CASE STUDY -1
Tangy spices Ltd, the countries’ biggest spices marketer has decided to launch a hostile bid for Italy’s major spice marketer Chilliano. This is a rare case of an Indian company making an unsolicited hostile bid for a foreign company. The Tangy Spices Ltd. has competencies in Indian spices. The major destination markets for the Tangy spices Ltd. exports have been the Europe and America. The competencies of Chilliano lie in Italian herbs and spices. The Indian company with the takeover wishes to synergies its operations in the world market. It also wants to take advantage of the reach enjoyed by the Italian company in several countries where its products are not beng sold presently.
The move of hostile takeover follows Chilliano’s rejection to an agreement entered a year back. At that time Chilliano was suffering losses and it offered majority shares at a price of € 2.25. A total of 20% shares were transferred at that time. In one year Chilliano was able to turnaround its operations and the company made handsome profits in the last quarter. The promoters who have residual holding of 35% in the company are reluctant to transfer the shares now. They have rejected the agreement with a plea that the earlier offer price was not sufficient.
Tangy spices Ltd has revised its offer to € 2.95. By this lucrative offer some of the large shareholders of Chilliano reveal their interest for selling their stakes. On the other hand, promoters maintained their position on this matter. Through the process of buying of shares in the market the Tangy spices Ltd. gradually consolidated its holding in Chilliano to 45%. Being a major shareholder they were ready for a takeover. At the same time, Tangy spices Ltd. was trying hard to improve their position so that they do not leave any space for Chilliano’s promoters in future.
Read the above case and answer the following questions:
Q (1) What strategic alternative is followed by Tangy spices Ltd?
There are different general strategic alternatives which are also known as Grand Strategies.
(1) Stability
(2) Expansion
(3) Retrenchment
(4) Combination
Expansion is the most popular strategy followed by organization. In expansion strategy, organizations can expand their operations through acquisition route.
Here Tangy Spicy Limited is following up the expansion strategy by acquiring the Chilliano of Italy.
Q (2) Is the hostile takeover by an Indian company appropriate?
Hostile takeovers are extremely expensive. Acquirer need to be ready to pay extra price than market price of equity. It should be done when a cash rich company sees strategic advantage in that acquisition. Indian companies can do the hostile takeover provided that takeover help them to position much stronger in the market. Additionally, price paid for takeover should be in line with the strengths or values to be achieved from that takeover.
For example, Corus acquisition by TATA STEEL is an example of hostile takeover but takeover positioned the TATA as market leader in steel mnufacturing capacity and technologies. So looking at this takeover, it seems if hostile takeover is done with proper long‐term strategy than it is quite appropriate for the Indian companies.
Q.(3) Why the Tangy Spices Ltd. is interested in this takeover?
The Tangy Spices Ltd. has competencies in Indian spices. The major destination markets for the Tangy spices Ltd. exports have been the Europe and America. The competencies of Chilliano lie in Italian herbs and spices. Tangy with this takeover will synergies its operations in the world market, particularly in Europe and America—its major exports markets. It also wants to take advantage of the reach enjoyed by the Italian company in several countries where its products are not beng sold presently.
Further, rejection of promoters to transfer the shares as agreed in an agreement entered a year back also prompted the Tangy to go for his takeover.
Q.(4) Why the promoters are reluctant to transfer the shares after the agreement?
Around a year back, the promoters of Chilliano had agreed to transfer the equity share to Tangy at € 2.25 per share. But in one year, Chilliano was able to turnaround its operations and the company made handsome profits in the last quarter. The promoters who have residual holding of 35% in the company become reluctant to transfer the shares now. They have rejected the agreement with a plea that the earlier offer price of € 2.25 per share was not sufficient. So, it is a case where promoters either feel that they are not getting right value for their equity or they do not intend sell equty due to increased profitability of company in the recent past.
CASE STUDY-2
Meters Limited is a company engaged in the designing, manufacturing, and marketing of instruments like speed meters, oil pressure gauges, and so on, that are fitted into two and four wheelers. Their current investment in assets is around Rs. 5 crores and their last year turnover was Rs. 15 crores, just adequate enough to breakeven. The company has been witnessing over the last couple of years, a fall in their market share prices since many customers are switching over to a new range of electronic instruments from the ange of mechanical instruments that have been the mainstay of Meters Limited.
The Company has received a firm offer of cooperation from a competitor who is similarly placed in respect of product range. The offer implied the following:
(i) transfer of the manufacturing line from the competitor to Meters Limited;
(ii) manufacture of mechanical instruments by Meters Limited for the competitor to the latter's specifications and brand name; and
(iii) marketing by the competitor.
The benefits that will accrue to Meters Limited will be better utilization of its installed capacity and appropriate financial ompensation for the manufacturing effort. The production manager of Meters Limited has welcomed the proposal and points out that it will enable the company to make profts. The sales manager is doubtful about the same since the demand for mechanical instruments in shrinking. The chief Executive is studying the offer.
Read the above case and answer the following questions:
Q.(1) What is divestment strategy? Do you see it being practised in the given case? Explain.
Divestment strategy involves retrenchment of some of the activities in a given business of the company or sell‐out of some of the businesses.
This strategy is largely followed in the following cases
Obsolescence of product/process
Business becoming unprofitable
High competition
Industry overcapacity
Retrenchment Strategy also includes turnaround of declining business operations.
I don’t believe this is being completely followed over here. The company is mainly planning a turnaround of business operation through manufacturing other organization’s products in orderto better utilize the manufacturing capacity. However, it seems customers are switching from mechanical instruments to electronic instruments, so this strategy should not be viewed as turnaround of business operations or divestment strategy.
Q.(2) What is stability strategy? Should Meters Limited adopt it?
If a firm is opting for stability of business operations by staying in the same business, same product, market and functions, and firm normally maintains same levels of effort as at present, then it is known as stability strategy.
The main aim of this strategy is to enhance functional efficiencies, better deployment and utilization of resources.
Meters Limited should not adopt the stability strategy. In this strategy, Meters Limited will continue manufacturing the mechanical meters with improved utilization of capacity and reduced costs but w know that market is losing customers base for mechanical meters.
Q(3) What is expansion strategy? What are the implications for Meters Limited in case it is adopted?
Expansion strategy is the most popular strategy and most of the business organizations opt for expansion strategy because this trategy prompts for the growth of business organizations.
There are two key types of expansions strategy
(1) Intensifications
(2) Diversifications
Both of them are growth oriented strategies; the difference lies in the way by which the firm actually pursues the growth.
Intensification involves the following:
Product Development
Market Penetration
Market Development
Diversification involves the following:
Vertically integrated diversification
Horizontally integrated diversification
Concentric diversification
Conglomerate diversification
Yes, company should adopt expansion strategy by adopting intensifications category. In intensification strategy, company can initially focus on product development i.e. developing new electronic instruments and then they can follow market penetration and market development
Q.(4) What are your suggestions to the Chief Executive?
My suggestions to chief executive will be the following:
for the time being, till the time new products are developed, we can accept the offer of other organization to manufacture their products for better utilization of capacitybut we have to be cautious about competition / sales of products in the same category and that should be properly laid out in the agreement. However, in the long‐term, we should focus on new products developments and try to expand product range by including the manufacturing of electronic instuments.
CASE STUDY -3
Sahni Auto Industries is a manufacturer and exporter of Autoparts with an annual turnover of Rupees one thousand crores. It employs about 2,00 persons in its factory in Punjab and its other offices in India and abroad.
The Personnel Administration and Human Resources Department of the company is headed by Mr. Amit Kapoor‐the Chief Personnel Manager. Mr. Amit Kapoor, an automobile Engineer joined the company 5 years ago as Product Development Manager. After a successful stint of 4 years as Product Development Manager, he was transferred to Personnel Administration and Human Resources Department as the Chief Personnel Manager as a part of Carer development plan. Mr. Vikas, MBA in Human Resources from a renowned Business school, joined the company as Personnel Manager only 3 months back. He reports to Mr. Amit Kapoor‐the Chief Personnel Manager. He handles all routine personnel and industrial relations matters.
One day, during informal discussion with Mr. Amit Kapoor, Mr. Vikas suggested him of linking Human Resources Management with Company's strategic goals and objectives to further improve busness performance and also to develop Organisational culture that fosters more innovative ideas. He also advocated creating abundant 'Social Capital' on the ground that people tend to be more productive in an environment which has trust and goodwill embedded init rather than which is highly hierarchical and formal. Mr. Amit Kapoor disagreed with Mr, Vikas and told him that the role of Human Resources Department was only peripheral to the business and all his suggestions abot its strategic role were beyond the purview of Personnel Administration and Human Resources Department. After this, Mr. Vikas started having number of arguments with Mr. Amit Kapoor in several issues relating to personnel and industrial relations since he felt that a person with a degree in Huma Resources Management was in a far better position to run Personnel Administration and Human Resources Department. Mr. Amit Kapoor‐‐the Chief Personnel Manager had often shown his displeasure on Mr. Vikas's argumentative ‐ tendency and had made it known to the General Manager.
The General Manager called Mr. Amit Kapoor in his office to inform him that he has been elected for an overseas assignment. He further told him to find a suitable person as his successor; he even suggested Mr. Vikas as a possible candidate. Mr. Amit Kapoor, however, selected Mr. Balram, who was working as Training Manager in a Multinational Company for the last 5 years. Mr. Vikas, soon started having arguments with Mr. Balram also over number of issues relating to industrial relations since he felt that he had no experience in handling industral relations matters. Mr. Balram now realised that Mr. Vikas was trying to make things difficult for him. After a series of meetings with the General Manager, Mr. Balram eventually succeeded in convincing him to transfer Mr. Vikas to an office outside Punjab. On learning about his impending transfer, Mr. Vikas wrote a letter to the General Manager joining details of various instances, when Mr. Balram had shown his incompetence in handling problematic situations. When asked for explanation by the General Manager, Mr. Balram had refuted almost all the allegations. The General Manager accepted his explanation and informed Mr. Vikas that most of his allegations against Mr. Balram were unwarranted and baseless. He further advised him to avoid confrontation with Mr. Balram. Mr. Vikas then wrote a letter to the Chairman repeating all the allegations against Mr. Balram. On investigation, the Chairman found most of the allegations true. He then called all the three‐the General Manager, the Chief Personnel Manager and the Personnel Manager in his office and implored them to forget the past and henceforth to wor in coordination with each other in an environment of Trust
and Goodwill.
Read the above case and answer the following questions:
Q.(1) Identify and discuss the major issues raised in the case.
This case is related with human resources function. The major issues raised in this case can be defined as follows:
Non‐linking of Human Resources Management with Company's strategic goals and objectives.
Lack of organisational culture that fosters more innovative ideas.
Highly hierarchical and formal organizational structure which lacks trust and goodwill and thus lacks productivity.
Human Resources Department was treated as peripheral to the business rather than an integrated function for strategic planning nd implementation.
Q.(2) Comment on the recruitment of the two Chief Personnel Managers.
The first Chief Personnel Manager, Mr. Amit Kapoor is an automobile Engineer joined the company 5 years ago as Product Development Manager. After a successful stint of 4 years as Product Development Manager, he was transferred to Personnel Administration and Human Resources Department as the Chief Personnel Manager as a part of Carer development plan.
I don’t see any disadvantage if a capable person without having formal HR qualification being transferred to the HR department. However, over here this transfer is not with an aim to bring some efficiency in the HR function rather it is a simple transfer from oneposition to another position; which I think is not correct. For example, Mr M. Pillai, a qualified CA, has been made HR director in the Infosys from his earlier position of finance director. This change in position of Mr. Pillai is considering him as most capable person and Infosys now a company with more 1 lakh employee has the HR more challengig task than the finance. Therefore they transferred the most capable person to HR director from finance director.
The second Chief Personnel Manager, Mr. Balram was earlier working as Training Manager in a Multinational Company for the last 5 years. He also has no formal experience and qualifications in the HR management. I don’t think his appointment as chief HR manager was also on any merit or to infuse any efficiency in the HR function.
Q.(3) Would you justify Mr. Vikas's argumentative tendency with the Chief Personnel Managers ? Give reasons for your answer.
I agree with Mr. Vikas argumentative tendency with Chief Personnel Managers regarding enhancing role of HR department and industrial relation i the company strategic management. I also agree with his view that Human Resources Management should be linked with Company's strategic goals and objectives. Because I think HR is as equal and important function as finance and marketing; and better HR management helps organizations to achieve their strategic goals and objectives.
But I don’t agree with his view that a person with HR qualifications only can better manage the HR department. As said above, Mr M. Pillai, a qualified CA, has been made HR director in the Infosys from his earlier position of finance director. This change in position of Mr. Pillai is considering him the most capable person and Infosys now a company with more 1 lakh employee has the HR management moe challenging task than the finance management.
Q.(4) Do you agree with suggestion offered by Mr. Vikas to Human Resources Management with the company's strategic goals ? If yes, suggest prominent areas where Human Resources Department can play role in this regard.
Yes, I agree with suggestion offered by Mr. Vikas to Human Resources Management with the company's strategic goals. In the the following area the HR department can play a role in this regard:
Providing purposeful direction: The human resource management can lead people and the organization towards the desired direction. The HR manager has to ensure that the objectives of an organization become the objectives of each person working in the organiation.
Creating competitive atmosphere: By creating committed and competitive atmosphere through opportunities for employees.
Facilitation of change: The Human resources are more concerned with substance rather than form, accomplishments rather than activities, and practice rather than theory. The human resources should be provided enough opportunities for the same.
Diversified workforce: In the modern organization management of diverse workforce is a great challenge. Workforce diversity can be observed in terms of male and female workers, young and old workers, educated and uneducated workers, unskilled and professional employee, etc. creating a great culture or non‐financial incentives also plays an important role in motivating the workforce.
Empowering human resources: Empowerment means authorizing every number of a society or organization to take of his/her own destiny realizing his/her full potential.
Building core competency: The human resource manager has a great role to play in developing core competency by the firm. A core competence is a unique strength of an organization which may not be shared by others in the form marketing and technica capability.
Developing ethical work culture: A vibrant work culture should be developed in the organizations to create an atmosphere of trust among people and to encouragecreative ideas by the people.
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