. This skeptical attitude was very unlikely of Upendra, who had been running the various programs in the district for almost 4 years now. BACKGROUND - UPENDRA PALLAI Many attributed the great amount of work done by UNICEF in Chandrapur district to Upendra Pallai.

Upendra's life story has been a story of struggle. Born to poor parents, Upendra had a tough childhood and had to take gaps in his education to earn for his family and educational expenses. Through immense hard work he was able to complete his engineering in Computers and worked in a software firm as a technical consultant for about 3 years. He was credited with the successful implementation of a major cloud based solution for a mid size company and an ERP implementation (Supplier and HR module) for a mid-size Panel manufacturing company. He was very passionate about technology and had developed a holistic perspective of IT as an enabler. His passion for social issues encouraged him to quit his job and join UNICEF as junior consultant on a contract basis. He rose to the rank of District consultant for Chandrapur within a span of 4 years. Despite huge initial lack of cooperation from his colleagues and people of the region, primarily owing to his young age and fast progress, he now was in a commanding position where people respected his opinion and his drive for carrying out difficult social programs. A man least scared of failure, Upendra was known to take bold decisions and

implement them with vigour and passion. He was entrusted with the big responsibility of managing all the programs in the district, getting them implemented with a good quality and within prescribed time. BACKGROUND - CHANDRAPUR DISTRICT IN MAHARASHTRA Chandrapur district is located in central India on the far east of Maharashtra state bordering Andhra Pradesh. This district is typically one of the hottest places in India with the extremes of temperatures affecting human life and day to day work. The region suffers from acute scarcity of water and power cuts of up to 5 hours a day due to shortage of electricity. In the British era, districts were allocated to states along linguistic lines; Chandrapur, with Marathi as the major language spoken, was transferred from Madhya Pradesh to the Bombay State in 1956. Rajura Tehsil was similarly transferred from Hyderabad to Nanded and then to Chandrapur in 1959. In 1981, Administrative difficulties mandated the split of the district into Chandrapur and Gadhchiroli, both of which are currently part of the Red Corridor. Chandrapur was named one of the 250 most backwards districts in India by the Ministry of Panchayati Raj; it thus receives funds from Backward Regions Grant Fund Programme (BRGF). The region is rich in mineral resources like coal and gypsum. With industries like the Wardha Valley Coalfield and several large limestone reserves, the region has seen rapid industrialization. This has attracted many cement firms to setup factories, e.g. L&T or UltraTech Cement, Gujarat Ambuja, ACC Cement, Manikgarh Murli Cement, etc. The third industry, mining and cement being the top two spots, is paper making (BILT â&#x20AC;&#x201C; Ballarpur Industries Ltd. being the major manufacturer). The Chandrapur Super-thermal power plant qualifies as one of the largest in Asia. The labour in these companies is usually unskilled and illiterate, and typically employed on a contractual basis. Being big players, there is a considerable amount of clout and lobbying that the companies exert on the governmental activities. The land mafia and Naxalites have also been known to create major hindrances in all kinds of development work. PANCHAYATI RAJ INSTITUTIONS IN INDIA Panchayati Raj in India is the greatest ever experiment of democracy undertaken in history in terms of electorate size, number of grassroots institutions covered (more than 250,000), number of persons elected to the Panchayats and Municipalities (in excess of 3.6 million) and in terms of the empowerment of some 1.2 million women (37% of the entire population of elected candidates) who have been elected to our Panchayati Raj Institutions (PRIs).

THE 11TH FIVE YEAR PLAN Decentralization of political institutions in India involves both the delegation and devolution of power. India with its socio economic constraints is a complex playground for such as change. In states, like Karnataka, Kerala and West Bengal, PRIs have played a vital role in changing the traditional power structure dominated by the deadly nexus of the local elite and the bureaucracy and has transformed the rural life style for marginalized sections in Madhya Pradesh, Rajastan & Gujarat. However, India's commitment to democracy, decentralization and development as stated in the constitution would keep pushing India to perform better to promote grass root empowerment. The initiatives through the 73rd Amendment have introduced new measures to alleviate the poor making the representation in the grass root politics more vibrant. Moving forward on these lines, the 11th Five Year Plan suggested a number of reforms in the Panchayati Raj Institutions in India. In order to increase peoples' participation, the Plan recommended the establishment of Ward Sabhas, standardization of Gram Sabha roles and establishment of an interface between the Panchayats and NGOs. For effective fiscal devolution, it was recommended to establish a database on local revenue collection by Panchayats keeping in line with the guidelines of the 12th Finance Commission. States were asked to overlook the tax collection process and train the people involved, wherever required. For schematic fund transfers relating to specific functions, transfers to the Panchayats were recommended by consolidating them into block transfers on the lines proposed by the Expert Group report on Planning at the Grassroots Level. A fund, exceeding Rs. 2000 Crore (1 Crore = 10 Million) was asked to be created in order to incentivize Panchayat empowerment by States and for the performance of devolved functions. With pre-set benchmarks, the funds would move only as fast as the implementation would happen at the ground level. National and State level task forces were to be established to plan, implement and monitor these strategies. The Plan also had a focus on E-Governance and made the following recommendations: 1. Software Development 2. Capacity Building 3. Developing an online community of Panchayats through the National Panchayat Portal. IT based support systems were sought for sharing of data such as census, health audits, educational inspections etc.

across different levels. Licensing, NOCs, house related services and other such systems were to be integrated with the online model. These guidelines, if implemented effectively, could largely improve the efficacy of PRIs and align them with their long-term objectives. WORKS BY UNICEF IN CHANDRAPUR UNICEF is a non-government organization under United Nations established for the upliftment and development of children. UNICEF works on the global level in collaboration with various political and nonpolitical decision-makers, and with the help of a multitude of partners at grassroots level, turns the most innovative ideas related to child health and benefits into reality. UNICEF India has been operational since 1949 and is the largest UN organization in the country. The target set by UNICEF is that each and every child in the country should get the best start in life, to develop his or her full potential. The role of UNICEF is that of an enabler as it plans and runs several pilot programs for social development. It then hands over the responsibility of the further full-scale implementation to the government agencies. It carries out extensive training to the government officials as well as NGOs so that the program can be effectively sustained. The overall standard of living of the people in the region is low even though a few of the villages are quite prosperous. Some of the villages have better administration and have managed to take advantage of the government schemes by showing good results, and thus growing prosperous. However, people in many other villages of this region are quite poor, most of who do not have sustainable means of livelihood. As per current records the percentage of people below poverty line is around 39%. Many people are under the influence of alcohol and while away their resources. There is a general sense of depravity among the citizens of the place and a general lack of ambition seen among the youth. UNICEF does significant work here to uplift the living standards of the people. The UNICEF employees are respected and listened to, as a result of this respect towards the organization. Chandrapur district sees a lot of activities by UNICEF. (See Exhibit 1 for an overview of the programs carried out by UNICEF in the region) All these programs are under guidance and supervision of Ms. Anuradha Nair, Social Policy, Planning, Monitoring & Evaluation (M&E) specialist. (See Exhibit 2 for the reporting structure for the programs) THE DEEPSHIKHA PROGRAM Creating health awareness and providing guidance for setting up small scale businesses, the Deepshikha 68

Program for adolescent girls has been very successful in Chandrapur. It was first implemented in 2008 when UNICEF turned its attention to this section of the society after the change of policy guidelines. Thereafter, a huge attention has been given to this program considering that the adolescent girls (typically in the age group 11-18 split into 2 groups 11-14 and 15-18) are highly vulnerable, especially in rural areas, since there is lack of basic amenities complemented by traditional thinking about the inferior status of women in the society, though it is slowly changing. One of the oldest programs in the district this program has run successfully and has achieved its objectives by up to 80%, much beyond what Ms. Anuradha had expected. (See Exhibit 3 for the impact created by the program) The success of this program was a feather in the cap for Upendra and this boosted his confidence to carry out other programs with vigour. NEED FOR BETTER REPORTING On perusal of some data collection sheets from the past records(see Exhibit 7 for the old reporting formats), Upendra found that there was a lack of coherent data of any form. The data was very haphazard, which led to drawing some plans which could not be implemented practically, making the planning ineffective. Thus the basic usability of the data itself was in question. To cite an example Upendra observed that there was almost 53% repetition (see Exhibit 6) between the data collected by Anganwadi and Medical Sub-Centre. There were several intersecting areas in the work of the various entities and this lead to repetition. For instance, both Anganwadi and Auxiliary Nurse Midwife (ANM) (the medical officer in the village) implemented vaccination and hence there was overlap in their data. Also at times there was cross-use of data across departments, leading to further duplication (for e.g. Medical Centre passed its birth death record to the gram Panchayat, but both maintained the records of birth and death). Another important issue was that since the same data was collected by several people, many a time people got irritated and gave wrong information to either of them. Also there were other reasons people gave false information e.g. taking advantage of the Below Poverty Line (BPL) benefits. The people involved in collecting, recording, and handling the data often complained about work overload. At the same time, the output was ineffective, to say the least. Due to opacity in the whole process, corruption could foster unchecked and caused a feeling of distrust between the villagers and the data collection authorities. This also caused a wide gap between the number of cases reported against corruption and the actual incidents of it.

UNICEF identified these needs and hence decided to come up with an optimized data reporting scheme for governmental data. The overall plan was that the system would first be designed by UNICEF, a pilot project would be implemented and then the program would be handed over to the government for implementation on a larger scale.

to be very low even among the government appointed officials, leave alone common people. The fund allocation (usually in case of the united fund) to the various schemes in the village is done in lieu with the decisions in the Gram Sabha. The Gram Sabha decisions were dominated by an influential few and the opinions of the entire village did not get voiced.

“The program is in the initial phases but has a huge potential for the overall upliftment of the village and increasing the efficiency of the functioning of the village. It also has potential to track the progress of various developmental activities in the village which currently got untracked with no one held accountable” said Dr. Ganesh Nigam, the State Consultant for M&E at UNICEF in Maharashtra state.

The new system could avoid blind data entry and incoherent decision making since functionaries could be held accountable to the entire village. Also, catching of fraudulent data during planning could become feasible by monitoring anomalies in the entered data.

UNICEF wanted to align the current village operation with the decentralization policy of the government, in which a major part of the decisions and work on the village level was to be carried out by the people in the village with the government making broad level policies and guidelines for the same. Being a global organization, UNICEF already possessed the technical know-how and experience with such projects across the world. POSSIBLE BENEFITS OF THE NEW SYSTEM In the ideal system the feedback mechanisms should be strengthened by Joint Planning (e.g. school gives the feedback for the pre-school: Anganwadi) for bringing about the improvement in the children even before they enter the school. It should also help in identifying some missing areas not reported by different entities and if deemed important, should actually be included in the reporting to the government. As observed by BDO for Chandrapur District Mr. Tukaram Tekade: “Developmental planning mechanism at Panchayat level is failing due to lack of database integration for the government's schemes. This causes lack of cohesiveness between them. No scheme can work effectively until this problem is cured.” A similar scenario existed at the Gram level. This scheme, Upendra believed, when scaled up would address the needs of the Panchayat level, district level and state level as well. It would induce reduction in the corruption due to transparency, as the data will be in public domain and its dissemination at regular intervals will reduce it. Also the instant report generation and strengthening of the Community based monitoring system (CBMS). Citizen services could be availed easily and corruption and delay in the process could also be reduced. The integrated common format for reporting should be of great help in implementation as well, along with planning. This system should bring in the much needed accountability in the functioning of the village authorities. The typical attendance and contribution of villagers in the Gram Sabha – the meeting of the entire village to discuss the issues and prioritize them was seen

Thus, he felt that success of the Gram Sabha as a decision making forum would be achieved through people-centric development by convergence of the data, planning and implementation at the Panchayat level. Considering all these factors, Upendra was strongly advocating the integration of the database at the village level. EVALUATION OF THE ALTERNATIVES Being an IT consultant Upendra was well aware of the various options available to him for the implementation of the system. While thinking about which solution would be best suited for addressing the issues present, Upendra and his team narrowed down on few options: a. Cloud based solution: A cloud based solution seemed viable on the cost and feasibility fronts. Several companies provide cloud based data processing services, thus precluding the need for heavy server infrastructure through rent and of maintenance through AMCs. The inherent problems of internet connectivity and electricity supply, however, continue to be of prime concern. Convincing government officials about data security would prove to be a tough task, given certain cases of medical information leakage and the consequent social gaffe in Chandrapur district. b. ERP: ERP is more focused, customizable and uses its own hardware infrastructure, but in the eGovernance context, it would handle seamless information flow between different departments and different functions within the departments. Though much more expensive than the cloud based system, it secures the data and eliminates the risk of losing important data to a large extent. A system in a corporate firm with 2 modules costs in the range of few crores. Considering the magnitude and complexity desired, it would be a major cost to the exchequer. Another major issue with ERP was that the migration process from the current system to the new system would be very cumbersome with multiple processes and stakeholder involved.

c. Integrated reporting system: An integrated data reporting system focuses on efficient flow of data and optimized structures for data collection. The main advantage is the removal of redundancy. Also the system establishes processes of reporting and data collection which are better as highly efficient and streamlined; this would help collect the data in a format that can be tuned according to the need. Additionally, the data can be integrated across schemes due to a common storage facility. One drawback would be elimination of cross references which would place a higher responsibility on the people collecting data. An overlap of administration could mean difficulties in reaching common grounds for the data requirements. Also, trusting each other's data collection was not an easy goal to start with. After detailed analysis, Upendra and his team evaluated the options under the following criteria. They considered Process optimization, Integration ease, Reduction in redundancy, Scalability and Cost (In order of importance, based on their expertise in the field) as the prime criteria. After several deliberations and evaluations they reached upon a conclusion that the Integrated Data Reporting System would be the right fit for the current requirement. Upendra conducted a Pilot Project in Satri village in Rajura Taluka, which connected the data for the concerned entities: Gram Panchayat, Anganwadi, School and Auxiliary Medical Sub-Centre. The results were encouraging and the scalability of the technical part of the project appeared plausible. More importantly, he came to know of the probable issues which could come up in the implementation of the e-governance in the village. PILOT PROJECT IN SATRI VILLAGE In order to gauge the feasibility of implementation for the system, Upendra thought of having a pilot study in Satri and Chanakha villages in the Rajura Block. These villages were specifically selected since they were typically known to be more development prone and the number of schemes that were successfully implemented in these villages were the highest in the district.(See Exhibit 1 for the schemes in the district) Also Upendra knew a few local people here who used to work on contract basis for UNICEF. The planning for the project was done for about a month and the actual pilot project was held for about 40 days. The software usage for the project was to be nonsophisticated and inexpensive (use of Google docs) and their use would just be illustrative to prove his hypothesis of implementing the change in the current system. They had designed optimized forms which would remove the data repetition and ensure efficient data collection (see Exhibit 8 for the new form structure). 70

After 6 weeks of implementation, Upendra analyzed the success of the project with the help of his team. They had covered the entire data of the month for the 2 villages in sectors: Anganwadi, medical sub-centre, Grampanchayat and School(see Exhibit 9 for evaluation of the success of the project). The task of collection of data and consolidation had been assigned to the computer operator in the Grampanchayat. CHALLENGES IN IMPLEMENTATION Upendra had been working in the area for more than 4 years and was aware of the several pressing social and demographic issues in the district. When he observed the statistics of the village with respect to literacy he was convinced that this certainly was a major hindrance in the implementation. Because of illiteracy of the people, he found it very tough to convince the people of even his most meritorious of ideas. For example, he had tried to organize an awareness camp for tuberculosis with the help of the medical sub-centre. But only 21 people turned up for the camp within a span of 3 days mainly because the people did not realize the importance or seriousness of the activity. A major part of it was attributed to the prevalent illiteracy, and minor part to ego and nonwillingness. On another occasion, he had attempted to conduct a computer hardware training program. But this too failed miserably as the villagers had to be taught from the basics. Some of them could not understand the English alphabet. Upendra was convinced that an inclusive approach was critical to the success of the program. He recollected the incident of the passive resistance offered by the Maharashtra state transport workers during the implementation of the online system, since the system was forced on them. Finally the system managed to work somehow, but struggled for a long time. He feared that without the proper extensive negotiations the system would be passively or even actively resisted by people whose personal interests came in the way. The local authorities know best the village, its people, its strengths and lacunae. They enjoyed a respected status in the village and an administrative clout. Their cooperation was needed in spearheading the implementation. But he had a disheartening experience in the Gram Sabha in Jivti village in the block. The Gram Sabha is the meeting of all the people in the village. The purpose of the Gram Sabha is to have a people opinion of the activities and issues in the village. Normally the Gram Sabha is held once in a month and all the people in the village are expected to be present there and express their opinions on the village progress and to prioritize the various issues. Since the government funds are allotted to specific tasks in the village, the decisions in the Gram Sabha shape the way the village would develop, by assigning the top priorities to the pressing issues in the village. The funds would then be

allotted to the most pressing issue. The proposal for the new system was put by Upendra in the Gram Sabha in order to seek the opinion of the people on the project. Before doing this, he had briefed all regarding the likely benefits the project would bring into the village .The proposal was then put to vote by the show of hands. However, contradictory to his belief, the proposal was rejected by a margin of 30 to 91 in the Gram Sabha. Upendra was quite concerned as the Sarpanch and Gramsevak voted against it. On occasions, Upendra overheard people saying, “What use is e-Government when our own local government can't function properly? “Or “Who benefits from it and what do I get from it? These are just the tantrums of the rich”. There were some more rational queries like “why do we need IT systems when labour is so cheap? Where do we get all the funds to set it up?” He had begun to sense the skepticism in people's voices. The volunteers who had failed at their task due to language barriers and education were also not much in favour of the new system. It was not easy for them, but no overhauling is ever easy, thought Upendra when he heard them. His only concern was how to prove it. These were not Upendra's only concerns. Chandrapur area was quite rich in minerals and had few big industries located around it. There was a sort of clout that the owners of these industries exercised over the public servants. The area was full of corporate lobbyists who, he was quite certain would create hindrances in the project. They had several popular techniques for the same which included strike, roadblock agitations and the like. This system was supposed to bring in transparency, which would make them lose their position of power, since they usurp a lot of benefits through the chaos in the system. In fact when the news of Upendra's pilot project reached few of them, Upendra received few threatening calls demanding him to stop the so called “wasteful work” he was going to do, or be prepared for dire consequences. But having worked in social sector for about 3 years and having faced such downs, Upendra was strong enough to turn a blind ear to such threats. Apart from this, the Right to Information (RTI) privilege was being used in stalling the constructive work of the government.

The people in the villages had little or no knowledge of the computers and were quite reluctant to learn. When Upendra approached the Gramsevak in Jivti village, he told Upendra that he was too old now to gain any computer knowledge and would rather prefer the paper pencil method. A huge amount of training would be needed in order to transform to the new system and it would involve cost as well as efforts. Upendra was looking outside the office window thinking of how to overcome the structural challenges and the people issues. On one hand, the idea of the system looked extremely promising, while on the other, people were so very reluctant to bring in any change in their ways of work and their mind sets. ! What are the issues pertaining to the implementation

of E-governance in the rural setting? ! How exactly can accountability and vigilance over

authentic data generation be increased on the ground level? ! What should the approach be toward change

management in this case? ! How could the issues identified before be addressed in

a scalable and sustainable manner? ! Mention the steps to be taken to make the solution

sustainable.

To request Detailed Teaching Note pertaining to this Case Study, feel free to write to samvid@spjimr.org with your full credentials & purpose. EXHIBITS Exhibit 1: Overview of the UNICEF programs in Chandrapur UNICEF runs several operations in the Chandrapur district of Maharashtra. These programs include ! Deepshikha program- a program for adolescent girls'

empowerment through the medium of Prerikas (inspirers) – women and adolescent girls trained by UNICEF and who spread awareness about the health related practices and also enable them through help and consulting in setting up small scale businesses of their own.

As described by Forest officer Mr. Pathan, “Normally the RTI activists approach the government officers, make cordial relations with them and then extract some information from them about their work. If some minor anomaly is found, they file a RTI petition and a large chunk of the officer's energy and resources would be spent in dealing with it, further delaying his work.”

! Micro-planning program- Program analyses the

Many of the government servants in the area were now unsure whether or not to cooperate with the people, lest they themselves be trapped.

! School sanitation program-Program aims at providing

various needs of the people and then needs are prioritized. The request for government funds is done according to these priorities so that the money is used for addressing the real issues and not just being used for unnecessary or low priority agendas. the school children a good environment to study and play. It has the purpose of improving the quality of

education, ensuring all the necessary facilities and amenities to school children including clean toilets for both sexes, kitchens and water supply.

pure drinking water and helping the 'Nirmal Gram Yojana' by the Government Of India for having toilets in every house in the village.

! Bio-village program- Program aims at creating an eco-

! Program for control of HIV/AIDS- Program to

friendly village through efficient waste management for both solid and liquid waste- biodegradable as well as non-biodegradable, reduction in the use of plastic,

educate people and clear their misconceptions of the disease and thus promote healthy living..

Exhibit 2: Current Reporting Structure for UNICEF (Limited to the scope of study) Policy Planning & M&E Specialist (Ms. Anuradha Nair)

State Consultant for M&E Projects (Dr. Granesh Nigam)

State Consultant for HIV AIDS Projects (Mr. Ashfaq)

District Consultant, Chandrapur (Mr. Upendra Pallai)

UNICEF Head Volunteer (Mr. Gunvat Vaidya)

District Consultant, Jalna (Ms. Alpa)

UNICEF Head Volunteer (Mr. Pradeep Niranjane)

UNICEF Head Volunteer (Mr. Ravikanrt Hore)

Exhibit 3: Impact of the Deepshikha program Qualitative Impact: ! 196 Deepshikhas executed the project in 196 villages. ! 19000 women will benefit from the project & start using sanitary napkins regularly. ! Agreement of 8-member women self-help group to set up the sanitary napkin production unit. ! Commitment of these women to be a part of the business and maintain the quality of sanitary napkins produced. Impact of training workshop

Impact of setting up production unit

No. of rural women benefited

19000

Annual Revenue Forecast

Rs. 8.77 Lac

No. of girl students benefited

1200

No. of people employed

No. of Deepshikhas benefited

196

Payback period for investment made

No. of Field Coordinators benefited

No. of villages catered

(Source: UNICEF Publication, Deepshikha Progress Report 20)

3 years & 10 months 96

Exhibit 4: Current Reporting Structure for UNICEF (Limited to the scope of study)

Zilla Parishad CEO Monthly Report

Annual financial report

Block Development Officer Monthly Report

Annual financial report

Gramsevak

District Child Development Officer Monthly Report

Child Block Development Officer Monthly Report

Aanganwadi

District Health Officer

Taluka Health Officer

Primary Health Centre Health Officer

Auxiliary Nurse Midwife (ANM) and assistant

Exhibit 5: Actual Information and description of Governmental entities

Health Department Annual Report

Monthly Report Scrutiny

District Education Officer Principal of School

School

School Clerk

The body of Grampanchayat comprises the Sarpanch (headman), Deputy Sarpanch, Gramsevak, regular members and associated members. Normally the number ranges from 9 to 20 based on the population of the village. The Grampanchayat body is responsible for the overall development of the village and for implementing various schemes in the village. The Grampanchayat collects data in various formats currently, mostly related to the annual tracking of the various activities carried out. It is provided a comprehensive list of the heads for income and expenses during the period of one year. Grampanchayat collects information on the following heads1. Tax collection- Water, Electricity, House and Health tax 2. Implementation of schemes- The progress report on various schemes like Nirmal Gram Yojana, Ecofriendly prosperous village scheme ,Mahatma Gandhi Employment Guarantee Scheme, schemes for Scheduled Caste, Schedule Tribes etc. 3. Regular developmental activities â&#x20AC;&#x201C; Construction and repair of roads, water supply, water purification, electrification of houses and streets etc. 4. Birth death reports The information on the tax and birth & death is sent monthly to the Panchayat Samiti while information on the schemes and other developmental activities is sent annually. The reporting structure is completely vertical. Sometimes the information is sought from the different departments (e.g. Birth death report from the health department), also for special purposes (e.g. If a particular ministry needs information about the village, before a minister visit) School: The school reporting structure is managed by the school principal and the clerk in the office. The structure is vertical with all the information sent to the block education officer. (BEO) It performs the reporting under the following heads. 1. Family Survey- The school performs a survey of the children in the village eligible for the school education. It helps the school identify the children not under the Sarva Shiksha Abhiyaan 2. Monthly report- Information on the attendance in the school, beneficiaries of various schemes, and salary sheet of the teachers. 3. School mapping plan- It contains detailed information on the various developmental activities done in the school and the amenities available along with photographs. 4. Activity book for the different programs and activities carried out e.g. Ambedkar Jayanti 74

5. Examination Results- Standard wise results are sent 6monthly 6. Report of the School Management Committee Meeting- Contains all the developmental plan information and action items for the school 7. The school also maintains separate reports for the various schemes a. School Uniform distribution scheme b. Free textbook scheme c. Poshak Ahar Yojana (Nutrition scheme) d. Midday meal scheme f. Scholarship for meritorious students g. Attendance bonus for SC/ST girls h. Other schemes for specific castes and for children with special needs. Anganwadi: The Anganwadi is in general responsible for the development and sustenance of small children and pregnant and lactating mothers. Working in collaboration with the ANM the Anganwadi delivers services of nutrition provision, vaccination and pre-school education. It has an Anganwadi Sewika and her assistant for the same. The reports sent by the Anganwadi Sewika are all monthly â&#x20AC;&#x201C; 1. Population classification 2. Information on birth-death 3. Nutrition scheme beneficiaries 4. Malnutrition report 5. Child and mother health check-ups during the month 6. Vaccination information 7. Pre-school education information Sub-centre: The sub-centre is the medical facility centre for the village and provides the basic healthcare services. The Auxiliary Nurse Midwife (ANM) is in charge of the sub-centre. The various reports which the ANM send to the Primary health centre are as follows: 1. Family welfare report (family planning) 2. Vaccination report 3. Report of supplies in the sub-centre 4. Child health report 5. Village contagion report.

Exhibit6: Similar Data collected from different sources The Exhibit gives the information about the disabled children in Satri village

(Source: Village reporting formats for Sub-centre and Anganwadi in Satri) Sub-centre SR No.

Type of disability

Bone related

Retarded

Vision related

Speech and hearing related

Learning disability

Other disabilities

Total disabilities

Exhibit 7: Original documentation systems 7.1: Demographic classification by Anganwadi

7.2: Nutrition data by Anganwadi

Exhibit 8: New optimized reporting formats 8.1: Optimized demographic data collection form. Family Id: Family Address: Family Income: Ration card No: GPS Coordinates: Number Scheme Id

321234112

Name Marital Primary DOB Age Sex Religion Social Education Present Mark Disability Id (First Name, Category (highest Id type number status occupation on body Middle Name, degree) Last name) UiD

Passport License Pan card

8.2 Optimized Nutrition scheme format for Anganwadi Enrolled Beneficiaries SC

Muslim

Christian

Parsi

Sikh

Jain

M F

Pregnant Mothers

Lactating Mothers

Adolescent Girls (11-14)

Adolescent Girls (14-18)

Buddhist

General

VJ/NT

OBC

Total

Handicapped Beneficiaries

Children <1Y 1-2 years 2-3 years 3-5 years 5-6 years

Note: It was observed that the new forms were efficient as well as exhaustive in data collection as seen from the illustrations. Exhibit 9: Pilot project result statistics Man-hours required for data collection Data Approximated from observations

Original

Gram Panchayat

100

Anganwadi

140

School

160

Medical Sub-centre

200

After Pilot Project

300

No. of parameters recorded in total data collection Original

After Pilot Project

1623

377

Percentage error in the data collected Original

After Pilot Project

15%

13%

Number of people who refused to help

Number of government entities which did not help readily

13 of 56

Number of threatening calls to Upendra and his team

Exhibit 10: Abbreviations UNICEF :

United Nations Children's Fund

ERP

Enterprise Resource Planning

NGO

Non-governmental Organization

BPL

Below Poverty Line

BDO

Block Development Officer

BEO

Block Education Officer

EPRA

Empowered Panchayati Raj Association

PPP

Public Private Partnership

M&E

Monitoring and Execution

CBMS

Community Based Monitoring System

ANM

Auxiliary Nurse Midwife

NETF

National e-Governance Task Force

PRI

Panchayati Raj Institutions

NRM

National Resources Management

NOC

No Objection Certificate

SC/ST

Scheduled Class/Scheduled Tribes

REFERENCES 1. UNICEF's work highlights in education and health : UNICEF India web site URLshttp://www.unicef.org/india/education.html , http://www.unicef.org/india/health.html;accessedas on 13th Nov 2012.

6. Planning Commission, Ministry of Panchayati Raj; Nov-2006; Report of the working group on democratic decentralization and Panchayati Raj Institutions (PRIs), 11th Five Year Plan.

2. UNICEF compendium on EPRA, 2010: EPRA database for village level data.

7. RTI act of 2005, Ministry of Law and Justice, Government of India: URL http://doj.gov.in/?q=node/141&page=show accessed as on July 2012

3. E-Governance Initiatives-India, GOI compendium on E-Governance issues URL: 'http://www.mapit.gov.in/compendium.pdf' accessed as on 13th October 2012

8. Praveen Suthrum and Jeffrey Phillips, C.K.Prahalad; Dec-2003; Citizen centricity: E-Governance in Andhra Pradesh, The University of Michigan Business School Press.

4. Yash Agarwal, OSRM unit, New Delhi; Revitalization of Educational statistics in India: Issues and strategies

9. Dr. John P. Kotter; 1996; Leading Change, Harvard Business School Press.

5. Commonwealth Secretariat- E-Health: Challenges and Opportunities; May, 2008 Geneva conference

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INTRODUCTION io +20, UN Conference on Sustainable Development, held during June 2012 in Rio de Janeiro, an event attended by more than 100 heads of state was highly criticized for the lack of organization and poor service. Many delegates suffered hour long traffic delays, and authorities had to intervene after a travel-agency which won the contract to arrange for hotel accommodation of the delegates charged multiple times the usual room rates. Makeshift camps had to be set up in a park due to scarcity of hotel rooms.

The conference brought to surface the appalling state of infrastructure in Rio and other big cities in Brazil. â&#x20AC;&#x153;We won't make the same mistakeâ&#x20AC;? promised Mr. Eduardo Paes, Rio's Mayor. A country which ranks 104 out of 142 countries in the World Economic Forum's survey on Quality of Infrastructure will hold the Football World Cup in 2014, followed by Olympics during 2016. BRAZIL AND THE 3 WAY DEADLOCK Brazil is the 6th largest economy by nominal GDP in the world and has seen remarkable growth in last decade backed by large developments in Agriculture, Mining and Manufacturing sectors. Brazil possesses a strong and growing middle class and huge reserves of natural resources. But the Brazilian economy faces a unique three way

ARTICLE

2014 Brazil FIFA World Cup & 2016 Rio Olympics: Opportunities to revive Brazilian economy

challenge: ! Overvalued currency ! High interest rates ! High inflation As of October 2012, Brazil's benchmark interest rate was at an all-time low of 7.25% which is still higher than that of most emerging economies. Inflation too has been over 6%. Brazilian Real has doubled in value against dollar in the last decade. The situation is so delicate that if the government tries to take steps to solve one, then the other would get aggravated. Say, if interest rates are increased to curb inflation then that leads to increased foreign investments and makes the Real more expensive. This would adversely affect exports and trade deficit. Similarly any attempt to make the currency more competitive and increasing exports would require keeping the interest rates low but that would lead to even higher inflation rates. Brazil has been enjoying substantial growth in recent past on the back of high commodity prices. Such growth, also exhibited by Russia, is not sustainable and can disappear if commodity prices collapse. The GDP growth rate for Brazil in 2008-09 was -0.3% suffering from the global economic meltdown and subsequent fall in commodity prices. Other emerging economies fared much better, with China growing at 9.2%, India at 3.9% and Poland at 1.6% during the same fiscal.

Strong demand for Brazilian products like coffee, steel etc. also drives up the value of Real, making other exports expensive and increasing purchasing power and effecting trade deficit. Inflation in Brazil can be primarily blamed on the poor supply side services. Brazil today seems to be a costly and an over hyped economy. Restaurants in Sao Paulo are pricier than those in Paris. Apartments in posh localities of Rio cost more than those in prime locations in New York. Local prices are so very high that the visitors from richer nations find Brazil extremely expensive. Clearly something is severely wrong if cities like London and Paris, having PPP adjusted GDP more than 2.5 times that of Rio and 1.5 times that of Sao Paulo, are being found to be more affordable than the Rio and Sao Paulo. CURIOUS CASE OF BRAZIL Brazil is seen often in the same light as other major emerging economies like India and China, especially as a part of BRICS Nations. There has been a tendency to compare the decision of Rio to host 2016 Olympics with the 2008 Beijing Olympics with regard to the expenditure and the consequent economic benefits achieved from the event. It becomes important to understand the stark differences between Brazil and China. China surpassed USA as Brazil's leading trade partner, and this makes them opposite in economic respect. Unlike China and India, Brazil's interest rates are very high, currency overvalued; spending is skewed towards welfare and less towards infrastructure. Productivity grew at 0.2% compared to 4% in China, which shows China has been putting more people to factories and investing heavily in better equipment, better roads, and efficiency. Productivity in India grew at close 3%. Brazil also suffers from shortage of workers and engineers and a visible decline in manufacturing and services standards. High cost of labor and transport is a direct result of investing too little in infrastructure. China's total investment has increased to 50% of the GDP and Brazil at 19% has one of the lowest rates in emerging world. Spending on new infrastructure, roads, railways, and ports is just 2% of GDP. Poor warehousing and roadways and lack of modern cargo movement facilities are common features of the economy and have been a critical cause of high inflation. Such low investment rates not only lead to inefficiencies but also make the economy extremely vulnerable to high inflation. The supply chain of Brazil is ageing and incompetent to cater to the demands of the economic giant it dreams of becoming. The supply side inflation has been crippling the economy. Considering the above facts and the three way deadlock, Brazil faces considerable odds in becoming a high growth economic power.

The World Cup and the Olympics provide Brazil the opportunity for getting huge investments and it will be a challenge for the Government to keep interest rates low and currency cheaper. The development of infrastructure in China especially before the Olympics was carried out by the government and huge amounts of funds were put into the purpose without much concern for the finances. The extremely high interest rates in Brazil reduce the attractiveness of private investments in long term infrastructure projects in Brazil. HOSTING THE MAMMOTH EVENTS The vigorous competition between nations to host the mega-events like the FIFA World Cup and Olympics is driven primarily by the lure of the vast economic windfall expected which can revitalize host economies. But the huge investments required to support the infrastructure for such events raise the questions of whether the economic benefit outweighs the costs incurred and also the opportunity cost of the investments in setting up sporting infrastructure. Considering only the financial impact of the games does not provide a balanced view of the overall economic impact of the games. The complete economic impact is seen over several years and can be broadly categorized into three phases: pre-games phase, games phase and post-games phase. Pre-games Phase: The key benefit that the host nation gains is boost in construction activity. In order to host event of such magnitude it is a must to not only develop world class sporting facilities but also infrastructure to accommodate smooth handling of several tens of thousands people coming to the host nation during those few weeks. This is the phase Brazil is in now. The investment in infrastructure is the key to deliver world class events like these. Games Phase: Apart from the revenue from the ticket sales, TV rights and other such revenue related to games directly, there are also benefits from the consumption of goods and services of the host nation by the huge volumes of the tourists. The number of tourists for the London Olympics was about 8.8 million and for the South Africa World Cup was over 3 million. Post-games Phase: Global publicity during the games and the infrastructure development that takes place ensures high tourism for years to come. The boost to international reputation that such huge events provide is also very critical in attracting foreign capital for years to come. Creating international reputation was one of the major reasons for Mexico City, the first Latin American city to host Olympics. These events provide opportunity for emerging economies to make a statement at international level and state their new status as economic giants.

COSTS A study by the University of Sao Paulo estimated that the infrastructure outlays in Brazil devoted to hosting the 2014 FIFA World Cup and the 2016 Rio Olympics to be approximately $18b and $15b respectively, hence the resulting total outlay of $33b. This is huge for an emerging market economy. Considering that the expenditure for the FIFA World Cup 2010 in South Africa was $3.5b, over twice the initial estimate and that for the 2004 Athens Olympics was $15b, over 10 times the initial budget. Taking cue from the past, the actual spend can be expected to be much higher than the planned outlay of $33b. As per analyst predictions, indirect investment, such as salaries that return to the economy, the estimate is of approximately $54b for the FIFA World Cup and $43b for 2016 Rio Olympics. Of these, 42% of the investment would come from the public sector and 58% from the private. BENEFITS For 2008 Beijing Olympics, over a $1b was invested on transportation projects like developing Beijing's subway system, rail system and construction of hundreds of kilometers of roads in and around the city. A new airport terminal was also constructed. Huge inflows of investment to prepare the nation for the event created a crucial ripple effect on economic growth. 2012 London Olympics are expected to increase economic output until 2015 by approximately $2b per year and create 17900 jobs every year. The games are expected to provide economic benefit that would constitute not less than 3.5% of the total growth expected in the national economy from 2013 to 2015. Ministry of Sport, Brazil, claims that 120000 jobs will be created per year by the work being done to prepare the nation for the two mega events. Furthermore, according to University of Sao Paolo, the overall economic impact of the 2016 Rio Olympics is to be over $50b. As per a study by Ernst & Young, the overall impact of the 2014 FIFA World Cup is to be around $70b. The overall benefit of over $120b expected in economic profit from both the events. This figure seems very optimistic and being from different sources may include several overlaps. Nevertheless there would be huge impact on several key sectors of the Brazilian economy. This investment would mostly cater to pressing need of development of infrastructure in Brazil. Large proportions of the budgeted expenditure are allocated for development of inter-city and intra-city roadways, airports and hotels. As of 2011, a meager 14% of the roads in the entire country are paved. Tourism is expected to receive a major boost in the entire

Brazil, especially Rio. The number of visitors to Rio is expected to more than double to over 3 billion by 2016. About 12000 new rooms are expected to be completed by 2016 in Rio. Other industries that will, be directly benefited include the construction, electricity and telecommunication industry. The advantages from hosting events of such magnitude cannot be taken for granted. Historically several host nations have failed to enjoy the dividends of the investing in organization of such events. Japan spent about $4b for FIFA World Cup 2002, mostly on infrastructure programs but all the spending barely made any positive difference to its sluggish economy. Similarly the number of tourists which were expected in Sydney after it hosted the 2000 Olympics barely saw any change. Other arguments made by the skeptics are that there is almost no long term employment benefits associated with such sporting mega events. Also the large sporting capacity often lies underused and ruinously expensive to maintain, as in the case of 2004 Athens Olympics. Out of the 24 stadia, 21 stadia, arena and other sporting facilities built for the games are mostly in ruins. Also, in months after the games tens of thousands lost jobs in the Greek construction industry. However this may be very different for Brazil which has huge population and severe backwardness of infrastructure and quality human resource. The measures that will be taken to develop the facilities and services for the events will kick start the much needed growth in spending on infrastructure and will not be contained only till sporting facilities. Development of airports, roadways and ports will ensure employment of huge number of locals not only during construction but also for decades through services offered by these necessities of a powerful economy. The 2014 FIFA World Cup and the 2016 Rio Olympics demand huge investments in infrastructure in Brazil and will be the drivers of growth and are the best hope Brazilian economy has to break the deadlock of high interest rates, expensive domestic currency and high inflation. With improved, more efficient infrastructure and global acclaim Brazil can be expected to attract a lot more investments not only in the commodity markets but in industries that will provide sustainable growth and holistic development of the Brazilian economy. CONCLUSION Brazil could not have expected a better opportunity to invigorate its economic growth. The facilities required for successful conduction of such events will force Brazil to shed all the inertia and invest in developing world class infrastructure to salvage national respect. The megaevents will provide the right platform for Brazil to experiment and break from its low growth trend. The

better infrastructure will help ease the supply side inflation concerns. At the same time lower interest rates and lower tax rates will bring in foreign investments and revive industrial growth. Brazil needs to take the right lessons from the 1988 Seoul, 1992 Barcelona and the 2008 Beijing Olympics and work towards upgrading the entire urban infrastructure which will reap great dividend for years to come. The 2014 FIFA World Cup and the 2016 Rio Olympics provide Brazil the opportunity to get benefited broadly in the following 5 ways: ! Revenue ! Increased tax collection ! Wealth generation for the region ! Legacy ! Infrastructure ready for global events ! Renovation of urban equipment

! Social ! Large social mobilization and involvement ! Creation of new jobs ! Intangible ! Increase in people's self esteem ! Strengthened regional identities ! Image ! Increased visibility of the city's brand ! International exposure

Just as the 1964 Tokyo Olympics, the 1988 Seoul Olympics and the 2008 Beijing Olympics propelled Japan, South Korea and Brazil respectively onto the global stage, the 2014 FIFA World Cup and the 2016 Rio Olympic Games will be Brazil's "coming out" party-an event that showcases Brazil's coming of age as a great economic power.

Nikhil Kuchroo, Welingkar School of Management - Mumbai

ARTICLE

Integrated Marketing Communication: Comic Con, Mumbai 2012

Figure 1: An official Comic-Con Mumbai 2012 Poster

The Comic-Con (Comics Conference)was held on 19-20 October 2012, at the World-Trade-Centre Building in Mumbai. This annual Event stands for the promotion of the graphic world of comics and films. This free-entry event, in its second year, saw more than 15,000 people throng the multiple stalls put up by several movie & comic merchandise manufacturers and Indian publishing houses, including, Amar Chitra Katha and Diamond Comics. This Event gave fans a chance to interact with their favourite comic characters and their publishers & creators and get a chance to meet like minded people. Last year the event generated revenues of close to INR 35 lakh in Mumbai alone. The special treat for the fans at the fest was the sneak peek of Warner Bros India's upcoming films - The Hobbit & Man of Steel. Also, there was a special preview of "The Sixth", the animated series by Vimanika Comics and Maya Animation. The Event was modelled on the lines of the Comic-Con International: San Diego, USA. The economic impact study from the San Diego Convention Centre, in 2011, estimated that over $1.63 million was generated for the San Diego economy during Comic-Con week. It boasted of 130,000 delegates and 1,000 exhibitors. The biggest draw was the content, the exclusives and the chance to meet and get the gear signed by some of the biggest names in the business. So how did JatinVarma, Founder, Comic Con India and his team pull the crowd to the Event? It started off with the identification of the core TG, the energetic, tech-

savvy and modern Gen-Y of Mumbai. A text-book execution of all aspects of integrated marketing communication for the Event targeting the core TG worked together as a unified force, rather than getting each to work in isolation, which maximized the cost effectiveness of the communication. We need to understand that comics appeal to a small section of the people in India and so utilizing media channels like TV will not only be expensive but lead to a lot of wastage with low Return on Investment. So, what was the procedure for effective communication for this Event and it's Promotion? 1. Get a Celebrity to visit: Actor Aayushman Khurana, protagonist of the movie Vicky Donor, launched Abhishek Sharma's (Famous from the movie Tere Bin Laden) brainchild Munkeeman 2. 2. Draw in the right delegates: The exclusive merchandise that was up for sale is near impossible to find elsewhere in India. Masks, accessories, action figures, comics, T-shirts and memorabilia saw that no visitor went empty handed. The presence of the right target group also saw the delegates spending lavishly over the merchandizes. 3. Socialize: Social media especially Facebook and Twitter were used extensively to spread the word. Word of mouth for this Event was so strong that the Mumbai Gen-Y truly got to know about the Event in spite of having no connection with the organisers, and roped in 6-8 more friends to visit the Event.

An online presence in the form of www.comicconmumbai.com made information like 'how to get there' available in a jiffy. 4. Give the visitors a chance to win a prize: â&#x20AC;&#x153;What is in it for meâ&#x20AC;? is the question in the mind of the typical consumer. So Comic-Con held a cosplay (costume play for the uninitiated) contest. This jazzed up the venue, giving something for all visitors to look forward to and truly formed the soul of the Event. 5. Get Advocates: By social media engagement the potential visitors were kept engaged. On the day of the Event people were provided with wristbands that helped further promote the Event as visitors left the Event to move around in the city. 6. Get a mascot: The fact that an Event needs a mascot is a no brainer. The mascot needs to embody all that the Event stands for. The organisers got it spot on with the caricature of the Kolibai (fisher-women) of Mumbai. 7. PR pays: The buzz of a funky contest, celebrity presence and super heroes is something any journalist would like to write about. The Event was extensively covered, before and after, in various print-media like the Times of India and Economic Times. Hindustan Times was also the official print media partner for the Event. COMIC-CON MUMBAI: A SWOT ANALYSIS Strengths: The Event drew strength from the fans of superheroes and comic books in India. The numbers determined the scale of the Event and the location of the Event. This Event has carved a strong niche for itself as competition today is non-existent. The patrons of the Event belong to the Section A class who have a fair amount of disposable income. Moreover, to rope in a larger crowd, movies and films have been integrated into the Event. The line between comics and films is blurring today with films drawing inspiration from comics and vice-versa.

Weakness: The major weakness of the Event was its inability to connect with the masses to generate the scale seen in the United States version of the Event. The reach of communication needs to improve and investments need to be made in brand building through Above-the-Line communications for the next versions of the Event. Opportunities: This kind of event sees a lot of opportunities. The media houses of the west like WB, Disney and Sony gain from such Events becoming popular. This fact was proved by the presence of Warner Brothers India to promote their upcoming film The Hobbit in Comic-Con Mumbai 2012. In future, these media houses can be tapped to provide sponsorship and not only contribute financially but also in terms of exclusive content. The Indian Film Industry also sees such events as an opportunity to interact with viewers and promote their films. Threats: The dying culture of reading on the whole and phasing out of comic books is the biggest threat being faced by the event. One may say that the event is an effort to combat this threat. At the same time nothing stops Bollywood from having its own annual convention if they so wish, to eliminate dilution from the studios of abroad. Such a move will greatly weaken the pull of Comic Con in India. Thus, despite a shoe-string media budget, brilliant design and execution led to a successful event thanks to efficient PR implementation and social media inclusion.

Nitin Malik, Mohit Saini - IRMA

INTRODUCTION In India, the last mile access is one of the key issues faced by any rural development scheme. Many villages are located in remote areas where even physical access is difficult. For decades we have been unable to address the short fall of teachers, doctors and other professionals who do not want to teach and operate respectively in rural India because of the hardships associated with traveling and staying in remote locations. Primary health care services are not accessible to many because healthcare professionals are not willing to work in villages. India has the second highest number of financially excluded households in the world with only 34% of its population covered by formal banking. The commercial banking sector has thus far focused on urban India, as it is more profitable and economically feasible to work in organized urban areas. The extension of banking and credit services to rural areas, however, remains a daunting challenge. The volume of business offered by these areas is commercially insignificant, as a result of which the unorganized semi urban and rural areas remain excluded. BANKING THE UNBANKED: USING MOBILE TECHNOLOGY If we look at banking in particular, then the two critical issues that prevent us from delivering banking services to the poor are: 1. Accessibility to the poorest districts 2.Transaction costs involved in providing banking services. The recent advances in technology in the last decade or so has given us the tools to address these key issues. Mobile technology is one space where countless innovations have taken place. These innovations are both technology led and process led. India is a unique country in the sense that more people have access to mobile phones than to a suitable toilet. India's mobile subscribers totaled 563.73 million at the last count (2012), enough to serve nearly half of the country's 1.2 billion population. Given that mobile phones in India have become easily affordable, a user can now buy a mobile for as low as `.1,500. Here exists an opportunity where mobile technology can be used as an effective medium to bank the un-banked and address the issue of financial inclusion.

ARTICLE

Achieving Financial Inclusion: By leveraging Mobile Technology to Bank the Unbanked

The C. Rangarajan Committee defines Financial Inclusion (FI)broadly as “the process of ensuring access to financial services and timely and adequate credit where needed by vulnerable groups such as weaker sections and low income groups at an affordable cost”. In this context mobile banking is “delivery of banking services through ubiquitous mobile phones”. Mobile services have offered us a technology based platform which is both economical and accessible. Various researches indicate that, the poorer a household; the stronger its need for financial services such as savings, remittances, credit, and insurance. LESSONS FROM M-PESA MODEL IN KENYA: BANKING ON MOBILE PHONES Safaricom, the largest telecom company in Kenya has developed a mobile banking model called M-PESA. This model operates through a network of agents also called Business Correspondents (BCs) in India. The key innovation in M-PESA is the use of E-floats as an online currency. Customers apply for an account through a basic ID. They deposit money to agents, who then convert it into e-floats. E-floats can be transferred to any person having an M-PESA account with Safaricom. The person on the other side can again convert e-float back to money. Consumer can deposit small amounts of money periodically with agents. This money gets accumulated as E-floats and can be redeemed back into currency at any time. Agents receive a commission on every transaction. Although M-PESA initially started as a service to help customers make remittances and payments, it quickly developed into a good savings instrument for the poor. M-PESA has now reached nearly 40 percent of the adult population in Kenya after a little more than 2 years of operation and contributes to 12% of Kenya’s annual GDP. MOBILE BANKING: THE INDIAN PICTURE In the present scenario, mobile banking penetration in India is very limited. Models like M-Paisa based on MPESA model have been initiated in few districts of Rajasthan. One successful model which has attained some scale is developed by Eko Financial Services India Ltd. They have innovated mobile banking space using an agent led model. They have developed a mobile platform in collaboration with banks like ICICI Bank and SBI. They also use Kirana shop owners as agents of banks; 85

where customers can deposit and receive payments. The service especially appeals to poor migrants from Bihar and Delhi, as they can easily send their money to their kin through Kirana Shops in Delhi. The relatives receive the money from a kirana shop present near their village. In India, in order to promote Financial Inclusion amongst the unbanked, the RBI has undertaken numerous initiatives in a mission mode through a combination of strategies and has also introduced several measures to achieve greater Financial Inclusion. This includes simplifying the Know Your Customer (KYC) norms, opening of no-frills accounts, engaging Business Correspondents (BC), use of technology and formalizing branchless banking using BC model, where banks partner with third party agents to offer basic financial services like deposit, savings and credits on their behalf. Various leading technology providers like A Little World, Financial Information Network & Operations Ltd. (FINO), EKO, Atyati Technologies etc. have created their own end-to-end solutions to assist various banks to offer financial services in areas where branch based banking is not feasible economically. REDEFINING THE ROLE OF KIRANA SHOP OWNERS (CSP) The kirana shop mentioned here may not be always present in a particular village but villagers generally have a shop or place (a kind of Customer Service Point or CSP) from where they buy their basic necessities or consumer items. This shop might be present in a nearby town or city, which is generally the nearest market for villagers. The kirana shop owners often have good information about the people to whom they sell their goods. They also trade goods by extending credit to customers and hence, develop a fair understanding about the credit history of customers. These strengths of Kirana shop owners can be leveraged to access the targeted beneficiaries. MAJOR ROAD BLOCKS There are some key issues that need to be considered before implementing any mobile banking services in India. First is the need to provide an easily facilitated ID card. The process of tracking the constant migration of rural poor to urban areas can be eased with an ID card which can help them apply for the account. As adoption of UID card increases, we can hope it will help in solving the ID issue to a much larger extent. The second challenge lies in getting trained and reliable agents. These agents can be either business

correspondents or kirana shop owners. Agents are the single point of contact to customers. Hence, it is very important that customers trust agents with their hard earned money. It is also critical to develop the right incentive structure for agents, so they are motivated to work and develop relationships with customers who are predominantly poor. THE FUTURE AHEAD Following the global practices in mobile banking, it is very clear that one of the very basic needs of poor people is to have a secure place to save their money. For example, a recent study of urban rickshaw pullers in Delhi found that a total of 95% of the respondents saved a portion of their earnings. People are even ready to pay money for this service rather than expecting an interest on savings. If any such service needs to be developed in India; then firstly, we have to do a proper need identification study of the target consumers. The role of government can be that of a facilitator and regulator, rather than that of an implementing agency. A sustainable enterprise driven model needs to be developed. The point here is to adopt a financial inclusion strategy which is more demand driven and which addresses poor people's needs. RBI can play a proactive role in the mobile banking sphere by creating an amenable regulatory environment. In our view, we can start with basic services like savings and remittances through Mobile banking. The primary reason for this is to develop trust among people. Once their trust is obtained, more services like payments for goods and services, micro credit re-payments, health insurance and later even cash transfers for poor can be added. The delivery of basic banking services using mobile technology can prove to be an evolutionary step and provide enough scope to branchless banking to cover the so far unbanked customers. It can further reduce the customer reliance on branch based banking model. The first step, however, should be to develop trust among poor sections of society so that they are comfortable parting with their money. Even in Kenya, the success of M-PESA can be attributed to the trust factor which the customers associated with the company, Safaricom. Hence, it can be expected that with an increase of customer confidence over security issues, mobile technology can emerge as a key tool to offer fast and convenient banking services.

FEATURES NFCG Article

Shweta Shankar, SCMHRD KEYWORDS Whistle blowing, Corporate Governance, Business Ethics, Organization Culture

ABSTRACT In today's era of globalization and technological advancement, one can easily say without doubt that corruption is one of the biggest evils plaguing our society. Corruption has become a way of life in many societies and particularly so in India. Studies have proved that GDP growth is inversely proportional to growth in corruption. Higher corruption leads to a lower GDP and vice versa. It is imperative to bring back that golden era where people were conscientious and businesses, honest and honorable. Though many systems and processes are in place, legal and otherwise to curb corruption, they have not been able to achieve the required measure of success. However a new method of curbing corruption by way of “whistle-blowing” has been able to achieve some success in controlling corruption. Whistle blowing can be defined as the act exposing wrongdoing within an organization. The whistle blower policy has rightly been recognized as one of the basic norms of corporate governance by most countries across the world. This essay deals with how whistle blowing is incorporated into corporate governance, talks about some major whistle blowing incidents and discusses about some initiatives that can be taken to enhance the effectiveness of whistle blowing.

1.0 INTRODUCTION n a developing country like India, we find that new firms and organizations crop up by the minute. The legal procedures make it relatively easy for a person to set up an organization in India. We find that most of the big companies face problems that are more internal rather than external. Corruption and fraud act as malaises and cripple the effective functioning of big companies.

An example in case is the shocking incident at Satyam Computer Services, where Satyam’s the then Chairman Mr. Ramalinga Raju took responsibility for broad accounting improprieties that overstated the company's revenues and profits and reported a cash holding of approximately $1.04 billion that simply did not exist.[1] Whistle blowing if encouraged could help in bringing to light such malpractices and process frauds at a very nascent stage itself. 2.0 WHISTLE BLOWING Whistle blowing can be defined “as the act exposing wrongdoing within an organization to internal or external parties.” The wrongdoing can include theft, burglary, violation of safety norms, embezzlement, financial fraud etc. Whistle blowers may disclose the fraud internally, i.e. to someone within that organization or externally, i.e. to someone outside the organization like law enforcement agencies, media, public etc. Sometimes, monetary

NFCG ARTICLE

Whistleblower Policy – a means to better Corporate Governance

incentives are given to encourage external whistle blowing. The term 'whistle blower' comes from the act of a referee blowing a whistle to indicate foul play. This term was coined by the US activist Ralph Nader in the early 1970s to avoid referees being called negatively as 'snitches' and 'informers'. Whistle blowing has the potential to transform the culture of an organization positively. Whistle blowing policies can greatly help organizations that firmly believe in honest and fair trade practices. 3.0 WHAT IS CORPORATE GOVERNANCE? Corporate governance is the system or structure by which organizations are managed or governed. It is the responsibility of the Board of Directors which is appointed by the shareholders of the company to ensure that the company has a sound and transparent governance system. The company and the board of directors are accountable to the shareholders. The decisions and rules of the board are subject to laws, regulations and the shareholders' opinion in meetings. The well-being of the company is the well-being of its shareholders, and the directors are accountable for this. This is clearly spelt out in the Companies Act 1956 through its various sections and in many other legal doctrines. [2]

4.0 RESULTS OF PRIMARY RESEARCH Methodology: An online survey was conducted in Dec, 2012. Eighty working professionals from India completed the online questionnaire. The targeted sample profile spanned across professionals employed in various organizations across sectors. Respondents were asked to respond to a set of core questions on corporate grievance reporting mechanisms.

Q4 - How are employees informed of the existence of this system?

Others Posters in office Emails Training sessions

The results of the survey are as follows:

Ethics manual

Q1 - Does your organization have a formal mechanism in place to report complaints/misconducts?

Code of Conduct manual 0.00% 10.00% 20.00% 30.00% 40.00% 50.00%

Donâ&#x20AC;&#x2122;t know 5%

Q5 - Does your organization conduct training sessions for the employees regarding the use of this mechanism?

No 10%

Yes 85%

No 51%

Yes 49%

Q2 - What are the channels available in the system referred to in Q1, used to report any complaints/ misconduct/ grievances? Q6 â&#x20AC;&#x201C;How aware are employees of the existence of the mechanism specified in Q1?

80.00% 70.00% 60.00%

Unaware 10%

50.00% 40.00% 30.00%

Highly aware 21%

20.00% 10.00% 0.00% Email

Q3 - Was the person's identity kept anonymous while reporting a grievance through the mechanism specified in Q1? 80.00% 70.00% 60.00% 50.00% 40.00% 30.00% 20.00% 10.00% 0.00%

Moderately aware 31%

Face to Hotline Open Other face number discussion meeting forum

Sufficiently aware 38%

Q7 - According to you, how efficient is this mechanism?

Yes, 67.70% 80.00% 60.00%

No, 33.30%

40.00% 20.00% 0.00% Very effective

Yes

Moderately effective

Ineffective

Q8 - Has there been an instance, where you were aware of some wrongdoing but you did not report it to the concerned person in your organization?

Yes 28%

for credit. The results obtained from the KPMG India Fraud Survey Report 2008[4], are as follows:

Fraud is a major problem in India 3%

No 72%

Disagree

11% 49%

Somewhat disagree

37%

Somewhat agree Agree

Q9 - Do you feel the need to have a formal mechanism to report misconducts/grievances?

Has your organisation experienced any fraud

Yes

40%

60%

Yes

0.00%

20.00%

40.00%

60.00%

80.00% 100.00%

! Nearly half of the respondents (49 percent) believed

5.0 SURVEY RESULTS OF SECONDARY RESEARCH According to a survey done by India Forensic Consultancy Services [3], Pune, at least 1200 out of 4867 companies listed on the Bombay Stock Exchange and 1288 companies listed on the National Stock Exchange as on March 31, 2007, including about 30 companies listed in the benchmark Sensex and Nifty indices had fudged their financial reports. The study investigated 11 sectors, viz. real estate, retail, banking, manufacturing, insurance, public sector undertakings, mutual funds, transport and warehousing, media and communications, oil and gas and information technology. The manufacturing sector, which contributes about 28 per cent of India's gross domestic product, is the one most affected with fraud mainly due to the peculiar nature of the business and the procedural complexities inherent in this sector. Real estate and public sector undertakings came second. The motive for committing accounting statement frauds, according to 73 per cent of 340 chartered accountants who were respondents to the findings of the study, was to exceed expectations of stock market analysts. Other reasons for the fraud include credit-hungry firms manipulating application data in order to qualify

that they have communication channels in place for anonymous reporting of suspected fraud and misconduct. However, only 15 percent of the frauds were detected through anonymous reporting. This indicates that even if organizations believe that they have a good reporting mechanism, the employees may not necessarily feel safe in reporting misconduct. 6.0 ROLE OF WHISTLE BLOWING IN ENHANCING CORPORATE GOVERNANCE By analyzing the KPMG report, we realize that a majority of the employees feel that most white collar crimes happen from within an organization than from an external body. Organizations are huge and it is difficult for just a few people to ensure that fair and honest practices exist across functions in the organization. The best and most efficient method to ensure that fraudulent happenings are exposed is by involving the employees of the organization. The people working in the company can be encouraged to report crime, malpractices or theft that happens in their department to an autonomous body which functions primarily for this purpose. Let us now look at the type of people who become whistle blowers. Interestingly, research shows that whistle blowers are not unhappy or disgruntled employees. Rather they seem to score high on conscience. They think 89

ethically and find it difficult to adhere to unethical practices. In a way these people put the interests of others and the society above their own as they do realize that by reporting fraudulent activities, they are putting their own selves and their careers at risk. But history has shown that whistle blowers are usually ostracized, punished or humiliated. Many of them even lose their jobs. Punishment of whistle blowers has now become a serious issue and we find that most of these whistle blowers are either suspended, dismissed, fired, humiliated, harassed or demoted. In some cases, it takes the form of extreme employee bullying wherein an entire department turns against a single individual. This is the main reason that forces normal employees to turn a blind eye towards corporate crime that happens right under their noses. People fear for themselves, their jobs and their families. So when they see that they do not get any protection for exposing crime, they refrain from reporting fraud or corruption. In a country like India which ranks 94 out of 176 countries in the 2012 Corruption Perceptions Index, created by Transparency International[5], this definitely does not augur well for our future. 7.0 THE PROCESS OF WHISTLE BLOWING The process of whistle blowing essentially has five basic steps as are depicted in the Figure below:(Figure1)

8.0 FAMOUS CORPORATE WHISTLE BLOWERS A hero of the present times, Julian Assange, founder and editor-in-chief of Wiki Leaks has more than 1.2 million individual leaks to his name. W. Mark Felt also known as Deep Throat remains the most famous whistle blower of all times. Back in 1972, he discovered President Nixon's illegal involvement in the dealings at the Watergate Hotel. He leaked this to the Washington Post and this subsequently led to the resignation of President Nixon and arrest of the then White House Chief of Staff. Another famous whistle blower is Linda Tripp who leaked to the press that Monica Lewinsky had committed a perjury in concealing her relationship with President Bill Clinton. In the corporate sector, Sherron Watkins, the former vice president of Enron reported the illegal fraudulent accounting practices in her company. And more famously we all know the story of Cynthia Cooper, former Vice President of Internal Audit at WorldCom who exposed the hundreds of false accounting entries in the company's financial statements. Her book 'Extraordinary Circumstances: The Journey of a Corporate Whistle blower' chronicles the struggle she underwent to expose this massive fraud.[6]

Concern raised by employee (1) Concern communicated to Ombudsperson(2)

Stop proceedings (4)

Inital enquiry(3) Go to (4) if concern is frivolous Go to (5) if concern is genuine

Set up an enquiry team and conduct further investigations (5)

Take appropriate action against the wrong doer. (6) Figure1 90

9.0 BUT, WHAT REALLY HAPPENS TO THESE WHISTLE BLOWERS? Reality is shocking and sometimes stranger than fiction. Let us look at some cases. ! Closer home, we have Manjunath Shanmughan, an

IIM graduate who was employed with the Indian Oil Corporation Ltd [IOCL], who was murdered on 19Nov-2005 for sealing a corrupt petrol station in Uttar Pradesh.

e-mails and dedicating a hot line number purely for this purpose. ! Users should also be given training sessions on the

types of corporate crimes that can take place, how to spot crime and how to report it. In many cases it is found that employees are not trained enough to be able to spot crime that happens right before their eyes. ! These trainings have to be conducted periodically and

with the Nation Highway Authority of India [NHAI], wrote an open letter to the then Prime Minister Atal Bihari Vaypayee exposing the unfair dealings in highway constructions. He was later found murdered on 27-Nov-2003.

it has to be given to employees of all ranks â&#x20AC;&#x201C; starting from the house cleaning staff to the top management officials. Awareness can be also be raised by conducting video making or poster designing contests with 'wiping corporate crime' as the theme. This will generate a lot of interest among the employees and is sure to catch the attention of many.

! Myron Mehlman, who was employed with Mobil,

! Once a concern/complaint has been lodged with the

found that the gasoline being sold by the company in Japan contained benzene in excess of 5% and this was dangerous. He was subsequently fired in 1999.

whistle blowing committee, it is essential that an initial inquiry is made at the earliest. If the concern turns out to be genuine, then a detailed investigation has to be carried out and the wrong doers have to be awarded appropriate punishment.

! Satyendra Dubey, an IIT graduate who was employed

From this, it is pretty evident that strong whistle blower protection acts need to formulated and acted upon. 10.0 THE INDIAN WHISTLE BLOWERS POLICY'S LEGAL JOURNEY Laws and regulations put together for the legal protection of whistleblowers is termed as 'whistleblower's protection'. On August 26, 2010 this bill was introduced in the Parliament and was passed by the Lok Sabha on December 27, 2011. It was introduced in the Rajya Sabha on March 29, 2012 and is currently pending there. 11.0 AREAS WHERE WHISTLE BLOWING CAN BECOME MORE EFFECTIVE No company is immune to crime or fraud and we see that increasingly most companies are adopting a whistle blower mechanism to encourage employees to report crime. I believe that any organization, from private to non-profit, across industries will benefit from adopting anonymous reporting mechanisms. It is an important initiative for organizations that wish to improve their corporate governance, risk mitigation measures and ensure good compliance to policies and ethics. Whistle blowing can prove to be effective in all types of organizations. ! For whistle blowing to be more effective, it is very

important for the company to enlist the support of its top management. According to the trickle-down effect, this is the best way to communicate to the employees that the company actually believes in whistle blowing. ! The whistle blowing policy has to be very clear and

effective communication of the policy to the users has to take place. This can be done by frequently sending

Most importantly, it is imperative to reward the whistle blower. This can be done by publicly acknowledging his act and giving him incentives/prizes. But in some cases, the whistle blower would prefer to not reveal his identity; these shall be treated as exceptions. 12.0 WHEN IS WHISTLE BLOWING ETHICAL? Whistle blowing is considered to be ethical under the following 5 conditions[7]: 1. When the company, through a product or decision can cause considerable harm to the public, or break existing laws. 2. When the employee identifies a serious threat of harm, he/ she must report it. 3. When the employee's immediate supervisor does not act, the employee should exhaust the internal procedures and chain of command to the board of directors. 4. The employee must have documented evidence that is convincing to a reasonable, impartial observer that his/her view of the situation is correct. 5. The employee must have valid reasons to believe that revealing the wrongdoing to the public shall result in changes necessary to remedy the situation. On the other hand, if there is evidence that the employee is motivated by the opportunity for financial gain or media attention, or that the employee is carrying out some personal vendetta against the company; then the legitimacy of the act of whistle-blowing must be questioned.

13.0 VOLUNTARY INITIATIVES BY COMPANIES Companies can do a lot of things in this regard. As whistle blowing primarily helps in better and more efficient functioning of a company, it is in the best interests of the company that it encourages whistle blowing by setting up appropriate mechanisms. According to a study performed by Price Waterhouse Coopers in 2011, every company can follow a basic five step model (given below) for encouraging effective whistle blowing from its employees. 1 Gaining top level commitmentThis is the first and the most important step in creating an efficient whistle blower policy. There should be a trickle-down effect and that is possible only if the top management of the company is wholly committed to implementing this policy. This policy should not be incorporated just for the sake of implementing a policy. The top managers of the company should sincerely believe and be committed that this policy would encourage employees to speak up against crime, which in the long run would only prove beneficial to the company. A research has found out that people prefer working in an organization that has moral and ethical values to one that is purely profit minded. Further, the responsibility of the top level management does not end with initiating such a policy; but the ultimate responsibility of the operational functioning of the policy must also rest with them. 2. Developing a whistle blowing policyOnce top level commitment has been achieved, we can move ahead and develop a strong whistle blower policy. While formulating this, we must keep in mind the risks associated (like fraud, environmental damage, corruption etc.) and try to mitigate them. The survey results indicate that 30% of the companies had informed their employees about the policy through code of conduct and ethics manuals while 27% of them had employed trainings and inductions. ! Access to whistle blower policy - This includes the

methods and means by which this policy can be made available to the employees. This can include manual of ethics and values, code of conduct etc. Induction trainings too can be conducted. ! Charters with the whistle blower policy can be

hung in every department. ! Who are the users? â&#x20AC;&#x201C; The primary intended users

are definitely the employees of the company. In addition, third parties like suppliers, lenders, distributors and customers too should be given access to the policy; as fraud can happen at any 92

level in an organization. According to the survey, 57% of the companies do not give access to external parties. ! Channel to report crime- A dedicated team (say

probably a team from the HR department) can be set up for dealing with these types of complaints. Crimes can be reported through e-mails or personally face to face. Hot line numbers too can be dedicated for this cause. 13% of the companies had a dedicated hotline number for reporting fraud; while 28% of the companies say that their employees prefer e-mails. The employee should be free to use the channel he/she is comfortable with. It is more important to communicate to the employees that they must report crime and they can do it through any of the above mentioned channels. ! Protection to whistle blowers - From the point of

view of the employees, this probably would be the most important part of the policy. Employees should feel safe and secure. Many studies have shown that the biggest reason why employees do not expose crime is because they fear retaliation and humiliation from their colleagues. The company should adopt a zero tolerance stance to victimization of whistle blowers. As we saw earlier, whistle blowers are many a time subjected to harassment, suspension, denial of promotion and sometimes even dismissal. 19% of the participants cited perceived risks as one of the reasons for not reporting crime. 3. Designing reporting mechanismsThis involves an effective system which allows employees to formally communicate their concern. This would be followed by investigation. It is also important to apprise the employee the results of the investigation. Feedback is highly important; and this instills confidence in the employee. 4. Embed the policyWhistle blowing must be viewed as a process rather than as an event. The culture of reporting crime must be embedded in the very work culture of the organization and instilled in every employee's mind. This objective can be achieved by conducting frequent training sessions. Informal meetings with the top management can also help in this regard. 54% of the respondents said that whistle blowing helps in improving organizational transparency and employee morale. 5. Monitoring and evaluationOnce a whistle blower policy has been developed, maintaining it is very important. The policy must periodically be reviewed for any possible loopholes or

failings. The policy also needs to be updated on a continuous basis to take into account the changing environment. Evaluation involves assessing the policy from various aspects and taking corrective measures wherever required. These functions should be done by an external party who is independent of the policy. 14.0 CONCLUSION Whether we believe whistle-blowers to be heroes who suffer personal hardship to bring media attention to unethical behavior in organizations, or we take the opposing view that they break the oath of loyalty to their employer, the fact remains that employees are becoming increasingly willing to respond to any kind of unethical behavior in their organization. The choice for an employer is to ignore them and face possible public embarrassment later on and even financial losses, or to create an internal whistle blowing system that allows whistle blowers to be heard and their concerns addressed before the issue escalates to an external whistle blowing case. To sum the issues discussed in the essay, it would be wise for all employers to put the following mechanism in place: 1. A well-documented process to document how such concerns are handled – a whistle-blower committee, clearly identified procedure to respond to the concerns, assurances of confidentiality, and nonretaliation against the employee.

Above all, employers must have a commitment to follow through on any and all concerns registered with the committee. For a whistle blower mechanism to work, trust must be established between the employees and their employer; – trust that information can be given anonymously and without any fear of retaliation. 15.0 REFERENCES 1. http://www.forbes.com/2009/01/07/satyam-rajugovernance-oped-cx_sb_0107balachandran.html 2. h t t p : / / w w w . l a w t e a c h e r . n e t / i n d i a n law/essays/whistle-blower-policy-and-indian.php 3. http://www.indiaforensic.com/research.htm 4. http://www.kpmg.com/in/en/issuesandinsights/art iclespublications/pages/kpmgindiafraudsurveyreport 2008.aspx 5. http://cpi.transparency.org/cpi2012/ 6.http://www.bloggingstocks.com/2008/04/03/worldc om-whistleblower-cynthia-cooper-tells-all/ 7. Business Ethics-a real world approach by Andrew W. Ghillyer 8.http://www.pwc.in/en_IN/in/assets/pdfs/services/ forensic-services/Whistleblowinganeffectivemeanstocombateconomiccrime.pdf

2. Establish clear channels of communication – employee hotline, e-mail system etc. 3. Prompt and thorough investigation of genuine complaints 4. Detailed report of investigations and the actions (if any) taken.

INSIGHT Leaders Speak

Mr. Ramraj Pai on life, leadership and the way forward…

LEADERS SPEAK

As part of Leader-Speak, Team Samvid 2.0 caught up with President (Ratings) of CRISIL Limited

Mr. Ramraj Pai, President, Ratings CRISIL Limited

Q) What are the three most important leadership lessons that you have learnt in your career? A) Firstly I think it is important to be a part of the solution, not the problem. You will have to understand and accept that the problem may not be out there but in here; be it in personal or professional life and you have to then resolve to be a part of the solution. The second lesson takes off from the first – it is all up to you and nobody else. Thirdly I believe enthusiasm is the only choice you have. Therefore instead of wasting your energy over worry, regret and other negative emotions, you need to make a positive contribution to the organization, society or family. In my experience, beyond a point all leaders have similar techno-functional skills. I think it's an action-oriented approach to problem solving with energy, drive, motivation and emotional quotient that makes a difference. Q) Has there been any one person who inspired you as a mentor? A) Crisil's late CEO Mr. R. Ravi Mohan was to me and to most people in CRISIL a great inspiration, someone who could think both at a height of 10,000 feet and at the ground level at the same time. Very few people have that skill. He followed a great leadership model of “Right thinking, Right action and Right Communication.” Such a model is becoming increasingly important because people's attention span is so short that it is of paramount importance to get people to understand faster. Apart from him, a host of other people have also inspired

me in different phases of my life. Movie stars, athletes etc. I think that although the film industry is better known for its excesses it also has some outstandingly disciplined highly creative people. Similarly there are role models in every industry but if I had to name one it would have to be Mr. Ravi Mohan. Q) What is the biggest challenge that leaders face today? A) Responding and managing volatility is the biggest challenge faced by the leaders today. Be it external, internal, market or employee related, volatility in every avenue has increased. Side by side complexity has also increased. Every problem now has multiple dimensions. Managing volatility and complexity together in a constrained time frame is one of the biggest and most important challenges faced by leaders today. Q) How should leaders deal with an ethical dilemma? A) I have a simple mantra. Assume every action you take is done in public. Assume that everything you are doing is known to the world. This is very relevant to CRISIL because we are in a regulated industry. At every point we potentially face an ethical dilemma. The simple philosophy is that if you can't hold your actions up to public scrutiny then don't do it. The reality is that information flows so fast and through so many platforms that no action can be kept secret for long. And if you can't sleep at night wondering whether a decision is right or

wrong then chances are there that it's a wrong decision. I think this is something we at CRISIL deal with regularly; we know a better rating will make the issuer happy. But it will neither be good for us in the long run nor good for the market on a whole. On the other hand, the converse, which is to give weak ratings - which decides interest rates may make banks happy but will seriously hurt the borrower's financials. So we face a daily dilemma of balancing out the market needs and treading the correct path. My personal view is that all perpetrators of scams and frauds that you see in the news would have started out like you and me. None of them began with an intention to commit a crime but at some point they faced a dilemma and chose a particular path. This is a very real issue that all managers will face - a series of small imperceptible choices which may go on to make or break a career. Q) How important do you think corporate governance is in today's context? Do you have a corporate governance policy in place at CRISIL? A) It is very important indeed. We are a highly regulated company, a Standard & Poor subsidiary, regulated by SEBI and have a strict code of conduct bound by several policies. More importantly since we rate companies in the marketplace, we ensure that we are doing what is right. Corporate governance is extremely crucial because the kind of confidence investors have in good management decides how they invest. Corporate governance is intrinsic to a business strategy that aims to be above board. Q) How do you recognize and tap growth strategies in a globalizing economy? A) We have a structured product development plan. We keep scouting the market for products and demand/ supply gaps in the domestic market. As an illustration, five year ago we launched a rating known as SME ratings when we recognized a market opportunity that banks could use these ratings to lend to SMEs. We created a viable business model and successfully implemented it. Today we have rated about 50,000 SMEs over the last 5 years. Additionally, we have a very rigorous process for identifying opportunities for inorganic growth both in domestic as well as international markets. Q) What do you think are some new and never seen before business trends which will shape the economy which india is going to encounter in next 5 or 10 years just as we saw the ‘dotcom bust’ or ‘2008-2009 recession’? A) Sustainable high growth is going to be a key challenge over a medium to long term. Urbanization, policy reforms, political landscape and social activism are all

going to play a critical role in charting India's socioeconomic story going ahead. Right now, we don't see the benefits of growth going to the entire economy so I see definite growth challenges. Social transformation is also imminent. We also need to successfully tackle issues like infrastructure, credit availability, inflation and food security. In terms of benefits we foresee huge potential in the use of technology to enhance productivity. We could also see material improvements in public governance at a broader level. The kind of demographic mobilization that we are witnessing in Delhi and other metropolitan cities couldn't even have been imagined twenty years back. Technological advancement and proliferation of social media platforms have significantly increased information access and public participation in socio-economic issues. Also, I see a critical need for skill development. At an international level the developed economies like US, Europe etc. will struggle unless they innovate continuously. China will transform itself from a growth oriented economy to a domestic consumption based model. But India is interesting because it has a unique set of socio-economic and demographic problems and opportunities. Building a strong infrastructure for skill development in conjunction with technological advancement can provide us significant productivity gains across sectors. At a global level, I see that the developed countries will continue to struggle thereby shifting the economic epicentre towards Asia. Q) Can we continue to survive as an import economy? A) As a country, we continue to remain largely selfsufficient. In recent years, while agriculture has shown a growth rate of 3.5%, other sectors, primarily services have grown at a much faster pace. As I had highlighted before, what is needed is a paradigm shift in productivity. Diminishing share of agriculture in the GDP doesn't imply that we are becoming import driven. Improvements in irrigation, technology and skill development leading to application of modern agricultural practices can provide us significant productivity gains in agriculture. Q) When & how does a leader decide to pass over the baton to his successor? A) The best leaders are the one who are highly driven with unimaginable energy levels and incredible response times. These people are always in want of newer challenges and are essentially driven by goals they have set for themselves. Such a leader effectively moves on when he feels he has achieved the purpose he had set out for himself in that particular role.

The process of succession planning, on the other hand, is a continuous one. An organization should always be like a well-oiled machine independent of individuals beyond a point. Therefore leaders always keep mentoring to reduce the risk of a leadership vacuum. It is always a conscious business decision to have a healthy leadership pipeline. An organization has to continue to function smoothly even if the leader decides to move on. Q) What message do you have for a graduate just stepping out of a b-school and setting foot into the corporate world? A) An MBA graduate stepping out of a B-school should be cognizant of his interests and what he wants to pursue in his professional life. If he has a novel idea and the passion to bring it to life, he should not be afraid of becoming an entrepreneur and taking risks. I think people with such interests should try to find organizations which give exposure to entrepreneurs and start-ups. They should pursue a job which takes them to the ground where businesses work and where opportunities are created.

I also believe that India is at the cusp of new opportunities. Chasing the highest paid or the best ranked job is not what everyone should be running after. I will strongly urge you people to look at the bigger picture, recognise the extant opportunities, decide and choose what you like even if that means taking more risks, joining start-ups over foreign trips and a cushy office. You should not be afraid of taking risks. It opens your vistas and broadens your perspective. So take bigger risks in the first couple of jobs as opposed to conventional wisdom. Take jobs with more exposure. Today it's okay to have a startup and it is okay to fail. Because, it is the 'idea' which fails, not the 'entrepreneur'.

LEADERS SPEAK

As As part partofofLeader-Speak, Leader-Speak, Team Team SamvidSamvid 2.0 caught 2.0upcaught up with Mr. Rajiv Kumar, Global of HRCRISIL Head of TCS Financial Solutions with President (Ratings) Limited Mr. Rajiv Kumar on life leadership and the way forward...

Rajiv Kumar, Global Head - HR: TCS Financial Solutions

What are the three most important leadership lessons that you have learnt in your career which shaped you as you are today? A)As you are aware TCS is a world class organization and there is tremendous opportunity to learn and grow for someone like me who has spent 15 years here, evolving from the grass root level. The journey has been an intense learning experience for me. For the past 5-6 years TCS has been kind enough to give me leadership positions and today I am in a leadership position as global HR head of FS, which is the financial and banking products arm of TCS with close to 5000 employees. This position has had tremendous challenges and they have helped me learn the ropes of leadership. Some of the lessons which I have learnt over the years are as follows:1. Put others before self: Helping others is a good way of helping oneself. I always believe in the words of Isaac Newton â&#x20AC;&#x153;If I have seen a little further it is by standing on the shoulders of Giants." If you help someone today there is a good possibility that he will lend you a helping hand tomorrow. 2. Do something extra every day: There are people who put in the 8-9 hours of work and go home, but a leader puts in that extra mile every day. So at the end of the year he is ahead of the crowd not only inside but outside the organization also. Some people whine about their work. Good leaders are grateful for their work. Think of all the possible complaints a worker could have. I have never heard anything but positive 98

words from people with leadership qualities and if at all they complain about their work, its constructive criticism and they do something about improving it. 3. Have a work life balance: I strongly feel that one must strive for balance between work and life. The success in professional life at the expense of personal life may not mean much. Q)Has there been any one person who inspired you as a leader? If so how did he or she change your life? A)From the late 70â&#x20AC;&#x2122;s when India was perceived to be a developing nation which was another word for a nation with a low GDP, and for a nation which was dependent on foreign aid for its survival, to whomsoever India is perceived as an economic power in its own right today. This has been achieved by the efforts of industry stalwarts who have been able to take India to the fore front of economic growth. While mentioning industry leaders, who else can I mention but our ex-chairman Mr. Ratan Tata who has been acknowledged internationally as one of the architects of Indias industrial growth. Mr. Tata has always been a source of inspiration for me because of what he has achieved in his life. The same would take other mortals a number of lifetimes to even come close. He is one of the few Indians who have been able to showcase the strength of the Indian industry in front of the international market with his acquisitions of multinational brands like Corus steel and Jaguar luxury

car brand. He has showcased the capability of India in front of the world and has proved that Indians can take up leadership positions where ever they go. Q)What is the biggest challenge that leaders face today? A)A volatile market situation where today's mantra of success can become tomorrow's pitfall is the biggest challenge that leaders face today. Leaders should have an ability to constantly learn/develop and evolve. That's how a person can keep himself and his organization ahead of the race. Q)How should a leader deal with an ethical dilemma A)Multi - million dollar deals and decisions involving hundreds and thousands of employees and various stakeholders put leaders under tremendous pressure to make the correct decisions. Their judgment should not only be right and result in profits but should also be good for the society. Leaders have always faced an ethical dilemma. I have always followed the following “ethics checks” to help me decide what is right: Is it legal? In case my thoughts and actions were to be laid bare in a court of law in the country I am functioning, would it hold good? How will it make me feel about myself ? Will it make me proud? Would I feel good if my decision was published in the newspaper and my family read about it? If the answer to the above questions is an emphatic “YES” I can safely assume that I can go ahead with my thoughts and actions with a clear conscience. Q)How do you constantly adapt to change in today's fast moving business environment? A)In my opinion, constant re-invention of self and ones leadership style is the only way of keeping ahead of the business. To survive and prosper in the modern economy, businesses must be able to adapt quickly to changes in the market place. They must identify and address problems and leverage technology and other opportunities faster than their competitors. Intense competition and rapid technological change requires that companies be lean and dynamic. To survive in this environment, organizations must have an intimate understanding of their own business processes, data and organization. Although executives can formulate new strategies, many organizations are unable to implement needed changes, without inflicting pain and disruption on its employees, suppliers and customers. To implement organizational change with surgical precision, the business must know itself. Q)How important do you think corporate governance is in today's business context? A)In today's networked world where the world has

become a global village “Corporate governance” is very important to maintain a clean and ethical image of the organization. It has succeeded in attracting a good deal of public interest because of its apparent importance for the economic health of corporations and society in general. Although better governance does not guarantee improved performance at the individual firm level, it makes companies respond more actively to changes in business environment in a positive manner. It is a check on the power of the relatively few individuals within the corporation who control large amount of other people's money, thus reducing the likelihood of corrupt behavior. Q)What do you think are some new and never seen before trends in business which India is going to encounter in the next 5 years? A)That's a difficult question. As I have stated before it's very difficult to predict the future in today's world. But I will try my best. One of the key responsibilities of a leader is to foresee what lies ahead and give direction to the business in a responsible manner. The next 5-10 years will bring new trends that will change the way in which we do business. I foresee three major trends that will affect every business: ! There is a new generation of young entrepreneurs

coming into the economy. As the Indian economy grows and accelerates this will create a host of opportunities for the new breed of entrepreneurs. They are energetic and enthusiastic new members who are in their 20's. They are well connected and are tech savvy. They already have networks through Facebook and Linkedin and when they come into business they expand the breadth and depth of their network. They bring fresh ideas. This is our new generation – Gen Y and Gen Z. ! The number of women entrepreneurs will grow.

Of late there are more and more women entrepreneurs joining and this trend will continue to grow. ! There will be an integration of online and face to

face networking: This will help create new opportunities locally, nationally and internationally at a click of a button. This is a revolution that can help small businesses scale up. Q)How do you ensure to continue to grow and develop as a leader? When do you decide that 'now it is time to pass the baton'? A) I think that a deliberate effort to broaden my experiences has been very helpful. By exposing myself to a variety of different experiences, I am able to look at things from different perspectives. I always reiterate the fact that we live in a period where our world is so rapidly evolving that we must maintain and drive the leading edge of progress. I try never to

stand still, never to stop exploring how to better respond to real-life challenges and never to become complacent. My career has been a constant endeavor to re-invent myself based on changing business needs. I seek feedback regularly from my leadership and team members. By encouraging them to express divergent opinions, I feel that we achieve a better outcome. Moreover, we all grow and develop as leaders through the feedback that we give each other in this process. Regarding “passing on the baton”, I would like to quote George Bernard Shaw. “Life is no brief candle to me. It is a sort of splendid torch which I've got a hold of for the moment, and I want to make it burn as brightly as possible before handing it on to future generations.” Stagnation for me is synonymous with death. A leader is constantly in search of someone who is worthy of taking over so that he can pass on the baton. That way he can free himself for higher responsibilities. It is not enough to run the race. We also pass our mission to the next generation. We must hand off the baton, at the right time, and must do it well. I speak to the next generation in a manner that appeals to them, I constantly engage with my team. Lastly, I will give and spend the much needed time for an effective, smooth and orderly transition.

100

Q)What advice would you give to someone taking up a leadership position for the first time or to a business school graduate who is just starting out in the industry? A)This is a nice question. My endeavor over the past few years, in my association with the academic world, has been to develop and mentor tomorrow's leaders. My message to them would be as follows:I) Seek to understand and learn An effective leader doesn't have all the answers but they have to make good decisions which are possible by gathering inputs and information from others. Ensure that you are seen to be open to the ideas of others and reward your subordinates for their ideas,to encourage this practice. II) Trust your team Effective leaders build up, and have confidence in their top class teams to deliver on what is being asked of them. They give their teams the freedom and support to realize their potential. Try to empower people to take ownership of problems rather than referring upwards. That will develop your team and set them up for career progress.

REFLECT Book Review

BOOK REVIEWS

The Difficulty Of Being Good – On The Subtle Art Of Dharma by Gurcharan Das Lipta Mahapatra, SPJIMR - Mumbai

Name of Book: The Difficulty of Being Good: On the subtle art of Dharma Writer: Gurcharan Das House of Publication: Penguin Books India Year of Publication: 2010 Edition: 1 Number of Pages: 488 Price: `699 ISBN: 13-9780670083497 10-0670083496

he Difficulty of Being Good: On the subtle art of Dharma examines the lapses in the moral values of mankind through our two thousand year old epic Mahabharata. The book is inspired from Mahabharata which prompted me to pick this book for reading. Our ancient epic is a tremendous source of knowledge and wisdom and Gurcharan Das probes us to stop and think – What is right and what is wrong. The book begins with a brief introduction to the key happenings in Mahabharata – the dice game, exile to Pandavas, onset of the Great War, rise and fall of the greatest warriors. Thereafter the author presents the perspectives of the central characters – Duryodhana's Envy, Draupadi's Courage, Yudhishthira's Duty, Arjuna's Despair, Bhishma's Selflessness, Karna's Status Anxiety, Krishna's Guile, Ashwatthama's Revenge, Yudhishthira's Remorse and finally summing up everything in Mahabharata's Dharma. What I found interesting is that the human nature has remained the same over thousands of years. Gurcharan Das has aptly compared Duryodhana's envy towards Pandavas to that of Hitler's towards Jews. Duryodhana's jealousy led to the destruction of the Kaurava clan while Hitler's hunger for power and envy towards the Jews led to the Second World War and destruction of Germany. As the author analyses the principal characters, he tries to draw a picture of the character and his nature. He begins with Duryodhana whose jealousy led to his own destruction. Duryodhana never tried to hide his harsh

feelings towards the Pandavas. He had an egoistic philosophy and nurtured his evil feelings. Also, Mahabharata never makes the choice between the 'good' and 'bad' easy. For example, in the claim to the Hastinapur throne both Yudhishthira and Duryodhana were justified. Duryodhana's father was the elder son and since he was blind, the throne went to Yudhishthira's father Pandu. Yudhishthira was born to Pandu through niyoga whereas Duryodhana was naturally born to Dhritharashtra. Also Yudhishthira was born just minutes before Duryodhana was born. Even after Dhritharashtra divided the kingdom between the two lines, discontent remained with Duryodhana on seeing Pandavas prosperity. This is how the argument goes and we can never figure out who is right and who is wrong. The famous 'game of dice' is also questionable. Duryodhana might say that he just took advantage of a king's weakness for gambling whereas Yudhishthira might say that he was duped to play the game against a cheat as a king cannot refuse an offer on the day 'rajsuya' ceremony is performed. Duryodhana might pronounce that Yudhishthira wasn't playing against a cheat but a player better than himself. Das connects this episode to the tiff between the Ambani brothers which prompted them to resort to legal proceedings. It's astonishing to find that relationships, emotions and reactions have remained very same through thousands of years. The other famous or rather infamous incident in Mahabharata is the disrobing of Draupadi. No one in the 101

entire assembly could protect Draupadi from being wagered in the game. All the elders including the respectable Bhishma were painfully silent when Draupadi was dragged in the assembly hall in a sole piece of garment. No one speaks and no one answers her bold question 'Whom did you lose first, yourself or me?'. This question posed a terrifying moral and social challenge to the society at that time. Finally Bhishma, the eldest of all, answers the question as a legal dilemma. If Yudhisthira lost himself first, he was not competent to stake Draupadi in the first place. But if we see from another angle, that a wife belongs to a husband and is expected to act upon his orders, Yudhishthira is allowed to stake her. Hence Bhishma fails to solve Draupadi's dilemma. Such instances in Mahabharata make us stop and wonder â&#x20AC;&#x201C; what is moral and what is not. What is just and what is unjust. Gurcharan Das comes back to the present world when Pratibha Patil was elected as the President of India. She had murder cases pending on her and still she was endowed with the most prestigious position of power. Bhishma like person Manmohan Singh remained silent. Gurcharan Das aptly calls this response of silence as 'immorality of silence'. Further, the author reflects on Arjuna's state of mind, his anxiety, his despair on fighting against his own family. Arjuna is pained at the thought that he has to fight against his own cousins, elders, Guru from whom he has learnt everything. As his eyes gaze at the battlefield he sees Dronacharya, Bhishma and he falls silent. This is the part of Bhagavad Gita in Mahabharata. Krishna debates with

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Arjuna and explains him that his duty is to fight the war. The author relates this to the war waged by U.S. on Iraq. Saddam Hussain's evil force in Iraq was removed by intervention of the US. But this was achieved through a blood curdling war. May be a war was necessary to free Iraq, or not. The dilemma stays. If Arjuna's duty is to fight, it is Yudhisthira's duty to follow 'dharma'. Yudhishthira follows dharma not from any hope of rewards, but because of his sense that 'he must do what he has to do'. The author connects Yudhisthira's sense of duty to a CEO of a firm he knew. This man refused to pay bribes to government, though the company was on the brink of bankruptcy. Half his workforce had to be fired and the organization was restructured, he lost 80% of his business to competitors but still chose to follow his sense of duty. Gurcharan Das aptly says â&#x20AC;&#x201C; Yudhishthira follows dharma not from any hope of rewards, but because of his sense that 'he must do what he has to do'. I believe that no one reads Ramayana or the Mahabharata for the first time. We hear the stories as children, grow with it and every time we read it we find something new. Everytime I pick up Mahabharata to browse through, it provides me a new line of thought, a new piece of wisdom, a new theory to rationalize upon. Gurcharan Das' work is like a mirror to us. Reflecting our actions and seeking answers to it in the Mahabharata. It reminds us about our aspirations to be good and 'how difficult it is to be good'.

Rekha Rane, MICA - Ahmedabad

Edited by: Naina Lal Kidwai Contributers: Adil Zainul bhai, Aditya Puri, Arun Duggal, Bindu Ananth, C. Rangarajan, Chanda Kochhar, Duvvuri Subbarao, Gunit Chadha, Jaspal Bindra, K.C. Chakrabarty, KR. Kamath, M.D. Mallya, M.V. Nair, Neeraj Aggarwal, P.J. Nayak, Rana Kapoor, Subir Gokarn, Sunil Bharti Mittal, Viral V Acharya, Y.M. Deosthalee

BOOK REVIEWS

Contemporary Banking In India

House of Publication: ABP Group (Business World) Year of Publication: 2012 Edition: 1 Number of Pages: 320 Price: `595 ISBN: 978-93-81425-02-2 Mr. C. Rangarajan (Chairman of the Prime Minister's Economic Advisory Council), one of the prime contributors to this book starts off by saying, â&#x20AC;&#x153;In any economy, the financial sector plays a critical role in facilitating economic growthâ&#x20AC;?. This is the basic premise on which this book has been edited and compiled by Ms. Naina Lal Kidwai, currently Group General Manager and Country Head HSBC India and former President of the Federation of Indian Chambers of Commerce and Industry (FICCI). The belief that the Indian Banking Sector plays a crucial role in developing the socioeconomic conditions of the country has propelled the editor and the contributors to capture the developments and issues of the Banking Sector in India. The book written with banking practitioners, students, academicians and policy makers in mind, talks about the changes brought by the monetary policy in India, the progress made, and the scope still left for further development of the Banking Sector and the Economy. The intention of the book is to broaden debate amongst all involved by leveraging the expertise of the eminent practitioners and key thought leaders. It brings to forefront many imminent issues in the Banking Sector and the challenges facing the re-emergence of the economic euphoria that India witnessed in the mid2000s. India's economic growth story has been the talk of many economic forums in the past decade, fuelled mainly by the resilience shown by the country during the global

financial crisis in 2008. The crisis that occurred then, and is again evident presently in the developed world is attributed majorly to regulation failures in the banking systems of the respective countries. One of the main themes that are glaringly obvious in the book is the role that regulation can, and has played, in stabilising, maintaining and propelling the Indian economy. The banks in India have, until recently, remained relatively isolated from upheavals in global economies due to the stringent rules put forth by the very prudent and effective regulator, Reserve Bank of India. The high levels of core equity required to be present in the capital base along with the feature of the rupee only being partially convertible has been the reason for the Banking Sector and India's economy to stay relatively unaffected by outside developments till now. N.L. Kidwai's underlying logic for editing this book, however, is not the famed growth story. According to her, India's unmatched potential for growth cannot be realised in the current scenario because the Banking Sector is now unable to match the growth in other sectors in the Indian industry, raising serious concerns about its capacity to invest in capital formation and enhancement. What N.L. Kidwai tries to put forth through this book is the direct opportunity for the Banking Sector in providing the much needed growth for the Indian industry and economy by placing equal responsibility for the same on the monetary policy makers, and the banks. The book itself is divided in four sections that logically

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flow from information about the Indian Banking System, to sub issues within the topic of Corporate Governance, to the significance of Financial Inclusion, and finally to the importance of Public Sector Banks and NBFCs in providing financial services and inclusive growth. The comprehensive understanding of the past, present and the future of the Banking Sector is provided through detailed essays written by stalwarts like C Rangarajan, Chanda Kochhar (MD & CEO ICICI Bank), A. Zainul bhai (MD India, McKinsey & Company), Subir Gokarn (Former Deputy Governor, RBI), M.V. Nair (Former Chairman & MD, Union Bank of India), K.C. Chakrabarty (Deputy Governor, RBI) etc. They give us an overview of the learnings from the past decade, and apply the same in showing how a strong financial future can be built, in which practical understanding from their experience can be easily detected. In the section of Corporate Governance, D Subbarao (Governor, RBI) and Jaspal Bindra (CEO, Standard Chartered PLC Asia Operations) focus on the importance of human capital building at the top most positions in order to build a strong future. This debate is then extended to discuss the implications of implementing Basel III on the Banking Sector and the entire Indian economy. The two relatively different topics, one of human capital, and another of capital adequacy standards have been explained together in order to allow the reader to understand the intricacies of the sector and the requirement for a stable governance during the transition stage.

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With the palpable gloom and despondency in the air due to the challenging times for the global and Indian economy, â&#x20AC;&#x153;Contemporary Banking in Indiaâ&#x20AC;? is just the right book to read if one wants to take a proactive approach to understanding how the banking system can be leveraged to bring about positive developments in the growth of the economy. The book gives many thought provoking views from relevant industry professionals, which are sublimely levelled in terms of prior knowledge required to understand them. Anyone from a nonbanking background can easily understand the arguments put forward by these eminent writers, but prior knowledge of the same would help in critically analyzing their views, since there are no counter arguments put across for any of them. It could be that everyone agrees on the same principles of reforms, be it policy makers or followers, but that only brings one question to mind â&#x20AC;&#x201C; why have more efforts not been put forth to implement some of these ideas. Be that as it were, the book is a brilliant read for anyone who is remotely interested in understanding the subtle implications of the monetary policies put forth, and their colossal impact on an entire nation's growth. Naina Lal Kidwai has done a brilliant job in inviting essays from the best of contributors, and the editing of the book is superb as it captures perfectly the essence of the Banking Sector, and its colossal importance to the Indian Economy.