Small Business Cases

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SMALL CASE STUDIES ON E N T RE P RE N E U RS H I P CASE STUDIES FOR THE STUDENTS OF SOCIAL ETREPRENEURSHIP PREPARED BY : DR. T.K. JAIN HONORARY CHIEF MENTOR, AFTERSCHOOOL © : AFTERSCHOOL CAREER GUIDANCE TRUST. NOTE : THE PURPOSE OF THIS CASE STUDY IS NOT TO SHOW THE RIGHT OR WRONG METHOD OF DOING SOMETHING. THE CONTENTS OF THESE CASE STUDIES ARE HYPOTHETICAL AND THEIR SIMILARITIES TO SOMETHING REAL IS BY CHANCE. THE PURPOSE OF THESE CASE STUDIES IS TO PROMOTE ACADEMIC DISCUSSION AMONG PGPSE PARTICIPANTS OF AFTERSCHOOOL. PGPSE IS THE PROGRAMME TO PROMOTE SOCIAL ENTREPRENEURSHIP THIS PROGRAMME IS AVAILABLE FREE OF COST FOR ANY PERSON WHO WANTS TO PLAY AN IMPACT MAKING ROLE IN SOCIAL TRANSFORMATION.

Small Business Cases TABLE OF CONTENTS

( R E A D A S P E R P G P S E P R O G R A M M E S Y L L A B US )

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NEW BUSINESS CHALLENGES PRODUCT POSITIONING PRODUCT POSITIONING NEAT AND CLEAN CITY VARUN LOGISTICS VDO ANDSOCIAL TRANSFORMATION PROCESS MOVIES FOR SOCIAL CHANGE MAHENDRA LOGISTICS ORGANISATIONAL TRANSFORMATION BY MADHAVAN

NEW BUSINESS CHALLENGES 2008 was a year of recession. For many firms, this was the worst year. Some firms were closing down, and some firms were on the bankruptcy. Ajay took it as an opportunity. He decided to acquire new businesses. He realized that this was the golden time to acquire running businesses. He decided to enter into some evergreen sector. One such sector was cement sector. In 2008, most of the cement companies were in troubles. They had built huge capacity, but demand was slackening. Many builders had cancelled their orders. Mini cement companies were getting closed down. Ajay took it as an opportunity and started searching out mini cement units. His plan was to create an all India brand of cement and to use mini cement plants to produce and market cement. His plan was further to make special types of cements – which are not made by other companies (like quick setting cement). Ajay acquired 4 mini cement plants in four parts of the country: North, South, East and West. These plants would fulfill the requirements of these regions. Ajay didn’t want to give head on competition to the large companies. He knew that there is no point in competing with a large company, if you are a small company. He therefore concentrated in niche marketing – particularly on specialized cements. He could easily make his brand in these segments. As 2008 completed, the blues of recession starting reducing and opportunities started blooming. Ajay undertook demand analysis. He used Delphi and Nominal Group technique to anticipate demand in the four regions of the country. He found the following scenario: D= demand P = production capacity North East West South D 100 120 30 40 P 25 30 120 200 Transportation cost is a big issue in cement companies. Ajay wanted to minimize his transportation cost also. Average cost of his cement bag was Rs. 130. His market selling price was Rs. 200. He had to pay commission to the sales persons, dealers, retailers, and masons out of this income. If goods are transported from one region to another region, the transportation cost would be as under : North to South: 20 North to East: 15 North to West: 5 South to East: 15 South to west: 5 Help Ajay in sorting out the issues.

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PRODUCT POSITIONING

Ajay had set up a tractor company. He imported Chinese components and assembles them and sold out tractors in India. His brand was FIELDFORCE. He popularized his brands through village fairs, trade displays, exhibitions in fairs etc. He didn’t give any advertisement, but he used to organize Kushti competitions in villages. He sponsored a national Kushti competition, which was telecast on TV also. Ajay believed that his customers were farmers, so he needed to reach the farmers. He wanted to match the expectations of the farmers. Ajay also used a mascot as his logo. The mascot displayed an elephant. Ajay symbolized power, rough and tough tractors through his publicity media. However, Ajay realized that the sales were not coming up. Ajay hired an advertisement and media company to give suggestion. The company gave a presentation that the sale of tractors in India had reached a maturity level. As per the media company, farmers in India no longer buy small tractors (which Ajay was selling). The media company suggested Ajay to switch over to big tractors. Ajay said to them that it was not possible for him to switch over to higher horse power tractors. Ajay this time asked a student from MBA to prepare a dissertation report on new products to launch. Ajay asked her to prepare a report and identity business segments with very high growth potential, high growth rate and future scope. The student suggested to Ajay to launch a moped for college girls. At that time there was only one brand of moped available. Ajay realized that there was great scope in this business. This was the product, which would sell in huge number. Its market segment was well defined. Its target customers were increasing in number. There was not much competition. The existing producer was making a moped which neither had style nor performance (as per Ajay). Ajay launched the moped for college girls. This moped was launched with his existing brand name (as the brand was already popular). The advertising agency of Ajay got agonized on this. They said that perception of people about the brand was that of rugged product. The said that product must be positioned appropriately. They suggested that Ajay should carefully design an appropriate brand personality and then launch a new brand. Ajay however, was adamant. He wanted the existing brand to be used. He said that our brand can be modified as per the new situation. He suggested that instead of Kushti, now he will sponsor some other events that will attract the attention of college girls. Ajay believed that every product passes through four stages: 1. introduction, 2. growth 3. maturity, 4. decline. Ajay believed that his product was in introduction stage and there was lot of scope in the future. You are requested to prepare appropriate strategy for Ajay.

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N E AT A ND C L E A N C I T Y

Use and throw has become the new culture in our society. People in smaller cities have also become habitual of it. Earlier people used to buy goods in cloth bags, but now every one takes plastic bags, and they throw away these bags. These bags pile up as heaps of wastage on the streets and add to the dirt and sewage of the city to make the living hell out of the beautiful cities. Now smaller cities are getting worst affected by it. They don’t have effective sewage treatment plants. They don’t have effective sanitation system. Stray animals move about on streets and eat the material thrown away by people. These animals get lots of problems by eating these materials. This further complicates the problem. Bikaner is an example of traditional city trying to change itself. The city still doesn’t have an effective sewage treatment system and sewage transportation system. People have adopted modern (so called) life style. The result is the huge pile of waste of plastic material around the streets. Beautiful ponds of the city have been converted into store house of plastic waste. People living in lower areas face more problems as during raining season, their area become a display of the plastic wastes of the city. Milch animals like cow, buffaloes eat plastic waste thrown by people. Purushottam Dawra was wondering about this problem. What to do? People are affected by this problem, but no person was taking an action. Everyone was looking towards government. Dawra was thinking that it is not the government, but the people, who should bring solutions to our problems. He was particularly concerned about milch animals like cows. Mr. Dawra designed a small open tank, of size of about 1 foot for collection of waste. Now he started explaining people about what to do with this. He told the people that you have two types of waste – 1. plastic waste and 2. edible waste. Differentiate these two wastes. Put plastic wastes separately. Put edible waste only in the waste tank prepared by Mr. Dawra This tank will be put outside their house. Milch animals can come and eat this waste. Plastic waste should be burnt by the people. People in Bikaner are very religious and believe in what ever is religious. Mr. Dawra wrote Ram words on these tanks. These tanks soon became popular. Lot of donors also came forward to help Mr. Dewra. Mr. Dawra took donation from them and got the tanks prepared. Soon over 3000 tanks were distributed all over the city. Lot of demand for these tanks was coming. These tanks have now solved the problem of waste to some extent. These tanks have helped the milch animals a great deal. People still don’t burn the plastic waste. This is still a big headache. Mr. Dawra is now planning to take some more action in this direction. Like him many concerned citizens are getting disturbed over the increasing plastic use in the city. The younger generation is excessively using the use and throw products made mostly by MNCs.

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Shopkeepers are being told by concerned citizens to use paper bag instead of plastic bags. In your opinion, what should be the next strategy of Mr. Dawra to solve this problem?

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VA R U N LO G I S T I C S

Varun Logistics is into transportation of small parcels and packets. The challenge is to minimize the cost of transportation and ensuring that there are no lost goods. They try to prepare a transportation schedule to facilitate faster transportation. This firm is situated in UP Border in Delhi. UP Border is the main transportation hub. Trucks come from different parts of the country and they are unloaded there. The firm then moves the packets in the trucks of the destination. Suppose one truck comes from Bangalore containing a packet for Chandigarh, then the packets will be loaded in the truck that has come from Chandigarh, so that the truck from Chandigarh would get something to take in its return journey. The truck from Chandigarh might bring something for Bangalore, those items will be loaded in the truck from Bangalore. The market is daily fluctuating. The rates of trucks are determined on the basis of demand and supply. If the truckers in South are in strike, the rates for trucks to south will shoot up. The firm gets a fixed rate of commission per packet (which is based on weight and length to be covered). The firm has to find the best possible sources for transportation. Generally it hires trucks in open market, but there are possibilities of pilferage during journey. Although the firm doesn’t suffer any loss (as all the goods are 100% insured), but it mars the goodwill of the firm. You have to help the firm in its restructuring plans regarding transportation system. The firm is having following options: 1.

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Have its own trucks. One truck will cost it Rs. 10 lakhs. Rate of interest will be 18% per annum. One truck will operate 20 days in a month and will earn Rs. 5000 per day when it is moving. It will also require Rs. 50000 per annum of maintenance expenditure. Contract with good companies – where there will be no possibility for pilferage. In that case the firm will have to guarantee minimum 200 truck loads in a year. This is a very small figure considering the business of this firm. However, in this case the transportation costs of these companies are 1.5 times those of the prevailing market rates (available in open market). If the firm goes for this option, the firm will also have to install an automated system, as the other firms will expect a very quick response from this company. This will cost another 2 to 4 lakhs. The firm can also go for having a system of performance based reward system for the drivers of the trucks. If the drivers and staff ensure safety of material, the firm can give them reward. Thus it can ensure safety of the goods and pilferage would be stopped. In this case it will have to spend about Rs. 2000 per truck hire, which will increase its expenses by 20% (thus reducing its margins by 20%).

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This firm is making lot of money. As the firm has no fixed investment. Except an office, the firm has no fixed investment now. Every day the firm gets about 100 to 150 tonnes of goods to transship. It keeps the goods in a rented godown and tries to arrange trucks and loads the goods in those trucks and takes away its profit in the process. It is able to earn about Rs. 5 per tonne of net profit (after deducting all the expenditure). The firm can easily make the turnover 10 times, as there is great business scope. Give your suggestions.

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VDO AND SOCIAL TRANSFORMATION PROCESS Village Development Group or VDG is now a powerful NGO. It was started by a group of professionals who had done their masters in social work and social entrepreneurship. The company works in villages in and around Bikaner. These villages are inhabitated by people belonging to backward communities. Shishir is one of the founders of this NGO. He had undertaking capability assessment of the villages before starting this NGO. He had carried out PRA (participatory research and analysis) in these villages. He visited these villages and identified the skills and abilities of the villages. For other persons, these villages had no talent, but for Shishir and his group there was a lot of talent in these villages. They found that villagers in these villages used to prepare woolen blankets and cotton blankets. Shishir decided to start with this skill. There purpose was to find a match between demands the capabilities of the villagers. They organized a group discussion the village to take the villagers into confidence. They clarified the villagers about their expectations and what could they do for the villagers. They told the villagers that they were not from government department, but wanted to work with the villagers. Honest working was their basic value and they wanted to work with the villagers in building an NGO for the development of the villages. The villagers joined with them in their work. Their first venture was to participate in an exhibition being organized by a government department for promotion of handicrafts. They presented their stall in the exhibition in which they displayed the creativity of the village in the exhibition. This exhibition gave them an opportunity to interact with the foreign buyers and to know about their requirements. They wrote down the expectations of the buyers in details. Thus this was a major milestone for them, although they didn’t get any business. They also studied the marketing strategies of other handicraft selling units. They understood that understanding of tastes and preferences in different countries would help them in sharpening their products. The NGO then had an open discussion to carve out the strategy. The NGO had no financial resource by this time, so they had to take their decision in financial constraints. One official from handicraft export promotion council had briefed them about possibilities for handicraft exports for them. And how they could move forward

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M OV I E S F O R S O C I A L C H A N G E

Sharat Babu works as lecturer in the department of commerce in Kolkata University. He is not satisfied as his role as change agent. He wants to involve the youth in the process of social change. He wants the youth to look beyond the present and dream for a better society. Teaching accounting and bookkeeping is not his cup of tea, but he is doing it because there is no option. He has a good collection of old classical movies, which are very good in terms of their lessons. He uses his university auditorium for showing some of these movies. He finds good response among the youth. He gets an idea to do something creative. He forms a movie club in the university. He seeks suggestions from the students regarding movies that they want to see. The criteria are: 1. the movie should be really different from the conventional movie 2. 2. the movie should have a social message 3. The movie should be useful to the youth. He gets lots of suggestions. He starts buying those movies and showing them in the auditorium of the university. He charges nominal charge of Rs. 5 from the students. Soon he has a very rich collection of international movies. Now he applies to various international forums and funding agencies regarding his work. His work is now appreciated by other bodies also and he receives support for this task. He prepares his website also where he shows the list of movies with their social theme. Mr. Sharat now receives invitations from premier institutions from across the globe to show some movies. He takes his collection and goes to these institutions and shows the movies. He also ties up with NGOs in different cities and shows these movies in different cities on different themes. In 2005, it is the peak time of his activities. He had taken 100 days of holidays from his university. He spent most of his time traveling in different places. He organized a 7 day programme in IIM Ahmedabad, where he displayed 30 movies in different class auditoriums and organized discussions on those movies also. Till date, his collection of movies is such as no one can really compete with him. He has collection of many rare movies. With spread of information technology, he has got advantage as well as disadvantage. Earlier he used to get calls from different parts of the country for showing unique movies, but now these movie clips are available on internet also and many people download pirated copies of these movies. Mr. Sharat had obtained license to show many international movies in different parts of the country, but now it seems to be irrelevant. Many of these movies are already available as pirated copies on internet. Downloading speeds have increased considerably and people can easily download these.

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Mr. Sharat particularly enjoys the discussions that follow these movies. He wants the youth to have detailed discussions on the matters of the movie. Generally, he shows movies of 1.5 hours and organizes discussions for half an hour. Thus this 2 hour session is something which people like and wait for. Mr. Sharat is now having another problem. His university has given him a notice. He has been asked to discontinue or become regular. He would not be given any more holidays. He has to now decide about the future of his life. Should he pursue his dream career or continue with the university job. Can you frame career anchors for him? MAHENDRA CERAMICS

Born in a lower middle class family, Mahendra was working with the Indian Railways. It was the summers of 1976. He observed that there was one party in Bikaner which used to send railways wagons full of a particular type of soils to various parts of country. In a curiosity, Mahendra decided to inquire about it. During his next visit to Delhi, he inquired about the rates of that soil. He went with the samples of the soil. He had collected address of the consignee of the last Railway Wagon and he went directly to that party and inquired about the rate of the soil. He was surprised to know about the rates of the soil. The soil was used in ceramics industry. Mahendra got an idea to experiment. He collected his small savings. It was total Rs. 20000. He purchased soil from this savings and sent the soil to the firm in Delhi. He collected the payment. In the process he earned Rs. 50000. Now he took these 70000 (20000 + 50000) and again purchased soil and sent it to the firm in Delhi and this time earned Rs. 170000. It was such a huge amount that he could never earn at a time. Now he decided to do this wholeheartedly. He got involved in this business. He resigned from his job. He realized that there are always business possibilities which most people don’t know. People only look for established businesses, but forget that real profit is in unexplored or underexplored sectors. Mahendra went to South India to explore the markets for that soil. He realized that profits could be more in South India. Now he started focusing on the Southern India. Till 1984, Mahendra had become established business person and was now considered a rich person in the city. Considering his success, many people started following him and now he had many competitors. Mahendra realized that it is better to earn and diversify so that he could earn more in some other sectors. Due to competition, his margins had reduced. He went to one of his buyers and asked him to tell about the process regarding factories. He now wanted to start a factory to use this soil. He was wondering that when this soil is purchased by the factory owners, he would be able to make more money if he sets up a similar factory. He tried for 3 years, but he couldn’t set up his factory. There were many restrictions in those days. With his savings from his business, he now purchased a mine of the soil. His margins were constantly

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shrinking. He was pondering on how to increase his profit. He asked his elder son to take up a course on ceramics engineering. At that time, this course was available in only a few institutions in India. The admission was through a rigorous entrance test. It was difficult for a boy from Bikaner to crack the test. So he decided to send his son to the USA to study. It took him Rs 18 lakhs (which was a huge amount for him), but the expected benefits were equally great. After 5 years, his son returned with ceramics engineering. Now his son started the process of his dreams. His son set up the first ceramics factory in the region. Now they could use the soil in the factory. The factory started making insulators. The variable cost of the one insulator of a particular type used to be Rs. 50. Insulators could be supplied to various government projects. This insulator could be sold to the government at Rs. 400. The real profits would depend on volume. Huge infrastructure development work was going on in South India and in the East India. The governments of Kerala, Tamilnadu were buying these insulators in bulk. Mahendra went to south India and got his first contract to supply the insulators. Soon they were able to establish their rapport with other governments and started supplying insulators all over India. They were able to make huge profits. Their average monthly profits were in the range of Rs. 1 lakh to 10 lakhs. The big challenge was to ensure transportation for supply of these insulators from Bikaner to South India. They had to incur Rs. 9 per kg on transportation of insulators from Bikaner to South India. They had to send one truck load every fortnight. Mahendra realized that he could reduce this cost substantially by using containers. One container was of 28 tonnes (four times the truck load). The cost per kg would be Rs. 4. But now he would be required to send more goods. He contacted buyers and stockists in South India. Thus he was now able to supply one container of insulators. This reduced his transportation costs and damages (damage in the process of transportation). His margins improved further. Mahendra was now thinking about new business possibilities. With the surplus profits that he was generating from this business, he could easily finance some new business. He had different ideas in his mind: 1. set up a vitrified tiles manufacturing plant 2. Set up an institution to impart training in ceramics engineering. 3. To diversify into other unexplored sectors like real estate or commodity trading. Give him some guidelines so that he may take appropriate decision. In your opinion, how should he expand his business?

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ORGANISATIONAL TRANSFORMATION BY MADHAVAN Madhavan joined as CEO of one of the leading companies of the country. However, the company was facing problems. Till date the company was in computer hardware and software support. The company had opened distribution points for various brands of computers. The company was having good turnover, the but the sales were shrinking. Margins were also reducing. The company had good staff, most of them were engineers. Madhavan decided to give the company a new shape. He wanted to convert the company from hardware based company to a software development company. The idea was to convert this company into higher value addition sectors. The margins would increase substantially, if the company entered into software and support sectors. Under the guidance of Madhavan, the company converted itself into an ERP and support company. The challenge was to constantly build the skills of the employees. Madhavan instituted a rigorous training and development department in the company. Every new recruit had to undergo 3 month rigorous training in this department. Here Madhavan would personally take at least one session. All the senior executives would come and take at least one session. The training sessions were very rigorous. The trainees would be given daily assignments of at least 4 hours. The trainees had to undergo class room training for 6 hours and then they had to complete the assignments. They would be evaluated every week on their performance and if they failed in performance, they would be given a warning. If their performance was again poor, they would be asked to leave the company. New recruits used to say that they have completed changed after the training. Madhavan was also very careful in recruitment. Instead of newspaper advertisements, Madhavan used to visit good institutions and recruit the students. He had instructed his HR department to prepare a very rigorous test for recruitment. The recruitment test consisted of two parts: 1. technical questions 2. Psychological questions to test team work, communication skills and attitude of the candidates. Madhavan had also asked all his employees to bring new persons and if the new recruit would stay with the company for 1 year, the referee employee would get a cash award of Rs. 40000. These initiatives enabled Madhavan to recruit motivated, self driven and committed employees. Madhavan was prepared for low grade recruits, but he would not compromise on attitude and motivation of the recruits.

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During training and development sessions, at least half the sessions would be on motivation, team work and positive thinking. The next one year witnessed massive changes in the company. New recruits who joined the company, used to be very ambitious. They would bring projects on their own and share their learning with others. Madhavan started an intranet across the company. All the employees were asked to share their experiences on intranet. All the employees would be evaluated on their contribution on intranet. Further the employees were also required to give presentations every weekend on their new projects and their new learning. The company soon converted into a learning company. However, there are some questions that you have to answer. Madhavan realized that old employees were not very fast on intranet. Due to better performance on intranet, the new recruits were able to move forward and get rewards. Old employees were having resentments at the new systems. As the new systems were introduced almost every day, the old employees were finding it difficult to adapt themselves and adjust with the fast changing pace of the company. What should Madhavan do? For Madhavan, the first priority is his team. He can compromise on profit, but he doesn’t want to compromise on teamwork, motivation, and morale of his team.

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