Professional Documents
Culture Documents
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JOURNAL
TATTVA is a forum for BIMTECH students to bring to light the outcomes of their journey of
discovery into the issues on which they have been cogitating - whether the issues are in
marketing, finance, world business, retail management, insurance or sustainability or
livelihood or microfinance. It is aspirational in intent, striving for rigour and has something of
importance or an insight to share. In short, it is a platform for full fledged researchers-in-themaking. We have christened it TATTVA, meaning essence or the most vital ingredient.
Welcome to TATTVA - a Research Journal of BIMTECH Students!
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JOURNAL
Preface
Management educators and planners may not reach a consensus on the issue of
curriculum design and the mix of conceptual knowledge, applied experience and
ultimately assimilation of the knowledge, but there is no disagreement on the issue of
integrating original and applied business research into management education.
At BIMTECH we consider summer projects not only as an opportunity to expose
students to the knowledge, practice, discipline, and ethics followed among corporate
business community but also as a platform to encourage conducting original research,
albeit on a limited scope and scale.
In our journey to continuously improve and increase the research content of projects
executed by students we have taken many concrete steps. Some of them being:
Align Research Methodology course to bring focus on design of experiments
Integrate SPSS and Excel into various courses through projects and assignments
Deliver Management Sciences, Supply Chain and Business Simulation & Modelling
courses using Excel
Incorporate Multivariate Data Analysis tools as part of the course
Encourage students to take up live projects requiring solution to real business
problems by collecting primary data and analysing with some statistical tools
Continuously enriching the course contents with Modelling and Simulation
exercises
This year, for the first time, BIMTECH has brought out TATTVA - a Research Journal of
BIMTECH Students, for showcasing nine research projects. It was a tough task for the
advisory board to select only nine out of so many excellent research projects. We plan
to bring out second volume shortly.
Such a venture like TATTVA cannot come to fruition without the active participation of
motivated students, help and cooperation of faculty guides at different centres of
learning at BIMTECH and the research project guides in the corporate sector who have
given valuable guidance and quality inputs to our students.
We hope you will appreciate the efforts put in by students under the guidance of
industry and faculty guides. Your feedback on these projects will work as a motivator
for all those who are involved in bringing out this issue.
We would in future be publishing the research efforts of students such as short term,
special research reports etc. in TATTVA.
Dr. A. K. Dey
Professor
Supply Chain & Operations Management
Centre for Business Management
Advisory Board
Dr. A. K. Dey
Prof. R. J. Masilamani
Prof. Ashok Malhotra
Prof. K. K. Krishnan
Prof Sangeeta Shukla
Student Committee
R. Natraj (CBM)
Parul Agarwal (CBM)
Priyanka Raina (CBM)
Industry Guides
Mr. Sukrit Vijayakar
Head Product Trading
International Supplies and
Trading Division
Essar Oil Limited, Mumbai
Mr. T. Srinivas
Head International Supplies and
Trading Division
Essar Oil Limited, Mumbai
Mr. Ravi Arora
Sr Manager (Sales & Marketing)
New Holland Fiat (India) Ltd.
Mr Deepak Bhandari
R K Feed Equipments
Halol, Gujarat
Mr. N. C. Dhal
Former SDM, Sambalpur Division
Principal, Sales Training Centre
LIC of India
Dr. Subhendu Chakrabarti
Scientist & Head
Business Processes Division
Central Leather Research Institute
Chennai
Faculty Guides
Dr. Anupam Varma
Dr. A. K. Dey
Prof. R. J. Masilamani
Prof. K. K. Krishnan
Student Contributors
Parul Aggarwal
Sweta Behera
Upasana Singh
Pallavi Banerjee
Vijay Gaur
Mahima Gupta
Rahul Goyal
K. Natraj
Sweta Agarwal
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JOURNAL
contents
R&D Intangibles Valuation - Integrating Monte Carlo and Real Options &
Fund Allocation Process Through AHP: A Focus on Public Funded Research
Organizations in India
Nataraj K and Ravi Agarwal
13
23
37
45
57
65
73
81
Abstract
Technological innovation involves extreme risk as the R&D activity is uncertain in terms of the cost involved in producing the output, time
duration involved in creating the output and also most importantly the output itself is not certain. This intangible nature of the R&D projects makes it
relatively hard to value when compared to other tangible projects. Hence capturing the actual value of the intangibles is considered to be highly
challenging by the researchers. In this paper a holistic approach is made with the objective of valuing the intangibility of the R&D projects. The project
starts by creating a framework for selection of the most appealing projects by evaluating the alternatives using multifactor criteria based on
hierarchical considerations which help in fund allocation process, followed by the projects income projection using tabula rasa method and life cycle
analysis method. After performing the basic discounted cash flow valuation, simulation analysis is done through Monte Carlo method to incorporate
uncertainties involved. As R&D activity will be carried out in phases there exist some options with the management which adds more value to the R&D
output. This is captured here by incorporating binomial lattice real options approach. The mentioned models are empirically implemented in a live
project which involves creation of collagens.
Keywords: Patent Valuation, Real Options, Binomial lattice, Monte Carlo simulation, AHP
JEL Classification: G11, C15, C52
Introduction
Patent valuation problems currently hinder efficient
transfer of technologyunlike the market for used cars,
no equivalent of the used car lot has emerged in the
context of patented technology.(Denton & Heald, 2003)
Most of the public funded organizations pore on
meliorating the small and medium scale industries. Also
in transferring the technology these organizations do
not have any rigid valuation framework and the
technology is priced as per the buying power of the
clients. But in order to have an internal evaluation
mechanism they need a framework that can be applied
to value the knowledge base being produced by their
various departments. Also in order to carefully allocate
the limited sanctioned budget a decision making tool is
also needed in order to select the most valuable projects
from the alternatives. Thus these two requirements are
Literature Review
Myers (1984) was among the first to publish in the
academic literature the notion that financial option
pricing methods could be applied to strategic issues
concerning real assets rather than just financial assets.
01
dK = _ Idt
IK dz
.....1
02
R&D Intangibles Valuation - Integrating Monte Carlo and Real Options & Fund Allocation Process through AHP
Internal
Business
Process
Learning
and
Growth
Human
Expertise
Probability of
technical
success
Relevance of
projects
objectives in the
social context
Anticipated
completion time
Reputation of
project Leader
Extent of
innovation
Anticipated
change of
commercial
success
Infrastructure
Availability of
Technology
Inhouse
Availablity of
material
resources
Technological
relevance of the
project
Customer
Utility of reginol
resources
Financial
Financial
Feasibility
of the
project
Commercial
Sponsorship
Aids or
collaboration for
the project from
outside source
Expected
economic benifit
from the output
04
R&D Intangibles Valuation - Integrating Monte Carlo and Real Options & Fund Allocation Process through AHP
Uniform Distribution:
A uniform distribution, or uniform prescribed
randomness, is one that assigns equal probability to
any value between prescribed upper and lower
bounds. Here the COGS are assumed to follow the
uniform distribution.
Triangular Distribution:
A Triangular Distribution is similar to the Uniform
Distribution in that it also assumes zero probability of
values below the specified lower bound and above the
upper bound. It differs in that the Triangular
Distribution uses a most likely value and constructs a
triangle of probability that varies linearly from the
maximum probability at the most likely value to zero at
the upper and lower bounds. Here the WACC/discount
rate is assumed to follow the triangular distribution.
Beta Distribution:
Beta key attributes are (effectively) a combination of
the Triangle and Normal Distributions, with a smooth
decrease in probability away from the peak value,
similar to the Normal Distribution, but with exact
upper and lower bounds like the Triangular
Distribution. Here the S.G.A costs are assumed to
follow the beta distribution. As the revenues are
already adjusted according to the life cycle, no
distribution is assumed for it. Else normal distribution
can be assumed for the same.
Figure 3: Distribution of NPV through Simulation
06
NPV
36.897
9.594
13.24
1.00
12.24
-5.76
18.00
1.00
19.00
11.00
20.00
50.00
0.725
-20.40
0.00
-20.40
9.60
-30.00
0.00
-30.00
30.00
0.00
0.00
0.00
-20.40
0.00
-20.40
9.60
-30.00
0.00
-30.00
30.00
0.00
0.00
0.00
7.648
0.525
14.56
1.10
13.46
-6.34
19.80
1.10
20.90
12.10
22.00
55.00
Introduction
Discount Factor
-10.20
0.00
-10.20
4.80
-15.00
0.00
-15.00
15.00
0.00
0.00
0.00
8.313
0.381
21.85
1.65
20.20
-9.50
29.70
1.65
31.35
18.15
33.00
82.50
9.035
0.276
32.77
2.48
30.29
-14.26
44.55
2.48
47.03
27.23
49.50
9.821
0.200
49.15
3.71
45.44
-21.38
66.83
3.71
70.54
40.84
74.25
185.63
Growth
123.75
9.252
0.145
63.90
4.83
59.07
-27.80
86.87
4.83
91.70
53.09
96.53
241.31
10
8.380
0.105
79.87
6.03
73.84
-34.75
108.59
6.03
114.62
66.36
120.66
301.64
11
6.680
0.076
87.86
6.64
81.23
-38.22
119.45
6.64
126.09
73.00
132.72
331.80
12
13
4.840
0.055
87.86
6.64
81.23
-38.22
119.45
6.64
126.09
73.00
132.72
331.80
Maturity
2.806
0.040
70.29
5.31
64.98
-30.58
95.56
5.31
100.87
58.40
106.18
265.44
14
1.627
0.029
56.23
4.25
51.98
-24.46
76.45
4.25
80.69
46.72
84.94
212.36
15
0.884
0.021
42.17
3.19
38.99
-18.35
57.34
3.19
60.52
35.04
63.71
159.27
16
0.480
0.015
31.63
2.39
29.24
-13.76
43.00
2.39
45.39
26.28
47.78
119.45
17
18
0.261
0.011
23.72
1.79
21.93
-10.32
32.25
1.79
34.04
19.71
35.83
89.59
Decline
0.142
0.008
17.79
1.34
16.45
-7.74
24.19
1.34
25.53
14.78
26.88
67.19
19
1.01
12.34
-5.81
18.14
1.01
19.15
11.09
20.16
50.39
20
18.334
0.006
3171.89
Discount Rate
-10.20
0.00
-10.20
4.80
-15.00
0.00
-15.00
15.00
0.00
0.00
2
Development
3158.55
0.380
0.320
0.050
0.220
0.400
0.00
Terminal Value
Add: Depreciation
NOPAT
Taxes
EBIT
Less: Depreciation
EBITDA
Set up costs
R&D costs
S.G.&A.
C.O.G.S.
Less:
Revenues
Phase
Period
R&D Intangibles Valuation - Integrating Monte Carlo and Real Options & Fund Allocation Process through AHP
Option to Expand:
The inputs required for solving the real options are:
Calculated from Monte Carlo valuation
Calculated by logarithmic cash flow returns approach by forecasting the free cash flow value while
performing the Monte Carlo simulation method.
t Number of years/number of steps in lattice
Remaining parameters are either found directly or by
using the formula mentioned in section 6.
u = es
d = e-s
p
=s
dt
=> u = 1.329
dt
=> d = 0.752
(rf - b) (dt)
u-d
-d
=> p = 0.518
07
Option to Contract:
As we are dealing with the same project the lattice of
the underlying will be the same. Hence only the option
valuation lattice will be calculated keeping the lattice of
the underlying from previous calculation. Additional
input required for this step, Contraction factor: 0.9,
with additional savings of Rs 12 Laks. Calculation of the
option valuation lattice starts with the terminal node of
the previous lattice. i.e. the value of that particular
node (Rs2685.99 L) is compared with the value after
including the expansion factor. Then the maximum
value is chosen as the value of the node in the option
lattice. Value of that node = Max (Rs2685.99, {(2685.99
* 0.9) + 12}
= Rs 2685.99 Lakhs
On comparing both the lattice the contraction option is
found to have the value of Rs 8.252 Lakhs (difference
between the starting nodes of both the lattices).
Option to Exit/Abandon:
Similar to the calculation of the above 2 options, the
calculation is performed and on comparing both the
lattice the expansion option is found to have the value
of Rs 6.258 Lakhs (difference between the starting
nodes of both the lattices).
Option to Choose:
In the real world business situations, all the options will
be available simultaneously and the option that
provides maximum value needs to be chosen. Real
options provide the method for finding this value too
through Option to choose method.
Here too the option valuation lattice alone is done as
the lattice of the underlying is the same. The
methodology for calculating the option lattice is also
similar i.e. the value of the nodes will be decided after
comparing all the options value simultaneously and
choose the option that gives the higher value. The
option to choose has the value of Rs 13.283 Lakhs.
from the results of various options value:
Option to Expand Rs 7.434 Lakhs
08
rf
dt
Time
Time Step
Up Factor
Down Factor
S*u
S*d
Calculation of nodes
37.48
S0
37.48*0.752
37.48*1.329
28.19113191
49.82951391
21.2043735
37.48
66.24814453
0.752164672
e^-s (dt)
(e^(rf*dt) - d)/(u-d)
1.329496102
e^s (dt)
15
0.05
0.2848
37.48
15.94918064
28.19113191
49.82951391
88.07664994
0.518084429
11.99641023
21.2043735
37.48
66.24814453
117.0975628
9.023275967
15.94918064
28.19113191
49.82951391
88.07664994
155.6807533
6.78698941
11.99641023
21.2043735
37.48
66.24814453
117.0975628
206.9769548
5.104933665
9.023275967
15.94918064
28.19113191
49.82951391
88.07664994
155.6807533
275.1750546
3.839750757
6.78698941
11.99641023
21.2043735
37.48
66.24814453
117.0975628
206.9769548
365.8441626
2.888124869
5.104933665
9.023275967
15.94918064
28.19113191
49.82951391
88.07664994
155.6807533
275.1750546
486.3883882
2.172345496
3.839750757
6.78698941
11.99641023
21.2043735
37.48
66.24814453
117.0975628
206.9769548
365.8441626
646.6514663
1.633961538
2.888124869
5.104933665
9.023275967
15.94918064
28.19113191
49.82951391
88.07664994
155.6807533
275.1750546
486.3883882
859.720604
1.229008144
2.172345496
3.839750757
6.78698941
11.99641023
21.2043735
37.48
66.24814453
117.0975628
206.9769548
365.8441626
646.6514663
1142.995192
0.924416508
1.633961538
2.888124869
5.104933665
9.023275967
15.94918064
28.19113191
49.82951391
88.07664994
155.6807533
275.1750546
486.3883882
859.720604
1519.607653
0.69531344
1.229008144
2.172345496
3.839750757
6.78698941
11.99641023
21.2043735
37.48
66.24814453
117.0975628
206.9769548
365.8441626
646.6514663
1142.995192
2020.312451
0.522990205
0.924416508
1.633961538
2.888124869
5.104933665
9.023275967
15.94918064
28.19113191
49.82951391
88.07664994
155.6807533
275.1750546
486.3883882
859.720604
1519.607653
2685.99753
R&D Intangibles Valuation - Integrating Monte Carlo and Real Options & Fund Allocation Process through AHP
09
Expansion Factor
10
32.95912785
60.47916463
259.0700412
3481.796789
Expand
Node Value
2685.99753
3481.796789
Open
TERMINAL NODE
262.0297227
262.0297227
17.54659378
32.54659878
59.97654093
109.2802249
Expand
24.08309606
44.47722842
81.34915166
Open
INTERMEDIATE NODE
Node Value
44.914
12.78216067
23.7148695
43.98266467
80.78928964
146.5968111
6.886186763
12.55940114
23.30645754
43.41905167
80.15485708
145.9595546
5.122152001
9.208546014
16.91923788
31.55424113
58.75241994
107.9954837
195.7178215
351.0273788
Max(Open, Expand)
Q3
Max(Open, Expand)
9.346200828
17.24320566
32.08161958
59.40551457
108.6753422
196.3785149
262.7117646
3.839750757
6.821927999
12.33985154
22.85330053
42.77044253
79.43295801
145.2515208
262.0297227
468.5505304
2.888124869
5.104933665
9.094171611
16.5801284
30.95015285
57.99820985
107.2321987
194.9911127
350.3193888
624.8967224
2.172345496
3.839750757
6.78698941
12.14026813
22.35084643
42.01203314
78.60801531
144.4700523
261.2820333
467.8094035
832.8588983
1.633961538
2.888124869
5.104933665
9.023275967
16.24108993
30.24596731
57.11430779
106.3804606
194.1976718
349.5402635
624.1175971
1109.449478
1.229008144
2.172345496
3.839750757
6.78698941
11.99641023
21.79670128
41.09859376
77.66411505
143.6197519
260.4629614
466.9903316
832.0398264
1477.28667
0.924416508
1.633961538
2.888124869
5.104933665
9.023275967
15.94918064
29.39305392
56.05417136
105.4512707
193.3366051
348.6791968
623.2565304
1108.588411
1966.441574
0.69531344
1.229008144
2.172345496
3.839750757
6.78698941
11.99641023
21.2043735
39.91888022
76.61029364
142.7145374
259.5577469
466.0851171
831.1346119
1476.381455
2616.893893
0.522990205
0.924416508
1.633961538
2.888124869
5.104933665
9.023275967
15.94918064
28.19113191
54.77836809
104.4996449
192.3849793
347.727571
622.3049046
1107.636785
1965.489949
3481.796789
R&D Intangibles Valuation - Integrating Monte Carlo and Real Options & Fund Allocation Process through AHP
References
Bekkum, S. V., Pennings, E., & Smit, H. (2009). A Real Options
Perspective On R&D Portfolio Diversification. SSRN.
Black, F., & Scholes, M. S. (1973). The pricing of options and corporate
liabilities. Journal of Political Economy 83 , 637-659.
Boer, P. F. (2004). Risk-adjusted Valuation of R&D Projects.
Boer, P. (2002). The Real Options Solution: Finding Total Value in a HighRisk World. New Jersey: John Wiley & Sons, Inc.
Carlsson, C., Fuller, R., Heikkila, M., & Majlender, P. (2007). A fuzzy
approach to R&D project portfolio selection. International
Journal of Approximate Reasoning , 93-105.
Cohen, J. A. (2005). Intangible Assets-Valuation and Economic benifit.
New Jersey: John Wiley & Sons,.
Cotropia, C. A. (2009). Describing Patents as Real Options. The Journal
of Corporation Law , 1128-1149.
Damodaran, A. (2006). Dealing with Intangibles: Valuing Brand Names,
Flexibility and Patents. Stern School of Business.
Damodaran, A. The Promise and Peril of Real Options.
Denton, F. R., & Heald, P. (2003). Random Walks, Non-Cooperative
Games, and the Complex Mathematics of Patent Pricing.
Rutgers Law Review.
Dixit, A. K., & Pindyck, R. S. (1994). Investment under uncertainty.
Princeton University Press.
Hsu, J. C., & Schwartz, E. S. (2003). A model of R&D valuation and the
design of research incentives. Cambridge: National Bureau Of
Economic Research.
Jeff, T., & Blatnicky, L. (2006, February 7). How to Value a Business
Intellectual Property. SanFransisco, CA. Retrieved from
www.hlhz.com.
Lerner, J., & Farrar, A. L. (2006). Valuing Patents for licensing: A Practical
survey of literature. SSRN.
11
12
Abstract
PURPOSE: The vast subject of Knowledge Management has recently started gaining significance in India. However, despite the investment of
time, resources and money, only few companies can claim to have successfully implemented an organization-wide Knowledge Management System.
These past experiences reiterate technology infrastructure to be only an enabler of knowledge management and the employees to be the driving force.
Thus, the purpose of the research is to explore the perception of employees towards knowledge creation, transfer and sharing practices in an Indian
Public Sector Enterprise, MMTC. This case seeks to recognize and recommend characteristics that enhance knowledge sharing attitudes in employees
and work culture in organizations.
The project also explores the need of developing knowledge management strategy and linking it with corporate goals and human resources
strategy and processes. It also identifies the existing knowledge initiatives and resources in the organization as a first step towards knowledge
management in the firm.
In a knowledge economy where knowledge is a source of competitive advantage for organizations, continuous learning can enable
organizations to adapt to changes faster than their competitors. Thus, companies aim to emerge as Learning Organizations which is defined by
Professor Garvin as an organization skilled at creating and transferring knowledge, and at modifying its behaviour to reflect the new knowledge. This
definition emphasises the inter-relatedness of the two concepts of Knowledge Management and Learning Organization.
The research describes the traits that define a learning organization and provides actionable steps which can enable this particular
organization to emerge as one.
APPROACH: The research uses primary data collected using two questionnaires. The first questionnaire attempts to capture the perception of
employees towards knowledge management initiatives and their linkage to Human Resource processes. The second questionnaire is a learning
Organization assessment survey developed by Garvin, Edmondson and Gino (2008) and published in Harvard Business Review (2008). The case
contains an analysis of the primary data using factor and discriminant analysis and perception mapping.
FINDINGS: This case provides a roadmap for knowledge management implementation based on two broad categories of knowledge
Management strategy, namely Codification (which is Explicit knowledge oriented) and Personalisation (which is Tacit Knowledge Oriented). The paper
emphasises on enhancing social interaction and collaboration within the organization to successfully share and transfer knowledge.
To emerge as a Learning Organization, the organization would need to improve on processes of information collection and transfer as well as
initiate openness to new ideas and experimentation as a part of their organization culture.
Key words: Knowledge management, Learning organization, Explicit knowledge, Collective knowledge, Factor Analysis
Introduction
The post industrial society today is on the brink of
change and is increasingly expressed as a knowledge
economy. Scholars all over the world are defining
knowledge as a powerful economic resource and a
source of sustained and unique competitive advantage.
13
Literature Review
In one of his path breaking works, Peter Drucker
acknowledges knowledge to be emerging as a critical
resource. Thus, managements most significant
responsibility is to ensure productivity of knowledge
which is going to emerge as the competitive advantage
of a nation, industry, a firm.
Prahalad (1998) also reiterates this in his work as he
quotes a recent survey where Japanese managers have
rated knowledge creation and innovation and not
quality as first source of competitive advantage.
Knowledge gains its value when applied for social or
commercial benefit. Thus, Knowledge Management
encompasses creation, sharing and utilisation of
knowledge whether at individual, group (or team) and
organizational level. Knowledge has primarily been
14
2.
3.
15
Methodology
To capture the perception of employees regarding
knowledge management initiatives, a questionnaire
was designed based on an extensive literature review.
The questionnaire also seeks to identify existing
knowledge resources and their usage in the
organisation. A five point Likert scale was utilised in the
questionnaire so as to maintain simplicity yet providing
ample scope to agree/disagree. The design of the study
undertaken is exploratory and descriptive in nature. An
effective sample size of 40 employees was utilised for
the research on Knowledge Management. Based on
convenience sampling, employees of diverse
departments and designations were included in the
sample.
16
Knowledge Management
Factor analysis was applied on all twenty questions in
the knowledge management questionnaire. However,
to refine the results acquired through factor analysis,
the anti-image matrix and communalities table were
analysed. Factors with lower values in anti-image
matrix and communalities table were dropped until
the KMO value was found suitable for further analysis.
Finally nine items of the questionnaire was considered
suitable for further. These extracted factors include:
Key Success Factors
Reliability Analysis
T-tests applied to each of the nine factors determined
that the questions allowed the respondents to clearly
agree or disagree. Each factor was rejected at 0.05
significance level.
Reliability analysis was also carried out by testing the
adequacy of sample size using Cronbach analysis. The
analysis yielded acceptable result of 0 .794.
Reliability Analysis
Using SPSS, Cronbach Alpha was calculated separately
for the two groups of data, namely Perception of
Employees and Expectation of Employees.
Cronbach Alpha measures slightly less than 0.7 in both
the cases but this can be attributed to lower number of
respondents.
T-Test conducted on Perception and Expectation of
Employees on the same parameters, was rejected at
0.05 level of significance and reflected significant
differences between perception and expectation of
employees.
18
Perception Matching
Primary data collected using the assessment survey
developed by Garvin et al. was essentially analysed
through the benchmarking scores provided as a part of
the diagnostic tool.
Comparison could also be drawn between the
expectations of employees as compared to the ratings
given by them for each questionnaire item which
together form the perception of the employees.
By assessing performance on each building block, the
areas which require improvement can be identified.
Garvin et al. believe the assessment tool can pinpoint
areas where companies need to foster knowledge
sharing, idea development, learning from mistakes and
holistic thinking.
On comparison of perception score with expectation
score given by employees as well as comparison of
perception score with benchmark score, the areas
noted for improvement were Appreciation of
differences(Supportive learning environment),
Analysis and Information transfer(Concrete learning
practices).
Conclusion
The three focus areas to consider while tapping
knowledge creation, generation, sharing and
dissemination processes so as to emerge as a
continually developing and learning organisation are
organisation culture and the work environment , the
knowledge sharing and Learning processes and
practices and top management support and leadership
in the organisation.
Limitations
19
ANNEXURES
Annexure A : Rotated Component Matrix for Knowledge Management
Rotated Component Matrixa
Component
1
.790
.170
.006
.718
.188
-.167
Learning Teams
.707
.178
.442
.117
.895
.162
.150
.881
-.035
.437
.651
-.078
.104
.033
.809
Innovation encouraged
-.387
-.113
.622
.587
.265
.620
Annexure B
BUILDING BLOCK 1 : SUPPORTIVE LEARNING ENVIRONMENT
EXPECTATION
PERCEPTION
BENCHMARKING
SCORE
Psychological Safety
TOP QUARTILE(100)
TOP : 87-100
Appreciation Of
Differences
THIRD QUARTILE(68)
THIRD : 65-79
BOTTOM QUARTILE(56)
BOTTOM QUARTILE(62)
BOTTOM: 38-80
TOP: 65-100
Openness
Ideas
to
New
BOTTOM
(40)
QUARTILE
THIRD:72-82
BOTTOM: 18-53
Information Collection
SECOND: 71-79
Analysis
THIRD QUARTILE(77)
THIRD: 72-86
Information Transfer
THIRD QUARTILE(79)
THIRD: 72-84
TOP : 85-100
Education
Training
TOP : 90-100
SECOND: 57-70
And
20
TOP QUARTILE(88)
TOP QUARTILE(90)
TOP: 83-100
Annexure C
References
Drucker P. F. (1993), Post Capitalist Society, Butterworth-Heinemann,
London.
Garvin David A., Amy C. Edmondson, and Francesca Gino. (2008) Is
Yours a Learning Organization? Harvard Business Review 86, No.
3 (March 2008).
Hislop D. (2002) Knowledge Management in Organization - A Critical
Introduction, Oxford University Press.
Kalam, A. P. J. (2001) in Keynote Address at Indian Economic Summit
2001- Transforming India into a Knowledge Society organised by
World Economic Forum.
Mukherji (2005) Knowledge Management Strategy in Software
Services Organization: Straddling Codification and
Personalisation, Management Review Volume 17, No. 3.
Nonaka I. and Konno N. (1998) The Concept of Ba: Building a
Foundation for Knowledge Creation. California Management
Review , Vol. 40, No. 3
Nonaka I. and Takeuchi H. (1995) The Knowledge Creating Company:
21
22
Parul Aggarwal*
Abstract
Objective: This study was done to identify the factors of after-sales service affecting customer satisfaction in the Indian consumer electronics
and home appliances market. The findings were extended to assess the after-sales service offered by MIRC Electronics Ltd. (ONIDA), Pune Region,
India, for its products and suggest possibilities for improvement to the company.
Approach: A questionnaire on sixteen parameters was constructed on a reverse five-point Likert scale, with 5 indicating Very Poor and 1
indicating Very Good. Response was collected from the 100 (Onida and non-Onida) dealers in the Pune Region of Maharashtra, covering eleven
different cities and townships. The responses of the respondents were validated through the customer complaints registered at their respective
counters. Responses were taken from only those dealers currently dealing in ONIDA products or who have dealt with them at least once in the previous
year.
Results: Using Factor Analysis, the 16 parameters were found to fall under three important categories Dealer-controlled Delivery, Companycontrolled Post-delivery (Installation and Warranty Service), and Dealer-controlled repair outside warranty. Using Regression Analysis, it was
established that customer satisfaction and loyalty for a brand were most affected by company-controlled post-delivery factors. Improving and
optimizing these factors would possibly lead to increase in market share of the company.
Conclusion: This study will help the marketers and the service providers of MIRC Electronics and other major players in the industry to pay more
attention to the company-controlled post-delivery factors of after-sales service to enhance satisfaction level of their customers and attract new
customers. Similar studies can be done with other companies in the industry to validate the findings and to generalize the conclusions for the Indian and
the global consumer durable sector.
Keywords: After-sales service, Customer Satisfaction, Indian Consumer Electronics, Home appliances, Consumer Durables, Delivery, Postdelivery, Installation, Warranty
Introduction
Importance of Studying After-Sales Service: After-sales
service is an integral aspect of Customer Relationship
Management (CRM), which is a vital tool to enhance
customer loyalty and retain profitable relationship with
customers over the long-term. This is particularly
important in the consumer durables industry, where the
frequency of repeat purchase is low. The literature
review suggested that there is a strong correlation
between customer satisfaction, as a dependent variable,
and the 3 independent variables Delivery, Installation,
and Warranty. An attempt was made to find out which
sub factors under these three categories are critical for
business organizations like MIRC Electronics Ltd. to
23
Factors of After-Sales Service Affecting Customer Satisfaction in Indian Consumer Electronics and Appliances Market
25
Literature Review
Creating innovative products of superior value and
attaining customer satisfaction towards the offered
products and services are the prerequisites for building
a lasting customer relationship. According to Kotler, P.
and Armstrong, G. (Principles of Marketing, Thirteenth
edition), profitable customer relationships can be built
and maintained for the long-term success of any
company only if the various aspects of acquiring,
retaining, and growing customers are dealt with
properly using effective customer relationship
management (CRM).
Factors of After-Sales Service Affecting Customer Satisfaction in Indian Consumer Electronics and Appliances Market
27
Factors of After-Sales Service Affecting Customer Satisfaction in Indian Consumer Electronics and Appliances Market
Dealer Repair
outside
warranty (C3)
Warranty
(C1)
(C1)
CUSTOMER SATISFACTION
Dependent Variable
Research Methodology
Hypothesis: Given the preceding problem statement
and defined research objectives, the following
hypothesis:
H01: There is no significant difference between
dealer-controlled delivery factors towards
customer satisfaction
H02: There is no significant difference between
company-controlled post-delivery factors
towards customer satisfaction
H03: There is no significant difference between
dealer-controlled warranty factors towards
customer satisfaction.
Research Design: This research is a quantitative
research where sources of information are gathered
from questionnaire. Instrument utilized was the selfadministered questionnaire featuring closed-ended
responses and scales to matrix questions. This study is
oriented towards describing the characteristics of a
population or phenomenon, thus qualifying as a
descriptive study. It also featured hypotheses testing
to determine the influence of dealer-controlled
delivery, company-controlled post-delivery, dealercontrolled warranty factors contributing to customer
satisfaction. Both, an exploratory and a conclusive
research, were carried out to collect and analyze data
in accordance with the objective.
Exploratory research was done to study the after sales
service system and the perceptions of the dealers
Factors of After-Sales Service Affecting Customer Satisfaction in Indian Consumer Electronics and Appliances Market
FACTORS
C 2 (DealerControlled Delivery)
X1
X2
X3
X4
X5
X6
C 1 (CompanyControlled PostDelivery)
X7
X8
X9
3.6
Good
Good
Nearly
Poor
3.4
Satisfactory
3.9
3.8
3.9
3.8
4.3
X15
X16
4
2.3
Poor
Good
X17
3.8
Nearly
Poor
X12
X13
X14
2.4
2.4
Rating
Good
Good
Good
Good
Poor
Nearly
Poor
Poor
Nearly
Poor
Nearly
Poor
Poor
X10
X11
C 3 (dealercontrolled warranty)
Dependent Variable
(DV)
Mean
Rating on
scale of 1-5
1.8
1.9
2
2.3
.777
1263.526
df
120
Sig.
.000
a. Based on correlations
Regression Analysis: Table 4 shows the R-Square and
Durbin-Watson test. R-Square test result of 0.936 can
be accepted for the regression analysis. The DurbinWatson test result of 1.963, an indicator that the
autocorrelation approaches zero or there is a
significant difference that exists between the
dependent and independent variables (no
autocorrelation). A strong R value of 0.968 shows a
significantly high correlation between the listed
factors and the overall satisfaction in after sales
service of the company.
3.7
Raw
Rescaled
Component
Component
Reception of Invoice
.019 .484
Transfer of product
.131 .536
.002 .395
.068 .365
.035 .360
.102 .421
.710 .038
.624 .297
.701 .121
.775 .068
.791 .186
.638 .058
.768 .086
.588 .182
.769 .208
.039 .169
Factors of After-Sales Service Affecting Customer Satisfaction in Indian Consumer Electronics and Appliances Market
R Square
.968
.936
Durbin-Watson
.25157
1.963
Sum of Squares
Mean Square
Sig.
55.657
3.479
54.967
.000
Residual
3.797
.063
Total
59.455
Regression
Standardized
Coefficients
Beta
Sig.
Tolerance
VIF
1 (Constant)
0.356
0.508
0.612
0.451
2.213
0.324
0.398
0.356
5.569
5.678
4.167
0.000
0.000
0.000
0.589
0.602
0.750
1.451
2.234
1.333
Collinearity Statistics
33
Conclusion
Based on the study, it can be concluded that the three
significant factors involved in after-sales service are
delivery, installation and warranty, with installation
and warranty functions being controlled by the
company. If all these all three factors are being looked
at professionally and efficiently, the reputation of the
company will be enhanced and this will contribute to
Factors of After-Sales Service Affecting Customer Satisfaction in Indian Consumer Electronics and Appliances Market
36
References
Armistead, C. and Clark, G. (1992). Customer Service and Support:
Implementing Effective Strategies. FT Books, London
Corey, R.E., Cespedes, F.V. and Rangan, V.K. (1989), Going to Market:
Distribution Systems for Industrial Products. Harvard Business
School Press, Boston, MA, pp. 22-59.
Gallagher, T., Mitchke, M.D. and Rogers, M.C. (2005). Profiting from
spare parts. The McKinsey Quarterly, 2 March.
Goffin, K. (1999). Customer support: a cross-industry study of
distribution channels and strategies. International Journal of
Physical Distribution & Logistics Management, Vol. 29, pp. 37497.
Irini D. R., et. al. (2008). After-sales service quality as an antecedent of
customer satisfaction, the case of electronic appliances. Journal
Managing Service Quality, Vol. 18 No. 5, pp. 512-527
Kotler, P. and Armstrong G., 2010. Principles of Marketing. Pearson
Prentice Hall, Thirteen Edition, New Jersey, NJ
Lele, M.M. and Karmarkar, U.S. (1983). Good product support is smart
marketing. Harvard Business Review, Vol. 61 No. 6, pp. 124-32.
Lele, M.M. and Sheth, J.N. (1987), The Customer Is Key, John Wiley &
Sons, New York, NY, pp. 179-207. Levitt, T. (1983). After the sale is
over . . .. Harvard Business Review, Vol. 61 No. 5, pp. 87-93.
Loomba, A.P.S. (1996). Linkages between product distribution and
service support functions. International Journal of Physical
Distribution & Logistics Management, Vol. 26 No. 4, pp. 4-22.
Murthy D.N.P., et. al (1995). A consumer incentive warranty policy and
servicing strategy for products with uncertain quality. Quality
and Reliability Engineering International 11, pp. 155163.
Saccani, N. et. al. (2006). The role and performance measurement of
after-sales in the durable consumer goods industries: an
empirical study. Journal of Productivity and Performance
Management, Vol. 55 No. 3/4, pp. 259-283
Shaharudin M. R. (2009). Factors affecting customer satisfaction in
after sales service of Malaysian electronic business market;
Canadian Social Science, Vol 5, No. 6
Sherman, S. (1992). How to prosper in the value decade. Fortune, p pp.
103.
Simmons, D.E. (2001). Field service management: a classification
scheme and study of server flexibility. School of Management,
Binghamton University, State University of New York,
Binghamton, NY.
Oliva, R. and Kallenberg, R. (2003). Managing the transition from
products to services. International Journal of Service Industry
Management, Vol. 14 No. 2, pp. 160-72.
Abstract
Problem Statement: The research was undertaken to identify the bundle of services preferred by households and corporates from an outside
agency. The study also identified which key parameters i.e. cost, time, quality etc were considered important by the respondents by recording
preference given to different alternatives for service fulfilment i.e. services rendered by outside agency, online help and maids help with regard to the
above mentioned parameters. The research also studied what were the preferred combination of attributes i.e. cost alternatives, service add on, time
execution and type of service by respondents and how each attribute added utility to the preferred set. Ultimately, it also studied if there were
differences in perception based on income, gender and working/nonworking spouse. Approach: After exploratory research, two questionnaires were
prepared to cover households and corporates. Analysis: The results were analysed using SPSS and Excel. The basic tools used were Factor Analysis,
Analytical Hierarchy Process (AHP), Discriminant Analysis and Conjoint Analysis.
Research Type: Case
Key Words: Concierge services, Factor Analysis, Analytical Hierarchy Process, Conjoint Analysis, Outsourcing
Introduction
Concierge Services
While people want things done, they do not have the
time to do them. They would be happy to pay someone
who can take care of their business efficiently with a
touch of class. With the advent of improved
opportunities, dual careers, increased burdens,
extended geographical coverage, higher disposable
income, quick paced urbanisation, and intense
competition, people have started seeking services which
will make their life more comfortable and daily work less
cumbersome. While people are getting resource and
time constrained, the service industry is being looked
upon with greater expectations to solve everyday
problems.
Many new services - never heard before - have now
come up around the globe fulfilling the anticipations of
37
Data Analysis
38
Results
KMO and Bartletts test of sphericity: In both the
cases, KMO were found to be more than 0.589 and the
null hypothesis for Bartletts test were rejected. This
implies that the observed correlation matrix in each
case is significantly (at 0.05 level of significance)
different than an identity matrix. Hence data reduction
can be carried out.
39
Conclusion
The study has brought out following observations:
Apart, from basic set of services offered, the
company should be open to some more services
customized for a particular household at an extra
fee on an a la carte basis.
The company should concentrate on putting as
many services online as possible. Moreover, order
and checking of status of service through mobile
crept in. The sample on the basis of gender was also not
equal leading to a possible bias. A bigger sample size
with equality in gender and income group would be
highly recommended. A similar study in metropolitan
cities of Gujarat would assist in knowing if preferences
amongst respondents differ on the basis of city status
i.e. tier 1, tier 2 and metropolitans. An office employee
is also a householder. Therefore his opinion as
corporate respondent may be influenced.
Decision
Mr Panchal was sure that demand for such a concierge
service did exist in Vadodara. However, he was unsure if
these pockets were huge enough to be catered to. He
did realize the results might be biased on account of
less sample size. But he was determined to make a
choice. He would like you to suggest if these services be
introduced or not and out of twenty three services
which should be selected during entry phase for
corporate and household segments. He would also like
you to suggest how to identify prospective clients.
Time
Service
Satisfaction
Alternatives
Rs 500 monthly for unlimited transactions
Rs 175 for 5 monthly transactions
Rs 50 per transaction with no initial fee
Rs 4000 annually for unlimited transactions
Within 3-4 hours
Within 2 days
Within a week
Before deadlines (irrespective of time taken)
Personal
Referral
Relocation
Quality of service
After Service perks
Timely Execution of service
Additional perks i.e. free tickets, discount on shopping
Limitations
The respondents were residents of Vadodara region
only. This study needs to be replicated in other areas to
increase external validity. The sample for each income
group was not the same and therefore bias may have
1
2
3
4
5
6
7
8
9
10
11
12
13
14
15
16
17
18
19
20
21
22
23
24
25
26
Bill Payment
Ticket Booking (Movie, Air, Rail)
Taxation Related forms
Information on schools/colleges
Key Duplication
Traffic Offence Related payment
Prepaid Mobile refill cards
Passport related forms
PAN CARD Forms
Classified AD Submissions
Car Hire/maintenance
Carpenter / Electrician / Mason
Computer Maintenance
Passport renewal
Furniture Disposal
Newspaper Disposal
Printing & Designing
Real estate Services
Interior Decorators
Architects
Home tutors
Movers and Packers
Paying Guest Accomodation
Utilities i.e. Gas, Telephone, Electricity related
Courier
Gift/Cake Delivery
41
Model type
No. of
respondents
Cronbachs
alpha
KMO of
sampling
adequacy
Bartletts
test of
sphericity
Corporate
31
0.789
0.589
Reject H0
Household
44
0.843
0.751
Reject H0
Combined
75
0.818
0.616
Reject H0
Correctly Reclassified
Households
Corporate
INCOME
87%
97%
GENDER
WORKING/
NONWORKING SPOUSE
89%
97%
87%
94%
Parameters
Satisfaction
Cost
Time
Service
(Constant)
42
Alternatives
Quality of service
After service perks
Timely execution of service (deadline)
Additional perks i.e. discount on
shopping
Rs 500 monthly for unlimited
transactions
Rs 175 monthly for 5 transactions,
Rs 50 per transaction with no initial
fee
Annual Rs 4000 for unlimited
transactions
Within 3-4 hours
Within 2 days
Within a week
Before deadlines
Personal services
Referral services
Relocation services
Utility
Estimate
-0.363
-0.888
1.363
Importance
Values
28.89
-0.113
-0.710
-1.419
-2.129
24.59
-2.839
0.204
0.408
0.612
0.816
-1.140
-2.281
-3.421
11.773
19.96
26.53
Outside Agency
Managed by you
Managed by your servant
fs
er
vic
e
lab
ilit
y
Qu
ali
ty
o
Av
ai
Sa
ve
s
Tim
e
Internet help
Co
st
E
ffe
ct
ive
ne
ss
Values
Attribute-Alternative Preferences
2
1.8
1.6
1.4
1.2
1
0.8
0.6
0.4
0.2
0
Attributes-Alternatives
Total
Variations
Explained
65%
Dimension
1
Alignment of factors
Dimension
Dimension
2
3
Dimension
4
Dimension
5
Administrative
Household
Relocation
Niche
Entertainment
8,9,14,25,10,1
12,16,13,15,11,24
20,19,18
22,21,17, 5
26,2,7
43
44
Abstract
Purpose: Exploring new potential market worldwide for the domestic gasoline producers. In order to earn better margins India looks at the
foreign markets. Thus, ESSAR Oil Ltd, a fully integrated oil and gas company of international scale which is one of the major players in oil industry of
India is exploring new opportunities for exporting gasoline to Nigeria due to attractiveness of the market. Nigeria is one of the largest exporters of
crude oil. In spite of this it is a very attractive market for gasoline. The cost benefit of exporting to Nigeria over other countries is high but it also involves
risk.
Design/methodology/approach: This paper is an analytical study which provides the data and results based on which one can make decision for
exporting gasoline to Nigeria. First the trend is determined and forecasted so as to look upon whether there is a sustained demand or not. Then the
technical feasibility has to be worked out whether the required gasoline quality is makeable at the concerned refinery or not. Then work out the
profitability of exporting to Nigeria.
Findings: ESSAR should export to Nigeria as the returns are higher than exporting to other countries. In spite of risk involved Nigeria is attractive
market.
Research limitations/implications: The research is based on secondary data. This only gives an insight about the Nigerian market. The duration
of the research is only 6 months. The gasoline market is a volatile market so it changes every time.
Practical implications: Oil companies who are looking for capturing new markets might benefit from the methodology for their initial research
with additional country specific requirements.
Originality/value: All the calculations and analysis are done on the original data.
Keywords: Gasoline export, Nigeria gasoline market, Gasoline profitability.
Paper type: Analytical Research paper
Introduction
The domestic gasoline market is the most attractive for
oil refiners in India. Exporting gasoline to different
country involves additional costs like freight, tariffs and
additional charges, all these reduce the profit margins
(EIA U.S 2010). But gasoline is still exported from India as
the domestic market is saturated (S.K Sarangi General
Manager IOL). Oil companies export in order to utilize
their production. They look for the best market to obtain
optimum refining margins. For cashing upon this one has
to search for markets which are inherently short of
gasoline, where the increase in gasoline demand is
gasoline at a good rate and which pays high prices for the
material. ESSAR is looking at Nigeria as a potential
market for exporting gasoline as Indian government has
notified an additional incentive of 2% on the export of
certain products to Nigeria, Algeria and Mexico (as
information received by ESSARs taxation department).
This will contribute to the profit margins while exporting
to Nigeria.
Nigeria lies to the Northwest of Africa. It is the most
populous country of Africa. Nigeria is a member of OPEC
(Organization of the Petroleum Exporting Countries)
*Centre of International Business & Policy 2009-11, Birla Institute of Management Technology
Under the guidance of Prof. Anupam Varma, Centre of International Business & Policy, Birla Institute of Management Technology
45
Statement of Objectives
The objective is to study both the technical and
economic feasibility for exporting gasoline to Nigeria.
Forecast the future demand 2010 for gasoline in
Nigerian domestic market for gasoline.
46
Review of Literature
Although Nigeria is the fifth-largest supplier of crude oil
to the U.S. and the 12th largest world-wide, Nigeria is
saddled with a decrepit infrastructure and little
economic development outside the oil sector. Its four
refineries, with a total capacity of 438,750 barrels a
day, are all more than 30 years old. Because of their age
and poor maintenance, they operate at around
100,000 barrels a day. That covers less than half of
Nigeria's gasoline requirement of around 250,000
barrels a day -- meaning it has to rely on imports. The
government says the solution to the refining-capacity
crunch lies in privatization and the construction of new
facilities by private investors; it wants to sell 51% equity
in the four refineries. But analysts say the investment
won't come until the government completes the
deregulation of the downstream sector, which began in
2003. (Vincent Nwanma and Norval Scott. Wall Street
Journal)
Inaccurate assessment of business and economic
development is possible if one refuses to assume that
seasonable patterns are not affected by other known
influences, such as price. Thus, another forecasting
alternative to seasonality is possible in addition to the
conventional alternatives of a fixed seasonal pattern or
a seasonal pattern that shifts but is not related to other
observable data. Motor gasoline, which showed a real
price increase of 50% in the last 10 years, is an
illustration. Regression analysis indicates that demand
for gasoline at the peak periods of the year have been
more responsive to higher prices than the demand has
been during other times in the year. These seasonal
price elasticities illustrate the worth of studying the
causes of seasonality in economic time series. (Planting
Ron, Business Economics)
Methodology
In order to work out the attractiveness of Nigerian
gasoline market series of methods was followed.
Initially secondary data analysis was done using help of
the online resources providing relevant information.
Here the overview of the Nigerian gasoline market was
done. Then based on the previous years consumption
data the demand for 2010 is forecasted by using the
Time Series moving average method and Regression
tool in Microsoft Excel. The required specification of
the Nigerian gasoline as per the specifications provided
by the buyer-Nigerian National Petroleum Corporation
(NNPC) was matched with the refinery specifications.
This comparison was done considering all the
important parameters critical in determining the
quality of gasoline. This comparison was made in order
to know whether the refinery can produce the required
quality or not. Then calculation of the profitability
margins was carried out. Then a comparative analysis
was done between the benchmarked countries and
Nigeria. After the economic and technical feasibility
research the potential risk factors were analyzed as to
they should not be neglected while evaluating the
attractiveness of Nigerian Gasoline market. The
recommendations are designed around this analysis.
47
Consumption of Gasoline-Forecasting
Initially for determining the potential of a market there
is a need of foreseeing the demand in that market.
Gasoline demand is dynamic and is highly affected by
various factors. It is majorly affected by the seasonal
demand. Oil demand is forecasted using the past 8 year
data and keeping other factors constant like-number of
refineries, war situation and political imbalances. The
data for gasoline consumption is of historical nature
which counteracts the seasonal effect. Thus,
forecasting will be done using moving average method.
The trend was determined using this data in order to
predict the future demand. The trend was determined
using the Regression in Excel to do a demand
forecasting for the year-2010.
The gasoline consumption data of past 8 years for
Nigeria is extracted from the Nigerian National
Petroleum council (NNPC) reports (NNPC Annual
Statistical 2002-2008) these are published on their
website. The consumption figures can be seen in the
Table I of Annexure B at the end.
The method involves the following variables (Frederick
S Hillier Third Edition)
Q - Quarter
MA-Moving Average
Technical Feasibility
The refineries are designed and built with certain
refining parameters, range and capacities i.e. the
equipment is made for refining a specific range of crude
oil and then getting the specific quality range of refined
oil products. Due to this constraint we have to check
whether the refinery could produce this quality of
product required by the buyer.
48
Economic Feasibility
Major Costs Involved
Gasoline benchmark prices (g) were taken for that
particular period.
Premium (p) offered by the Nigerian buyers on basis of
$/MT was found from the listings news services like
Reuters. The information of the last tenders signed is
listed. The premium offered by Nigerian buyers is very
high-$82 a tonne over average cash prices of premium
unleaded gasoline in Europe(EOL,2010).
Freight (f) for exporting gasoline to that country is
calculated by obtaining costs from online portal like
world scale which provides with the freight charges.
Demurrage charges (d) taken in the case of Nigeria due
to congestion at the ports.
FOB value of the product (V) is calculated by the
following formula
V=g+p-f-d
Duty exemption on the crude imported in India is 5%
on custom duty paid.
Additional benefit for exporting to Nigeria is 2% on
FOB value of the product as mentioned above.
Duty calculation is done on the basis of two schemes:
1) Duty drawback: 5% discount on the crude oil
which is used in the production of gasoline.
2) Advanced authorization scheme: Standard
conversion values are determined by the
Premium
Demurrage
Benefit %age
Any major change in these will affect the profit
margins.
49
0.744492417
0.74
0.73
0.72
0.708267916
0.70668646
0.7
0.69
0.68
Q1
Q2
Q3
Quarters of an year
50
Quarterly Avg
Consumption
0.717302732
0.71
Q4
Consumption
Trend
600000
Quarterly
Consumption
500000
400000
Consumption Q3-02Q1-04Q3-04Q1-05Q3-05Q1-06Q3-06Q1-07Q3-07Q1-08Q3-08Q1-09
in '000 lts
Quarters for 2002-2009
Q1
Q2
Q3
Q4
Average
Consumption
in million lts*
738.533
739.509
740.485
741.461
Average
Consumption in
million MT*
6.277
6.286
6.294
6.302
100.00
100.00
95.00
90.65
90.00
85.00
80.00
95.00
94.44
93.51
85.00
84.98
81.77
81.51
77.51
75.21
75.00
Nigeria EPP
Singapore EPP
84.98
82.54
77.89
75.81
Nigeria EPP
Arab Gulf EPP
70.00
65.00
Aug-09
Sept-09
Oct-09
Aug-09
Nov-09
Sept-09
Oct-09
Nov-09
100.00
95.00
94.44
93.51
90.65
90.00
80.00
83.01
75.00
65.00
85.00
90.65
80.00
70.00
95.00
94.44
93.51
90.00
84.98
82.43
Nigeria EPP
80.00
US EPP
84.98
82.73
81.82
79.02
75.00
71.48
70.00
90.65
85.00
80.98
77.81
75.00
94.44
93.51
90.00
Nigeria EPP
Europe EPP
73.46
70.00
65.00
65.00
Aug-09
Sept-09
Oct-09
Nov-09
Aug-09
Kidnap
Serious crime
Attempts
Total
29
40
Sept-09
Oct-09
Nov-09
Recommendations
After working out all the possibilities the most
important recommendations to make are
51
Annexure A
Definitions
Parameters which are highly important in determining
the quality
Annexure B
Table I. Annual Consumption of gasoline in Nigeria (NNPC Annual Statistical 2002-2008)
Year
52
2009
Consumption in
million Lts
8,145
2008
9,500
2007
8,859
2006
8,005
2005
8,644
2004
8,676
2002
8,580
ESSAR
Test method
ASTM
Min
Appearance
Odour
Color
Visual
Visual
Specific Gravity @ 15 C
D 1298
0.72
Parameters
Unit
Distillation
Distillation Rec. up to 70 C
(E-70)
Distillation Rec. up to 100
C(E-100)
Distillation Rec. up to 180
C(E-180)
FBP
Max
Test
Method
Min
Max
To be stated
To be stated
To be stated
0.78
D 4052
>0.72
<0.78
% vol
10
D 86
10
45
% vol
50
D 86
40
75
% vol
90
D 86
90
D 86
210
D 86
<210
Total Sulphur
wt ppm
D 5453
1000, No. 1
Strip max
D 5453
<1000
Copper Corrosion
D 130
Class 1b
D 130
RON
D 2699
91
D 2699
360
gm/m3
D 525
D 381
Oxidation Stability
Existent Gum
Equal
<91
Not in
range
D 381
>4
5 ppm
Not in
range
Equal
>5
ppm
Not in
range
>2
62
D 5191
>62
68
Free water
Nil
Suspended matter
Residue %(viv)
Nil
2
Lead
Benzene
%m/m
RVP
kPa
D 323
Table III. a. All the prices used in the calculation stated in the following table.
Charges
Demurrage calculation
Premium
82
Rate (PDPR)
Benefit
5%
Days
Extra Benefit
2%
Quantity (MT)
Month
Crude Price in
$/bbl
Crude Price in
$/MT
515.93
18000
Aug-09
71.34
10
Sep-09
67.64
489.19
35000
Oct-09
73.15
529.03
$/MT
5.14
Nov-09
77.71
562.03
$/b
0.61
53
Paid price
Freight WCI-WAF
Demurrage
FOB* Vadinar
SION =a
Min a Vs b
DBK
With 2% benefit
82
781
28
5.14
747
650
1.27
655
650
32
15
795
94
630
82
712
28
5.14
679
591
1.27
621
591
30
14
722
85
Oct
529
676
82
758
28
5.14
725
630
1.27
672
630
32
14
771
91
Nov
562
706
82
788
28
5.14
755
656
1.27
714
656
33
15
803
94
**
EPP in $/MT
EPP in $/bbl
Premium
699
489
Market price
516
Sep
Crude Price
Aug
Months 09
Months 09
Crude Price
FOB Sing
Freight WAF-SG
Premium
Demurrage
SION=a
Min a Vs b
DBK in $/MT=5%
EPP in $/MT
EPP in $/bbl
Aug
71.34
80.13
1.76
78.37
666
579
1.27
655
579
28.96
695
81.77
11.73
99.73
Sep
67.64
73.84
1.76
72.07
613
533
1.27
621
533
26.64
639
75.21
9.78
83.09
Oct
73.15
76.05
1.76
74.28
631
549
1.27
672
549
27.45
659
77.51
13.14
111.69
Nov
77.71
79.88
1.76
78.12
664
577
1.27
714
577
28.87
693
81.51
12.92
109.83
11.89
101.09
54
Months 09
Crude price
FOB Sing
Freight WAF-AG
Premium
Demurrage
SION=a
Min a Vs b
DBK in $/MT=5%
EPP in $/MT
EPP in $/bbl
Aug
71.34
80.73
1.18
79.55
676
588
1.27
655
588
29.40
706
83.01
10.49
89.19
Sep
67.64
73.83
1.18
72.65
618
537
1.27
621
537
26.85
644
75.81
9.17
77.98
Oct
73.15
75.83
1.18
74.65
635
552
1.27
672
552
27.59
662
77.89
12.76
108.45
Nov
77.71
80.29
1.18
79.11
672
585
1.27
714
585
29.23
702
82.54
11.89
101.07
11.08
94.17
Crude price
FOB Sing
Premium
Demurrage
SION=a
Min a Vs b
DBK in $/MT=5%
EPP in $/MT
EPP in $/bbl
Months 09
Aug
71.34
84.41
5.41
79.00
671
584
1.27
655
584
29.19
701
82.43
11.07
94.14
Sep
67.64
73.91
5.41
68.50
582
506
1.27
621
506
25.32
608
71.48
13.50
114.74
Oct
73.15
79.98
5.41
74.56
634
551
1.27
672
551
27.56
661
77.81
12.85
109.19
Nov
77.71
83.01
5.41
77.60
660
574
1.27
714
574
28.68
688
80.98
13.46
114.39
12.72
108.12
Months 09
Crude price
FOB Sing
Freight WAF-EUR
Premium
Demurrage
SION=a
Min a Vs b
DBK in $/MT=5%
EPP in $/MT
EPP in $/bbl
Aug
71.34
82.18
3.76
78.41
667
580
1.27
655
580
28.98
695
81.82
11.68
99.32
Sep
67.64
74.16
3.76
70.40
598
520
1.27
621
520
26.02
624
73.46
11.52
97.96
Oct
73.15
79.49
3.76
75.73
644
560
1.27
672
560
27.99
672
79.02
11.63
98.86
Nov
77.71
83.05
3.76
79.29
674
586
1.27
714
586
29.30
703
82.73
11.70
99.47
11.64
98.90
55
References
Annual Statistical 2002-2008 NNPC, Bulletin Manager GMISCORPORATE PLANNING & DEVELOPMENT DIVISION CPDD),
retrieved from<http://www.nnpcgroup.com/PublicRelations/
OilandGasStatistics/AnnualStatisticsBulletin/MonthlyPerforma
nce.aspx>,<http://www.nnpcgroup.com/PublicRelations/Oilan
dGasStatistics/MPIFigures/MonthlyPetroleum/tabid/130/Fold
erID/54/Default.aspx>
Anonymous. Energy Intelligence Briefing. New York: Apr 15, 2009. West
African Loadings Suffering From Global Malaise retrieved
from<http://proquest.umi.com/pqdweb?index=0&did=168373
9001&SrchMode=3&sid=4&Fmt=3&VInst=PROD&VType=PQD
&RQT=309&VName=PQD&TS=1285244147&clientId=109000>
B Bhaskara Rao, Gyaneshwar Rao. Energy Policy. Kidlington: Oct 2009.
Vol. 37, Iss. 10; pg. 3978, Cointegration and the demand for
gasoline
BBC News Nigeria Friday, May 14, 2010 as viewed on 23 Sep. 10 on
<http://www.bbc.co.uk/news/10116945>
Bergen Risk Solutions-Nigeria Maritime Security Review No. 5, July
2008 as viewed on 23 September 2010 on <http://
www.bergenrisksolutions.com/index.php?dokument=154>
Dianne Waddell and Amrik S. Sohal, Forecasting the key to managerial
decision Making, Vol. 32 No. 1, 1994,pp.41-49
EIA U.S Energy Information Administration Independent statistics and
a n a l y s i s ( v i ew e d o n 2 3 S e p . 1 0 ) r et r i ev e d f r o m :
<http://www.eia.doe.gov/pub/oil_gas/petroleum/analysis_pu
blications/oil_market_basics/trade_text.htm>
EOL product trading desk H.O Mumbai 2010
Felix Olanrewaju Awosika University of Lagos, Department of Political
56
Abstract
Purpose The purpose is to identify the factors which are considered by Customers while deciding between opting for a national brand and a
private label and how can a company increase the sales of its private labels by working upon these factors.
Design/ Methodology/ Approach The study is descriptive in nature. A case study is conducted on Romas private labels for this purpose. The
data is collected using a structured questionnaire.
Findings The research came out with three parameters of judgment from a customer point of view. These are Merchandise Mix, Brand Equity
and Brand Knowledge. The research shows how a customer makes a purchase decision when private labels come into picture. The parameters change
to some extent due to a completely different value proposition provided by the private labels as compared to national brands.
Research limitations/ Implications A key limitation of this study is the sampling frame. The sampling frame is limited to a certain age group in
a restricted geographical area. The responses are collected in a limited time frame for a particular industry Consumer durables and electronics.
Future research is required in order to test the generalization of the proposed parameters.
Practical Implications - To boost the sales of private labels and enhance their image in minds of the customers, it is important for the company to
focus on few key areas identified in the findings. The merchandising mix of the store should reflect a proper mix of store brands and national brands.
The brand equity of the retailer helps in increasing the private labels sale as the retailer becomes a brand in itself emphasizing the private labels also to
be treated as a brand in the mind of the customer. Knowledge about brand can increase the reliability factor for customers by reducing their perceived
risks about a product. .If worked out properly these parameters can bring out substantial improvements in the sales of private labels.
Key words Private labels, consumer durables and electronics, merchandising mix, brand equity.
Paper type Research Paper
Introduction
We grew in the world dominated by manufacturer
brands, well known as national brands. However, with
time we saw change in the retail landscape. More and
more retail stores were carrying products with their own
label. These products which were manufactured or
provided by the retailers themselves came to be known
as private labels or in house brands or store brands.
Private Labels are often positioned as the low cost
alternatives to the regional, national or international
brands, although some brands have also been
positioned as premium brands due to the strong
57
Literature Review
For conducting this research it was important to get an
insight about the concepts of the development of
private labels, their importance, and consumer
perception for brands and store image etc. There are
various factors which can influence a customers
purchase decision. Some of them are discussed below:
A brand-image is defined as the total sum of brand
associations held in consumer memory that lead to
perceptions about the brand (Keller, 1993). These
associations of brand image are multidimensional and
consist of the affective dimension or the attitudes
towards the brand and the perceived quality
dimension (Keller, 1993). Consumer uses different
cues, benefits, symbolic meanings etc. to relate to a
brand. The cues used by the customers can be intrinsic
or extrinsic cues.
Extrinsic cues refer to cues which are extrinsic to a
product and do not have to be experienced in order to
make judgments, like the packaging, brand name, price
and advertising. Intrinsic cues refers to the factors like
58
Demographic Profile
Research Methodology
Male
Percentage
within Age
group
57
62
53
72
62.5
Female
Percentage
within Age
group
43
38
47
28
37.5
Total
percentage
Percentage
of Total
100
100
100
100
37
54
37
26
100
Yes
No
Total
Count
% within Private label
awareness
% within Gender
% of Total
Count
% within Private label
awareness
% within Gender
% of Total
Count
% within Private label
awareness
% within Gender
% of Total
Total
Male
Female
48
64.9%
26
35.1%
74
100.0%
50.5%
31.6%
47
60.3%
45.6%
17.1%
31
39.7%
48.7%
48.7%
78
100.0%
49.5%
30.9%
95
62.5%
54.4%
20.4%
57
37.5%
51.3%
51.3%
152
100.0%
100.0%
62.5%
100.0%
37.5%
100.0%
100.0%
59
3.
4.
5.
Factors for
preference to
National Brand
It has high
credibility
This brands
products are of
high quality
The features
available in this
brand were not
available in any
other brand
Prices were
affordable and
less than other
brands
The brand
provides
excellent after
sales services
Strongly
Disagree
Disagree
Neither
agree nor
disagree
Agree
Strongly
Agree
16.93
12.90
22.58
47.58
0.80
6.45
33.06
44.35
15.32
8.06
9.67
9.67
20.16
51.61
17.74
16.93
12.09
35.48
17.74
20.16
29.03
21.77
12.90
16.12
3.
4.
5.
6.
1.
2.
3.
4.
5.
6.
Factors for
preference to
Romas Private
Labels
I found it value for
money
It is a high quality
product
The offer provided
was better than
offers on other
brands
The prices were
affordable
I liked the features
provided in the
private label
I trust the brand
Roma
Strongly
Disagree
Disagree
Neither
agree
nor
disagree
Agree
Strongly
Agree
3.57
14.28
60.71
21.42
3.57
17.85
60.71
14.28
3.57
7.14
39.28
25
21.42
7.14
7.14
3.57
17.85
71.42
3.57
10.71
21.42
28.57
32.14
3.57
21.42
35.71
39.28
7.
8.
Factors for
rejecting Romas
Private Label
No other option
was available
I was less aware
about Romas
Pvt. Label
CS!s didnt
explained me
about it
Didnt found it
value for money
Did not liked its
quality
Had bad
experience with it
earlier
I am brand loyal
towards the other
brand
I do not trust
Romas Pvt.
Labels ( lack of
credibility)
Strongly
Disagree
Disagree
Agree
Strongly
Agree
20.96
Neither
Agree nor
Disagree
12.90
29.83
2.41
14.51
21.77
9.67
24.19
26.61
37.09
21.77
20.16
29.03
16.93
12.09
22.58
10.48
48.38
16.93
1.61
26.61
8.87
56.45
5.64
3.22
88.70
3.22
4.83
3.22
6.45
25.80
15.32
26.61
25.80
17.74
25.80
10.48
16.93
29.83
.624
Approx.
ChiSquare
Df
Sig.
280.570
28
.000
Extraction
No of Option
Awareness
CSA's explanation
Value for money
Quality
Experience with the brand
1.000
1.000
1.000
1.000
1.000
.644
.628
.537
.871
.798
1.000
.829
1.000
1.000
.542
.626
.772
-.071
.30
.933
.891
.114
-.209
.121
-.249
.776
.012
.005
.061
.043
.670
.766
.094
.146
.373
.008
-.021
.902
.224
-.154
Conclusion
In this fast growing consumer durables industry, if
retailers want to survive and perform well, the only way
is to seek assistance of store brands to create
61
62
Managerial Implications
Consumer durables and electronics are usually low
margin high value products. In such a competitive
environment, it becomes indispensable for companies
to develop strategies and methods to sustain their
position in the market and to generate higher profit
margins. Retailers can achieve it with the help of
private labels. Therefore, private labels form an
integral part of companys overall strategy and
objectives.
The paper discusses few parameters considered by the
customers for evaluating the store brands. How a
retailer can use those parameters to enhance the
overall contribution of private labels in the sales and to
increase its acceptance for the customers is discussed
below:
The merchandising mix at any store should be
complete and satisfying for the customer. The
merchandising mix should have a right mix of national
and store brands i.e. there should be a harmony
between the two offerings and they should be available
in a price range, capable of fulfilling the requirements
of the target market. In addition, the retailer has to
focus on developing the store image as we find there is
a positive correlation between the store brand equity
and sales of private labels. Another important aspect
which was identified in this study was the importance
of knowledge about the brand. For private labels brand
is the retailer itself and functional aspects of a
particular product labeled in - house. For this the most
important role particularly played for store brands, is
by the Customer Sales Executives (CSAs).Other being
the past experience of the customer with the brand,
which can be positive only by providing a good quality
References
Aaker, D. A. and Joachimsthaler. E. 2000, Brand Leadership, London,
Free Press.
Esbjerg, Lars ; Grunert, Klaus G. ; Juhl, Hans Jrn. 2004. Retailer brand
architectures: Consumer perceptions of five Danish food
retailers, Konferencen: 8th International Conference on
Corporate Reputation, Image, Identity & Competitiveness, Fort
Lauderdale, USA, , 20 - 23 May 2004.
Keller, K.L. 1993, "Conceptualising, measuring and managing
customer-based brand equity", Journal of Marketing, Vol. 57
No.1, pp.1-22.
Kusum Ailawadi and Kevin Keller 2004, Understanding Retail
Branding: Conceptual Insights and Research Priorities, Journal
of Retailing, Vol. 80, Issue 4 (Winter), 331-342.
Semeijn, J.; Ambrosini, A.B. 2004. Consumer Evaluations of Store
Brands: Effects of Store Image and Product Attributes, Journal of
Retailing and Consumer Services, 11 (4), 247-258.
Sonnenberg, N.C. and Erasmus, A.C. 2008, Exploring the role of retailer
image and store brands as extrinsic cues in young urban
consumers choice of interior textile products, Latin American
Advances in Consumer Research, 2.
Steve Burt, Jose Carralero-Encinas, 2000 "The role of store image in
retail internationalisation", International Marketing Review, Vol.
17 Iss: 4/5, pp.433 453
63
64
Abstract
Problem Statement: Competitive Analysis of New Holland Tractors was done among six domestic competitors. For this customer and dealer
perception was taken in the area of Western U.P. and Haryana. Eight different variables were identified and position of each competitor was analyzed
on the basis of that. These variables are: Price, Finance (Loans), Availability of spare parts, after sale service, Brand Name, Design/Style, Power (Lifting
capacity) and Sales Promotion.
Approach: A questionnaire was designed with above set of variables and responses from 164 customer and 20 dealers was recorded.
Results: Using Analytical Hierarchy Process (AHP) market share was determined on the basis of above variables among six competitors in
western U.P. and Haryana. Using one way ANOVA it was checked whether there is a significant difference between six competitors with respect to each
variable. Perceptual maps with combination of up to two variables (attributes) were drawn to infer about the positioning of six competitors.
Conclusion: This study will help manufacturer of tractors to improve on the variables on the basis of which they are lagging their respective
market share with respect to competitors.
Key words: Analytical Hierarchy Process (AHP), Customer and Dealer perception, One way Anova
Introduction
India is mainly an agricultural country. Agriculture in
India accounts for approximately 15.7 percent of Indias
GDP in 2009 and employs about 52 percent of the
population (Refer website of Agricultural and Processed
Food Products Export Development Authority - APEDA).
The agri-biotech sector in India has been growing at a
whopping 30 per cent since the last five years, and it is
likely to sustain the growth in the future as well.
Agricultural biotech in India has immense potential and
India can become a major grower of transgenic rice and
several genetically engineered vegetables by 2010.
According to the Centre for Monitoring Indian Economy
(CMIE), crop production is expected to rise by 1.7 per
cent during FY 10 and food grain production is expected
to increase by 1.1 per cent and wheat production is
projected to remain at the same level of 80 million
tonnes as estimated for FY 09 while rice production is
65
Literature Review
Analytical Hierarchy Process (AHP) is an approach to
decision making that involves structuring multiple
choice criteria into a hierarchy, assessing the relative
importance of these criteria, comparing alternatives
for each criterion, and determining an overall ranking
of the alternatives as defined by DSS Resources. The
AHP is a structured technique for dealing with complex
decisions. Rather than prescribing a "correct decision,
the AHP helps the decision makers find the one that
best suits their needs and their understanding of the
problem.
Procedure
The procedure for using the AHP can be summarized
as:
1) Finding factors affecting the decision.
2) Assigning them weights.
3) Pair wise comparison.
4) Forming matrix with respect to various factors for
66
5)
6)
7)
8)
different alternatives.
Formation of normalised matrix.
Consistency check.
Check for consistency criteria, if any of the
matrixes found inconsistent.
Evaluating final ranks.
Results
The statistical analyses used are Analytical Hierarchy
Process (AHP), Single Factor ANOVA, Tukey-Kramer
Test and Perceptual Mapping. Where ever applicable,
= 0.05 was used as the level of significance for the
analysis.
Design/
Style
Sales
promotion
Sales
Force
Finance
Price
Power
Finance
0.06122
0.06122
0.06122
0.06122
0.06122
0.06122
0.06122
0.06122
Price
0.16326
0.16326
0.16326
0.16326
0.16326
0.16326
0.16326
0.16326
Power
0.18367
0.18367
0.18367
0.18367
0.18367
0.18367
0.18367
0.18367
Brand Name
Spare
parts/After
Sale service
0.14285
0.14285
0.14285
0.14285
0.14285
0.14285
0.14285
0.14285
0.10204
0.10204
0.10204
0.10204
0.10204
0.10204
0.10204
0.10204
Design/Style
Sales
promotion
0.02040
0.02040
0.02040
0.02040
0.02040
0.02040
0.02040
0.02040
0.16326
0.16326
0.16326
0.16326
0.16326
0.16326
0.16326
0.16326
Sales Force
0.16326
0.16326
0.16326
0.16326
0.16326
0.16326
0.16326
0.16326
Rank
1
2
3
4
5
6
Spare
Parts/After
Sale service
Sum
Average
Variance
M&M Fin.
Groups
164
1300
7.926829
0.816699
Escorts Fin
164
968
5.902439
1.536436
NHFI Fin
164
785
4.786585
1.751721
JD Fin.
164
804
4.902439
1.879994
Tafe Fin.
164
785
4.786585
1.751721
ITL Fin.
164
804
4.902439
1.879994
ANOVA
Source of Variation
Between Groups
SS
df
MS
P-value
F crit
1275.325
255.065
159.1411
9.2E-124
2.223254
1567.5
978
1.602761
2842.825
983
Within Groups
Total
Result:
Since the F (Observed value is greater than the F critical
value the null hypothesis is rejected. This implies that
actual difference
('*' if significant)
M&M
Escorts
NHFI
JD
Tafe
ITL
M&M
Escorts
NHFI
2.0244*
3.1402*
0.3992
1.1159*
0.3992
0.3992
-
0.3992
0.3992
0.3992
0.3992
0.3992
0.3992
0.3992
0.3992
0.3992
JD
3.0244*
1*
0.11585
0.3992
0.3992
Tafe
3.1402*
1.1159*
0.11585
0.11585
0.3992
ITL
3.0244*
1*
0.11585
0.11585
0.11585
Result:
As far as Finance is concerned:
M&M is significantly different from Escorts, New
Holland Fiat India Pvt. Ltd., John Deere, TAFE, and ITL
(Sonalika).
Escorts is significantly different from New Holland Fiat
India Pvt. Ltd., John Deere, TAFE, and ITL (Sonalika).
This implies that M&M and Escorts are significantly
different from the rest.
Similarly, other five variables were analysed and
conclusions drawn.
Perceptual Mapping for various Tractor Companies
This has been done by taking two attributes (Variables)
69
a)
Finance Vs Price
Result: From the perceptual map obtained (Figure 1)
we can see that
Fig: 1. Perceptual Mapping with respect to
Finance and Price
Conclusion
New Holland Fiat (India) Pvt. Ltd. 100% subsidiary of
CNH Global is operating in India since 1998 in the
business of tractors and Agri-machinery. The Plant is
situated at Greater Noida, Uttar Pradesh, producing a
range of tractor from 32 HP to 75 HP in over 90 variants
and marketing other Agriculture Equipments.
70
References
Cooper, L.G., 1983. A review of multidimensional scaling in marketing
research. Applied Psycholog. Measure., 7: 427-450. DOI:
10.1177/014662168 300700404
Day, G.S., A.D. Shocker and R.K. Srivastava, 1979. Customer-oriented
approaches to identifying product markets. J. Market., 43: 8-20.
http://search. ebscohost.com/login.aspx?direct=true
&db=bth&AN= 5004693&site=ehost-live
DeSarbo, W.S. and V.R. Rao, 1984. GENFOLD2: A set of models and
algorithms for the general unfolding analysis of
preference/dominance data. J. Classif., 1: 147-186. DOI:
10.1007/BF01890122
Dowling, G.R., 1988. Measuring corporate images: A review of
alternative approaches. J. Bus. Res., 17: 27-34. DOI:
10.1016/0148-2963(88)90019-7
Green, P.E. and Y. Wind, 1975. New way to measure consumers
judgments. Harvard Bus. Rev., 53: 107-117.http://search.
ebscohost.com/login.aspx? direct=true &db=bth&AN=
3867280&site=ehost-live http://search.ebscohost.com/
login.aspx?direct=true &db=bth&AN=9084110&site=ehost-live
New Holland MIS Report
Pegels, C.C. and C. Sekar, 1989. Determining strategic groups using
multidimensional scaling. Interfaces, 19: 47-57. DOI:
10.1287/inte.19.3.47
Srivastava, R.K., M.I. Alpert and A.D. Shocker, 1984. A consumer
oriented approach for determining market structures. J. Market.,
48: 32-45. http://search.ebscohost.com/login.aspx?direct=true
&db=bth&AN=5004394&site=ehost-live
Wind, Y., 1982. Product Policy: Concepts, Methods and Strategy.
Addison-Wesley Publishing, Reading, MA., ISBN: 10:
0201083434.
71
72
Sweta Behera*
Abstract
In todays world women are given equal status as men. But when it comes to life insurance, the criteria used to provide insurance coverage to
women is different from that of others. The underwriting of female lives is not the same as the general underwriting practices in a life insurance
company. This is because the risks associated with female lives are not similar to their male counter parts. This study was undertaken in Life Insurance
Corporation (LIC) of India, which is the largest life insurance company in India. It was aimed to understand the underwriting practices of LIC of India and
compare the underwriting of male and female lives. It gives an idea about how the underwriting of female lives is based on different parameters. This
paper also focuses on different classifications used by LIC of India for underwriting female lives and the variation of risk in each class. An attempt has
been made to find insurability of female lives with respect to underwriting guideline of LIC of India.
Keywords: Life insurance, Underwriting, Female Lives, Category I, Category II, Category III, Category IV
Introduction
Life insurance is not a new term. It has been present in
the Indian market since 1818. Privatization has
promoted it more. So, today most of us can nod their
heads when asked if they have heard the name life
insurance. A life insurance policy provides protection
against financial loss caused by death.
Insurance underwriting is the process of classification,
rating, and selection of risks. This consists of evaluating
information and resources to determine how an
individual will be classified (standard or substandard
risk). While underwriting, a persons health (morbidity)
or how long they may live (mortality), or both are
scrutinized. It depends on the cover wanted. The goal of
life insurance underwriting is to accurately assess an
individuals risk level for the purposes of assigning the
correct rate for life insurance. Some of the factors
affecting life insurance underwriting include age, sex,
health status, physical features, family history, built,
occupation, past history of insurance, personal medical
history, hobbies and personal habits. An underwriter is
*Centre for International Business & Policy 2009-11, Birla Institute of Management Technology
Under the guidance of Prof. K.K. Krishnan, Centre for Corporate Relations, Birla Institute of Management Technology
73
Review of Literature
Black and Skipper (1994) have explained the purpose of
underwriting in modern life and health insurance;
discusses underwriting philosophy, including the
distinctions between standard and substandard
classes and smoker/non-smoker differentials in
standard classes; analyzes factors that affect life and
health risk classification; and explains substandard
classification methods. In USA, there is not much of a
difference in the underwriting of male and female lives
are followed unisex mortality tables.
Morton (1977) has discussed the relevancy of risk
factors and mortality data to underwriting; analyzes
74
Objectives
The study was undertaken with the following
objectives:
Understand the life insurance underwriting of LIC
of India with respect to female lives.
Compare underwriting of male and female lives.
Comprehend the necessity of classifying female
lives for underwriting.
Find out the insurance dynamics of life insurance
underwriting and death claims and to examine
death claim ratio of male and female lives.
Methodology
Although this is a piece of descriptive research, the
study was dependent on primary as well as secondary
data. Secondary data was collected from the records of
Divisional Office, LIC of India, Sambalpur, Orissa (where
this study was undertaken) regarding business
underwritten during past five years. The death claim
records of past three years were procured to find out
the dynamics of life insurance underwriting and death
claims. The death claim ratio of male and female lives
was also examined. Secondary data was also collected
through desk research from literature and statistics in
the internet, books, reports and journals dealing with
underwriting and its related concepts.
Primary data was collected from sample of sixty-seven
women drawn from SRIT colony, located in the centre
of Sambalpur city (Total population-935613, Male475112, Female-460491: Source- Official website of
Sambalpur-www.sambalpur.nic.in) in order to find out
the incidence of insurance among these people and
their insurability with respect to the underwriting
guidelines of LIC of India. SRIT colony was selected as
the sample area. This was due to some of the reasons
like, it was the only planned housing colony under
Sambalpur Municipal Corporation housed by people
from different income brackets. The inhabitants of the
colony are from varied educational and occupational
background and one would find here all categories of
women such as working women, housewives and
students. Over here Lastly, this area is adjacent to LIC of
India, Divisional Office, Sambalpur thereby it was likely
to have many actual and prospective customers.
A semi-structured questionnaire was administered for
the purpose of collecting primary data. The names of
all the female land telephone subscribers living in that
area were identified from the telephone directory of
the current year for collecting primary data. Numbers
were selected randomly and calls were made to these
people. Appointment for a formal house visit was fixed
over phone. All the female members of the sample
household who were above 18 years of age and agreed
to be interviewed were included as sample
respondents. The reason for not including females
Research Findings
LIC of India has 4 different categories for classifying
female lives while underwriting. The first three
categories contain single, married or widow women.
These categories are:
Category I- employed or self-employed women
filing Income Tax Returns
Category II- Women having unearned income
filing Income Tax Returns
Category III- Housewives with or without income
Female students from 18 years to 25 years (This
category is not addressed as Category IV by LIC of
India but has been named so for its convenient use
in this present study)
Primary Data
Sample respondents were divided into 4 classes
depending upon their age viz. up to 25, 26-40, 41-55,
55 and above. A majority of the sample respondents
fell under the age groups 26-40 years (37.31%) and 4155 years (40.31%). It was evident within these two age
groups 17 (25.38%) respondents belong to Category I
and 32 (47.76%) respondents belong to Category III.
And Category IV (7.46%) was applicable only in case of
respondents upto 25 years of age because this category
of LIC (for females) has only female students upto 25
years of age. Although a big percentage of respondents
belong to these two age-groups but it can be seen that
respondents are spread across all age-groups because
random sampling was done for the study.
75
Death claims
Women
Total
Number (%)
16 (6.02%)
266
2009-10
Men
Number (%)
250 (93.99%)
Ratio
2008-09
241 (94.14%)
15 (5.86%)
256
16.07:1
2007-08
236 (95.16%)
12 (4.84%)
248
19.67:1
15.63:1
Death claims
Women
Total
Number (%)
12 (8.16%)
147
2009-10
Men
Number (%)
135 (91.84%)
Ratio
2008-09
104 (87.40%)
15 (12.61%)
119
6.93:1
2007-08
110 (90.91%)
11 (9.09%)
121
10:1
11.25:1
2009-10
5 (31.25%)
4 (25.00%)
7 (43.75%)
2008-09
5 (33.33%)
4 (26.67%)
6 (40.00%)
2007-08
3 (25.00%)
2 (16.67%)
7 (58.33%)
2009-10
4 (33.33%)
3 (25%)
5 (41.67%)
2008-09
4 (26.67%)
3 (20%)
8 (53.33%)
2007-08
2 (18.18%)
3 (27.27%)
6 (54.55%)
Conclusion
Female lives are divided into four distinct categories for
the purpose of underwriting in LIC of India depending
on the risk they bring to the pool of insurance. Risk
factor differs from one category to other in case of
female lives due variation in their income and social
standing. Each category has different limit for
Male
No
Major males ( and or
students) equivalent to
female category I and IV
Same
Same
Same (own income)
Children
No
Different
Financial underwriting
(Maximum coverage allowed)
MHR Requirement
Female
Yes
Category I and IV
female lives equivalent
to male lives
Same
Same
Same(own/husbands
income)
Different for each
category
MHR
MHR
MHR limits
MHR limits-same
Same
MHR on child if
above 12 years
else MHR on
parent
12 yrs and above
Up to 65 years (age
nearer birthday)
Medical underwriting
FMR
FMR
EMR
Same
Same
ACR / Juvenile
FMR/ school
report
Same
Special Reports
Same
Same
Different
Same
Same
Same
Same
Same
1 month
Same
4(b) on Married women
Category III
Same
Same
Same
Same
Same
3 months
Same
N/A
Can be Applicable
N/A
Can be Applicable
Can be Applicable
N/A
Can be Applicable
N/A
N/A
N/A
N/A
Same
N/A
N/A
10(a) and 76 (76
is applicable
where SA is Rs. 1
crore or less)
N/A
Applicable
N/A
Proposal Form
Age Proof
Income Proof
Different
Same
Parents income
Abbreviations: MHR: Moral Hazard Report, FMR: Full Medical Report, ACR: Agents Confidential
Report, EMR: Extra Mortality Rate, KYC: Know Your Customer, AML: Anti-Money Laundering, DGH:
Declaration of Good Health, PP Extra: Previous Policy Extra and SA: Sum Assured
79
80
References
Balay, Ken, "Mastering the Underwriting Decision," Reinsurance
Reporter No. 96 (Summer, 1981): p.9.
Black, Kenneth, Jr. and Harold Skipper, Jr., "Life and Health Insurance
Underwriting: I," pp. 639663 and "Life and Health Insurance
Underwriting: II," (pp.664691) In Life Insurance, 12th (ed.)
Englewood Cliffs, N.J.: Prentice Hall, 1994.
Fiederlein, W. Taylor, "Preferred Risk Underwriting, Reinsurance
Section News No. 29 (December 1991): p. 8.
Gopalakrishna, G. 2010. The Universe of Underwriting: Priorities in
Life Insurance, IRDA Journal, VIII (5): 16-19.
Knoppers Bartha M and Yann Joly. 2004. Physicians, Genetics and Life
Insurance, Canadian Medical Association Journal, 170 (9):
1421-1423. Available: http://www.cmaj.ca/cgi/reprint/170/
9/1421
Leigh, T.S. 1996. The Freedom to Underwrite, Presented to the Staple
Inn Actuarial Society, London, 9 January 1996.
Morton, Alton P., "Individual Life Insurance Underwriting Principles and
Practices: A 1976 Review," Transactions of the Society of
Actuaries Vol. XXIX (1977): p. 315.
Subramanian, K., J. Lemaire, J. Hershey, M. Pauly, K. Armstrong and D.
Asch 1999. Estimating Adverse Selection Costs from Genetic
Testing for Breast and Ovarian Cancer: The Case of Life
Insurance, Journal of Risk and Insurance, 66 (4): 531-550.
Abstract
This study analyzes the factors influencing fast fashion retail based on consumer perception for designing of brand strategies based on the
research result. Focused on the apparel industry, the study examines factors of consumer preferences, marketing tools, accessibility, media richness
and product attributes.
The result of the study suggests the importance of brand attributes and various marketing and expansion strategy to be successful in fast fashion
environment. The Study will benefit various upcoming brands and existing brands in India for designing their entry strategies, marketing activities and
various bases for business planning.
Keyword : Apparel industry, Fast fashion retail, Consumer perception & behavior, Marketing strategy, Media richness, store locations and
expansion strategies.
Introduction
Fast fashion, which has been growing rapidly abroad,
offers on-trend, in season apparel at lower prices.
What's more, these retailers stock stores more
frequently, but with limited quantities of merchandise,
giving shoppers a reason to visit stores more often. Such
a retail concept depends on the regular creation and
rapid replenishment of small batches of new goods.
Such a retailer creates a large number of designs; some
of them may resemble the latest couture creations, but
often beats the high-fashion houses to the market and
offers almost the same products, made with less
expensive fabric, at much lower prices. This "fast
fashion" system depends on a constant exchange of
information throughout every part of retailers supply
chainfrom customers to store managers, from store
managers to market specialists and designers, from
designers to production staff, from buyers to
subcontractors, from warehouse managers to
distributors, and so on. Most companies insert layers of
81
Wave 2
Wave 1
Y 1987
Y 1990
Y 1993
Y 1996
Y 1999
Y 2002
Y 2005
Y 2008
Fast Fashion Retail Strategy Based on Consumer Perception: An Empirical Research in Delhi NCR
Literature Review
Clothing in general and fashionable clothing in
particular, is a publicly consumed good that signals to
other people information about the personality and
status of its wearer (Dodd, Clarke, Baron, Houston,
2000). Consumer got the knowledge of fashion product
from various media. Social influence, caused by word
of mouth, plays a very important role in fashion buying.
Some consumers become especially interested in and
preoccupied with clothing and fashion so that their
interest, experience, and knowledge lead them to
become opinion leaders for others (Goldsmith and
Hofacker 1991).
Fashion always works on forecasting of future
consumer trends. Fashion and trend forecasting is the
prediction of mood, behavior and buying habits of the
consumer at particular time of season. It is no longer a
question of finding fashion markets or consumers by
1.
2.
3.
Research Objective
Brand
Uniqueness
Brand
Awareness
Marketing &
Media Richness
Merchandising
Advertising tools
Service
Effectiveness of
Media
Accessibility
& Location
Frontend
Attributes
Value
Product Quality
Sample
A random sample of 150 fashion consumers. Table1.1
explains the demographics of respondents classified
under three groups.
Store Ambience
Price
Selling Staff
Purchase
Experience
After Sale
Service
Gender
Group
1
2
Age
15-25
Monthly Income
Male
Female
<25000
25000-50000
27
17
31
23
12
25-35
29
17
8
35and
3
7
3
7
above
Note Income is in Rupees and results are in %age
84
50000-1 Lac
>1 Lac
Fast Fashion Retail Strategy Based on Consumer Perception: An Empirical Research in Delhi NCR
Research Methodology
Descriptive Research
The complete study is based on two components of the
market
1.
2.
Factor
Product Design
Quality
Price
Service Experience
Ambience
Response
Inference
Most preferred
brand
Wills Lifestyle
UCB
Van Heusen
Arrow
Allen Solly
Tommy Hilfiger
Peter England
Levis
Louis philippe
Others
18%
20%
15%
6%
4%
8%
2%
8%
10%
9%
Reason Behind
not buying from
a branded store.
Lack of awareness
Lack of availability
You find it expensive
You dont like the product
Others
Newspaper advertisements
Radio
T.V. advertisements
Word of mouth
Magazine
Others
27%
13%
36%
7%
17%
30%
0%
14%
27%
22%
7%
Source of
Awareness
85
Do you
remember TV
advertisement
of your favorite
brand
Yes
No
30%
70%
Tried new
variants of after
viewing the
advertisements
Promptness of
purchase due to
association with
fashion shows
Most
influencing offer
Yes
No
36%
64%
Yes
No
42%
58%
68%
11%
8%
9%
4%
Every week
Every forth night
Every month
Occasionally
Others
Genuine need
Depletion of old products
Liking a product instantly
Buying for an occasion.
Brand name
Offers/ Discounts
Unique designs
Highly Accessible
Far off
Accessible
Stand alone outlet
Multi brand outlet
Outlet inside the mall
0%
2%
12%
74%
12%
18%
5%
25%
18%
20%
13%
13%
17%
70%
31%
30%
39%
Reason behind
your purchase
of fast fashion
product
Accessibility of
branded stores
in India
Preferred
location of
purchase
th
40
Highly Accessible
30
Count
Purchase
Frequency
Far off
20
Accessible
10
Fast Fashion Retail Strategy Based on Consumer Perception: An Empirical Research in Delhi NCR
Table 1.4 shows the importance of various purchase factors on likert scale.
Factor
Importance of factor
Extremely
important
Very
important
Somewhat
important
Not very
important
Not at all
important
5(very
High)
66%
31%
2%
0%
0%
37%
40%
17%
4%
18%
37%
34%
27%
27%
27%
Quality of
the product
Price of the
product
Reputation
of the
company
Purchase
experience
first use
experience
Usage
experience
After
purchase
service
1(Very
Low)
35%
42%
20%
0%
1%
0%
35%
38%
22%
2%
0%
8%
1%
22%
52%
18%
5%
1%
36%
8%
0%
15%
38%
28%
11%
5%
31%
27%
8%
4%
17%
34%
28%
11%
7%
23%
41%
27%
5%
2%
14%
44%
28%
5%
7%
34%
25%
23%
12%
4%
15%
33%
43%
4%
3%
Feasibility of the TestBecause KMO value is .847 which is greater than 0.6
and Bartletts test is rejected, carrying out Factor
analysis is appropriate tool for data reduction.
Factor analysis
KMO and Bartlett's Test
Table 1.5 Validity test of Factor analysis
Kaiser-Meyer Olkin Measure of
Sampling Adequacy.
Bartlett's Test
Approx. Chiof Sphericity
Square
Df
Sig.
.847
405.905
21
.000
Initial Eigenvalues
% of
Cumulative
Total
Variance
%
3.950
56.428
56.428
3.950
56.428
56.428
3.408
48.692
48.692
1.044
14.918
71.346
1.044
14.918
71.346
1.586
22.654
71.346
.682
9.742
81.088
.498
7.110
88.199
.370
5.286
93.484
.256
3.661
97.146
.200
2.854
100.000
87
Component
1
2
.520
.609
.028
.895
.299
.538
.868
.227
.839
.160
.856
.084
.836
.202
Inference
Component 1 referred to as a new construct brand
experience and Component2 referred to brand image.
To get success in Fast Fashion Apparel It is very
important to focus on both these aspects.
Component 1 include
1) Quality
2) Purchase Experience
3) First use experience
4) Usage Experience
5) After Purchase Experience
Component 2 include
1) Quality
2) Price
3) Reputation
Quality
Price
Reputation
Purchase Experience
first use experience
Usage Experience
After Purchase
Experience
Component
1
2
.033
.361
-.256
.747
.044
.308
.271
-.050
.279
.306
.266
-.098
-.166
-.062
From Table 1.8 following factors can be evaluated as Brand Experience = 0.033*Quality + 0.271*Purchase
Experience + 0.279* First use Experience + 0.306*
Usage Experience + 0.266*After Purchase Experience
88
Valid N
(listwise)
50
88
12
Fast Fashion Retail Strategy Based on Consumer Perception: An Empirical Research in Delhi NCR
1.0
Recall of TV Advertisement
0.8
Sensitivity
Media Effectiveness
0.6
0.4
0.2
0.0
0.0
0.2
0.4
0.6
0.8
1.0
1 - Specificity
Diagonal segments are produced by ties.
Area under the curve shown in Fig 1.5 can be explained in table 1.10.
Table 1.10 Coverage of various media tools and their effectiveness
Test Result Variable(s)
Do You remember any of the T. V. advertisements of your brand
Area
.425
.539
Conclusion
The purpose of the study was to analyze fast fashion
apparel market in India for a successful business
planning. Following are the conclusion that can be
drawn from the findings Brand Experience and Brand Image are the major
factors which influence the consumer buying
behavior. So, a company should look into these
.490
Managerial Implication
References
90
www.bimtech.ac.in