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IIBMS – LINCOLN ELECTRIC

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CASE: 3       LINCOLN ELECTRIC   IIBMS – LINCOLN ELECTRIC Lincoln Electric is one of the leading companies in the global market for arc welding equipment. This is a cost-competitive business in which consumers are price sensitive. Lincoln’s success has been based on extremely high levels of employee productivity. The company attributes its productivity to a strong organizational culture and an incentive scheme based on piecework. Lincoln’s organizational culture dates back to James Lincoln, who in 1907 joined the company his brother had established a few years earlier. Lincoln had a strong respect for the ability of the individual and believed that, correctly motivated, ordinary people could achieve extraordinary performance. He emphasized that the company should be a meritocracy where people were rewarded for their individual effort. Strongly egalitarian, Lincoln removed barriers to communication between workers and managers, practicing an open-door policy. He made sure that all who worked for the company were treated equally; for example, everyone ate in the same cafeteria, there were no reserved parking places for managers, and so on. Lincoln also believed that any productivity gains should be shared with consumers in the form of lower prices, with employees in the form of higher pay, and with shareholders in the form of higher dividends. The organizational culture that grew out of James Lincoln’s beliefs was reinforced by the company’s incentive system. Production workers receive no base salary but are paid according to the number of pieces they produce. The piecework rates at the company enable an employee working at a normal pace to earn an income equivalent to the average wage for manufacturing workers in the area where a factory is based. Workers are responsible for the quality of their output and must repair any defects spotted by quality inspectors before the pieces are included in the piecework calculation. Since 1934 production workers have been awarded semiannual bonuses based on merit ratings. These ratings are based on objective criteria (such as an employee’s level and output) and subjective criteria (such as an employee’s attitude toward cooperation and his or her dependability). These systems give Lincoln’s employees an incentive to work hard and to generate innovations that boost productivity—doing so influences their level of pay. Lincoln’s factory workers have been able to earn a base pay that often exceeds the average manufacturing wage in the area by more than 50 percent, and they also receive bonuses that in good years can double their base pay. Despite high employee compensation, the workers are so productive that Lincoln has a lower cost structure than its competitors. Question What kind of control system does Lincoln Electric rely on to generate high employee productivity? Can you think of any possible unintended consequences of an incentive pay system based on piecework? How does Lincoln guard against these unintended consequences? Do Lincoln’s control systems match the strategy of the enterprise? How? IIBMS – LINCOLN ELECTRIC At Global Study Solutions, we take immense pride in our ability to offer specialized support to students pursuing various programs at IIBMS (Institute Indian Institute of Business Management & Studies). Our dedicated team comprises experienced professionals who excel in crafting precise and well-researched solutions for assignments and case studies across different disciplines and courses. Our commitment to aiding students in achieving academic success aligns perfectly with the educational standards upheld by IIBMS Institute (Institute Indian Institute of Business Management & Studies). We understand the importance of delivering high-quality, customized solutions that meet the unique requirements of assignments and case studies within the institute\’s curriculum. Whether in MBA, EMBA, GMS, DMS, or any other programs offered at IIBMS Institute (Institute Indian Institute of Business Management & Studies), our team is equipped to provide expert guidance and meticulously crafted solutions. We prioritize accuracy, originality, and timely delivery; ensuring students receive the necessary assistance to excel academically. We are dedicated to fostering an environment of academic excellence and providing dependable support to the esteemed students of IIBMS Institute (Institute Indian Institute of Business Management & Studies). IIBMS Answer Sheets IIBMS Mumbai IIBMS Bangalore Customized Answer Solutions MBA Assignment Solutions EMBA Case Study Solutions GMS Answer Sheets DMS Assignment Help Professional Writing Assistance Tailored Academic Solutions Comprehensive Answer Sheets Specialized IIBMS Support Academic Writing Services Timely Submission Support Expertly Crafted Answers Personalized Guidance Reliable IIBMS Assistance Get expert assistance with your IIBMS Institute (Institute Indian Institute of Business Management & Studies) assignments and answer sheets from our professional academic writing services. Our team specializes in supporting students with IIBMS Institute (Institute Indian Institute of Business Management & Studies) coursework, ensuring top-notch answer sheets and comprehensive solutions. Ace, with our tailored assistance, your IIBMS Institute exams, offering precise guidance and accurate answer sheet preparation. Seeking reliable help for your IIBMS Institute studies? Trust our academic writing services for meticulously crafted answer sheets and exceptional support. Score high in your IIBMS Institute assessments by availing our expert aid in preparing comprehensive and well-structured answer sheets. IIBMS Institute Project Report Writing Services IIBMS Institute Customized Project Reports IIBMS Institute Project Support IIBMS Institute Professional Project Report Assistance Tailored Solutions for Project Reports IIBMS Institute Quality Project Documentation IIBMS Institute Expert Project Report Writers IIBMS Institute Comprehensive Project Analysis IIBMS Institute Structured Project Report Services IIBMS Institute Detailed Project Documentation IIBMS Project Evaluation Support IIBMS Institute Custom Project Report Formats IIBMS Institute Project Research and Analysis MBA/EMBA/GMS/DMS Project Reports IIBMS Institute (Institute Indian Institute of Business Management & Studies) assignments, solved papers, and study materials are available through our academic writing services. Seeking assistance with IIBMS Institute coursework? Our professional team delivers accurate and timely solutions for all your academic needs. Our specialized academic writing support simplifies access to IIBMS Institute (Institute Indian Institute of Business Management & Studies) question papers and model answers. Need expert guidance for your IIBMS Institute assessments? Our service offers comprehensive solutions for students seeking assistance. Our academic writing services ensure precise and high-quality answers for IIBMS Institute assignments, aiding students in their educational journey. Academic writing professionals play a crucial role in assisting students with their university assignments, striving to achieve several

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IIBMS – IMPROVING PRODUCTIVITY IN THE AUTO INDUSTRY

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CASE: 2: IMPROVING PRODUCTIVITY IN THE AUTO INDUSTRY   IIBMS – IMPROVING PRODUCTIVITY IN THE AUTO INDUSTRY In 2004 Detroit’s big three care makers—GM, Ford, and Daimler Chrysler—accounted for only 58.6 percent of vehicles sold in the United States, the lowest level ever, down from 76.7 percent in 1984. For most of the last decade strong sales of sports utility vehicles, in which Detroit dominates, have held overall market share losses in check; but now foreign producers such as Toyota, Honda, and Kia are going after that segment too, creating huge potential problems for Detroit. The American automobile makers have responded by trying to reinvigorate their passenger car business, coming out with a host of new designs and cutting the costs of developing and producing those cars. The old rule of thumb in the industry was that it took four years and cost $1 billion to design a new car and tool a factory to produce it. To recoup these costs, Detroit would typically sell a car for seven years before developing a new design. Unfortunately for the American producers, the Japanese have shortened the life cycle of a typical vehicle to five years; and by lowering development and tooling costs, they have been able to make good money on their car models. Now the American producers are trying to strike back. Typical is Ford, which has reduced its product development time by a quarter since the late 1990s and continues to reduce development time by 10 percent per year. Ford now designs almost a third of its models in less than 30 months. One reason for this progress has been the increase in communication among designers at Ford. Ford designers used to work in different teams and did not share enough knowledge about parts and platform design. Now teams get together to see they can share the design work. Moreover, design teams are trying to use the same parts in a wider variety of car models, and where appropriate use parts from old models in new cars. Detroit auto designers used to boast that new models were completely redesigned from the floor up with all new parts. Now that is seen as costly and time-consuming. At General Motors, for example, the goal is now to reuse 40–60 percent of parts from one car generation to the next, thereby reducing design time and tooling costs. At Ford the number of parts has been slashed. For example, Ford engineers now choose from just 4 steering wheels instead of contemplating 14 different designs. Another important trend has been to reduce the number of platforms used for car models. This is something Japanese producers have long done.  Honda, for example, builds its Odyssey minivan and Pilot and Acura MDX SUVs on the same platform and has added a pickup truck to the mix. Currently Chrysler bases its vehicle fleet on 13 distinct platforms. The company is trying to bring this down to just four platforms, reducing the product development budget from $42 billion to $30 billion in the process Ford and General Motors have similar aims. The platform for GM’s new small car offering, the Pontiac Solstice, will also be used for its new Saturn coupe and perhaps one more GM car. As GM develops its next generation Chevy Silverado and GMC Sierra pickups, it plans to reuse much of the existing platform, cutting development costs in half to nearly $3 billion. Over the next eight years Ford plans to use its Mazda 6 sedan platform (Ford owns Mazda) as the basis for 10 new vehicles. The idea, according to Ford’s head of operations, is to engineer it once and use it often. Along with these changes in design philosophy, the Detroit companies are retooling their factories to reduce costs and make them capable of producing several car models from the same line. By doing so they hope to reduce the breakeven point for a new car model. GM’s Solstice, for example, is forecast to sell around 25,000 units a year—too few to recoup fixed costs under the old design and build philosophy. But GM has cut design costs (by using a common platform and parts) and tooling costs (by investing in flexible manufacturing technologies that can produce multiple designs based on the Solstice platform from the same basic line). GM has also worked hard to get unions to agree to changes in inflexible work rules. Assembly-line workers now perform several different jobs, which reduces waste and boosts productivity. Similarly, Ford hopes to have 75 percent of its production built on flexible assembly lines by 2010; if successful, its investments in flexible factories could reduce annual costs by some $2 billion a year. The big problem with the new vision coming out of Detroit, as critics see it, is that not much is new about it. The techniques being talked about will reduce development time and tooling costs; but Japanese automakers have been pursuing the same techniques for years. The critics fear that Detroit is chasing a moving target, and when they arrive in the promised land it will be too late because their global competitors will already have taken competition to the next level. Questions How have lower development and tooling costs given Japanese auto manufacturers an advantage in the marketplace? What steps are the Detroit automobile makers taking to reduce product development time and tooling costs? If they are successful, what are the implications of these initiatives for the number of car models they can sell and breakeven volumes for individual models? Will these initiatives benefit Detroit’s customers? How? The Japanese producers have for years used many of the methodologies now being introduced in Detroit. Why do you think it has taken the Detroit automakers so long to respond to their foreign competitors? IIBMS – IMPROVING PRODUCTIVITY IN THE AUTO INDUSTRY At Global Study Solutions, we take immense pride in our ability to offer specialized support to students pursuing various programs at IIBMS (Institute Indian Institute of Business Management & Studies).

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IIBMS – Spirituality in the workplace

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CASE 1:    Spirituality in the workplace IIBMS – Spirituality in the workplace      Traditionally, the workplace and spirituality did not mix in America. But things are changing. Andre Delbecq, a Professor in Santa Clara University, a Jesuit institution, said: “There were two things I thought I’d never see in my life, the fall of the Russian empire and God being spoken about in a business school.” Now management books and conferences (including the annual meeting of the Academy of Management) deal with the various aspects of how God can be brought into the organizational environment. To be sure, people who want to integrate spiritual dimensions into the workplace are still considered rebels. But ServiceMaster, a Fortune 500 company with some 75,000 employees, created a spiritual organization culture many years ago. Indeed, Peter Drucker, one of the most prolific writers on management, had high regards for the company that is known for its products such as Terminix (pest control), TruGreen, Merry Maids, and others. When people in the US were asked if they believe in God, some 95 per cent said yes. It is in a spiritual context that business people under the daily pressure can discuss their inner feelings. As the baby boomers, now in their 50s, are reaching the top in the organizational life, they begin to wonder what life is all about. They lived through the youth culture of the 1960s and the 1980s that was dominated by greed. They are now questioning the real meaning of life and the ethical dimension of work. Jose Zeilstra, an executive at Price WaterhouseCoopers worked around the world, practicing her Christian principles in different cultures. During her assignment in China, she strongly argued against the practice of giving “very expensive gifts.” As a result the business transaction did not work out. Yet, in the long run, while integrating her personal beliefs with her work, resulted in a very successful career. Academic institutions such a the University of St. Thomas, the University of Denver, and the Harvard Divinity School are following and studying the movement of spirituality. Other schools such as Antioch University in Los Angeles, the University of New Haven in Connecticut, the University of Scranton in Pennsylvania, Santa Clara University in California as well as institutions abroad such as the University of Bath in England and the Indian Centre for Encouraging Excellence in Bombay, India, are conducting research, conferences, or lecture on spirituality.        The cover story of Business week (November 1, 1999) discussed how company outlets such as Taco Bell, Pizza Hut, and McDonald’s as well as the Xerox Corporation pay attention to spiritual needs of their employees. Some companies claim an increase in productivity, decrease in turnover, and a reduction in fear. A research study by the consulting firm McKinsey & Co. in Australia showed that firms with spiritual programmes showed reduced turnover and improved productivity. Professor Ian I Mitroff at the University of Southern California even stated, “Spirituality could be the ultimate competitive advantage.” But there is also the concern that cult members and groups with a radical perspective could use the workplace for their own aims. Still, employees in companies that integrate spirituality in their work place count on the potential benefits of greater respect for individuals, a more humane treatment of their fellow workers, and an environment that permeates their organization with greater trust. Question: What is spirituality? Is this topic appropriate for businesses? What are the arguments for and against its inclusion in business? IIBMS – Spirituality in the workplace At Global Study Solutions, we take immense pride in our ability to offer specialized support to students pursuing various programs at IIBMS (Institute Indian Institute of Business Management & Studies). Our dedicated team comprises experienced professionals who excel in crafting precise and well-researched solutions for assignments and case studies across different disciplines and courses. Our commitment to aiding students in achieving academic success aligns perfectly with the educational standards upheld by IIBMS Institute (Institute Indian Institute of Business Management & Studies). We understand the importance of delivering high-quality, customized solutions that meet the unique requirements of assignments and case studies within the institute\’s curriculum. Whether in MBA, EMBA, GMS, DMS, or any other programs offered at IIBMS Institute (Institute Indian Institute of Business Management & Studies), our team is equipped to provide expert guidance and meticulously crafted solutions. We prioritize accuracy, originality, and timely delivery; ensuring students receive the necessary assistance to excel academically. We are dedicated to fostering an environment of academic excellence and providing dependable support to the esteemed students of IIBMS Institute (Institute Indian Institute of Business Management & Studies). IIBMS Answer Sheets IIBMS Mumbai IIBMS Bangalore Customized Answer Solutions MBA Assignment Solutions EMBA Case Study Solutions GMS Answer Sheets DMS Assignment Help Professional Writing Assistance Tailored Academic Solutions Comprehensive Answer Sheets Specialized IIBMS Support Academic Writing Services Timely Submission Support Expertly Crafted Answers Personalized Guidance Reliable IIBMS Assistance Get expert assistance with your IIBMS Institute (Institute Indian Institute of Business Management & Studies) assignments and answer sheets from our professional academic writing services. Our team specializes in supporting students with IIBMS Institute (Institute Indian Institute of Business Management & Studies) coursework, ensuring top-notch answer sheets and comprehensive solutions. Ace, with our tailored assistance, your IIBMS Institute exams, offering precise guidance and accurate answer sheet preparation. Seeking reliable help for your IIBMS Institute studies? Trust our academic writing services for meticulously crafted answer sheets and exceptional support. Score high in your IIBMS Institute assessments by availing our expert aid in preparing comprehensive and well-structured answer sheets.   IIBMS Institute Project Report Writing Services IIBMS Institute Customized Project Reports IIBMS Institute Project Support IIBMS Institute Professional Project Report Assistance Tailored Solutions for Project Reports IIBMS Institute Quality Project Documentation IIBMS Institute Expert Project Report Writers IIBMS Institute Comprehensive Project Analysis IIBMS Institute Structured Project Report Services IIBMS Institute Detailed Project Documentation IIBMS Project Evaluation Support IIBMS Institute Custom Project Report Formats IIBMS Institute Project Research and Analysis MBA/EMBA/GMS/DMS Project Reports   IIBMS Institute (Institute Indian Institute of Business Management & Studies) assignments, solved papers,

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IIBMS – PANDIT TO AFAUZI

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Case I: IIBMS – PANDIT TO AFAUZI IIBMS – PANDIT TO AFAUZI – IIBMS The case is based on an actual incident which took place in an Army unit operationally deployed in a field area just a few months before the 1971 showdown with Pakistan. The opposing forces of India and Pakistan were taking their respective positions in a pre-war scenario. The clouds of showdown were looming large over the horizons of both the countries. The rumbling of own tanks and guns, the reconnaissance, leaders of different arms and services establishing liaison with one another in the process of formulating plans for both defence and attack, digging of main and contingency positions was in progress, complete war machinery was being mobilized, camouflaged, and concealed. Ammunition and other explosives were being unloaded and dug down. Junior leaders were being briefed and rebriefed, communications were being checked, and troops were being motivated and looked after as most of them were green because of their sudden induction in the Army in post war days of 1965. Such was the scene which convinced all and sundry that war was imminent. Most of the troops looked forward to a showdown mainly because they wanted to get rid of the heavy ammunition as also for the mere thrill of it. Those who had not seen a battle, seemed excited over the prospects of a war and those who had seen the war, took everything in their stride, displaying a perfect cool, calm and confident countenance. One Ram Bali Mishra (RBM) was a raw and green jawan of about 20 years of age and two years\’ service and naturally had not seen a war. He was relatively tall, well built with fair complexion. He had pleasant manners, turned himself out well and spoke well. He was a complete teetotaler, non-smoker, and a vegetarian. He was well educated and well versed in religious affairs, particularly, of the religion to which most of the unit belonged. In the absence of the religious teacher of the unit, he held religious institute (dharamsthal) and gave religious discourses at the dharamsthal to all officers, junior commissioned officers JCOs), non-commissioned officers (NCOs) and jawans. During the pre-war days, he was performing the duties of a Sahayak (assistant, formerly known as orderly) to Gun Position Officer (GPO), a young officer, of the rank of a Second Lieutenant with one year of service. RBM\’s charter of duties included: (a) Attending all the training activities of his trade (telephone operator) which were being organized in the sub-unit; (b) Making arrangements to get the food from the officers\’ mess and water from the tube- well for the office; and (c) Attending the telephone and noting down all the messages for the office. By virtue of the nature and timings of these duties, RBM was excused physical training in the morning and games in the evening which all other jawans of the sub-unit attended. He was generally happy with these duties and working with the officer: After a short span of a week or so, the officer noticed some changes in the behavior of RBM. He also looked pale and worried. He was less talkative, less lively and his interaction with other jawans decreased. He started keeping aloof except where his duties warranted interaction with others. The officer tried to find the reasons from RBM but nothing emerged except a shy and coy smile and “aisi to koi baat Nai, Sahib\”. The officer tried to probe further to find out if some guilt conscience was bothering him because of some bad habit which young man of his age is likely to fall prey to, in the absence, of even visual contact of civil life and members of the opposite sex.   This was denied vehemently. After another week or so, it was noticed that RBM had developed constipation, ate very little, felt tired after walking even a few hundred yards and had become weak. He was interviewed by the officer but nothing emerged once again. He was sent to the Regimental Medical Officer (RMO). The RMO inspected him and gave some medicines. On being contacted by the officer, the RMO mentioned that there was nothing wrong medically with RBM except that he was scared of the prospects of war. He even disclosed that after having been medically examined, RBM even started giving a discourse to the RMO on the bad effects of a war on environment, economy, costs, etc. He stated that people would be loaded with sufferings; killed, injured, maimed, and would become homeless. The children would become orphans, women widowed, and the humanity would suffer. He vehemently advised the RMO to make all attempts to stop the war and if he could, at least oppose it. After a brief conversation, the RMO was convinced that all the symptoms pointed to a fear psychosis of war. He gave some medicines to RBM and sent him to the sub-unit. The RMO told the GPO that because of the worry about the war, RBM had developed problems of digestion and hence, ate less, became inactive and felt tired quickly. He had earlier been feeling shy of expressing his apprehensions about the war to others, lest they consider him a coward. The GPO gave a thought to the whole problem and interviewed RBM, advising him to attend· all physical activities, including physical training, weapon training, games, etc. thence on. The officer also planned to keep RBM among the persons of his trade, specially in the command post which controlled the firing of the guns, where from the officer himself was expected to control the\’ fire in case of breakout of war. A small cadre (class) was organized for all ranks of the sub-unit to apprise them of the organization of all arms and services in the army, starting from the level of a sub-unit. They were explained the tactics in the battlefields, the deployment patterns of different arms, the pattern and modes of support by the Air Force, the

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IIBMS – REBRANDING MCJOBS

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CASE: 4   IIBMS – REBRANDING MCJOBS IIBMS – REBRANDING MCJOBS As with most fast-food restaurant chains, McDonald’s needs more people to fill jobs in its vast empire. Yet McDonald’s executives are finding that recruiting is a tough sell. The industry is taking a beating from an increasingly health-conscious society and the popular film Supersize Me. Equally troublesome is a further decline in the already dreary image of employment in a fast-food restaurant. It doesn’t help that McJob, a slang term closely connected to McDonald’s, was recently added to both Merriam-Webster’s Collegiate Dictionary and the Oxford English Dictionary as a legitimate concept meaning a low-paying, low-prestige, dead-end, mindless service job in which the employee’s work is highly regulated. McDonald’s has tried to shore up its employment image in recent years by improving wages and adding some employee benefits. A few years ago it created the “I’m loving it” campaign, which took aim at a positive image of the golden arches for employees as well as customers. The campaign had some effect, but McDonald’s executives realized that a focused effort was needed to battle the McJob image. Now McDonald\’s is fighting back with a “My First” campaign to show the public—and prospective job applicants—that working at McDonald\’s is a way to start their careers and develop valuable life skills. The campaign’s centerpiece is a television commercial showing successful people from around the world whose first job was at the fast-food restaurant. “Working at McDonald\’s really helped lay the foundation for my career,” says ten-time Olympic track and field medalist and former McDonald\’s crew member Carl Lewis, who is featured in the TV ad. “It was the place where I learned the true meaning of excelling in a fast-paced environment and what it means to operate as part of a team.” Richard Floersch, McDonald\’s executive vice president of human resources, claims that the company’s top management has deep talent, but the campaign should help to retain current staff and hire new people further down to hierarchy. “It’s a very strong message about how when you start at McDonald\’s, the opportunities are limitless,” says Floersch. Even the McDonald\’s application form vividly communicates this message by showing a group of culturally diverse smiling employees and the caption “At McDonald\’s You Can Go Anywhere!” McDonald\’s has also distributed media kits in several countries with factoids debunking the McJob myth. The American documentation points out that McDonald\’s CEO Jim Skinner began his career working the restaurant’s front lines, as did 40 percent of the top 50 members of the worldwide management team, 70 percent of all restaurant managers, and 40 percent of all owner/operators. “People do come in with a ‘job’ mentality, but after three months or so, they become evangelists because of the leadership and community spirit that exists in stores,” says David Fairhurst, the vice president for people at McDonald\’s in the United Kingdom. “For many, it’s not a job, but a career.” McDonald\’s also hopes the new campaign will raise employee pride and loyalty, which would motivate the 1.6 million staff members to recruit more friends and acquaintances through word of mouth. “If each employee tells just five people something cool about working at McDonald\’s, the net effect is huge,” explains McDonald\’s global chief marketing officer. So far the campaign is having the desired effect. The company’s measure of employee pride has increased by 14 percent, loyalty scores are up by 6 percent, and 90-day employee turnover for hourly staff has dropped by 5 percent. But McDonald\’s isn\’t betting on its new campaign to attract enough new employees. For many years it has been an innovator in recruiting retirees and people with disabilities. The most recent innovation at McDonald\’s UK, called the Family Contract, allows wives, husbands, grandparents, and children over the age of 16 to swap shifts without notifying management. The arrangement extends to cohabiting partners and same-sex partners. The Family Contract is potentially a recruiting tool because family members can now share the same job and take responsibility for scheduling which family member takes each shift. Even with these campaigns and human resource changes, some senior McDonald\’s executives acknowledge that the entry-level positions are not a “lifestyle” job. “Most of the workers we have are students—it’s a complementary job,” says Denis Hennequin, the Paris-based executive vice president for McDonald\’s Europe. Questions Discuss McDonald\’s current situation from a human resource planning perspective. Is McDonald\’s taking the best approach to improving its employer brand? Why or why not? If you were in charge of developing the McDonald\’s employer brand, what would you do differently? Would “guerrilla” recruiting tactics help McDonald\’s attract more applicants? Why or why not? If so what tactics might be effective? IIBMS – REBRANDING MCJOBS At Global Study Solutions, we take immense pride in our ability to offer specialized support to students pursuing various programs at IIBMS (Institute Indian Institute of Business Management & Studies). Our dedicated team comprises experienced professionals who excel in crafting precise and well-researched solutions for assignments and case studies across different disciplines and courses. Our commitment to aiding students in achieving academic success aligns perfectly with the educational standards upheld by IIBMS Institute (Institute Indian Institute of Business Management & Studies). We understand the importance of delivering high-quality, customized solutions that meet the unique requirements of assignments and case studies within the institute\’s curriculum. Whether in MBA, EMBA, GMS, DMS, or any other programs offered at IIBMS Institute (Institute Indian Institute of Business Management & Studies), our team is equipped to provide expert guidance and meticulously crafted solutions. We prioritize accuracy, originality, and timely delivery; ensuring students receive the necessary assistance to excel academically. We are dedicated to fostering an environment of academic excellence and providing dependable support to the esteemed students of IIBMS Institute (Institute Indian Institute of Business Management & Studies). IIBMS Answer Sheets IIBMS Mumbai IIBMS Bangalore Customized Answer Solutions MBA Assignment Solutions EMBA Case Study Solutions GMS Answer Sheets DMS Assignment Help Professional Writing Assistance Tailored Academic Solutions Comprehensive Answer Sheets Specialized IIBMS Support Academic Writing

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IIBMS – BOOM AND BUST IN TELECOMMUNICATIONS

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CASE: 2   BOOM AND BUST IN TELECOMMUNICATIONS IIBMS – BOOM AND BUST IN TELECOMMUNICATIONS In 1997 Michael O\’Dell, the chief scientist at World-Com, which owned the largest network of “Internet backbone” fiber optic cable in the world, stated that data traffic over the Internet was doubling every hundred days. This implied a growth rate of over 1,000 percent a year. O\’Dell went on to day that there was not enough fiber optic capacity to go around, and that “demand will far outstrip supply for the foreseeable future.” Electrified by this potential opportunity, a number companies rushed into the business. These firms included Level 3 Communications, 360 Networks, Global Crossing, Qwest Communications, World-Com, Williams Communications Group, Genuity Inc., and XO Communications. In all cases the strategic plans were remarkably similar: Raise lots of capital, build massive fiber optic networks that straddled the nation (or even the globe), cut prices, and get ready for the rush of business. Managers at these companies believed that surging demand would soon catch up with capacity, resulting in a profit bonanza for those that had the foresight to build out their networks. It was a gold rush, and the first into the field would stake the best claims. However, there were dissenting voices. As early as October 1998 an Internet researcher at AT&T Labs named Andrew Odlyzko published a paper that de-bunked the assumption that demand for Internet traffic was growing at 1,000 percent a year. Odlyzko’s careful analysis concluded that growth was much slower—only 100 percent a year! Although still large, that growth rate was not nearly large enough to fill the massive flood of fiber optic capacity that was entering the market. Moreover, Odlyzko noted that new technologies were increasing the amount of data that could be sent down existing fibers, reducing the need for new fiber. But with investment money flooding into the market, few paid any attention to him. WorldCom was still using the 1,000 percent figure as late as September 2000. As it turned out, Odlyzko was right. Capacity rapidly outstripped demand, and by late 2002 less than 3 percent of the fiber that had been laid in the ground was actually being used! While prices slumped, the surge in volume that managers had bet on did not materialize. Unable to service the debt they had taken on to build out their networks, company after company tumbled into bankruptcy—including WorldCom, 360 Networks, XO Communications, Global Crossing. Level 3 and Qwest survived, but their stock price had fallen by 90 percent, and both companies were saddled with massive debts.   Questions   Why did the strategic plans adopted by companies like Level 3 Global Crossing and 360 Networks fail? The managers who ran these companies were smart, successful individuals, as were many of the investors who put money into these businesses. How could so many smart people have been so wrong? What specific decision-making biases do you think were at work in this industry during the late 1990s and early 2000s? What could the managers running these companies done differently that might have led to a different outcome? IIBMS – BOOM AND BUST IN TELECOMMUNICATIONS At Global Study Solutions, we take immense pride in our ability to offer specialized support to students pursuing various programs at IIBMS (Institute Indian Institute of Business Management & Studies). Our dedicated team comprises experienced professionals who excel in crafting precise and well-researched solutions for assignments and case studies across different disciplines and courses. Our commitment to aiding students in achieving academic success aligns perfectly with the educational standards upheld by IIBMS Institute (Institute Indian Institute of Business Management & Studies). We understand the importance of delivering high-quality, customized solutions that meet the unique requirements of assignments and case studies within the institute\’s curriculum. Whether in MBA, EMBA, GMS, DMS, or any other programs offered at IIBMS Institute (Institute Indian Institute of Business Management & Studies), our team is equipped to provide expert guidance and meticulously crafted solutions. We prioritize accuracy, originality, and timely delivery; ensuring students receive the necessary assistance to excel academically. We are dedicated to fostering an environment of academic excellence and providing dependable support to the esteemed students of IIBMS Institute (Institute Indian Institute of Business Management & Studies). IIBMS Answer Sheets IIBMS Mumbai IIBMS Bangalore Customized Answer Solutions MBA Assignment Solutions EMBA Case Study Solutions GMS Answer Sheets DMS Assignment Help Professional Writing Assistance Tailored Academic Solutions Comprehensive Answer Sheets Specialized IIBMS Support Academic Writing Services Timely Submission Support Expertly Crafted Answers Personalized Guidance Reliable IIBMS Assistance Get expert assistance with your IIBMS Institute (Institute Indian Institute of Business Management & Studies) assignments and answer sheets from our professional academic writing services. Our team specializes in supporting students with IIBMS Institute (Institute Indian Institute of Business Management & Studies) coursework, ensuring top-notch answer sheets and comprehensive solutions. Ace, with our tailored assistance, your IIBMS Institute exams, offering precise guidance and accurate answer sheet preparation. Seeking reliable help for your IIBMS Institute studies? Trust our academic writing services for meticulously crafted answer sheets and exceptional support. Score high in your IIBMS Institute assessments by availing our expert aid in preparing comprehensive and well-structured answer sheets.   IIBMS Institute Project Report Writing Services IIBMS Institute Customized Project Reports IIBMS Institute Project Support IIBMS Institute Professional Project Report Assistance Tailored Solutions for Project Reports IIBMS Institute Quality Project Documentation IIBMS Institute Expert Project Report Writers IIBMS Institute Comprehensive Project Analysis IIBMS Institute Structured Project Report Services IIBMS Institute Detailed Project Documentation IIBMS Project Evaluation Support IIBMS Institute Custom Project Report Formats IIBMS Institute Project Research and Analysis MBA/EMBA/GMS/DMS Project Reports   IIBMS Institute (Institute Indian Institute of Business Management & Studies) assignments, solved papers, and study materials are available through our academic writing services. Seeking assistance with IIBMS Institute coursework? 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IIBMS – STAR ENGINEERING COMPANY

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CASE – 4   STAR ENGINEERING COMPANY IIBMS – STAR ENGINEERING COMPANY  Star Engineering Company (SEC) produces electrical accessories like meters, transformers, switchgears, and automobile accessories like taximeters and speedometers. SEC buys the electrical components, but manufactures all mechanical parts within its factory which is divided into four production departments Machining, Fabrication, Assembly, and Painting—and three service departments—Stores, Maintenance, and Works Office. Though the company prepared annual budgets and monthly financial statements, it had no formal cost accounting system. Prices were fixed on the basis of what the market can bear. Inventory of finished stocks was valued at 90 per cent of the market price assuming a profit margin of 10 per cent. In March, the company received a trial order from a government department for a sample transformer on a cost-plus-fixed-fee basis. They took up the job (numbered by the company as Job No 879) in early April and completed all manufacturing operations before the end of the month.             Since Job No 879 was very different from the type of transformers they had manufactured in the past, the company did not have a comparable market price for the product. The purchasing officer of the government department asked SEC to submit a detailed cost sheet for the job giving as much details as possible regarding material, labour and overhead costs. SEC, as part of its routine financial accounting system, had collected the actual expenses for the month of April, by 5th of May. Some of the relevant data are given in Exhibit A. The company tried to assign directly, as many expenses as possible to the production departments. However, It was not possible in all cases. In many cases, an overhead cost, which was common to all departments had to be allocated to the various departments using some rational basis. Some of the possible bases were collected by SEC’s accountant. These are presented in Exhibit B. He also designed a format to allocate the overhead to all the production and service departments. It was realized that the expenses of the service departments on some rational basis. The accountant thought of distributing the service departments’ costs on the following basis: Works office costs on the basis of direct labour hours. Maintenance costs on the basis of book value of plant and machinery. Stores department costs on the basis of direct and indirect materials used. The accountant, who had to visit the company’s banker, passed on the papers to you for the required analysis and cost computations.   REQUIRED   Based on the data given in Exhibits A and B, you are required to:   Complete the attached “overhead cost distribution sheet” (Exhibit C). Note: Wherever possible, identify the overhead costs chared directly to the production and service departments. If such direct identification is not possible, distribute the costs on some “rational basis. Calculate the overhead cost (per direct labour hour) for each of the four producing departments. This should include share of the service departments’ costs. Do you agree with: a.   The procedure adopted by the company for the distribution of overhead costs? b.   The choice of the base for overhead absorption, i.e. labour-hour rate?   Exhibit A   STAR ENGINEERING COMPANY Actual Expenses(Manufacturing Overheads) for April RS RS Indirect Labour and Supervisions: Machining Fabrication Assembly Painting Stores Maintenance Indirect Materials and Supplies Machining Fabrication Assembly Painting Maintenance Others  Factory Rent Depreciation of Plant and Machinery Building Rates and Taxes Welfare Expenses (At 2 per cent of direct labour wages and Indirect labour and supervision) Power  (Maintenance—Rs 366; Works Office Rs 2,200, Balance to Producing Departments) Works Office Salaries and Expenses Miscellaneous Stores Department Expenses  33,00022,000 11,000  7,000 44,000 32,700 2,200 1,100 3,300 3,400 2,800 1,68,000    44,000      2,400    19,400   68,586 1,30,260      1,190 1,49,700 12,800 4,33,930 5,96,930   Exhibit B STAR ENGINEERING COMPANY Projected Operation Data for the Year  Department  Area  (sq.m) Original Book of Plant & Machinery Rs Direct Materials Budget Rs Horse  Power Rating Direct Labour  Hours Direct Labour  Budget Rs Machining Fabrication Assembly Painting Stores Maintenance Works Office Total  13,000 11,000  8,800  6,400  4,400  2,200  2,200 48,000 26,40,000 13,20,000   6,60,000   2,64,000   1,32,000   1,98,000     68,000 52,80,000 62,40,000 21,60,000 10,80,000 94,80,000 20,000 10,000   1,000   2,000 33,000 14,40,000   5,28,000   7,20,000   3,30,000 30,18,000 52,80,000 25,40,000 13,20,000   6,60,000 99,00,000   Note  The estimates given in this exhibit are for the budgeted year January to December where as the actuals in Exhibit A are just one month—April of the budgeted year.   Exhibit C STAR ENGINEERING COMPANY Actual Overhead Distribution Sheet for April Departments Overhead Costs Production Departments Service Departments Total Amount Actuals for April (Rs) Basis for Distribution A. Allocation of Overhead to all departments A.1 Indirect Labour and Supervision       1,49,700 A.2 Indirect materials and supplies   12,800 A.3 Factory Rent 1,68,000 A.4 Depreciation of Plant and Machinery   44,000 A.5 Building Rates and Taxes     2,400   A.6 Welfare Expenses     19,494     A.7 Power   68,586 A.8 Works Office Salaries and Expenses   1,30,260       A.9 Miscellaneous Stores Expenses   1,190 A. Total (A.1 to A.9) 5,96,430 B. Reallocation of Service Departments Costs to Production Departments B.1 Distribution of Works Office Costs B.2 Distribution of Maintenance Department’s Costs B.3 Distribution of Stores Department’s Costs Total Charged to Producing C. Departments (A+B)     5,96,430 D. Labour Hours Actuals for April   1,20,000   44,000   60,000   27,500 E. Overhead Rate/Per Hour (D)   IIBMS – STAR ENGINEERING COMPANY At Global Study Solutions, we take immense pride in our ability to offer specialized support to students pursuing various programs at IIBMS (Institute Indian Institute of Business Management & Studies). Our dedicated team comprises experienced professionals who excel in crafting precise and well-researched solutions for assignments and case studies across different disciplines and courses. Our commitment to aiding students in achieving academic success aligns perfectly with the educational standards upheld by IIBMS Institute (Institute Indian Institute of Business Management & Studies). We understand the importance of delivering high-quality, customized solutions that meet the unique requirements of assignments

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IIBMS – CHOOSING BETWEEN PROJECTS IN ABC COMPANY

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CASE – 3   IIBMS – CHOOSING BETWEEN PROJECTS IN ABC COMPANY IIBMS – CHOOSING BETWEEN PROJECTS IN ABC COMPANY ABC Company has three projects to choose from. The Finance Manager, the operations manager are discussing and they are not able to come to a proper decision. Then they are meeting a consultant to get proper advice. As a consultant, what advice you will give? The cash flows are as follows. All amounts are in lakhs of Rupees. Project 1: Duration 5 Years Beginning cash outflow = Rs. 100 Cash inflows (at the end of the year) Yr. 1 – Rs 30; Yr. 2 – Rs 30; Yr. 3 – Rs 30; Yr.4 – 10; Yr.5 – 10 Project 2: Duration 5 Years Beginning Cash outflow Rs. 3763 Cash inflows (at the end of the year) Yr. 1 – 200; Yr. 2 – 600; Yr. 3 – 1000; Yr. 4 – 1000; Yr. 5 – 2000. Project 3: Duration 15 Years Beginning Cash Outflow – Rs. 100 Cash Inflows (at the end of the year) Yrs. 1 to 10 – Rs. 20 (for 10 continuous years) Yrs. 11 to 15 – Rs. 10 (For the next 5 years) Question: If the cost of capital is 8% which of the 3 projects should the ABC Company accept? IIBMS – CHOOSING BETWEEN PROJECTS IN ABC COMPANY At Global Study Solutions, we take immense pride in our ability to offer specialized support to students pursuing various programs at IIBMS (Institute Indian Institute of Business Management & Studies). Our dedicated team comprises experienced professionals who excel in crafting precise and well-researched solutions for assignments and case studies across different disciplines and courses. Our commitment to aiding students in achieving academic success aligns perfectly with the educational standards upheld by IIBMS Institute (Institute Indian Institute of Business Management & Studies). We understand the importance of delivering high-quality, customized solutions that meet the unique requirements of assignments and case studies within the institute\’s curriculum. Whether in MBA, EMBA, GMS, DMS, or any other programs offered at IIBMS Institute (Institute Indian Institute of Business Management & Studies), our team is equipped to provide expert guidance and meticulously crafted solutions. We prioritize accuracy, originality, and timely delivery; ensuring students receive the necessary assistance to excel academically. We are dedicated to fostering an environment of academic excellence and providing dependable support to the esteemed students of IIBMS Institute (Institute Indian Institute of Business Management & Studies). IIBMS Answer Sheets IIBMS Mumbai IIBMS Bangalore Customized Answer Solutions MBA Assignment Solutions EMBA Case Study Solutions GMS Answer Sheets DMS Assignment Help Professional Writing Assistance Tailored Academic Solutions Comprehensive Answer Sheets Specialized IIBMS Support Academic Writing Services Timely Submission Support Expertly Crafted Answers Personalized Guidance Reliable IIBMS Assistance Get expert assistance with your IIBMS Institute (Institute Indian Institute of Business Management & Studies) assignments and answer sheets from our professional academic writing services. Our team specializes in supporting students with IIBMS Institute (Institute Indian Institute of Business Management & Studies) coursework, ensuring top-notch answer sheets and comprehensive solutions. Ace, with our tailored assistance, your IIBMS Institute exams, offering precise guidance and accurate answer sheet preparation. Seeking reliable help for your IIBMS Institute studies? Trust our academic writing services for meticulously crafted answer sheets and exceptional support. Score high in your IIBMS Institute assessments by availing our expert aid in preparing comprehensive and well-structured answer sheets.   IIBMS Institute Project Report Writing Services IIBMS Institute Customized Project Reports IIBMS Institute Project Support IIBMS Institute Professional Project Report Assistance Tailored Solutions for Project Reports IIBMS Institute Quality Project Documentation IIBMS Institute Expert Project Report Writers IIBMS Institute Comprehensive Project Analysis IIBMS Institute Structured Project Report Services IIBMS Institute Detailed Project Documentation IIBMS Project Evaluation Support IIBMS Institute Custom Project Report Formats IIBMS Institute Project Research and Analysis MBA/EMBA/GMS/DMS Project Reports   IIBMS Institute (Institute Indian Institute of Business Management & Studies) assignments, solved papers, and study materials are available through our academic writing services. Seeking assistance with IIBMS Institute coursework? Our professional team delivers accurate and timely solutions for all your academic needs. Our specialized academic writing support simplifies access to IIBMS Institute (Institute Indian Institute of Business Management & Studies) question papers and model answers. Need expert guidance for your IIBMS Institute assessments? Our service offers comprehensive solutions for students seeking assistance. Our academic writing services ensure precise and high-quality answers for IIBMS Institute assignments, aiding students in their educational journey.   Academic writing professionals play a crucial role in assisting students with their university assignments, striving to achieve several key goals: Quality Assurance: Their primary aim is to deliver high-quality content that meets academic standards and fulfills the requirements of the university assignments. This involves thorough research, proper structuring, and adherence to guidelines provided by the educational institution. 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Customization and Client Satisfaction: They tailor their services to individual student needs, providing personalized assistance and ensuring client satisfaction by addressing specific requirements and preferences. Continuous Improvement: Academic writing professionals continuously update their knowledge base, research techniques, and writing skills to adapt to evolving academic standards and deliver the best possible support to students.  

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IIBMS – GREAVES LIMITED  

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CASE – 2   IIBMS – GREAVES LIMITED IIBMS – GREAVES LIMITED    Started as trading firm in 1922, Greaves Limited has diversified into manufacturing and marketing of high technology engineering products and systems. The company’s mission is “manufacture and market a wide range of high quality products, services and systems of world class technology to the total satisfaction of customers in domestic and overseas market.” Over the years Greaves has brought to India state of the art technologies in various engineering fields by setting up manufacturing units and subsidiary and associate companies. The sales of Greaves Limited has increased from Rs 214 crore in 1990 to Rs 801 crore in 1997. The sales of Greaves Limited has increased from Rs 214 crore in 1990 to Rs 801 crore in 1997. Profits before interest and tax (PBIT) of the company increased from Rs 15 crore to Rs 83 crore in 1997. The market price of the company’s share has shown ups and downs during 1990 to 1997. How has the company performed? The following question need answer to fully understand the performance of the company:   Exhibit 1   GREAVES LTD. Profit and Loss Account ending on 31 March          (Rupees in crore) 1990 1991 1992 1993 1994 1995 1996 1997 Sales Raw Material and Stores Wages and Salaries Power and fuel Other Mfg. Expenses Other Expenses Depreciation Marketing and Distribution Change in stock 214.38 170.67 13.54 0.52 0.61 11.85 1.85 4.86 1.18 253.10 202.84 15.60 0.70 0.49 15.48 1.72 5.67 3.10 287.81 230.81 18.03 1.11 0.88 16.35 1.52 5.14 4.93 311.14 213.79 37.04 3.80 2.37 25.54 4.62 5.17 0.48 354.25 245.63 37.96 4.43 2.36 31.60 5.99 9.67 – 1.13 521.56 379.83 48.24 6.66 3.57 41.40 8.53 10.81 5.63 728.15 543.56 60.48 7.70 4.84 45.74 9.30 12.44 11.86 801.11 564.35 69.66 9.23 5.49 48.64 11.53 16.98 – 5.87 Total Op Expenses 202.72 239.40 268.91 291.85 338.77 493.41 672.20 731.75   Operating Profit Other Income Non-recurring Income   11.61 2.14 1.30   13.70 3.69 2.28   18.90 4.97 0.10   19.29 4.24 10.98   15.48 7.72 16.44   28.15 14.35 0.46   55.95 11.35 0.52   69.36 13.08 1.75 PBIT   15.10   19.67   23.97   34.51   39.64   42.98   65.67   82.64 Interest     5.56     6.77   11.92   19.62   17.17   21.48   28.25   27.54 PBT     9.54   12.90   12.05   14.89   22.47   21.50   37.42   55.10 Tax PAT Dividend Retained Earnings     3.00 6.54 1.80 4.74     3.60 9.30 2.00 7.30     4.90 7.15 2.30 4.85     0.00 14.89 4.06 10.83     4.00 18.47 7.29 11.18     7.00 14.50 8.58 5.92     8.60 28.82 12.85 15.97   15.80 39.30 14.18 25.12   Exhibit 2   GREAVES LTD. Balance Sheet                                (Rupees in crore) 1990 1991 1992 1993 1994 1995 1996 1997 ASSETS Land and Building Plant and Machinery Other Fixed Assets Capital WIP Gross Fixed Assets Less: Accu. Depreciation Net Tangible Fixed Assets Intangible Fixed Assets   3.88 11.98 3.64 0.09 19.59 12.91 6.68 0.21   4.22 12.68 4.14 0.26 21.30 14.56 6.74 0.19   4.96 12.98 4.38 10.25 23.57 15.79 7.78 0.05   21.70 33.49 5.18 11.27 71.64 19.84 51.80 4.40   30.82 50.78 6.95 34.84 123.39 25.74 97.65 22.03   39.71 75.34 8.53 14.37 137.95 33.90 104.05 22.45   42.34 92.49 8.87 13.92 157.62 42.56 115.06 20.04   43.07 104.45 10.35 14.36 172.23 53.87 118.86 21.11 Net Fixed Assets     6.89     6.93     7.83   56.20 119.68 126.50 135.10 139.97   Raw Materials Finished Goods Inventory Accounts Receivable Other Receivable Investments Cash and Bank Balance Current Assets Total Assets LIABILITIES AND CAPITAL Equity Capital Preference Capital Reserves and Surplus   5.26 29.37 34.63 38.16 32.62 3.55 8.36 117.32 124.21   9.86 0.20 27.60   6.91 33.72 40.63 53.24 40.47 14.95 8.91 158.20 165.13   9.86 0.20 32.57   7.26 38.65 45.91 67.97 49.19 15.15 12.71 190.93 198.76   9.86 0.20 37.42   21.05 53.39 74.44 93.30 24.54 27.58 13.29 233.15 289.35   18.84 0.20 100.35   28.13 52.26 80.39 122.20 59.12 73.50 18.38 353.59 473.27   29.37 0.20 171.03   44.03 58.09 102.12 133.45 64.32 75.01 30.08 404.98 531.48   29.44 0.20 176.88   53.62 69.97 123.59 141.82 76.57 75.07 33.46 450.51 585.61   44.20 0.20 175.41   50.94 64.09 115.03 179.92 107.31 76.45 48.18 526.89 666.86   44.20 0.20 198.79 Net Worth   37.66   42.63   47.48 119.39 200.60 206.52 219.81 243.19 Bank Borrowings Institutional Borrowings Debentures Fixed Deposits Commercial Paper Other Borrowings Current Portion of LT Debt   14.81 4.13 4.77 12.31 0.00 2.33 0.00   19.45 3.43 16.57 14.45 0.00 3.22 0.00   26.51 9.17 19.99 15.03 0.00 3.10 0.08   24.82 38.09 4.56 14.08 0.00 3.18 0.12   55.12 38.76 4.37 15.57 15.00 17.08 15.08   64.97 69.69 4.37 17.75 0.00 1.97 0.02   70.08 89.26 2.92 20.81 0.00 2.36 1.49 118.28 63.60 1.49 19.29 0.00 2.57 1.57 Borrowings   38.35   57.12   73.72   84.61 130.82 158.73 183.94 203.66 Sundry Creditors Other Liabilities Provision for tax, etc. Proposed Dividends Current Portion of LT Dept   37.52 5.70 3.18 1.80 0.00   49.40 10.16 3.82 2.00 0.00   59.34 10.70 5.14 2.30 0.08   77.27 3.59 0.31 4.06 0.12 113.66 1.42 4.40 7.29 15.08 148.13 1.99 7.70 8.58 0.02 153.63 1.70 12.19 12.85 1.49 179.79 3.04 21.43 14.18 1.57 Current Liabilities   48.20   65.38   77.56   85.35 141.85 166.42 181.86 220.01 TOTAL LIABILITIES Additional information: Share premium reserve Revaluation reserve Bonus equity capital 124.21       8.51 165.13       8.51 198.76       8.51 289.35   47.69 8.91 8.51 473.27   107.40 8.70 8.51 531.67   107.91 8.50 8.51 585.61   93.35 8.31 23.25 666.86   93.35 8.15 23.25   Exhibit 3   GREAVES LTD. Share Price Data   1990 1991 1992 1993 1994 1995 1996 1997  Closing share price (Rs) Yearly high share price (Rs) Yearly low share price (Rs) Market capitalization (Rs crore EPS (Rs) Book value (Rs)   27.19 29.25 26.78

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IIBMS – Zip Zap Zoom Car Company

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Case 1: IIBMS – Zip Zap Zoom Car Company IIBMS – Zip Zap Zoom Car Company       Zip Zap Zoom Company Ltd is into manufacturing cars in the small car (800 cc) segment.  It was set up 15 years back and since its establishment it has seen a phenomenal growth in both its market and profitability.  Its financial statements are shown in Exhibits 1 and 2 respectively. The company enjoys the confidence of its shareholders who have been rewarded with growing dividends year after year.  Last year, the company had announced 20 per cent dividend, which was the highest in the automobile sector.  The company has never defaulted on its loan payments and enjoys a favorable face with its lenders, which include financial institutions, commercial banks and debenture holders. The competition in the car industry has increased in the past few years and the company foresees further intensification of competition with the entry of several foreign car manufactures many of them being market leaders in their respective countries.  The small car segment especially, will witness entry of foreign majors in the near future, with latest technology being offered to the Indian customer.  The Zip Zap Zoom’s senior management realizes the need for large scale investment in up gradation of technology and improvement of manufacturing facilities to pre-empt competition. Whereas on the one hand, the competition in the car industry has been intensifying, on the other hand, there has been a slowdown in the Indian economy, which has not only reduced the demand for cars, but has also led to adoption of price cutting strategies by various car manufactures.   The industry indicators predict that the economy is gradually slipping into recession.   Exhibit 1 Balance sheet as at March 31,200 x (Amount in Rs. Crore)   Source of Funds Share capital                                        350 Reserves and surplus                           250                              600 Loans : Debentures (@ 14%)               50 Institutional borrowing (@ 10%)        100 Commercial loans (@ 12%)    250 Total debt                                                                                            400 Current liabilities                                                                                 200 1,200   Application of Funds Fixed Assets Gross block                                                     1,000 Less: Depreciation                                             250 Net block                                                           750 Capital WIP                                                       190 Total Fixed Assets                                                                              940 Current assets: Inventory                                                           200 Sundry debtors                                                    40 Cash and bank balance                                        10 Other current assets                                 10 Total current assets                                                                 260 -1200   Exhibit 2 Profit and Loss Account for the year ended March 31, 200x (Amount in Rs. Crore) Sales revenue (80,000 units x Rs. 2,50,000)                                       2,000.0 Operating expenditure: Variable cost: Raw material and manufacturing expenses    1,300.0 Variable overheads                                                        100.0 Total                                                                                                                1,400.0 Fixed cost: R & D                                                                                          20.0 Marketing and advertising                                               25.0 Depreciation                                                                   250.0   Personnel                                                                          70.0 Total                                                                                                                   365.0   Total operating expenditure                                                                1,765.0 Operating profits (EBIT)                                                                                   235.0 Financial expense: Interest on debentures                                                            7.7 Interest on institutional borrowings                        11.0 Interest on commercial loan                                    33.0                     51.7 Earnings before tax (EBT)                                                                                          183.3 Tax (@ 35%)                                                                                                                 64.2 Earnings after tax (EAT)                                                                                            119.1 Dividends                                                                                                                     70.0 Debt redemption (sinking fund obligation)**                                                              40.0 Contribution to reserves and surplus                                                                  9.1 *          Includes the cost of inventory and work in process (W.P) which is dependent on demand (sales). **        The loans have to be retired in the next ten years and the firm redeems Rs. 40 crore every year. The company is faced with the problem of deciding how much to invest in up Gradation of its plans and technology.  Capital investment up to a maximum of Rs. 100 Crore is required.  The problem areas are three-fold. The company cannot forgo the capital investment as that could lead to reduction in its market share as technological competence in this industry is a must and customers would shift to manufactures providing latest in car technology. The company does not want to issue new equity shares and its retained earnings are not enough for such a large investment.  Thus, the only option is raising debt. The company wants to limit its additional debt to a level that it can service without taking undue risks.  With the looming recession and uncertain market conditions, the company perceives that additional fixed obligations could become a cause of financial distress, and thus, wants to determine its additional debt capacity to meet the investment requirements. Mr. Shortsighted, the company’s Finance Manager, is given the task of determining the additional debt that the firm can raise.  He thinks that the firm can raise Rs. 100 crore worth debt and service it even in years of recession.  The company can raise debt at 15 per cent from a financial institution.  While working out the debt capacity.  Mr. Shortsighted takes the following assumptions for the recession years. A maximum of 10 percent reduction in sales volume will take place. A maximum of 6 percent reduction in sales price of cars will take place. Mr. Shortsighted prepares a projected income statement which is representative of the recession years.  While doing so, he determines what he thinks are the “irreducible minimum” expenditures under Recessionary conditions.  For him, risk of insolvency is the main concern while designing the capital structure.  To support his view, he presents the income statement as shown in Exhibit 3.   Exhibit 3 projected Profit and Loss account (Amount in Rs. Crore) Sales revenue (72,000 units x Rs. 2,35,000)                                       1,692.0 Operating expenditure Variable cost : Raw material and manufacturing expenses    1,170.0 Variable overheads                                                          90.0 Total                                                                                                                1,260.0 Fixed cost: R & D                                                                                          — Marketing and advertising                                               15.0 Depreciation                                                                   187.5 Personnel                                                                          70.0 Total                                                                                                                   272.5 Total operating expenditure                                                                1,532.5 EBIT                                                                                                                  159.5 Financial expenses: Interest on existing Debentures                                        7.0 Interest on existing institutional borrowings      10.0 Interest on commercial loan                                30.0 Interest on additional debt                                             15.0                  62.0 EBT                                                                                                                      97.5 Tax (@ 35%)                                                                                                        34.1 EAT                                                                                                                     63.4 Dividends                                                                                                              — Debt redemption (sinking fund obligation)                                             50.0* Contribution to reserves and surplus                                                       13.4   * Rs. 40 crore (existing

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