WE PROVIDE CASE STUDY ANSWERS, ASSIGNMENT SOLUTIONS, PROJECT REPORTS AND THESIS
Managerial Economics
Case Study 1: Economic Analysis of Organization ABC
Organization ABC was one of the leading organizations in manufacturing soaps. After a certain point of time, the organization found that there was an increase in its cost and reduction in profits. However, the economy of the nation was at boom. Apart from this, the manufacturing industry was also enjoying high profits. Therefore, Chief Executive Officer (CEO) of the organization decided to take suggestions from economists regarding the deteriorating condition of the organization. The economists first analyzed the problem and collected relevant data. They found that the price of the organization’s product was quite high as compared to the market price. Moreover, substitute products were easily available in the market. Therefore, consumers were not willing to purchase ABC’s product due to the availability of similar products at cheap prices. To overcome the problem, economists suggested the organization to lower down its prices and observe the effect on demand. In addition, economists recommended the organization to organize promotional campaigns. Based on suggestions, the organization reduced the prices by 5% and organized various promotional campaigns, As a result, the demand for the organization’s product increased by 3%. This helped the organization to come back to its previous position.
Questions:
Q1. Which economic theory is used to solve the problem in the case study?
Q2. Which economics concept is used in this case study?
Case Study 2: Kingfisher Airlines Pricing Strategies
Kingfisher Airlines (KFA), India-based airline group, is a wholly owned subsidiary of United Breweries (UB) Group. The parent organization is India’s largest producer of beer and established its operations in India in 2005. KFA is positioned as a budget airline rather than a low cost carrier airline. The reason is that the low cost carrier airline is treated as low quality and delayed flight service provider. The passengers of KFA are treated as honored guests and the flight is not referred as a journey but an experience of a lifetime. During the launch, Vijay Mallya, chairman and Chief Executive Officer (CEO) of KFA, said “Kingfisher Airlines will have a ‘Fly the Good Times’ approach and this will reflect in the experience what we will offer to passengers. With costs lower than economy class travel on full service airlines and marginally more than the bus services type low cost competition, Kingfisher Airlines offers a far better value proposition. The aircraft and service will reflect the Kingfisher lifeline imagery and credibility that has been built over the years.” KFA’s strategy is to differentiate itself from other airlines by providing value-added air travel services at reasonable fares. KFA offers three kinds of services for different types of customers namely Kingfisher First for business-class customers, Kingfisher Class for upper-class customers, and Kingfisher Red for middle-class and lower-class customers. It provides a fun-filled experience with in–flight entertainment systems and well-designed interiors. KFA provides quality services, screens and headphones, specialized meals and beverages, and free gifts to guests. In the year of its launch, KFA was voted as the best new airline of the year. KFA has an advantage of familiarity of brand with the customers. Thus, it does not conduct marketing and promotional activities. The pricing strategy of the aviation industry is also affected by the environment-related factors, such as crude oil prices, dollar rates, and competition. When KFA was launched, it was called as the budget airline as the ticket prices charged, were lower than its competitors, such as Indian Airlines, Jet, and Sahara. The ticket prices were 25% lower than Jet Airways and around `20% more than Air Deccan. Jet Airways brought down its fares to compete with KFA when it took over Sahara Airlines. These competitive price pressures lead KFA to provide more value-added services, including mobile updates and home delivery of air tickets. According to Mallya, “We are offering our passengers’ more than just value-based fares; we will offer a complete lifestyle experience.” In this high competition, KFA has positioned itself as a successful airline in a shorter period of time. The targeted segments of KFA are high and middle income customers. It also targeted the youth and high lifestyle segments. Mostly, the targeted population is modern and trendy that is looking for a great flying experience. It has been termed as a true value carrier and awarded as the prestigious 5- Star Airline Status by Skytrax, which is the world’s leading independent research and quality evaluation body for airlines.
Questions:
Q1. What pricing strategy was followed by Kingfisher to complete in the aviation industry? Was it competition or cost-based strategy?
Q2. Do you think that pricing acts as a differentiating factor in the aviation industry?
Case Study 3: The Business Cycle of ABC Country
ABC country was facing a downturn in its economy. All the economic factors, such as production, prices, savings, and investment, of the country started decreasing. In the initial phases of downturn, businessmen were not able to recognize it. They considered it minor fluctuations in the economy, which could be easily handled by market forces. Therefore, they continued to produce goods and services at the same rate as they were doing earlier. As a result, the supply of goods and services exceeded the demand. Gradually, businessmen realized that they had overinvested. This problem of one industry spread in other industries, due to interlink among different industries. At this time, businessmen stopped any type of further investment in consumer and capital goods. Consequently, they started reducing the cost on labor, machinery, furniture and other factors of production. As a result, various economic factors, such as consumption, savings, and employment, started decreasing. In addition, debtors were not able to repay their debts and creditors were not ready to lend more money. Apart from this, individuals and businesses were not ready to invest in stock markets. Many weak organizations left industries or dissolved. At this point of time, the economy had reached its bottom level and from this point, individuals and organizations tried to become optimistic. Therefore, organizations started hiring employees at low wages. Employees accepted the amount of salary provided to them by organizations because they wanted to fulfill their basic needs. In addition, consumers also had an opinion that the price of products and services would not fall now. Therefore, they started increasing their consumption rate. This consumption rate stimulated the demand and consequently the production. As a result, the investment and bank credit also increased. The economy started running back on the growth path.
Questions:
Q1. What are the phases of business cycle explained in the case study?
Q2. What are the main causes of recession in ABC country?
The Russian Federation (Russia) faced several economic problems when it was formed after the dissolution of Union of Soviet Socialist Republic (USSR) or the Soviet Union. Therefore, Boris Yeltsin the first President of Russia implemented various measures for the economic growth of Russia, such as stabilization policies and economic restructuring. These measures helped the Russian economy to become market-focused economy from a centrally planned economy. These measures are briefly discussed in the present case study. In addition, the case study also analyzes the policy measures presented by Vladimir Putin, Russia’s second President. It also focuses on the economic conditions of Russia in the Presidency of Boris Yeltsin and Vladimir Putin and the impact of their policies on the economy. Towards the end, the case study highlights the challenges faced by the Russian economy. Several Russian officials and economists have described the economic conditions of Russia in different time period as follows: According to Mark Spelmen, Accenture Energy Analyst, in July 2007, “Everyone is focusing on the fact that there are more billionaires in Moscow than there are in London, but what we’re actually also seeing is that the disposable income of skilled people in Russia is going up. You see a lot of infrastructure a lot of housing, shopping malls. The commodity boom is now percolating beyond Moscow.” According to prominent Russian intellectuals in the late 1990s, “The catastrophe has run its course. The economic policy of Yeltsin’s and Chernomyrdin’s aides has made a small section of the farmer communist nomenclature and of the “new Russians” unbelievably rich, plunged most of the nation’s industry into paralysis, and reduced the majority of the population to poverty. As far as property ownership is concerned, the gap between the rich and poor is much deeper now than that which led to the [1917] October [Bolshevik] Revolution.” Earlier to 1991, Russia was considered as the biggest republic with the name Russian Soviet Federative Socialist Republic (RSFSR) in Soviet Union. In 1990-1991, the inflation rate in Russia was very high and there was a shortage of supply in every industry. At the time, the GDP of Russia shows a decline of 17% and retail prices reached to 140%. The political conditions of Russia were also not good at this time. As a result, the Soviet Union was dissolved in 1991. After that, Boris Yeltsin was elected as the President of Russia. Boris Yeltsin took several measures to transform the Russian economy in the market-based economy. In 1991, Boris Yeltsin along with his advisors and an economist, Yegor Gaidar implemented certain measures for bringing up the Russian economy form inflation. The measures taken by him were stabilization measures and economic restructuring. The stabilization measures involved decreasing the government budget deficit, increasing government revenues, and controlling the supply of money by subsidizing credit provided to business persons. In addition, he enforced price control policies, made several amendments in tax policies, and increased privatization. In the initial stages, the policies made by Boris Yeltsin were not able to achieve its goals. However, with the introduction of monetary and fiscal policies, the government was able to implement such measures and achieved its goals and objectives. In 1996, Boris Yeltsin was again elected as the President of Russia. After that, Russia faced a situation of decrease in the foreign exchange reserves and the economy started showing another decline. In 1998, Russian economy experienced a financial crisis in which its currency, ruble, showed a decline of 75%. The financial crisis in Russia made people against Boris Yeltsin; as a result, he faced high opposition in the parliament. The State Duma elections of 1999 and Presidential elections of 2000 brought a major change in the Russian politics. Vladimir Putin was elected as the President of Russia on 2000. The Parliament of Russia started supporting policies introduced by Vladimir Pultin, the President of Russia and Mikhail Kasyanov, the Prime Minister of Russia. Both of them look various legislative initiatives and measures to transform the Russian economy in the market-based economy. In 2007, the Gross Domestic Product (GDP) of Russia was above $1 trillion. In the mid of 2000s, the growth of Russian economy was very fast that is mostly contributed by the growth in domestic energy industry of Russia. According to various Russian analysts, the major source of income for the Russian economy was oil exports. Therefore, the Russian economy showed a drastic change with the change in the prices of oil. Therefore, the decline in oil prices was considered as a risk factor for the sustainability of the Russian economy. According to the report of World Bank in 2007, Russia should have taken measures to control inflation as the global economy was going to face an inflationary condition, which might affect the Russian economy. However, Russia was the least affected country in the global economic slowdown of 2007. It is because of the fact that the major contribution in GDP of Russia came from its fossil fuels and natural resources that were hardly affected by recession. In addition, Russian trade with United States, which is the source of financial crisis of 2007, was very limited.
Questions:
Q1. What are the measures adopted by Boris Yeltsin to overcome inflation?
Q2. What are the measures used by a government for controlling inflation?
Earlier, there were only few organizations operating in the magazine publication industry. At that time, it became a trend to provide free gifts, audio and video CDs, DVDs, and scented candles, to customers along with magazines. The concept of free gifts was introduced to increase customer base. However, after some time, it became a problem for the entire industry as he cost of production was increasing. In such a situation, some organizations stopped providing free gifts, so that the cost of production could be reduced. Consequently, these organizations lost their customers. This is because at this point, customers preferred free gifts with magazines. On the other hand, some organizations increased the prices of magazines to overcome the cost of production. However, these organizations did not succeed in their strategy, as the customers were not willing to buy magazines at higher prices. Even some of the organizations reduced the prices of magazines to increase the number of customers, generate revenue, and overcome the production cost. As a result, rest of the organizations in the industry also reduced their prices to earn profit and minimize cost of production. This led to heavy losses for organizations that initially reduced the prices. Therefore, organizations were bound to provide magazines at fixed rate along with free gifts.
Questions:
Q1. What type of market structure is prevailing in the magazine industry? Why?
Q2. What are the problems faced by organizations in the magazine industry due to oligopoly?
Business Ethics
Case 1: KFC (Marks 20)
Abstract
The case highlights the ethical issues involved in Kentucky Fried Chicken's (KFC) business operations in India. KFC entered India in 1995 and has been in midst of controversies since then. The regulatory authorities found that KFC's chickens did not adhere to the Prevention of Food Adulteration Act, 1954. Chickens contained nearly three times more monosodium glutamate (popularly known as MSG, a flavor enhancing ingredient) as allowed by the Act. Since the late 1990s, KFC faced severe protests by People for Ethical Treatment of Animals (PETA), an animal rights protection organization. PETA accused KFC of cruelty towards chickens and released a video tape showing the ill-treatment of birds in KFC's poultry farms. However, undeterred by the protests by PETA and other animal rights organizations, KFC planned a massive expansion program in India.
BACKGROUND OF KENTUCKY FRIED CHICKEN
KFC is based in Louisville, Kentucky, and is the world’s most popular chicken restaurant chain. Founded by Colonel Harland Sanders in the early 1930s by cooking & serving food for hungry travelers. In 1952 Sanders started franchising his chicken business & named it as Kentucky Fried Chicken. KFC is part of Yum! Brands, Inc., the world's largest restaurant company in terms of system restaurants, with more than 36,000 locations around the world. Yum! Brands is run by David Novak, Chairman & CEO. KFC operates more than 5,200 restaurants in the United States and more than15,000 units around the world.109 countries and territories around the world. Every day, more than 12 million customers are served at KFC restaurants. KFC Division is run by Cheryl Bach elder, President and Chief Concept Officer.
KFC’s Entry in INDIA
KFC was the first fast food multinational to enter INDIA, after the economic liberalization policy of the Indian Govt. in early 1990s. KFC received permission to open 30 new outlets across the country & Opened first fast food outlet in Bangalore in June 1995 by targeting upper middle class population. PepsiCo planned to open 60 KFC and Pizza Hut outlets in next 7 yrs in the country.
Issues:
Understand the significance of cultural, economic, regulatory and ecological issues while establishing business in a foreign country. Appreciate the need for protecting animal rights in developed and developing countries like India. Understand the importance of ethics in doing business. Examine the reasons for protests of PETA (People for Ethical Treatment of Animals). Identify solutions for KFC's problems in India
Problems for KFC ·
Protests by farmers led by the Karnataka Rajya Ryote Sangha (KRRS) & the farmer’s leader was Nanjundaswamy who used the term “junk food” against KFC.
· Protests by cultural & Economic activists.
· Protests by PETA in the late 1990s.
· Support of celebrities in against of KFC.
· Understand the Culture, Regulatory & Ecological issues.
· Understand the importance of Ethics in doing business
· Examine the reason for protests of PETA
· Identify Solutions for KFC‟S Problems in India.
Weaknesses
· Non Ethical business practice.
· PETA Protest. · KRRS Protest.
· MSG flavour in chicken.
Opportunity
· Retail boom in India.
· Indians youth are adopting western culture.
· Indian Economy.
· Cosmopolitan Rapid Development.
Threats
· MSG chicken flavour.
· PETA like organizations.
· Political parties Protesting for junk foods.
· Protest support from famous Personalities like Anil Kumble, Aditi Govithrikar, John Abraham etc.
Questions:
1. Since its entry in India in 1995, KFC has been facing protests by cultural & Economic activists and farmers. What are the reasons for these protests?
2. Do you think in the light of fierce competition, it is justified for business organizations not to give importance to ethical values at the cost of making profits? Why or Why not?
FACTS OF THE CASE China was eager to enter joint ventures with foreign companies to construct and operate automobile manufacturing plants inside China. The plants would not only manufacture cars to supply China’s new internal market, but could also make cars that could be exported for sale abroad and would be sure to generate thousands of new jobs. The Chinese government specified that the new car had to be priced at less than $5000, be small enough to suit families with a single child (couples in China are prohibited from having more than one child), rugged enough to endure the poorly maintained roads that criss-crossed the nation, generate a minimum of pollution, be composed of parts that were predominantly made within China, and be manufactured through joint – venture agreements between Chinese and foreign companies. Experts anticipated that the plants manufacturing the new cars would use a minimum of automation and would instead rely on labor – intensive technologies that could capitalize on China’s cheap labor. China saw the development of a new auto industry as a key step in its drive to industrialize its economy. The Chinese market was an irresistible opportunity for General Motors, Ford and Chrysler, as well as for the leading Japanese, European and Korean automobile companies. With a population of 1.2 billion people and almost double digit annual economic growth rates, China estimated that in the next 40 years between 200 and 300 million of the new vehicles would be purchased by Chinese citizens. Already cars had become a symbol of affluence for China’s new rising middle class, and a craze for cars had led more than 30 million Chinese to take driving lessons despite that the nation had only 10 million vehicles, most of them government – owned trucks. Environmentalists, however, were opposed to the auto manufactures’ eager rush to respond to the call of the Chinese government. The world market for energy, particularly oil, they pointed out, was based in part on the fact that China, with its large population, was using relatively low levels of energy. Critics pointed out that if China were to eventually have as many cars on the road per person as Germany does, the world would contain twice as many cars as it currently does. No matter how “ pollution – free” the new car design was, the cumulative environmental effects of that many more automobiles in the world would be formidable. Even clean cars would have to generate large amounts of carbon dioxide as they burned fuel, thus significantly worsening the greenhouse effect. Engineers pointed out that it would be difficult, if not impossible, to build a clean car for under $5000. Catalytic converters, which diminished pollution, alone cost over $200 per car to manufacture. In addition, China’s oil refineries were designed to produce only gasoline with high levels of lead. Upgrading all its refineries so they could make low-lead gasoline would require an investment China seemed unwilling to make.
IDENTIFICATION OF ISSUES / PROBLEMS IN THE CASE
China was eager to enter joint ventures with foreign companies to construct and operate automobile manufacturing plants inside China. The Chinese government had specified that the new car had to be priced at less than $5000, be small enough to suit families with a single child (couples in China are prohibited from having more than one child), rugged enough to endure the poorly maintained roads that criss-crossed the nation, generate a minimum of pollution, be composed of parts that were predominantly made within China, and be manufactured through joint – venture agreements between Chinese and foreign companies. Environmentalists, however, were opposed to the auto manufactures. Engineers pointed out that it would be difficult, if not impossible, to build a clean car for under $5000 because Catalytic converters, which diminished pollution, alone cost over $200 per car to manufacture. In addition, China’s oil refineries were designed to produce only gasoline with high levels of lead. Upgrading all its refineries so they could make low-lead gasoline would require an investment China seemed unwilling to make. Many government officials were also worried by the political implications of having China become a major consumer of oil. If China were to increase its oil consumption, would have to import all its oil from the same countries that other nations relied on, this would create large political, economic and military risks.
INDIVIDUAL OPINION
I think China should enter joint ventures with foreign companies to construct and operate automobile manufacturing plants. This would not only generate the Chinese economy to boost up but will also generate a lot of employment opportunities to the Chinese population. Also having a car which is priced at less than $5000, will suit families with a single child. So the requirement will also not fulfill only the middle class but also the poor class in some time to come. Also looking from the point of view that the arrangement for making new cars will not only cater to the Chinese internal market but also be exported to other countries. This will get foreign exchange for China which will enhance the economy.
1. In your judgment, is it wrong, from an ethical point of view, for the auto companies to submit plans for an automobile to China? Explain your answer?
2. Of the various approaches to environmental ethics outlined in this chapter, which approach sheds most light on the ethical issues raised by this case? Explain your answer.
3. Should the US government intervene in any way in the negotiations between US auto companies and the Chinese government? Explain.
Attempt any 04 questions:
1. Distinguish ethical decision making from other practical decision situations.
2. Discuss the role of mission statements and codes in creating an ethical corporate culture.
3. Describe the three key concerns of ethical analysis of marketing issues.
4. Explain why ethics is important in the business environment.
5. Discuss the need for ethics in performance appraisal.
