ISSN: 0973-9165OCTOBER 2014 - MARCH 2015 Vol: 10. No: 2
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IMPACT OF MANAGEMENT AUDIT SYSTEM ON ORGANISATIONAL EFFECTIVENESSA STUDY OF
SELECT PUBLIC
AND PRIVATE SECTOR
COMPANIES IN INDIA
Dr. K. Nirmala
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IFIM International Journal of Management FOCUS October 2014 - March 2015|
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Published by Dr. R. Satish Kumar
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Management, No-8 (P) & 9 (P),
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Email:
3IFIM International Journal of Management FOCUS October 2014 - March 2015|
From the Editor's Desk
Chief Editor - FOCUS
Dr. R. Satish Kumar
4 IFIM International Journal of Management FOCUS October 2014 - March 2015|
The Focus Journal was launched in the year 2005 and is completing ten years now. This is the Volume: 10, No. 2 issue of Focus. Thanks to all the Editorial Board Members, Referee panel members, Subscribers, and Authors who have supported us during these ten years.
Management Institutes need to encourage their faculty in writing quality research papers and publishing in National and International Journals of repute. This requires the management institutes to invest a considerable amount of money on various researh ativities such as organising Case Workshops, and FDPs to facilitate the faculty members in achieving their research goals.The management institutes must enhance their infrastructure in terms of Library, Computer Labs and Electronic Databases such as Ebsco, J-Gate and Emerald. Subscription of Harvard Case Studies will help the faculty members to update their curriculum and include Case Discussions and Presentations in their classroom teaching.
Need of the hour is to collaborate with the industry practitioners and invite them for guest lectures, make them part of Board of Studies to upgrade the management curriculum on a continuous basis.
Management Institutes need to organise Management Conferences/ Seminars which will provide the opportunities for the faculty members to connect with both the academia and industry pratitioners.
Management Institutes need to get certified by both national and international accreditation bodies such as NBA, NAAC, AACSB, etc. This will help them in streamlining their pedagogy, learning goals and the academic delivery processes so as to meet everchanging needs of the students and the industry.
These initiatives will definitely make our MBA graduates placeable and help them to become future corporate leaders.
IMPACT OF MANAGEMENT AUDIT SYSTEM ON ORGANISATIONAL EFFECTIVENESS
A STUDY OF THE PERFORMANCE MEASUREMENT TOOLS IN SOCIAL ENTERPRISES WITH SPECIAL REFERENCE TO BLENDED VALUE ACCOUNTING
IMPACT ON CUSTOMER SATISFACTION THROUGH CRM AT BIG BAZAAR (MPM MALL)
APPLICABILITY OF THE LINEAR CVP MODEL IN THE INDIAN CEMENT SECTOR
PREDICTORS OF WORK-FAMILY CONFLICT & FAMILY-WORK CONFLICT
CREATIVE ACCOUNTING-CONCEPT, PRACTICES AND MEASURES
A STUDY ON RURAL YOUTH'S SHOPPING PREFERENCES TOWARDS MOBILE PHONES AND PERSONAL COMPUTERS
USE OF SOCIAL NETWORKING WEBSITES AS AN EMERGING MARCOM TOOL
CONVERGENCE OF AS 14 AMALGAMATION TO IND AS 103 BUSINESS COMBINATION AND CARVE OUTS FROM IFRS 3.
SHOE POLISH- CASE SUDY
A SELFMADE MARKETING PROFESSIONAL-PROFILE STUDY OF MR. RAMACHANDRAN R.V
BOOK REVIEW- JUGAD INNOVATION
IMPLICATIONS OF IFRS IMPLEMENTATION IN INDIA
Index
S.No. Title and Name of the Author Page No.
1
2
3
4
5
6
7
8
9
10
11
5IFIM International Journal of Management FOCUS October 2014 - March 2015|
12
13
01-18
19-29
30-43
44-51
52-55
56-66
67-75
76-83
84-90
91-97
98-100
101-105
106-107
Dr. K. Nirmala
Aparna R Hawaldar | Dr. Manita D Shah
DR. Y. Vinodhini
Dr. P.Paramshivaiah | Mr. Puttaswamy | Ms. Ramya S.K
Mihir Dash
Nita Choudhary | Shikha Ojha | Niranjan Kumar Singh
Poonam Dugar | Neha Desai
Kavitha R Gowda | Dr.Soney Mathews
Charu Bharti
Vibha Tripathi
Dr. Pankaj Jain | Prof. (Dr.) V. S. Dahima
Dr. Hari Krishna Maram
Dr. Pankaj Jain
Cover Story
ABSTRACT:
To meet the global challenges companies have to adopt
appropriate strategies and structure for enhancing the
organizational efficiency. Management Audit is one such tool to
evaluate the performance of business organizations. The paper
focuses on Management Audit System implementation and its
impact on Organisation Effectiveness in both Public and Private
sector companies. Empirical and analytical method is adopted
for the study. Sample companies selected are ten each from
public and private sectors. The statistical test like t-test,
correlation and Ratio analysis are conducted to evaluate the
impact and implementation of Management Audit System. The
outcome of the analysis revealthat Organisational Effectiveness
is better in Public sector companies as compared to Private
companies. The authors state that Management Audit System
helps in examining managerial decisions which have a strong
impact on the performance of business organizations.They
further opine that this method of evaluation doesnot need
specialized knowledge or tool like operation research etc. The
paper concludes that Management Audit System is must for
every enterprise to be successful and compete in global
competition.
IMPACT OF MANAGEMENT AUDIT SYSTEM ON ORGANISATIONAL EFFECTIVENESSA STUDY OF SELECT PUBLIC AND PRIVATE SECTOR
COMPANIES IN INDIA
*Associate Professor, Department of Commerce, Bangalore University, Bangalore,India | E-Mail: [email protected]
Dr. K. Nirmala*
Key words: Management Audit System, Organization Effectiveness, Public sector,
Private sector, Ratio analysis.
1. INTRODUCTION
The management of business is becoming more and more
complex because of globalization of economies. Almost all the
countries are liberalizing for the entry of foreign operators. This
had resulted in a competitive environment in which the business
organizations have to function very effectively and efficiently
for their survival and to stay as a potential competitor in the
global socio-economic ambience (Khan. A. Q. 1996).
Today's mantra of business is “survival of the fittest”. To be in
the competition they have to evaluate their weaknesses, utilize
their strengths and improve their performance. In other words,
they have to undergo a broad examination of their managerial
decisions, achievements, failures delays, etc. and provide all
findings, favorable or unfavorable, which have a bearing on their
performance. All this calls for the conduct of “Management
Audit” in these 0rganisations.
Management audit therefore, is future oriented, independent
and systematic evaluation of the activities at all levels of
management for the purpose of improving Organizational
effectiveness through the attainment of the Organizational
objectives (Anil. B. Roy Chowdhury, 1996).It is considered as a
comprehensive and constructive examination of an
6 IFIM International Journal of Management FOCUS October 2014 - March 2015|
Organization, its plans, objectives and means of operations, and
an investigation from top level to lower level of management. It
is a critical review of all aspects or processes of management and
reviews the performance of various managers and systematically
examining, analyzing and appraising the management's overall
performance.
The Indian companies are growing both organically and
inorganically. Many companies are competing with global
companies in offering goods and services. The concept of
management audit is quite novel in the Indian context.
(Satyanarayana Chary T, et.all. 2004) in their study conducted
regarding the implementation of Management Audit System,
indicates that it is still in nascent stage and some companies
having foreign collaborations have attempted to implement
Management Audit in all their activities and some are in the
process of implementing. (Khan A Q,1996) in his study indicate
that the accomplishment of systematic Management Audits are
very often caused by major changes in the business such as
change in the top management, mergers and acquisitions,
succession planning and restructuring/strategic alignment .
Some companies conduct Management Audit only to those
activities or functional areas where the performance is poor or
needs immediate improvement to maintain a proper rate of
growth of business and returns.
To assess the Organizational effectiveness few measures such as
return on sales, return on equity, market share change and
customer satisfaction are considered. (Rodsutti M.C, &
Swierczek F.W., 2002) indicated organizational effectiveness,
capabilities-managerial skills, organization culture, organization
communication and perceived organization reputation are
other parameters considered in assessing organizational
effectiveness.
Even though, there is theoretically and logically a clear positive
linkage between Management Audit System and Organizational
effectiveness, it is still observed that all the companies from both
public and private sectors are not very keen in introducing
Management Audit System. What could be the reason for this?
Is Management Audit System a sound concept? Is there any
problem in the introduction of Management Audit System? Or
is there a doubt of who is the right person to do this type of
audit? and so on. All these research questions needed an
empirical study on different aspects of Management Audit
System in the existing scenario relating to implementation of
Management Audit System and its impact on organizational
effectiveness.
1.1 MANAGEMENT AUDIT IN INDIA
2. STATEMENT OF THE PROBLEM
3. REVIEW OF LITERATURE
The literature review on Management Audit and Organizational
Effectiveness indicates a mixed result. Some companies which
have adopted Management Audit System have fared remarkably
better, whereas, in case of some companies, in spite of having
Management Audit System, these companies have failed to
improve their Organizational Effectiveness. This leads to the
necessity of studying important issues and problems relating to
linkage between Management Audit and Organizational
Effectiveness.
One of the basic issues relates to the question that, if
implementation of Management Audit System is going to
improve the Organizational Effectiveness, then why it is not
made mandatory like financial audit.Is it because of the
experience of some companies where in spite of introduction of
Management Audit System the organizational effectiveness has
not improved. Does it mean that Management Audit System
does not have any value? Are there problems which make
implementation of Management Audit difficult or is
Management Audit still not accepted as measurement of
management performance tool for improving the organizational
effectiveness? Or is it that the cost and time factor which has
come in the way of implementing Management Audit System in
all Organizations or is it because of the non-feasibility in
ensuring the co-ordination in the entire Organization? Or is it
because Management Audit covers non-financial parameters
which could be theoretical concept requiring some more
validation and authentication. The other issues could be failure
of many companies in not having clear-cut idea about their
vision, mission and objectives,Organizations feel that the
internal audit system automatically takes care of Management
Audit and there is no need to have separate Management Audit.
These are some of the question which requires an in-depth
study. This study is a humble attempt in this direction.
As noted by the authors not much of literature review is available
on Management Audit System and its adoption in enhancing
Organizational Effectiveness by Indian Companies.
Management Audit System seem to be in the infancy stage due
to many reasons like no rules governing the system as in the case
of financial audit, who is the right person to do the audit and so
on. The literature review relates to Management Audit System
and Orgnisational Effectiveness is given below-
Management Audit is a “procedure for systematically analyzing
and appraising a management's overall performance”. An
effective management audit will induce constructive thinking
and reveal the firm's strong and weak points and it will also
7IFIM International Journal of Management FOCUS October 2014 - March 2015|
increase the firm's effectiveness and efficiency and thereby,
increase the firm's profit (Brown, J R. &Cooper, W. D.,1988).
To ensure the effectiveness of Organizational activities in any
Organization syntheses among three different things needs to be
established. They are – individual, group and organizational
effectiveness. The causes of individual effectiveness includes
physical attributes, personality traits, motivation and morale
etc., the causes for group effectiveness comprise of leadership,
communication and socialization etc., and the causes of
organizational effectiveness include technology, environmental
conditions, competence and many other variables (Lawless
D.,1972).Flesher D.L. (1993) in his paper claims that the small
businesses today could probably benefit from a management
audit of the firm's long-term financial affairs. Management
Audit by articulating the missions, objectives and expected
results along with the methods of performance evaluation goes a
long way towards improving the performance of public
enterprises Batra GS (1997). Management Audit helps in
examining managerial decisions which have a bearing on the
performance of business Organizations. The evaluation is more
suited as the management of a business enterprise need not be
equipped with specialized knowledge of tools such as operations
research,advanced statistics etc. they further indicate procedure
to conduct management audit and conclude that management
audit is a must for every enterprise (T.Satyanarayana Chary
&et.all2004). Similarly Cann J.M.,(2004)says while
organizational agility is certainly essential, so is organizational
resiliency. Further he suggests that academics and practitioners
must work even more closely together to understand the trends
and to translate theory into usable and practical
recommendations for managing highly dynamic Organizational
environments.
Wang Z. (2005) presents general frame work for understanding
the Organizational Effectiveness which includes three-strategy
model for global technology innovation and organizational
development. The frame work discussed personnel strategy,
system strategy, and organizational strategy. He concludes that
the personnel strategy could play a crucial role in enhancing the
effects of human resources management and entrepreneurship
by supporting the main dimensions of HRM. The system
strategy was use to facilitate technology innovation through
knowledge management while the organizational strategy was
adopted to create positive organizational culture and high
performance system. Burton J.C., (1968) reveals how the
auditors in future would attest the effectiveness of the
management's performance. According to the author there are
four areas in developing a frame work for Management Audit.
First, the criteria for a management audit must be considered.
Second, standards of managerial performance must be
developed, if the evaluation of management stewardship is to
have meaning. Third, a method of reporting must be
established, so that the auditor can have a structured means of
disclosing the results of his examination, finally, it will be
necessary to develop management auditing procedures and
standards of documentation to support the report given. The
methods of critical path and PERT analysis could be used in
office management as well as to other activities. Picketh T. R.
(1968).
Based on the research gap found from the literature review on
Management Audit and Organizational Effectiveness and
problem statement, the following objectives have been
formulated for this study-.
To compare the implementation of Management
Audit System between public and private sector
company
To assess the impact of implementation of Management
Audit system on Organizational Effectiveness between public
and private sector companies:
To achieve the above objectives the following Hypothesis
havebeen formulated.
H1= There is a significant extent of implementation of
Management Audit System in functional activities between
public and Private Sector Companies.
H2= There is a positive impactof Management Audit Systemon
Organizational effectiveness reflected in Management Process
between public and private sector companies.
H3= There is a positive impact of Management Audit System on
Organizational effectiveness reflected in Production between
public and private sector companies.
H4= There is a positive impact of Management Audit System on
Organizational effectiveness reflected in Marketing between
public and private sector companies.
H5= There is a positive impact of Management Audit Systemon
Organizational effectiveness reflected in Accounting and
Finances between public and private sector companies.
This study is based on empirical and analytical method. There
are 245 central government and 160 state government public
sector companies of which 50 percent are not performing well.
For present study Bangalore based Ten public sector companies
were selected. Similarly Ten private sector companies were
selected from 282 companies which were listed in Bangalore
4. OBJECTIVES OF THE STUDY
>
>
5. HYPOTHESES
6. METHODOLOGY
Cover Story
8 IFIM International Journal of Management FOCUS October 2014 - March 2015|
stock exchange. The criteria followed for choosingpublic and
private sector companies were minimum of ten years in business
and having 500 employees, existence of all functional
departments., clear organization structure with regular meeting
of Board of Directors, head office in Bangalore and
implementation of Management Audit System partially or fully
for at least last 3 years. Ten public and private sector companies
selected for the study shown in (Annexure Table- 1)
Organizational effectiveness was measured through financial
ratios like Net Asset Ratios, profitability ratios, net sales ratios
(Annexure Table -2). Ten years data was taken for calculating
financial ratios i.e. from 2003 to 2012. For analysis, the ten years
data was divided into two parts pre-implementation period and
post-implementation period. The variables chosen for
management process were objectives, planning, organization,
control and systems, and procedures. The functional activities
were Production, Marketing, Research and Development,
Accounting and Finance, Human Resource Management and
Information Technology.The data collected was been analyzed
using statistical tools such as , analysis of variance, Ratio
Analysis.
7. DATA ANALYSIS AND DISCUSSIONS
The above table reveals the level of implementation of
Management Audit System overall variable wise mean scores in
public and private sector companies. It shows that when public
and private sector companies are compared, in public sector
management process(77.02 percent), production(80.10
percent), marketing(75.76 percent), financial accounting(79.02
percent), human resource(79.38 percent), and information
technology(80.51 percent) which are greater than the private
sector companies. In private sector research and development
which is 74 percent is greater compared to public sector with
71.13 percent. It is evident from the statistical results that the
mean response on Management Audit System between public
and private sector companies for all the seven different aspects
of study are found to be non-significant (P<0.05). It further
reveals the data subjected for statistical test indicate the mean
response under different variable of Management Audit for the
Public sector (F=0.48NS), private sector (F=0.16NS) and
combined (F=0.41NS).
Public Sector Companies have implemented Management
Audit System to the extent of 77.9 percent and private to the
extent of 74.51 percent. The 't' Test (0.47NS) indicates the
difference is not significant. Hence, H1 is rejected i.e there is no
significant difference in the extent of implementation of
Management Audit System across public and private sector
companies.
9IFIM International Journal of Management FOCUS October 2014 - March 2015|
Table 2 indicates company wise the degree of implementation of
Management Audit System with regards to management
process, production, marketing, research and development and
accounting in public and private sector companies.
The Karl Pearson's coefficient of correlation for public
companies between the level of implementation of
Cover Story
10 IFIM International Journal of Management FOCUS October 2014 - March 2015|
Management Audit System on management process,
production and the number of ratios which indicate positive
impact as shown in Table 2 indicates -0.14 and -0.20 this reveals
that there is insignificant negative correlation i.e the level of
implementation of management audit has not impacted
Organizational Effectiveness, where as in case of marketing it is
+0.55, R&D +0.14(not impacted) and accounting +0.14.
The Karl Pearson's coefficient of correlation for private
companies between the level of implementation of
Management Audit System on management process,
production and accounting the number of ratios which indicate
positive impact as shown in Table 2 indicates 0.603,
0.27(moderately positive correlation) and 0.74, this reveals there
is positive correlation, where as in case of R&D it is -0.026
showing negative correlation.
Table-3
Impact of Implementation of Management Audit System on the Organisational Effectiveness
Table indicates the impact between implementation of
Management Audit System on the Organizational Effectiveness
through Ratio Analysis. This table reveals that there is
significant impact of Management Audit System on Accounting
and Finance in both public and private sector companies and
hence accept the Hypotheses(Hyp-5)and Management process
in the case of Private Sector companies (p<0.05-Hyp 2). Apart
from these, there is no impact of Management Audit System on
Management Process in public sector companies (Reject Hyp -
2), production and marketing in both the sectors (Reject Hyp 3,
Hyp 4)
.
< The result of empirical data reveal that there was no
significant difference in the extent of implementation of
Management Audit System on functional activities like
management process, production, marketing, R&D and
accounting.
< The extent of implementation of Management Audit
System is found highest in IT(80.51) and production(80.10) in
public sector where as in private sector only in IT the impact was
high(80.34).
< Implementation of Management Audit System on
Organizational Effectiveness is moderately positive across public
n private sectors.
< There is a significant impact of Management Audit
8. SIGNIFICANT FINDINGS OF THE STUDY
System on accounting and finance in both public and private
companies, in case of management process there is significant
impact only in private sector companies.
< There is no impact of Management Audit System on
management process in public sector companies and
productionand marketing functions in both the sectors.
< The vertical analysis indicates implementation of
Management Audit System has created positive impact in the
case of net profit to fixed assets in eight of ten companies.
Similar is the case with cash from operations to fixed
assets.Management Audit has impacted net sales to fixed assets,
net profit to capital employed and cash from operations to total
assets in case of six out of 10 companies. Further analysis
indicate implementation of Management Audit has impacted
net sales to capital employed, net profit to total assets and cash
from operations to capital employed in the case of five out of ten
companies. The least impact is seen in the case of net sales to
total assets. The above analysis indicates the Management Audit
System has impacted significantly using of fixed assets compared
to other variables. (AnnexureTable-3)
< Vertical analysis indicates implementation of
Management Audit System has created positive impact in the
case of Cash from operations to Fixed Assets ratio in eight out of
ten companies. Similarly in the case of Net Profit to Total Assets
and Net Profit to Fixed Assets there is positive impact in seven
out of ten companies. Further analysis indicate that Net Sales to
Capital employed, Net Sales to Total Assets and Net Profit to
11IFIM International Journal of Management FOCUS October 2014 - March 2015|
Capital employed and Cash from operations to Capital
employed reveal six out of ten companies having been impacted
after the implementation of Management Audit System.
(Annexure Table-4)
< The vertical analysis indicates implementation of
audit system has created positive impact in the case of inventory
turnover ratio in seven of ten companies. Management audit has
impacted Cost of production to Net profit, Cost of production
to Cash from operations, Cost of raw materials to Net profit
and Cost of raw materials to Cash from operations in case of six
out of ten companies. Further analysis indicates
implementation of management audit has impacted Cost of
production to Net sales five out of ten companies. The least
impact is seen in the case of Asset utilization ratio and Cost of
raw materials to Net sales. The above analysis indicates the
Management Audit System has impacted significantly using of
inventory compared to other variables. (Annexure Table-5)
< Vertical analysis indicates implementation of
management audit system has created positive impact in that
case of Cost of production to Net profit and cost of raw materials
to Net profit in seven out of ten companies. Similarly in the case
of Cost of production to Cash from operations, Cost of raw
materials to net sales, Cost of raw materials to Cash from
operations and inventory turnover ratio impact in five out of ten
companies. (Annexure Table-6)
< The vertical analysis indicates implementation of
audit system has created positive impact in case of debtor's
turnover ratio out of ten companies. Management audit has
impacted selling and administration expenses to net sales,cost of
production to net sale in case of five out of ten companies.
Further analysis indicate implementation of Management
Audit has impacted selling cost to net sales and debtors velocity
in case of two out of ten companies, which indicates the least
impact. The above analysis indicates that the Management
Audit System has impacted significantly debtor's turnover ratio
compared to other variables. (Annexure Table 7)
< Vertical analysis indicates implementation of
Management Audit System has created positive impact in case of
debtor's turnover ratio in seven out of ten companies. Similarly
in case of selling and administration expenses to net sales there
is positive impact in six out of ten companies. Further analysis
indicates that cost of production to Net Sales reveal four out of
ten companies having been impacted after the implementation
of Management Audit System (Annexure Table-8)
< The vertical analysis indicates implementation of
audit system has created positive impact in case of total research
expenditure to Net Sales and capital expenses on research to Net
sales in three out of seven companies. Management Audit has
impacted recurring expenses on research to Net Sales on two out
of seven companies. Further analyses indicate implementation
of Management Audit has impacted capital expenses on
research to Net profit on one out of seven companies, which
indicates the least impact. The above analysis indicates the
Management Audit System has impacted total expenditure to
net sales and recurring expenditure to net profit. (Annexure
Table-9)
< Vertical analysis indicates Implementation of
Management Audit System has createdpositive impact in the
case of all ratios selected i.e Total research expenditure to Net
profit, Total research expenditure to net sales, capital expenses
on research to net profit, capital expenses on research to Net
sales and Recurring expenditure to Net sales reveal two out of
s e ve n c o mp a n i e s h av i n g b e e n i mp a c t e d a f t e r
theimplementation of Management Audit System. (Annexure
Table10)
< The vertical analysis indicates implementation of
audit system has created positive impact on EPS, nine out of ten
public sector companies. In the case of capital employed to net
worth, interest coverage ratio, profit before interest and tax to
Net sales and Debt-Equity ratio, the positive impact is eight out
of ten public sector companies selected. Similarly in the case
with Net profit to Net worth, where Management Audit has
impacted seven out of ten companies. Further analysis indicate
the least impact is seen in the net sales to capital employed,
Profit before interest and tax to Net Sales, Current ratio on five
out of tem companies. The above analysis indicates the
Management Audit System has impacted significantly on
earnings per share to other variables. (Annexure Table-11)
< Vertical analysis indicates implementation of
Management Audit System has created positive impact in the
case of net sales to capital employed, Capital employed to Net
worth and interest coverage ratio in six out of ten companies.
Similarly, in the case of profit before interest and tax to Net sales,
net profit to Net worth, Debt-Equity ratio, current ratio and
earnings per share, there is positive impact in five out of ten
companies. Further, analysis indicates that profit before interest
and tax to capital employed has shown the least impact
compared to other ratio. (Annexure Table-12)
Further research shall be looked into measuring the
organizational effectiveness on implementation of Management
Audit System with pre-determined measurable Financial and
Non-financial parameters. The study can be extended to service
sectors like Educational Institutions , IT Companies, Health
care, Law and Order and Government Organizations.
9. SCOPE FOR FURTHER RESEARCH
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12 IFIM International Journal of Management FOCUS October 2014 - March 2015|
CONCLUSION
The present study noted that the Management Audit System is
still at the infancy stage in India, because not even one company
out of twenty sample companies have implemented
Management Audit System fully. The process of liberalization
and globalization has gained momentum in India, hence,
foreign investors, non-resident Indians and multi-national
companies are showing keen interest in establishing joint
venture, independent enterprises and investments through
capital market. Today, the changes that take place in the
Organizations reflect only the attitudes and perspectives of the
individuals who make isolated decisions. How the decision will
affect the organizations overall performance is not assessed, very
few Organizations having foreign collaborations have attempted
to implement Management Audit System. It is high time that
Management Audit System is used for assessing the managerial
efficiency and thereby enhancing the Organisational
Effectiveness.
As such, the authors conclude that the parameters such as
management process which consists of objectives, planning,
organization, control, systems and procedures and functional
activities relating to production, marketing, research and
development, accounting and finance, human resource
management and information technology are to be thoroughly
examined under Management Audit System and its impact
should be measured through effectiveness of Organization. It
was found that there is a positive impact of Management Audit
System on Organizational Effectiveness in both public and
private sector companies, but it is not significant. When the
implementation of Management Audit System is compared
among public and private sector companies, public sector
companies are better. Further the impact of implementation of
Management Audit System is seen on the functional activities
except on research and development in both public and private
sector companies. Authors conclude by suggesting Management
Audit System helps in evaluating managerial decisions which
have a strong impact on the performance of business
organizations. Companies have to implement this system for
their success and to compete in the global market.
13IFIM International Journal of Management FOCUS October 2014 - March 2015|
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14 IFIM International Journal of Management FOCUS October 2014 - March 2015|
15IFIM International Journal of Management FOCUS October 2014 - March 2015|
Cover Story
16 IFIM International Journal of Management FOCUS October 2014 - March 2015|
17IFIM International Journal of Management FOCUS October 2014 - March 2015|
Bibliography
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> Aswathappa K. (2000). Organisational Behavior. Himalaya Publishing House. p560-590
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> Rodsutti, M.C. &Swierczek, F.W. (2002). Leadership and organizational effectiveness in multinational enterprises in Southeast
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Manpower. 26(6). 481-487.
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18 IFIM International Journal of Management FOCUS October 2014 - March 2015|
A STUDY OF THE PERFORMANCE MEASUREMENT TOOLS IN SOCIAL ENTERPRISES WITH SPECIAL REFERENCE TO BLENDED VALUE ACCOUNTING
FOCUS Research Papers
*Research Scholar, Tumkur University, Email: [email protected], Ph. 94484 66953
Aparna R Hawaldar*
Professor, Alliance School of Business, Alliance University**
Dr. Manita D Shah**
ABSTRACT
Over the past five to ten years, there has been an explosion of
interest around social entrepreneurship, strategic philanthropy,
sustainable development, corporate social responsibility,
socially responsible investing, and other social investing. Scores
of organizations have been launched to advance these issues,
many business articles addressing these topics have been
published, and new programs have been cropping up at
conferences, business schools and universities. All these efforts
have in common the pursuit of more than simple economic
value and more than basic social impact. They all are advancing
what may be viewed as a shared agenda of simultaneously
valuing social equity, environmental sustainability and
economic development.
This paper presents an exploratory analysis of the emergent
performance reporting practices used by social entrepreneurs in
terms of their institutional settings and strategic objectives.
These reporting practices not only account for financial
performance but also disclose more nuanced and contingent
social and environmental impacts and outcomes. Furthermore,
they act as symbolic objects expressing the market orientation of
many socially entrepreneurial organizations in that they aim to
provide more complete and transparent disclosure of a variety
of performance impacts. Conceptually, this paper draws upon
approaches developed within the sociology of accounting as
institutional practice.
Keywords: social impact, blended value accounting, social enterprises
INTRODUCTION
In the present global scenario, the investors are divided between
doing well and doing good. They invest in either for-profit
organisations or not-for-profit organisations.
In reality, the core nature of investment and return is not a tradeoff
between social and financial interest but rather the pursuit of an
embedded value proposition composed of both (Emerson, 2003).
One of the unique features of Social Entrepreneurs is that they
are a diverse group. Most of them may be involved in tackling
any comprehendible issue in any country in the world. Their
pioneering ideas often make them cross the divide between
traditional disciplines, and the solutions that they nurture are
habitually unique to the culture and circumstances of the
communities in which they work.
The funders of social enterprises also adopt an assortment of
approaches: while some funders invest only in debt or equity,
others use charitable grants. Some funders support the Social
Entrepreneur as an individual at her earliest stages of
experimentation, while others concentrate more on the growth
and efficiency of the organization at later stages of
development.
Despite this diversity, there is a shared viewpoint that
differentiates the field of Social Entrepreneurship from other
approaches to philanthropy and evaluation. The funders of
social enterprises think in a different way. Unlike a corporate
19IFIM International Journal of Management FOCUS October 2014 - March 2015|
investor who is interested in rate of financial return, the social
investor seems to focus more on social impact and returns.
There are around thirty contemporary social impact
measurement methods used worldwide. These methods have
been developed to meet the changing needs of management
information because of the increased awareness in socially
responsible activities worldwide.
Similar to financial accounting methods, the social accounting
methods intend to measure the impact of corporate activities
on society. In majority of the cases, social impact is not
expressed by the market, hence do not have a market value and
are consequently ignored by corporations (Elkington 1999,
Schaltegger and Burritt 2000, Lamberton 2005). However,
accounting methods provide crucial information for
managerial decision-making and for internal and external
reporting (Zimmerman 2009).
Conventionally, it is understood that value can either be
economic or social.
The Triple Bottom Line (TBL) concept focuses on value
creation across the three dimensions of sustainability; the
economic, social and environmental dimensions. Although
this concept has been widely used, the interpretation of value
creation differs among users; some interpret TBL as a zero-sum
game while others interpret TBL as an optimisation game of
blended value (Emerson 2003). The idea behind the blended
value is that all corporations, whether for-profit or not, create value
that consist of economic, social and environmental value components;
and this value is itself non-divisible and, therefore, a blend of these three
elements (Ann et al. 1999, Elkington et al. 2006).
Therefore, the task for any organisation, whether non-profit,
nongovernmental or for-profit, is to optimize the impacts on
several dimensions rather than maximizing impacts against any
one dimension. At this point, it becomes important to note that
the involvement of varied constituents within the corporation
does not promise socially responsible behaviour.
Regardless of the standpoint, it is realistic to assume that
organisations are interested in social impact measurement for
reporting and decision making purposes.
There is no consensus on the definition of social impact which
is causing confusion. Major dissimilarities are in the usage of
Social Impact Measurement Tools
Defining of social impact
words such as ‘impact’, ‘output’, ‘effect’ and ‘outcome’.
Furthermore, the term social impact is often interchanged by
terms such as ‘social value creation’ (Emerson et al. 2000) and
‘social return’ (Clark et al. 2004).
Burdge and Vanclay (1996) have defined social impact as “By
social impacts we mean the consequences to human
populations of any public or private actions that alter the ways
in which people live, work, play, relate to one another, organise
to meet their needs and generally act as a member of society.”
Latane (1981) defines social impact as “By social impact, we
mean any of the great variety of changes in physiological states
and subjective feelings, motives and emotions, cognitions and
beliefs, values and behaviour, that occur in an individual,
human or animal, as a result of the real, implied, or imagined
presence or actions of other individuals”. According to
Emerson et al (2000) “Social value is created when resources,
inputs, processes or policies are combined to generate
improvements in the lives of individuals or society as a whole”.
Freudenburg (1986) defines social impact as” Social impact
refers to impacts (or effects, or consequences) that are likely to
be experienced by an equally broad range of social groups as a
result of some course of action”.
From an economic viewpoint, the aim of economic behaviour is
understood to be the maximisation of wealth or profit, which is
realized by the efficient management of scarce resources. Thus,
managers always to seek to achieve efficient outcomes.
The traditional performance measurement is often based on
the goal-attainment approach and usually do not consider social
or environmental questions. One of the assumption that lie
beneath the goal-attainment approach is that the goals of an
organisation are identifiable and unambiguous (Forbes 1998).
The effectiveness of an organisation is measured by the progress
made towards the attainment of these goals. Conventional
performance measures are used to measure this progress.
However, including the other dimensions of environmental
and social impact becomes slightly complicated.
To develop an integrated blended value outlook, the traditional
accounting methods will have to integrate all three dimensions-
economic, social and environmental. In 1991, Eccles (1991)
predicted the beginning of a change in performance
measurement and predicted that ‘within the next five years, every
corporation will have to redesign how it measures its business
performance’ (p. 131). Corporations have habitually relied always on
financial measures of performance. The present newer competitive
Developments in performance measurement
19 IFIM International Journal of Management FOCUS October 2014 - March 2015|
realities mandate new measurement systems for integrating
social dimensions of corporate performance.
Generally the corporations assess their success or failure on the
basis of targets achieved – the amount of money invested,
quantity of products distributed, and so on – rather than on
how their economic activities have impacted the society and
environment. Such impacts can be measured at the individual
level, the corporation level, and the societal level. An innovative
and interdisciplinary approach is needed for the integration of
social impact into the processes of management.
Many methods have been developed to measure social impact
since the 1990s. the literature research and internet search have
resulted in thirty quantitative (social) impact measurement
methods. These have been listed in Table 2. Quantitative
Measurement of Social impact - an overview of methods
methods are more apt for the corporations to make the
intangible results more tangible and to use social impact
measurement for decision-making and control issues.
There are several methods have been developed by, or for, non
profit or governmental corporations like the SROI, OASIS,
SCBA, and LEM while there are other methods which are
mainly developed for, and used by, for-profit corporations like
SRA, ACAFI, TBL, MIF, and BACO. Even though a method
may have firstly been developed for a certain kind of
organisation, the method can be adapted by other kinds of
organisations. The SROI method is a good example of this
phenomenon. SROI was developed primarily for non-profit
organisation but is currently very popular among profit
corporations.
(Social) Impact measurement methods
1. Acumen Scorecard
2. Atkinsson Compass Assessment for Investors (ACAFI)
3. Balanced Scorecard (BSc)
4. Best Available Charitable Option (BACO)
5.
BoP Impact Assessment Framework
6.
Center for High Impact Philanthropy Cost per Impact
7.
Charity Assessment Method of Performance (CHAMP)
8.
Foundation Investment Bubble Chart
9.
Hewlett Foundation Expected Return
10.
Local Economic Multiplier (LEM)
11.
Measuring Impact Framework (MIF)
12.
Millennium Development Goal scan (MDG- scan)
13.
Measuring Impacts Toolkit
14.
Ongoing Assessment of Social Impacts (OAS IS)
15.
Participatory Impact Assessment
16.
Poverty Social Impact Assessment (PSIA)
17.
Public Value Scorecard (PVSc)
18.
Robin Hood Foundation Benefit- Cost Ratio
19.
Social Compatibility Analysis (SCA)
20.
Social Costs - Benefit Analysis (SCBA)
21.
Social Cost- Effectiveness Analysis ( SCEA)
22.
Social e - valuator
23. Social Footprint
24. Social Impact Assessment (SIA)
25. Social return Assessment (SRA)
Social return on Investment (SROI)
Socio-Economic Assessment Toolbox (SEAT)
Stakeholder Value Added (SVA)
Toolbox for Analysing Sustainable Ventures in
Developing Countries
26.
27.
28.
29.
Wellventure Monitor30.
Table 1: Overview of social impact measurement methods
The measurement methods have been developed based on the diverse purposes for which they are used and also depending on what
they are intended to measure.
FOCUS Research Papers
21IFIM International Journal of Management FOCUS October 2014 - March 2015|
DESCRIPTION OF SOCIAL IMPACT
MEASUREMENT METHODS
1. Acumen Scorecard
2. Atkisson Compass Assessment for Investors
(ACAFI)
3. Balanced Scorecard (BSc)
Developed in 2001 by: Acumen Fund in association with
McKinsey, a non-profit enterprise that invests in and grants to
both non-profit and for-profit ventures in its portfolio.
'The system was developed to assist both for profit businesses,
and not-for-profit corporations focus on actions that deliver
both immediate results and improve an corporations long term
competitive positioning in changing and dynamic
marketplaces.’
'The system assesses the social ventures investments in
Acumen's portfolio of for-profit and non-profit corporations. It
entails tracking progress on short- and long term outcomes,
which is assessed in terms of outcome milestones and
benchmarks.’
This system is developed by AtKisson Inc.in 2000. 'This
method builds on AtKisson's Compass Index of Sustainability,
a tool for assessment of the sustainability of communities. The
framework for investors is designed to integrate with the
reporting guidelines of major CSR standards, particularly the
Global Reporting Initiative (GRI) and the Dow Jones
Sustainability Index (DJSI), as a venture matures. The method
incorporates a structure with five key areas: N = nature
(environmental benefits and impacts) S = society (community
impacts and involvement) E = economy (financial health and
economic influence), and W = well-being (effect on individual
quality of life), and a fifth element, + = Synergy (links between
the other four areas and networking), and includes a point-scale
rating system on each of the five areas. Each area has several
indicators each of which has specific criteria. The method has
been peer reviewed by corporate executives, economic
academicians, and investment professionals.’
The Balanced Score Card is developed by Robert Kaplan and
David Norton in 1992.
'The Balanced Scorecard proposes that corporations measure
operational performance in terms of financial, customer,
business process, and learning-and-growth outcomes, rather
than exclusively by financial measures, to arrive at a more
powerful view of near term and future performance. It
advocates integration of these outcomes into corporations'
strategic planning processes. The scorecard is a framework for
collecting and integrating the range of metrics along the Impact
Value Chain, and is adaptable to an organisation's stage. It
helps coordinate evaluation, internal operations metrics, and
external benchmarks, but is not a substitute for them. Recently
Kaplan has adapted the Balanced Scorecard for nonprofits,
suggesting that such institutions adopt strategic performance
measures that focus on user satisfaction (Clark et al. 2004).’
This system is developed by Acumen Fund in 2006. 'Rather
than seek an absolute standard for social return across an
extremely diverse portfolio, Acumen Fund looks to quantify an
investment's social impact and compare it to the universe of
existing charitable options for that explicit social issue.
Specifically, this tool BACO helps inform investors where their
philanthropic capital will be most effective—answering “For
each dollar invested, how much social output will this generate
over the life of the investment relative to the best available
charitable option?” The BACO ratio (for best available
charitable option), must be seen as a starting point for assessing
the social impact and cost-effectiveness of investments. The
point of the analysis is to inform our portfolio decision-making
with a quantifiable indication of whether our social investment
will “outperform” a plausible alternative.’
The Bottom of the Pyramid Impact Assessment Framework is
developed by Ted London in 2007. 'The aim of the BoP Impact
Assessment Framework is to understand who at the base of the
pyramid is impacted by BoP ventures and how they are affected.
The framework is developed to evaluate and articulate impacts,
to guide strategy and to enable better investment decisions.
Next to this the system contributes to a deeper knowledge of the
relationship between profits and poverty alleviation and to
recognize the poverty alleviation implications of different types
of ventures. It builds upon the different well-being constructs as
developed by 1998 Nobel Prize winner Amartya Sen.’
This tool is developed by the Center for High Impacts
Philanthropy from the University of Pennsylvania in 2007.
High impact philanthropy means getting the most good for your
philanthropic buck. It is the process by which a philanthropist
makes the biggest difference possible, given the amount of
capital invested. In order to assess cost per impact,
philanthropists must be able to assess, to the extent possible, its
two components: 1) social impact, as measured by specific,
objective criteria for success; and 2) cost, as measured by the
investments made by philanthropists or other sources to realise
4. Best Available Charitable Option (BACO)
5. BoP Impact Assessment Framework
6. Center for High Impact Philanthropy Cost per
Impact
23 IFIM International Journal of Management FOCUS October 2014 - March 2015|
the impact. Assessment requires objective, reliable information
on what's effective, what's not, and how much capital is required
to achieve a given impact. The Center for High Impact
Philanthropy aims to deliver the information and analytic tools
required to answer these questions.’
The CHAMP method is developed by the Dutch charities test
(nationale goede doelen test) in 2006. 'The performance of
charity's ADT are determined by effectiveness - What did we
achieve? - And efficiency - how fast and in a cost-effective way?
Effectiveness and efficiency can be measured on five distinct
levels:
1. Impact on society: how is society is affected by the effect of the
charity on their target group?
2. Impact on the public: in what way is the situation of the target
group demonstrably improved by the output of the charity?
3. Output: what concrete results are produced by the core
activities of the charity using the input factors (money,
volunteers, etc.)?
4. Activities: how effective are the core activities of the charity?
5. Input: how effective and efficient are the activities related to
the input factors such as fundraising and recruiting volunteers?'
'The CHAMP method provides indicators to measure the
performance on all different levels. This tool is developed to
help donators, and volunteers to choose between a wide range
of non- profit corporations.’
'This form of analysis is more of a visualization tool that plots
the quantifiable impact on the x-axis, the percentage of
implementation on the y-axis, and the relative size of a
foundation's grant in a given field. This results in an easy
comparison of the performance of corporations across a
portfolio and can have different variables for the x-axis, y-axis
and bubble relativity for flexible data display. Foundation board
of directors and senior management teams could use the bubble
chart to assess the relative performance and cumulative
foundation investment (or total philanthropic investment)
against the indices of performance they care about most. The
analyses can be used to discuss performance, explore why one
program or a group of programs are positioned where they are,
and inform future investments.'
This tool is developed by the William and Flora Hewlett
Foundation. This foundation was founded in 1966 to solve
7. Charity Assessment Method of Performance
(CHAMP)
8. Foundation Investment Bubble Chart
9. Hewlett Foundation Expected Return
social and environmental problems at home and around the
world.
'The method calculates the expected return of investments and
is developed to enable foundations To ask and answer the right
questions for every investment portfolio: what's the goal? How
much good can it do? Is it a good choice? How much difference
will we make? What's the price tag? The method is purely
prospective. The expected return provides a systematic,
consistent, quantitative process for evaluating potential
charitable investments, and is based heavily on cost-
effectiveness analysis and cost-benefit analysis.’
“The Economic Multiplier is an central concept in Keynesian
and post-Keynesian economics. A multiplier is a factor of
proportionality that measures how much an endogenous
variable changes in response to a change in some exogenous
variable.”
“The local economic multiplier is based on the idea that dollars
spend in locally-owned stores will impact the local economy
two or three times more in comparison to dollars spend in
national retailers. The basics of the local multiplier
methodology are the identification of income in three rounds.
The first round measures direct income of the study group, the
second round measures indirect income, i.e. local spending of
the study group, the third round measures induced income, i.e.,
local spending by local recipients of study group spending. The
local multiplier is the sum of direct, indirect and induced
income divided by direct income.'
The Measuring Impact Framework is developed in 2008 by the
World Business Council for Sustainable Development. The
Measuring Impact Frameworkis designed to help corporations
understand their contribution to society and use this
understanding to inform their operational and long-term
investment decisions and have better-informed conversations
with stakeholders. The framework is based on a four-step
methodology that attempts to merge the business perspectives
of its contribution to development with the societal
perspectives of what is important where that business operates.
Step one, set boundaries: determine the scope and depth of the
overall assessment in terms of geographical boundary (local
versus regional) and types of business activities to be assessed.
Step two, measure direct and indirect impacts: Identify and
measure the direct and indirect impacts arising from the
corporation's activities, mapping out what impacts are within
the control of the corporation and what it can influence
10. Local Economic Multiplier (LEM)
11. Measuring Impact Framework (MIF)
FOCUS Research Papers
23IFIM International Journal of Management FOCUS October 2014 - March 2015|
through its business activities. Step three, assess contribution to
development. Assess to what extent the corporation's impacts
contribute to the development priorities in the assessment
areas. Step four, prioritise management response: based on
steps two and three extract the key risks and opportunities
relative to the corporation's societal impact, and based on this,
develop an appropriate management response. There is no
“one size fits all” way to use this methodology. In order to
appropriately tailor the methodology to the business and its
operating context, as well as ensure follow-up actions are taken,
corporations are encouraged to make the assessment as
participative as possible, consulting people both within and if
possible external to the corporation.’
The MDG-scan is developed in 2009 by the Dutch National
Committee for International Cooperation and Sustainable
Development (NCDO) and Dutch Sustainability Research
(DSR). 'The MDG Scan is a tool designed for corporations to
measure the positive contribution tot the Millennium
Development Goals (MDGs) and demonstrate their role in the
global initiative to reach these eight MDGs. The MDG Scan
measures each corporation's MDG impact by entering key data
in a secured environment. Once the corporation approves the
publication of its results, they will be visible for everyone. The
MDG Scan is a practical tool for corporations. Without
spending much time or effort, corporations can gain insight in
their MDG Footprint. Based on key data on core business and
community investment activities that can be entered after
registering, the MDG scan estimates your corporation's
contribution to each of the MDGs. Real time results generation
quickly provides easy-to-understand insights, globally, per
country or per sector / industry. Each corporation can
download a personalized MDG impact results report, which
facilitates internal discussions and in-depth analysis of its MDG
impact.’
'The Volunteering Impact Assessment Toolkit was developed in
2004 by the Institute of Volunteering Research (IVR) with
input from the London School of Economics, The University of
East London and Roehampton University. It is widely
recognised that volunteers make a difference to the work of
many social economy corporations, but this is mainly
supported by anecdotal evidence. The Toolkit is a way of
changing this. It is easy to use, comprehensive and adaptable. It
allows corporations to look at the impact of volunteering on the
volunteer, the service user, the corporation and the wider
community. It can help corporations gain a greater
understanding of how and why volunteering works in the
12. Millennium Development Goal scan (MDG-scan)
13. Volunteering Impact Assessment Toolkit
corporation as well as gather evidence to support funding bids.'
‘This new toolkit will enable corporations to assess the impact
of volunteering on all key stakeholders: the volunteers, the
corporation, the beneficiaries, and the broader community.
Results over time can be compared. Corporations will be able to
use it to assess a wide range of impacts, from the skills
development of volunteers to the economic value of
volunteering corporations. Positive and negative results,
intended and unintended impacts can be explored.’
Developed in 1999 by REDF (formerly The Roberts Enterprise
Development Fund) a nonprofit enterprise that creates job
opportunities through support of social enterprises that help
people gain the skills to help themselves.
'REDF developed this system for its internal use and that of the
nonprofit agencies in its portfolio to assess the social outputs
and outcomes of the agencies overall, including the social
enterprises they each operate. The system is a customised,
comprehensive, ongoing social management information
system (MIS). It entails both designing an information
management system that integrates with the agency's
information tracking practices and needs, and then
implementing the tracking process to track progress on short- to
medium term (two years) outcomes.’
‘The Feinstein International Center has been developing and
adapting participatory approaches to measure the impact of
livelihoods based interventions since the early nineties.
Participatory Impact Assessment (PIA) takes the participatory
methodology of these processes and applies it to the original
corporational objectives in asking the critical questions “what
difference are we making?” PIA offers not only a useful tool for
discovering what change has occurred, but also a way of
understanding why it has occurred. The framework does not
aim to provide a rigid or detailed step by step formula, or set of
tools to carry out project impact assessments, but describes an
eight stage approach, and presents examples of tools which may
be adapted to different contexts. A guide for practitioners is
available to demonstrate how PIA can be used to overcome
some of the inherent weaknesses in conventional humanitarian
monitoring evaluation and impact assessment approaches, such
as; the emphasis on measuring process as opposed to real
impact, the emphasis on external as opposed to community
based indicators of impact, and how to overcome the issue of
weak or non-existent baselines.’
This system has been developed by the World Bank in 2000.
14. Ongoing Assessment of Social Impacts (OASIS)
15. Participatory Impact Assessment
16. Poverty Social Impact Assessment (PSIA)
24 IFIM International Journal of Management FOCUS October 2014 - March 2015|
'PSIA is a systematic analytic approach to “the analysis of the
distributional impact of policy reforms on the well-being of
different stakeholder groups, with a particular focus on the
poor and vulnerable…” (PSIA User's Guide). It is not a tool for
impact assessment in and of itself, but is rather a process for
developing a systematic impact assessment for a given project.
Its components are not new, but PSIA has been formally
articulated as a systematic approach by the World Bank in 2003.
The method emphasises the importance of setting up the
analysis by identifying the assumptions on which the program is
based, the transmission channels through which program
effects will occur, and the relevant stakeholders and
institutional structures. Then program impacts are estimated,
and the attending social risks are assessed, using analytical
techniques that are adapted to the project under study.'17
Public Value Scorecard (PVSc)
The Public Value Scorecard is developed in 2003 by Prof. M.H.
Moore, Director of the Hauser Center for Non-profit
Corporations at the John F. Kennedy School of Government at
Harvard University.
‘The Public Value Scorecard is based on the concept of the
Balanced Scorecard. All the basics of the Balanced Scorecard–
that non-financial measures are important, that process
measures are important as well as outcome measures, that a
measurement system ought to support the execution of an
agreed upon strategy – are used but put to work through the use
of strategic concept that seems more appropriate to nonprofits.
The ultimate goal of non-profits is not to capture and seize value
for themselves, but to give away their capabilities to achieve the
largest impact on social conditions that they can, and to find
ways to leverage their capabilities with those of others. There are
three crucial differences between the BSc and the PVSc. First, in
the public value scorecard, the ultimate value to be produced by
the organisation is measured in non-financial terms. Second,
the public value scorecard focuses attention not just on those
customers who pay for the service, or the clients who benefit
from the organisation's operations; it focuses as well on the
third party payers. Third, the public value scorecard focuses
attention on productive capabilities for achieving large social
results outside the boundary of the organisation itself.’
The Robin Hood benefit-cost ratio was developed by the Robin
Hood Foundation in 2004.
'In 2004, we determined that for truly effective grant making, we
needed to know the value of similar and dissimilar programs.
For example, is a certain job training program a better
18. Robin Hood Foundation Benefit-Cost Ratio
investment than a particular education program? To answer this
question, Robin Hood developed an innovative methodology
of evaluation, or metrics. First, a common measure of success
for programs of all types is applied: how much the program
boosts the future earnings (or, more generally, living standards)
of poor families above that which they would have earned in the
absence of Robin Hood's help. Second, a benefit/cost ratio is
calculated for the program—dividing the estimated total
earnings boost by the size of Robin Hood's grant. The ratio for
each grant measures the value it delivers to poor people per
dollar of cost to Robin Hood—comparable to the commercial
world's rate of return.’
This tool has been developed in 2003 by the Institute for
Sustainable Development at the Zurich University of Applied
Sciences Winterthur (ZHW), Switzerland.
'The Social Compatibility Analysis (SCA). This method defines
objective criteria according to which social compatibility is
evaluated. First, the user of the SCA-tool divides a system into a
number of subsystems, i.e. a product could be divided into
subsystems according to the life cycle phases preproduction,
production, use and disposal. Second, relevant evaluation
criteria are selected. Finally, subsystems should be assigned to
classes A (highly relevant social problems), B (of medium
relevance), C (of low relevance) or 'not relevant' for all the
chosen criteria. The SCA is useful when the social dimension of
a project is concerned, when the clarification of differing
stakeholder opinions is needed or when sets of solutions are to
be negotiated.’
This is a general economic tool for performance measurement.
Since the 1990s the traditional cost-benefit analysis has been
extended to include impacts upon the society.
‘Social cost-benefit analysis is a type of economic analysis in
which the costs and social impacts of an investment are
expressed in monetary terms and then assessed according to
one or more of three measures: (1) net present value (the
aggregate value of all costs, revenues, and social impacts,
discounted to reflect the same accounting period; (2) benefit-
cost ratio (the discounted value of revenues and positive
impacts divided by discounted value of costs and negative
impacts); and (3) internal rate of return (the net value of
revenues plus impacts expressed as an annual percentage return
on the total costs of the investment.’
The term cost-effectiveness analysis refers to the economic
19. Social Compatibility Analysis (SCA)
20. Social Costs-Benefit Analysis (SCBA)
21. Social Cost-Effectiveness Analysis (SCEA)
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25IFIM International Journal of Management FOCUS October 2014 - March 2015|
analysis of an intervention. This is a general economic tool for
performance measurement. Since the 1990s the traditional
cost-effectiveness analysis has been extended to include impacts
upon the society.
'For example, one measure of cost-effectiveness is the cost per
HIV infection averted. This is affected by many factors:
intervention cost, number of people reached, their risk
behaviors and HIV incidence, and the effectiveness of the
intervention in changing behavior. The purpose of cost-
effectiveness analysis is to quantify how these factors combine
to determine the overall value of a program. Cost-effectiveness
analysis can determine if an intervention is cost-saving (cost per
HIV infection averted is less than the lifetime cost of providing
HIV/AIDS treatment and care) or cost-effective (cost per HIV
infection averted compares favorably to other health care
services such as smoking cessation or diabetes detection).’
Cost-effectiveness analyses also break down the costs and
resources needed to implement interventions—personnel,
training, supplies, transportation, rent, overhead, volunteer
services, etc.
The social e-valuator is developed in 2007 by the d.o.b.
Foundation and the Noaber Foundation and Scholten
Franssen, a Dutch consultancy corporation. The social e-
valuator is a web-tool based on the SROI methodology.
'The social footprint is a measurement and reporting method
that corporations can use to manage, measure and report the
sustainability of their impacts on people and society in a broad
range of areas. It is a context-based measurement tool that takes
actual human and social conditions in the world into account as
a basis for measuring the social sustainability performance of
corporations. The Social Footprint might be seen as an
adaptation of the concept of ecological footprint. Both
footprints are alike in the sense that both are about measuring
gaps, but the similarity ends there. In the case of the Ecological
Footprint, the gaps of interest to us are between resources we
need and resources we are stuck with; in the case of the Social
Footprint, the gaps of interest to us are between resources we
need and resources we have decided to produce. Ecological
resources are fixed and limited, social resources are not. The
sustainability metrics make it possible to measure non-financial
organisational performance (e.g., the triple bottom line) against
standards of performance. Numerators express actual impacts
on vital capitals in the world, and denominators express norms
for what such impacts ought to be in order to ensure human
well-being.’
22. Social e-valuator
23. Social Footprint
24. Social Impact Assessment (SIA)
25. Social return Assessment (SRA)
26. Social return on Investment (SROI)
'The concept of SIA is understood to include adaptive
management of impacts, projects and policies (as well as
prediction, mitigation and monitoring) and therefore needs to
be involved (at least considered) in the planning of the project
or policy from inception. The SIA process can be applied to a
wide range of interventions, and undertaken at the behest of a
wide range of actors, and not just within a regulatory
framework. It is implicit that social and biophysical impacts
(and the human and biophysical environments) are
interconnected. The overall purpose of all impact assessment is
to bring about a more sustainable world, and that issues of
social sustainability and ecological sustainability need to be
considered in partnership. SIA is also understood to be an
umbrella or overarching framework that embodies all human
impacts including aesthetic impacts (landscape analysis),
archaeological (heritage) impacts, community impacts, cultural
impacts, demographic impacts, development impacts,
economic and fiscal impacts, gender assessment, health
impacts, indigenous rights, infrastructural impacts,
institutional impacts, political impacts (human rights,
governance, democratisation etc), poverty assessment,
psychological impacts, resource issues (access and ownership of
resources), tourism impacts, and other impacts on societies.’
This system was developed in 2000 by Pacific Community
Ventures (PCV), a nonprofit organisation that manages two for-
profit investment funds that invest in corporations that provide
jobs, role models, and on-the-job training for low-income
people, and that are located in disadvantaged communities in
California.
‘PCV developed the method for its own use in assessing the
social return of each investor and of its portfolio overall. The
system entails tracking progress specifically on the number and
quality of jobs created by PCV's portfolio corporations. It helps
the fund target and improve its services to its investors and to a
group of corporations to which it provides business advisory
services. The method is separate from financial performance
assessment.’
Developed in 1996 by REDF (formerly The Roberts Enterprise
Development Fund) a nonprofit enterprise that creates job
opportunities through support of social enterprises that help
people gain the skills to help themselves.
‘REDF developed social return on investment (SROI) analysis
to place a dollar value on ventures in its portfolio with social as
26 IFIM International Journal of Management FOCUS October 2014 - March 2015|
well as market objectives. The approach combines the tools of
benefit-cost analysis, the method economists use to assess non-
profit projects and programs, and the tools of financial analysis
used in the private sector. Conceptually, the approach differs
from these established types of analysis, notably in what is
considered a “social” benefit. Practically, it is more accessible to
a broad range of users, substituting readily understood terms
and methods for technical jargon and complicated techniques.’
The Socio-Economic Assessment Toolbox was first launched in
2003 by Anglo American plc. 'The toolbox builds on several
steps. (1) profiling our own operations and our host
community, (2) identifying and engaging with key stakeholders,
(3) assessing the impacts of our operations – both positive and
negative – and the community's key socio-economic
development needs, (4) developing a management plan to
mitigate any negative aspects of our presence and to make the
most of the benefits our operations bring, (5) working with
stakeholders and communities to help address some of their
broader development challenges they would face even without
our presence, (6) producing a report with stakeholders to form
the basis for ongoing engagement with and support for the
community.’
'Stakeholder value analysis is based on the stakeholder
approach or standard-setting and strategic management of
corporations, which is used to analyse relations between
stakeholders (interest groups) and corporations. Measuring the
contribution to corporation value due to stakeholder relations
(stakeholder value) is done in four steps. In the first two steps,
the return on stakeholder (RoSt) is calculated for the
corporation in question and the reference corporation
(e.g.market average). The RoSt represents the stakeholder's
relative contribution to the value of the corporation. In the
third step the RoSt of the reference corporation is subtracted
from the RoSt of the corporation in view. In the final step this is
multiplied by the corporation's stakeholder costs to obtain the
stakeholder value added.’
The toolbox for analysing sustainable ventures in Developing
Countries is developed by UNEP (United Nations
Environmental Programme) in 2009.
'The toolbox is developed to answer questions related to the
identification of opportunities, the understanding of the
determinants of success and the assessment of costs and
benefits appear repeatedly. It addresses initiatives that support
27. Socio-Economic Assessment Toolbox (SEAT)
28. Stakeholder Value Added (SVA)
29. Toolbox for Analysing Sustainable Ventures in
Developing Countries
sustainable ventures including donor programmes, award
schemes, private and public investors, professional education
programs and policy makers. They can use the tools to
systematically identify, evaluate, advice, and promote
sustainable ventures. The tools respond to three questions that
appear over and again in the process of building and managing a
sustainable venture:
< Where are opportunities to create value by meeting
needs better and more efficiently?
< What factors determine the success of the venture?
< What are costs and benefits of the venture for the
business, society and the environment?”
The Wellventure Monitor™ is developed in 2006 by the Fortis
Foundation Netherlands (FFN) and the Erasmus University
Rotterdam (EUR). 'The Wellventure Monitor™ measures the
effects of community investment on several aspects. It makes
clear what the target group benefits from the project.
The idea of blended value is credited to Jed Emerson (Emerson,
2004). The blended value approach extends the idea of
economic value to combined social and economic value created
by an organisation or activity. Social Return on Investment
(SROI) was also devised by Jed Emerson and is a way of
measuring this blended value.
Blended value accountingConventional wisdom and legal definitions clearly separated
“doing well” from “doing good.” Corporations were for-profit
entities that sought to maximize economic value, while public
interest groups were nonprofits that sought to maximize social
or environmental value. It is clear, however, that nonprofit
organizations create economic value and for-profit companies
have social impact and worth. Consider, for example, the
economic value of 170 million boxes of Girl Scout cookies sales
or the social impact of Wal-Mart providing employment for 1.4
million people. While not the primary purpose of these
organizations, a growing group of practitioners, investors and
philanthropists are advancing strategies that intentionally
blend social, environmental and economic value.
Organizations operating in this middle ground of commercial
and social enterprise (regardless of their legal status) have
differing aspects of both social and commercial value creation.
There were many reasons such as these cited as to why it is more
difficult to successfully function in this middle ground, but the
30. Wellventure Monitor™
Blended value and SROI
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27IFIM International Journal of Management FOCUS October 2014 - March 2015|
most pervasive responses either had to do with issues of
accountability or the lack of a supporting capital market and
policy environment infrastructure for creating and investing in
blended value.
While there are accepted models regarding value creation in the
for-profit marketplace, many organizations in the nonprofit
sector do not articulate or track their social outcome goals, let
alone hold themselves accountable to particular performance
objectives. Creating and investing in blended value presents
unique challenges for practitioners and investors alike. The
inefficiency of raising capital, the lack of accountability and the
current policy and tax structure all present barriers to pursuing
blended value. The research suggests that there is promising
work being done to address these issues, but that more needs to
occur.
The research presented here has provided a theoretical analysis
of social impact reporting in social entrepreneurship. It has
suggested that social entrepreneurs use social impact reporting
in a number of strategic ways to enhance their performance,
access resources, and build organizational legitimacy. A new
conceptual model of social impact reporting has been
established – the Blended Value Accounting spectrum. The
Blended Value Accounting spectrum explicitly suggests that
Conclusion
there are a range of reporting practices available to managers
that can be used creatively and adaptively in different contexts
and to different strategic ends. From this perspective, the
function and value of such reporting is fluid, contingent, and
dynamic: but not passive or unstrategic. This emphasis on
diversity and contingency is in contrast to the
institutionalization of many reporting practices across all three
sectors of society that are static and resistant to reform. Given
the recent history of standardized accounting systems proving
unfit for purpose as risk management/control systems in
finance either at the micro- (the Enron scandal of 2001) or
macro-levels (the global financial crisis), introducing increased
diversity of reporting systems into organizations seems an
urgent objective (Power, 2007) The use of SROI by
corporations such as Philips in the Netherlands demonstrates
the broader applications of reporting practices first developed
in the social sector
We hope that the research presented here constitutes the start
of a larger project to both understand the field-level reality of
social impact reporting innovation and to learn wider lessons
from the social entrepreneurs that are pushing forward the
boundaries of such action. The 'moral obligation' to use
reporting practices strategically to drive improved internal
performance and better external accountability surely applies to
all organizations social, commercial, and public sector.
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corporation, the employees, and the social organisation gains from it. The Wellventure Monitor™ provides insight into the effects of a specific project. But more
importantly; it is also possible to see the sum of the different projects. This way, the long-term benefits of community investment become visible. With the tool,
corporations and corporations can create a survey after finishing a project and send it to those involved at the corporation, employees of the organisation, and to the
target group. The surveys are processed automatically. The tool can be used to view, analyze, and present the results. Per project, or over a longer period of time.’
http://www.wellventuremonitor.nl
FOCUS Research Papers
29IFIM International Journal of Management FOCUS October 2014 - March 2015|
INTRODUCTION
“CRM Guru”, explains the definition of CRM: in big business,
even if it consists of only several persons, there is no collective
mind till all information is not saved by different media; and
having saved it, it should be presented to “appropriate people”
“at appropriate time”.
Customer relationship management (CRM) can help to select
the most useful clients for an enterprise. Enterprises most
frequently feel who their main customers are, but only some use
systematized media of customers’ stimulation, loyalty
development. Collected data about consumers later become
knowledge, and the latter determines profit for an enterprise.
However the enterprise’s activity can be based on such
knowledge only when the data are processed and on their basis
motivated decisions to attract or sustain customers are taken. Of
course, it is necessary to possess special media, by means of
which it is possible to perform the mentioned actions and which
simplify the very decision-making. At present most
organizations recognize evident benefit of CRM and almost
every enterprise either use certain CRM technologies,
supporting their business, or evaluate specific benefit of CRM
technology and plan its future realization.
IMPACT ON CUSTOMER SATISFACTION
THROUGH CRM AT BIGBAZAAR (MPM MALL)
*DR. Y. Vinodhini
*Professor & Principal, Al-Qurmoshi Institute of Business Management, Hyderabad, Email: [email protected]
FOCUS Research Papers
-An empirical study
30 IFIM International Journal of Management FOCUS October 2014 - March 2015|
Research design:
1.2 Sample Design
1.21 Sampling Area
1.22 Sample population:
The type of research is a descriptive research where we are trying
to describe the levels of satisfaction of customers of Big Bazaar,
and also to identify various factors which play important role in
deciding the level of satisfaction of customers of Big Bazaar.
Research design is a framework or blueprint for conducting the
market research project. It specifies the details of the procedures
necessary for obtaining the information needed to structure
and /or solve marketing research problem.
Research design is descriptive for this project which comes
under conclusive research design. Conclusive research design is
to assist the decision maker in determining, evaluating and
selecting the best course of action to take in a given situation.
And a descriptive research has its major objectives the
description of something- usually market characteristics or
functions. It is used to determine the perceptions of people
toward product.
Big Bazaar MPM store , Abids, Greater Hyderabad city is the
sampling area.
Research mainly subjected to customers visiting Big Bazaar,
which were including all middle and lower middle class people.
CRM
Key Customer
Focus
CRM
Organization
Knowledge
Management
Technology
-based CRM
Research Methodology
1.23 Sample size
Our sample size was 100 people
Our sampling technique is convenience sampling, which was
that we took into consideration the customers we were willing to
respond easily. Sampling technique is used for this project is
non probability sampling because of time and resource available
for the project is limited. So, convenience sampling is used
Research instrument was questionnaires with structured set of
questions which were to measure satisfaction levels of customers
on various terms as if like on brands purchased, quality, price
etc.
The sources of data used mainly primary, with help of
questionnaires.
The technique has been used for summarization of some useful
data to meet the objectives.
1.24 Sampling technique
Data collection
Data collection instrument:
Data sources
Data analysis
Demographic analysis
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31IFIM International Journal of Management FOCUS October 2014 - March 2015|
Factor analysis
Chi-square analysis: -
REVIEW OF LITERATURE
This technique is usually used for the data summarization. With
the help of this technique we can arrange some correlated sets of
variables under one factor. This helps in saving time and cost.
here factor analysis technique has been used to identify the
prominent factors responsible for the satisfaction level towards
the customer relationship management of insurance industry.
Chi square technique is usually used to find the dependency of
different variables or in other words we can say that it is used to
find out the whether there exist a relationship between two
variables or not.
Keng and Ehrenberg, 1984 specified that Since the origin of
organized retail itself is very ne win India, there is not enough
literature, which studies the factors that govern consumer
choice of retail outlets and their relative positions. However,
studies in the west have found out that though consumers buy
products from the same supermarket in multiple occasions, they
are not 100% loyal i.e., they buy similar products form other
outlets in different occasions Although most literature has
found out that consumer choice of retail outlets follow a non-
hierarchical process.
Fotheringham , 1988 studied that consumer choice may follow
a hierarchical model at times. Most studies have focused on the
relation between store choice and price formats.
Tang, Bell and Ho, 2001 specified in their study that Price
formats have an impact on store choice. There have been studies
which found out that store choice is also related to perceive ed
shopping utility which may depend on Service Quality (Parking
space, friendliness of employees, billing time), Assortment of
products (popular brands), Purchase Flexibility etc. (Tang, Bell
and Ho, 2001) Lastly, unplanned time spend in store and
unplanned purchases have been found to be linked with factors
like perceived quality, variety, specials and value for money.
Oxenfeldt (1974) and Martineau (1958). Mentioned that
various definitions about a retail store image have been given by
scholars form time to time. The oldest and most basic one can
be credited to who defined a store's personality as:…. the way in
which the store is defined in the shopper's mind; partly by its
functional qualities and partly by an aura of psychological
attributes.” Later on, defined it as:“ an image is more than the
sum of its parts…..it represents interaction among
characteristics and excludes extraneous elements… It has some
emotional contents… a combination of factual and emotional
material.”
Ditcher 1985 emphasized on the image being something
complete.“It describes not individual traits or qualities, but the
total impression an entity makes on the minds of others… an
image is not anchored in just objective e data and details. It is the
configuration of the whole field of the object.”
All over the world there has been a considerable amount of
research to find out retail store image. However, most of the
studies can be divided into three different categories based on
the methodology used which are semantic differential scales,
multidimensional scaling and qualitative techniques.
Dodd's et al., 1991 & Rao and Monroe, 1989 specified that
most of the research on controllable cues has focused on price,
brand name, store name and level of advertising). However, the
focus has been almost exclusively on the perceived price-quality
relationship, even though it has been demonstrated that the
availability of other cues typically reduces the importance of
price as a cue (Bonner and Nelson, 1985; Dodd's et al., 1991).
Based on Monroe and Krishnan (1985), a positive relation
between the perceived price and perceived quality can be price-
sensitive, it is expected that price play a very important role in
determining the quality of the merchandise. In order to avoid
confounding the price and value constructs, price perceptions
were operational zed as perception of price within the range of
known prices of equivalent products in the product category.
Hence it can be posited that: “There exist a positive relationship
between relative price and goods quality.”
32 IFIM International Journal of Management FOCUS October 2014 - March 2015|
Smith and Barclay, 1997 mentioned that Satisfaction with the
relationship is regarded as an important outcome of
buyer0seller relationships). We define relationship satisfaction
as “a consumer's affective state resulting from an overall
appraisal of his relationship with a retailer” .
Anderson and Narks, 1984 in business as well as consumer
markets customers tend to be more satisfied with sellers who
make deliberate efforts towards them. Consequently, we posit
the following hypothesis:“A higher level of customer retention
orientation of the retailer leads to a higher level of relationship
satisfaction.
Yim(2005); it presents four elements groups consumers
Data analysis and interpretation
Factor Analysis: KMO and Bartlett's Test
(customers) characteristics, management of knowledge/data
(information about customers), CRM structure (organisation
structure, organisation obligations, sources, human resources,
etc.) and CRM substantiation by IT technologies.
Jason(2004), According to each customer is a unique
personality, thus it is necessary to analyze his or her needs and
features. It means that it is necessary to accumulate at least little
information about a customer, to possess his or her contact
information, work profile and main wishes he also assumes that
certain reorganization of an enterprise is necessary. If the level
of customer service is not developed sufficiently, customer
relationship cannot be managed effectively.
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34 IFIM International Journal of Management FOCUS October 2014 - March 2015|
Extraction Method: Principal Component Analysis.
Interpretation : According to above table we can see that,out of the total variance,695 of the variance is explained by 5
factors,20.885%,17.713%,11.602%,10.084%,9.653.
Extraction Method: Principal Component Analysis.
Rotation Method: Varimax with Kaiser Normalization.a.
Rotation converged in 11 iterations.
Interpretation:
Out of the total factors above the factors can be divided into 5
factors namely,
Factor 1(physical characteristics of the store)
Physical facilities
Presentation
Store layout
Factor 2(hygiene)
Cleanliness
Hygiene
Factor 3(monetary requirements)
Billing procedures
Cards acceptance
Offer schemes/discounts)
Factor analysis 4(Store's support)
Service
Employee behaviors
Home brands quality
Price/quality justification in case of home brands
Factor 5(store reputation(quality)
Brands available sufficient or not
Product availability
Quality of product
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Interpretation:
From cross tabulation we can see that in food bazaar quality stated by maximum of our respondents is stated as highly statisfied, and
in non food section it is also highly statisfied,as per our table we can see there were only 9 & 5 respondents in big bazaar who sopped
electronic or furniture respectively from big bazaar and most of them stated quality as highly dissatisfactory ,So , it is adviced to the
management to increase the quality of products in electronic and furniture section to increase sales there
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Interpretation:
We can see from the table itself that in food bazaar there is high satisfaction level in
customers as per as brands availability is concerned, but in, electronic and furniture section the more frequency is in highly
dissatisfied (6)and dissatisfied(3)respectively, and for
clothes(7)highly dissatisfied
So, according to the research if Big Bazaar wants to increase its sales and level of satisfaction in customers in electronic clothes
and furniture section go on increasing brands or no. of brand
Cross tabulation( income group and overall satisfaction)
38 IFIM International Journal of Management FOCUS October 2014 - March 2015|
Interpretations
We can infer from above data that in low income groups such as>10,000 or say 10,000-20,000 satisfaction level is highest 5 in highly
and 19 in highly satisfied again respectively , while in high such as 30,0000-40,000 and >40,000 the satisfaction level is 3 in
dissatisfied and 4 in dissatisfied respectively so we can infer there is relationship or association between income group and
satisfaction level.
Interpretation
We can infer since the value of chi square is less than 0.05
therefore the H0 hypothesis is rejected hence we can say that
there is association in income and overall satisfaction, and
how we have seen in above cross tabulation
Hence it is suggested the management that yes, though the
lower income groups are more satisfied from big bazaar , but
to increase the overall profitability we have to target high
income groups because they are dissatisfied , hence we cans
say that from the one before the previous cross tabulation
,that to make high income group satisfied increase brands in
furniture ,electronic section. And target high income
groups.
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Cross tabulation (distance from the store and frequency of visits)
Case Processing Summary
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Interpretation
We can directly see that if distance is less 0-5
example say kms then frequency of visit is highest
in >4times(59) and if distance more >20 it is most
in once a month(5)
And as, the chi square coefficient is less than our
level of significance so,H0 rejected hence, there is
association between frequency of visit and
distance from the store i.e inversely proportional.
Interpretation
The pie chart shows that out of our 100
samples 6%,13%,19%,20%,42% are
highly satisfied, satisfied neutral,
dissatisfied ,highly dissatisfied Hence
management should increase the
employee support and knowledge to
increase customers satisfaction ,and
thereby sales.
Interpretation
The chart shows that out of 100 samples
,15%,25%,26%,9,25% say brands available as
highly satisfied , satisfied , neutral, dissatisfied
,highly dissatisfied respectively so to increase
customer satisfaction and we know that is from
higher income groups management should
increase brands in all sections.
Interpretation
Out of total 66%,18%,7%,6% and 3% are
highly dissatisfied, dissatisfied, neutral,
satisfied , highly satisfied.
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CONCLUSIONS
RECOMMENDATIONS
Customer relationship management (CRM) is first of all it is business strategy meant for development of customer relationship; and its results optimize
profitability, income and meeting the needs of customers
1. Summarizing the functionalism and validity of researched elements of different models, it would be possible to highlight
that in order to successfully implement CRM, it is necessary for Big Bazaar store that they must balance and integrate technologies, processes and
people. These elements are closely related to enterprise's strategy, processes of technologies, and processes of integration of overlapping functions
as well as orientation to basic customers.
2. Model's formation has to appeal to certain continuity of actions (a situation is evaluated, CRM strategy is formulated, investments are
determined, anticipated profit is calculated), and creation of the system can be successful when the following elements of the system are analyzed
and related: customers, relationship interaction, information sources and data bases, processes and employees.
3. Customer relationship management cannot be only the illustration of the relationship, it is much more important to understand the
management and development of relationship. CRM integrates new strategic initiatives of communication with customers or their groups, it
creates common platform of communication with customers. Thus the Big Bazaar store managers must consider the above mentioned factors in
order to effectively implement the CRM.
4. In the end we conclude from our analysis that though the overall satisfaction level as mentioned by the customers was low in Big Bazaar but there
are several ways also to increase their satisfaction level and hence sales of select 5 Big bazaar stores .The customers had less confidence on quality
of products, authenticity of billing procedures i.e all went wrong every time, their schemes were not updated at cash counters or even at the
different sections too. So, the managers should take some strict and constructive measures to ensure all such modifications to be done correctly
by time.
5. Customers also wanted more brands in different section especially in electronic section for they relied less on products or brands sold by Big
Bazaar stores currently at that time. They should also improve quality of their brands as stated by the customers as almost dissafactory.
6. These could also some methods to increase customers foot fall and sales in different or specially electronic or clothes section of Big Bazaar as per
our research and findings.
7. Employees behaviors and support was also not satisfactory as per the customers so managers should take some serious training methods for the
store sales force. Lastly, higher income groups were less satisfied from the store which signaled the store management to target higher groups with
some appropriate kind of strategy. Promotional activities as carried during the study has provided a good way success which increased the overall
foot fall in the store day by day. Hence in the end we can state though overall customer stated their satisfaction level as dissatisfactory but yet there
are ways to make them satisfied as well as loyal customers of Big Bazaar
. Diversity of CRM model and its structure shows that CRM as system is forming and thus preparation of typical model, which would enable its
successful implementation, is possible.
. Though gifts like bags, magazines were good to attract customers but more good offers should be inculcated to increase customer buying
activities.
. The store should increase its product line and for this it should contact to many distributors so they can provide a huge amount of products so
that they can find every product according to their need.
. The space should be increased in the store for the customers to move to find every products of their choice. The employees should be trained in
this way so that they can answer the questions of the customers regarding their problems in services efficiently.
. Number of brands in various sections specially clothes and clothes to be increased especially the quality of Home brands to be improved.
. Employees should be given proper training about knowledge and support to customers and billing softwares to be updated and improved.
42 IFIM International Journal of Management FOCUS October 2014 - March 2015|
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Implications of IFRS implementation in IndiaImplications of IFRS implementation in India
Dr. P.PARAMSHIVAIAH* Mr. PUTTASWAMY** Ms. RAMYA S.K.***
A Perceptual study
ABSTRACT:Financial reporting is an information system of business and it
should be presented in an understandable language to all the
stakeholders. In the era of globalization, India has become an
economic force. To be a leader globally, India has to adopt many
changes required to interface the stakeholders of India and of
abroad and also comply with financial reporting standard. In
this backdrop a uniform international accounting system
(International Financial Reporting Standards) has emerged.
Many countries have adopted IFRS and India, planned to
implement in phased manner to bring about accounting quality
improvement through uniform standards. However, accounting
quality is a function of the firm's institutional setting within the
legal and political system of the economy in which it exists. IFRS
implementation involves technical complexities and legal
hurdles.
This paper aims to understand the complexities and issues
concerned with the delay in implementation process. The
primary data from 198 respondents from academicians,
professionals and business people, was collected with five point
Likert scale and factor analysis, Kruskal Wallis tests were applied
after the validation test.
The test results that there is no significant difference in the
perception of the respondents. It was found that the experts
view is to implement and make necessary changes for adoption
and gain its benefits. The paper suggests training and removing
legal hurdles soon.
Key words: IFRS, India, implementation, Implications
INTRODUCTION:Accounting is considered as the language of business. Financial
reporting is the medium through which the language is
communicated to the parties interested in business
information. Accounting and financial reporting are regulated
by Generally Accepted Accounting Principles (GAAPs)
comprising of accounting standards, company law, stock market
regulations, and so on. The global GAAPs that is seeking to
harmonize accounting and financial reporting world is the
International Financial Reporting Standards (IFRS) issued by
the International Accounting Standards (IASs; International
Financial Reporting Standards (IFRSs); Standing
Interpretations Committee (SICs) pronouncements; and
International Financial Reporting Interpretations Committee
(IFRICs) guidelines. Accounting Framework has been shaped
by International Financial Reporting Standards (IFRS) to
provide for recognition, measurement, presentation and
disclosure requirements relating to transactions and events that
are reflected in the financial statements. IFRS was developed in
the year 2001 by the International Accounting Standard Board
(IASB) to facilitate a single set of high quality, understandable
and uniform accounting standards. Users of financial
statement would require sound understanding of financial
statement but this can only be made possible if there is General
Accepted Accounting Practice (GAAP). With globalization of
finance the unified GAAPs enable the world to exchange
financial information with more meaningful and credible.
Investors from all over the world rely upon financial statements
before taking decisions while different countries adopt
*Dean & professor, Department of studies and Research in commerce, Tumkur University, TUMKUR, Mobile:- 94485 33326, E-mail:- [email protected]
**Assistant professor of commerce & Research Scholar, Governement First Grade College HIRISAVE, HASSAN-573211, Mobile:- 9741836197.,E-mail:[email protected]
***Assistant Professor of Commerce, Govt.Womens College Holenarasipura, HASSAN
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44 IFIM International Journal of Management FOCUS October 2014 - March 2015|
STATEMENT OF ORIGINALITY
We the authors of the present paper hereby affirm and declare that the research paper entitled “Implications of IFRS implementation in India:
A Perceptual study” is our original research paper. No part of the information in the body of the text has been reproduced from any of the other source
without prior permission. We also declare that the present research paper has not been presented / published anywhere before this submission.
With Regards: Dr. P. PARAMASHIVAIAH, Prof. PUTTASWAMY, Ms.RAMYA. K.S
accounting treatments and disclosure practices in respect of the
same economic event. This certainly makes the investors
confused and puzzled while interpreting financial statements.
Therefore, to have uniformity in a presentation of financial
results and position of business entity almost all the countries
have agreed upon to adopt one single common accounting
language i.e. IFRS. Precisely, “Convergence can be considered
to design and maintain national accounting standards in way
that financial statements prepared in accordance with National
Accounting standards drawn unreserved statement to
compliance with IFRS”. The convergence with IFRS in India is
perceived to be a milestone decision leading to significant
benefits to Indian corporate in terms of easier access to
international capital markets, lower cost of capital, improved
comparability, elimination of complexities of multiple
reporting and many others.
IFRS can be defined as “A single set of high quality,
understandable and enforceable global accounting standards
that require high quality, transparent and comparable
information in financial statements and other financial
reporting to help participants in the world's capital markets and
other users make economic decisions”
The difficulty in converging Indian Accounting Standards with
IFRS requires the preparers and practitioners to understand the
magnitude and complexity.
India originally decided to implement IFRS from 1st April 2011
in a phased manner but it was postponed. The Ministry of
Corporate Affairs (MCA), in January 2013, sought the opinion
of ICAI about the time of implementing IFRS convergence.
ICAI gave its recommendations in February 2013 suggesting
that companies with net worth above Rs 1000 Crore should
implement IFRS from 1st April 2015; those with Rs 500 Crore
to Rs 1000 Crore by 1st April 2016 and all others by 1st April
2017. ICAI has not recommended a time frame for banking and
insurance companies to embrace IFRS. However, experts are of
the view that the banking and insurance companies also should
start converging IFRS from 1st April 2015. It is argued that IFRS
is not a new concept now and no additional time is required to
adjust to IFRS. MCA has not made any announcement as
regards the recommendations of ICAI up till now.
More than 100 countries have already adopted IFRS, including
1.1. What is IFRS?
1.2. RATIONALE OF THE STUDY
China, Canada, and Australia. US is considering moving from
US GAAP to IFRS. India is one of the few countries in the world
which has yet to adopt IFRS. BRICS countries have also
implemented the IFRS- China (some years back), Brazil (in
2008) and Russia (in 2012). Japan is one of the few developed
countries that have not yet implemented IFRS. The whole
Europe is already in the IFRS mode. India has not yet converged
even after three years of its announcement. FICCI was
apprehensive about India's ability to adopt IFRS in 2011 and
opined it was highly unfair and impractical due to shortest
possible time frame. There is good number of examples of
benefits perceived for gaining advantages of international
accounting. Many research studies also have discussed the
important issues and challenges of adopting IFRS in India.
India is not going to adopt altogether IFRS. In fact India is
about to converge Indian GAAPS with IFRS. While IFRS is
still not compulsory in India, a few companies have already
adopted it, such as Bharti Airtel, Dabur, Infosys and Noida Toll
Bridge.
The debate amongst the experts and practitioners is on as to why
it is delayed up till 2015. The most important question that
arises during this debate is that why India is cut a sorry figure
when it announced the date, but did not make itself ready to
implement the same in 2011? Under this rationality the
researcher made an attempt to understand the perception on
the implications of implementing the convergence of Indian
GAAPS to IFRS soon. It was thought considerably relevant to
study the views of professionals and academicians and business
community on the issue. We limit the scope of present study to
understand the perception of professionals-who actually
practice with converged standards; Academicians-who deal with
education and training in accounting and reporting standards;
Business people-whose business is affected due to
implementation of IFRS. Thus, the statement of the problem is
recognized as “Implications of IFRS implementation in India: A
Perceptual study”
Considerably a good number of research studies thrown light
on the various issues with respect to IFRS adoption across the
globe.
Joseph (2000) has studied the importance of the uniformity in
reporting in an environment of technology up-gradation and
political reorganization of nations across the globe. He
identifies that consistency in reporting enables to attract global
I. LITERATURE REVIEW
45IFIM International Journal of Management FOCUS October 2014 - March 2015|
entrepreneurs and investors by increasing the rate of investment
and also lead to the integration of individual economy to the
international economy.
conducted a study regarding international
standards with respect to banking operations and importance of
corporate financial reporting in corporate governance and
documentation of the changes occurred in corporate reporting
practices. He has given justifiable suggestions for their gradual
introduction in the Indian Banking sector.
in his study observed some
interesting issues with regard to the financial reporting of
banking companies in India and finds that the quality of
financial reporting enables the banks to capitalize their
underlying strengths, disclosure practices and social viability.
focuses on the impact of convergence on auditing
firms and concludes that achieving true convergence of
accounting standards is a costly and time-consuming objective,
and will require a huge investment of money and a significant
change in the training of accounting students in the near future.
studied the convergence of Domestic
Accounting Standards and IFRS and also exhibits that
influence of Multinational Enterprises and large international
accounting firms can lead to transfer of economic resources in
their favor, wherein the public interests are usually ignored
find that the level of
earnings management for firms that report their results under
US GAAP is significantly lower, while the level of earnings
management under German GAAP and IAS is roughly equal.
Based on the evidence, they concluded that the different
accounting choices embedded in different accounting
standards influence the level of earning management.
critically examined the change in accounting treatment for
goodwill pursuant to international financial reporting
standards (IFRSs) by reference to the Australian reporting
regime.
undertook a study of financial data in 21
countries and examined whether application of IAS/IFRS is
associated with higher accounting quality and the findings of
the study confirmed that firms applying IAS/IFRS evidence less
earnings management, more timely loss recognition and more
Kannan (2003)
Dangwal and Singh (2005)
Tokar (2005)
Chand & White (2007)
Goncharov and Zimmermann (2007)
Graeme Wines, Ron Dagwell, Carolyn Windsor (2007)
Barth et al (2008)
relevance of accounting numbers. The study also found that the
firms applying IAS/IFRS experienced an improvement in
accounting quality between the pre-adoption and post
adoption.
analyzed whether
mandatory introduction of IFRS standards had an impact on
earnings quality, and more precisely on earnings management
and concluded that frequency of earnings management did not
decline after the introduction of IFRS.
has analyzed the impact of mandatory
change in financial reporting standards in European union and
found that the transition from local GAAP to IFRS had a small
but statistically significant impact on total assets, equity, total
liabilities and among assets the most pronounced impact on
intangible assets and property and equipment.
analyzed the development of reporting
standards for both financial reporting and for corporate social
responsibility (CSR) reporting. It aims to argue that both
International Financial Reporting Standards and US Generally
Accepted Accounting Principles are vehicles of colonial
exploitation and cannot be sustainable. This can be contrasted
with the voluntary approach to the development of CSR
reporting standards.
examines whether IFRS
improved the usefulness of accounting information in a code
law country that has a strong system of legal enforcement and
high quality domestic accounting standards. They found that
IFRS have improved the relevance of accounting information in
Finland but they also highlighted the concern about reliability
of those items of financial statement that are prepared using
judgment.
They aslo undertook study of key financial rations of companies
of Finland and later found that the adoption of IFRS changes
the magnitude of the key accounting ratios and also showed that
the adoption of Fair Value Accounting rules and stricter
requirements on certain Accounting issues are the reasons for
the changes observed in Accounting Figures and Financial
ratios.
studied Economic effects of IFRS adoption by
emphasizing on the fact that universal financial reporting
standards will increase market liquidity, decreases transaction
costs for investors, lower cost of capital and facilitate
international capital flows.
Jeanjeana and Herve stolowya (2008)
Capkun et al. (2008)
Armstrong C. (2008)
Lantto & Sahlstrom (2007) (2009)
Epstein (2009)
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46 IFIM International Journal of Management FOCUS October 2014 - March 2015|
Alfred Wagenhofer (2009)
Dennis W. Taylor (2009)
Rudy A. Jacob, Christian N. Madu (2009)
Robyn Pilcher, Graeme Dean (2009)
Susana Callao, Cristina Ferrer, Jose I. Jarne, Jose A. Lainez
(2009)
Siqi Li (2010)
Cai & Wong (2010)
analyzed the challenges that arise
from political influences and from the pressure to sustain a
successful path in the development of standards. It considers
two strategies for future growth which the International
Accounting Standards Board (IASB) follows the work on
fundamental issues and diversification to private entities.
compared the costs to financial
statement prepares of making the transition to International
Financial Reporting Standards (IFRSs) relative to the benefits
to financial statement users from receiving “higher quality”
IFRS-based information (measured as incremental value-
relevance for listed companies in the UK, Hong Kong and
Singapore). These countries had different approaches to
harmonization leading up to IFRS adoption.
examined the
academic literature on the quality of International Financial
Reporting Standards (IFRS), formerly International
Accounting Standards (IAS), which are poised to be the
universal accounting language to be adopted by all companies
regardless of their place of domicile.
determined the impact
financial reporting obligations and, in particular, the
International Financial Reporting Standards (IFRS) have on
local government management decision making. In turn, this
will lead to observations and conclusions regarding the research
question: “Does reporting under the IFRS regime add value to
the management of local government?”
discovered the quantitative impact of International
Financial Reporting Standards (IFRS) on financial reporting of
European countries and evaluate if this impact is connected
with the traditional accounting system in which each country is
classified, either the Anglo-Saxon or the continental-European
accounting system.
carried out a study on 1084 European Union
firms during the period of 1995-2006. He concludes that on an
average, the IFRS mandate significantly reduces the cost of
equity for mandatory adopters and reduction is present only in
countries with strong legal enforcement. He also concludes that
increased disclosures and enhanced information comparability
are two mechanisms behind the cost of equity reduction.
conducted a survey of global capital
markets and summarized that the capital markets of the
countries that have adopted IFRS have higher degree of
integration among them after their IFRS adoption as compared
to the period before the adoption.
carried out a study of financial data of publicly
listed companies in 15 member states of European Union
before and after the full adoption of IFRS in 2005, thereafter
found that the majority of Accounting Quality indicators
improved after IFRS adoption in the EU and after there is loss
of managing earning towards a target, a lower magnitude of
absolute discretionary accruals and higher accruals quality.
They also proved that the improved accounting quality is
attributable to IFRS, rather than changes in managerial
incentives, institutional features of capital markets and general
business environment.
As evident from the literature review, good number of studies
carried out in different countries in different perspectives. They
have highlighted the benefits of having single set of financial
reporting standards across the globe. Most of the above
mentioned studies are post-convergence period researches. In
India IFRS still not implemented, post adoption impact and
implications cannot be studied. However, a few research studies
have been carried out recently in India, on conceptual basis.
Most of the studies explain advantages, issues and challenges on
theoretical background. Hence the research gap exists in India
and no research works studied the perception of Professionals,
academicians and business people. Furthermore, since the
government has not adopted IFRS yet, studies on post
implementation impact and implication would be controversial
and irrational. Therefore we have carried out perceptual study
on issues and challenges of implementation of IFRS in India.
The major utility of this study is that it signals the major issues
and practical vulnerability in the process of IFRS
implementation. It will also guide the policy makers to take
necessary precautions and to calibrate legal framework that suits
the compatibility of IFRS in corporate reporting practices.
1. To study the perception of professionals,
academicians and business people on IFRS
implementation
2. To identify the major contributing factors on issues
and challenges in IFRS implementation
Chen et al (2010)
.2.1. RESEARCH GAP
2.2. OBJECTIVES OF THE STUDY
47IFIM International Journal of Management FOCUS October 2014 - March 2015|
3. To know whether there is an association between
different groups of respondents
4. To offer pertinent suggestions based on the research
findings
H01: there is no significant difference in the perception of
respondents
H11: there is a significant difference between the mean
perceptions of respondents
This study is exploratory in nature. It also yields empirical
results. The study relied both on primary data and secondary
source of information. The primary data consists of socio-
economical status as well as qualitative information consists of
perceptions of three category of respondents- chartered
accountants and finance professionals, academicians who teach
both graduate and post-graduates students in the relevant
subject, and also business people. The secondary source consists
of published information from journals, books, compendiums
of ICAI, research papers, thesis and government records, and
extensive literature survey. The primary data was collected by
distributing structured questionnaire.
We identified the respondents by multi-stage random sampling
method and also adopted judgmental random sampling and
Purposive sampling method for data collection. In the first
stage, the registered chartered Accountants in the southern
region were identified from the directory of members of
chartered accountants. There are 192513 chartered
accountants are the members of all the regions in India as per
the directory, as on 1st April 2012 out of which 18700 are
practicing chartered accountants from southern region.
Purposive sampling method was followed to collect data from
Business people and college teachers and university teachers.
Questionnaires were distributed through e-mails to 70 members
in each group, totally 210 structured questionnaires were sent to
the population in Mysore, Bangalore, Belgaum, Chennai and
Thrissur. Judgment sampling method was adopted. In all 198
completed questionnaires were finally considered for the study.
2.3. Hypothesis:
II. RESEARCH METHODOLOGY
3.1. DATA
3.2. SAMPLING
3.3 TOOLS OF ANALYSIS
III. RESULTS AND ANALYSIS
Data collected, edited, codified and analyzed by applying SPSS
version 16. Factor analysis was applied. The data failed to test
the normality assumption. However, the data fulfills the
homogeneity test. Hence, Krsuskal-Wallis test was adopted for
testing the hypothesis.
The table 1 shows the demographic details of the population
considered for survey. Of the total 230 respondents 87 were
academicians, 95 were accounting and finance professionals-
practicing Chartered Accountants, and 48 were Business
people.
All these respondents are considered as preparers and
practitioners. Among the academicians 49 percent are educated
up to post graduation and 46 percent of the academicians have
doctoral degrees, and only 4.6 percent have professional
degrees. Majority of the professionals have professional degree
and more than 50 percent of the business people are studied up
to post graduation and doctoral degree. The table shows that
more than 60 percent of the respondents have up to 30 years of
experience in their respective field. Age-wise analysis shows that
more than 50 percent of the population aged below 40 years and
the rest aged above 40 years. The respondents considered for
survey have enough experience and practice in their relevant
field of accounting and reporting and obviously more suitable
sample for data collection.
For data analysis and testing the hypothesis, we have tested the
reliability through Cronbach's Alpha (Table 2). The value more
than 0.50 which is considered to be reliable and value of the
data in the present study is 0.577, which is more than 0.50,
shows the homogeneity of items.
4.1. TESTING THE VALIDITY
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48 IFIM International Journal of Management FOCUS October 2014 - March 2015|
4.2. FACTOR ANALYSIS
Factor analysis through which various factors of statements
asked to the respondents are reduced to find out the important
factors determine the issues and challenges as perceived by the
respondents. Before that, Kaiser-Meyer-Olkin measure of
sampling and Bartlett's test of Sphericity (Table3 ) was applied.
Bartlett's test of sphericity was significant, supporting the
factorability of the correlation matrix and the associated
significance level was extremely small (0.000). A high value
which is above 0.5 to 1.0 generally indicates that a factor analysis
may be useful with the data. As here KMO value is 0.659 on
factors of issues and challenges perceived is more than 0.50, we
found that the results of factor analysis are useful with the
present data.
A factor analysis was conducted to develop constructs that will
help to evaluate factors that are identified as key issues and
challenges of IFRS implementation. 10 factors were generated,
COMPONENTSa,bTest Statistics
TABLE 4: FACTOR ANALYSIS AND KRUSKAL WALLIS TEST
which explained 69.311 percent of the variance with the loss of
only 30.681 percent of information. The extracted factors were
then rotated using
Variance maximizing method (Varimax). These rotated factors
with their variable constituents and factor loadings are given in
Table 5. Of the 10 factors identified adoptability is the first
factor emerged as an important component with the highest
factor scoring and the total variance of 12.45 percent, the
second factor is understandability with the total variance of
11.48 percent, then follow preparedness, flexibility, problem of
reporting, transitional problems, reliance, Technological issues,
regulatory issues. However, inferential ambiguity as scored more
than 80 percent and emerged as
Technological issues, regulatory issues. However, inferential
ambiguity as scored more than 80 percent and emerged as a vital
component though the total variance is 3.17. Answers to the
questions with five point Likert scale was analyzed with factor
analysis. Majority of the respondents are of the view that proper
training to the preparers, practitioners and users is the very
important thing that should happen before we go for
convergence.
49IFIM International Journal of Management FOCUS October 2014 - March 2015|
a. Kruskal Wallis Test, b. Grouping Variable: OCCUPATION
Regulatory bodies need to streamline the legal issues concerned
with taxation and disclosure norms to the corporations on the
basis of total turnover or total capital as the case may be. The
experts view is that the recent companies Bill 2012 should have
been postponed or the compulsory rotation of auditors should
have been delayed until the IFRS issues are properly settled
down. Unless we are prepared internally for the convergence,
unless the ambiguities are wiped out, without any clarity in the
norms it is highly difficult to converge, even in a phased
manner, in the country like India filled with too many Laws and
Acts. It will also be difficult on the part of the users of
accounting information to read and understand and take
decisions based on the financial reporting unless there is
awareness among all the parties.
Initiatives and preparedness on the part of regulatory bodies
ICAI and advisory Committees for the IFRS implementation is
much necessary. It builds confidence of the preparers and users
of IFRS reporting system through its supportive function. In
the light of this the statements were included in the data
instrument about the said supportive functions. Based on the
4.3. TESTING OF HYPOTHESIS
4.3.3 Hypothesis (H01)
frequencies of the responses we calculated mean, standard
deviation, Chi-Square Test for testing another null Hypothesis
(H01) which states that there is no association between the
perceptions about the supportive functions. Table (8) below
shows the mean and standard deviation of the perception
among the three groups of population- professionals,
academicians, and Business people.
Since IFRS is principle-based approach and have limited
implementation and application guidelines, it requires the
preparers; especially, initial period learning and subsequent
revisions form the implementation. There are technical
complexities, manual work stress, management problems. As
the time frame for implementation of IFRS has been changed
there arose a great amount of debate among the people as to
what complexities involved IFRS implementation. In the light
of repeated postponement of IFRS convergence process it was
thought necessary to understand the reasons behind the delay.
To understand the issues and challenges concerned with the
IFRS implementation in India as perceived by the appropriate
groups of the population we served questionnaires to respond
to the statements prepared on the basis of widely available
literature and conceptual background about the Indian GAAPs
and IFRS. The data was tested and found valid. Factor analysis
I. SUGGESTIONS AND CONCLUSION
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50 IFIM International Journal of Management FOCUS October 2014 - March 2015|
resulted in ten dimensions and the most important issues
concerned with this phenomenon is adoptability,
understandability and preparedness. Majority of the
respondents strongly agree that there is a talent crunch and
speedy academic training and professional guidance is sought
among the practitioners. And also the expert view is that there
are transitional issues to be tackled with the necessary changes
in the legal environment that is compatible to the taxation and
other relevant interdisciplinary issues.
The problem of flexibility and inferential ambiguity between
the preparers and users, particularly investors share value
measurement and dividend issues are quite unique in the
country. Hypothesis testing shows that there is no significant
difference in the perception among the population. But as the
respondents believe the steps taken by the governing body and
the advisory committees towards the speedy process of
convergence is not much sufficient. Only thing required is that
highly influential new company law Bill must clear the obstacles
and the compulsory rotation of auditors must be delayed until
the convergence process completes and everything is settled.
Moreover, the academic inputs to the professional regions are
not at all satisfactory. A sound theoretical and practical training
in the light of international GAAPs, industry-academia
integration is very much necessary. The results suggest that the
accounting and finance professionals, academicians and
business people more or less carry the same perception towards
IFRS convergence. With this background we conclude that
practitioners and experts view it necessary to converge Indian
GAAPs with IFRS by arranging necessary rooms for universal
adoptability.
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4. Cai, Francis, and Wong Hannah,(2010) ? The Effect of IFRS Adoption On Global Market Integration? International Business & Economics Research Journal, Vol. 9, No 10, 2010, pp. 25-34.
5. Banerjee, B. (2001) Corporate Financial Reporting Practices in India. Indian Journal of
Accounting, Vol. XXXII, Dec. 2001.
6. Bhattacharjee, Sumon, Islam, Zahirul, Muhammad, (2009). Problems of Adoption of International Financial Reporting Standards (IFRS) in Bangladesh, International Journal of Business and
Management, 4 (12). Pp 165-175
7. Callao, Susana, Jarne, I, José, Laínez, A, José,(2007), Adoption of IFRS in Spain: Effect on the comparability and relevance of financial reporting, Journal of International Accounting Auditing
& Taxation, 16 (2) Pg 148.
8. Chand, Pramod, White, Michael,(2007). A critique of the influence of globalization and convergence of accounting standards in Fiji, Critical Perspective on Accounting, 18 (5) pg 605.
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Review, Vol. 7, No. 2, Dec. 2003.
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51IFIM International Journal of Management FOCUS October 2014 - March 2015|
Applicability of the Linear CVP Model in the Indian Cement Sector
ABSTRACT
INTRODUCTION
The Cost-Volume-Profit (CVP) model is a model for analyzing a
firm's cost and revenue structure, and it is widely used in
practice to examine the possible impacts of a range of strategic
decisions. In spite of its theoretical appeal, however, the CVP
model has had very little application empirically.
This study examines the applicability of the CVP model
empirically for the Indian cement sector using linear regression.
The results of the study indicate that though the simple CVP
model with linear cost and revenue functions does offer some
interesting insights, there are anomalies in several cases. Thus,
the CVP model with nonlinear cost and revenue functions may
be more appropriate in explaining the cost and revenue
structure for companies in the Indian cement sector.
Keywords: Cost-Volume-Profit (CVP) model, cost and revenue
structure, linear regression.
The Cost-Volume-Profit (CVP) model is a model for analyzing a
firm's cost and revenue structure, summarizing the consequence
of changes in sales volume on the firm's costs, revenues, and
profits. The simple CVP model was introduced by Hess (1903)
and Mann (1903-07), with linear cost and revenue functions.
Even though it is relatively simplistic, it is a very versatile
technique for profit planning, and it is extensively used in
practice to examine the possible consequences of a range of
strategic decisions, including pricing policies, product mixes,
Mihir Dash*
*Alliance University Bangalore, India
market expansions/contractions, outsourcing, plant
utilization, and so on (Brealey and Myers, 1991; Horngren et al,
1994).
The simple linear CVP model has several inadequacies. The
model assumed linear cost and revenue functions, which
prevented it from capturing some significant nonlinear
phenomena, such as the range of profitability and the optimal
point. Several studies have incorporated nonlinear costs and
revenues in the CVP model (Guidry et al, 1998). Also, the CVP
model was a deterministic model, and was thus not effective in
the case of decision-making under uncertainty. Several
extensions to the CVP model were proposed to include
uncertainty conditions (Jaedicke and Robichek, 1964; Hilliard
and Leicth, 1975); and Adar et al (1977) and Kottas et al (1978)
proposed general models for CVP analysis under uncertainty.
Further, Kottas and Lau (1978) applied simulation techniques
for stochastic CVP analysis. Also, the CVP model was essentially
a single-variable model, applicable only in the case of a single
product or a fixed product mix. González (2001) proposed an
extension of the CVP model for multiproduct firms. Some
other extensions of the CVP model are: learning effects
(McIntyre, 1977), capital structure (Guidry et al, 1998; Kee,
2007; Prihadyanti, 2011), cost stickiness (Banker et al, 2013),
and several others.
In spite of its theoretical appeal and its several extensions, the
CVP model has had very little application empirically. Xishuan
and Huifang (2008) employed a linear regression model to
empirically test the CVP model, with profit as the dependent
FOCUS Research Papers
52 IFIM International Journal of Management FOCUS October 2014 - March 2015|
variable, and sales volume, variable costs, and fixed costs as the
independent variables; however, this specification clearly
suffers from multicollinearity. The present study analyses the
applicability of the linear CVP model empirically for the Indian
cement sector using linear regression.
The study considers the simple CVP model with linear cost and
revenue functions. The model assumes a linear cost function
TC=FC+vx and a linear revenue function TC=px. The viability
condition for the firm (i.e. the condition for the firm to be
profitable at some level of production) is that P>V, and, under
this assumption, the break-even point is given by BEP=
A simple sustitution yields the equation TC=
implying a linear relationship of TR on TC, with a negative
intercept, and, under the assumption of viability, a slope greater
than one. On the other hand, a similar substitution yields the
equation also implying a linear
relationship of TC on TR, with positive intercept, and, under
the assumption of viability, a slope lying in the unit interval, i.e.
between zero and one.
In particular, the regression coefficients above are linked with
the percentage contribution margin, 1 - v/p, which is equivalent
to the rate of change of contribution margin with respect to total
revenue, and thus would be closely related with profitability.
The regression coefficients can thus be used as a basis for
comparison of profitability performance between companies in
the same industry, and between different sub-segments of an
industry.
Model Specification
Methodology
Findings
The objective of the study is to explore the applicability of the
linear CVP model as discussed in the preceding section in
explaining the cost and revenue structure in the Indian cement
sector. The data for the study was collected for a sample of
twenty-two large cement companies and seven small/medium 1cement companies from the Capitaline database, based on data
availability. The sample companies were further classified into
region (North and South India). The study period was 2003-
2012. The data pertaining to the costs and revenues for each
company was obtained from the income statement. The costs
included raw materials costs, power & fuel costs, employee
costs, other manufacturing expenses, selling & administrative
expenses, and miscellaneous expenses, while the revenues
included the sales turnover.
The cost-revenue relationship was analysed using linear
regression in accordance with the models specified in the
preceding section. The regression results are presented in Table
1. The regression coefficients were used to compare the
profitability performance of North and South India based
companies as well as large and small/medium companies using
two-way ANOVA without interaction. The results of the two-
way ANOVA tests are presented in Tables 2 and 3.
The results in Table 1 show that all of the regressions were
statistically significant, with a coefficient of determination of at
least 85%, except for Cement Corporation of India, with a
coefficient of determination of 61.0%.
Table : results of regression of TR on TC and TC on TR
53IFIM International Journal of Management FOCUS October 2014 - March 2015|
1www.capitaline.com
First considering the linear regressions of total revenues on total
costs, it was found that all of the regression coefficients were
greater than one, except for Kalyanpur Cements and Sainik
Finance & Industries, both of which had incurred losses during
the study period. The regression coefficients of Barak Valley
Cements, Gangotri Cement, and Prism Cement were relatively
low, less than 1.10, indicating that these companies may be at
risk of loss. On the other hand, the regression coefficients of JK
Lakshmi Cement and Chettinad Cement Corporation were
relatively high, greater than 1.70, indicating higher profitability.
However, the regression constants were negative only for ten of
the sample companies, and significant only for Gangotri
Cement; for the remaining nineteen sample companies, the
regression constants were positive, and significant for six of
these. This could have resulted from the slump in demand in
the construction sector during the study period. Another
possibility could be that some of the sample companies have
undertaken expansion strategies, which could increase the fixed
costs without an immediate increase in sales.
Similarly for the linear regressions of total costs on total
revenues, it was found that all of the regression coefficients were
less than one, except for Kalyanpur Cements and Sainik
Finance & Industries, and were relatively high (greater than
0.90) for Barak Valley Cements, Gangotri Cement, and Prism
Cement, corresponding with the linear regressions of total
revenues on total costs. Once again, the regression constants
were positive for only thirteen of the sample companies, and
significant for three of these; for the remaining sixteen of the
sample companies, the regression constants were negative, and
significant for three of these.
In summary, the linear CVP model seems to be appropriate only
for the following sample companies (i.e. only fourteen of the
twenty-nine sample companies): Burnpur Cement, Gujarat
Sidhee Cement, JK Cements, Madras Cements, Mangalam
Cement, Prism Cement, Shree Cement, Shree Digvijay
Cement, Ultra Tech Cement, Gangotri Cement, Barak Valley
Cements, Sainik Finance & Industries, Anjani Portland
Cement, and Bheema Cements.
The results of the ANOVA tests indicate that South India based
cement companies were significantly more profitable than
North India based cement companies, and that large cement
companies were significantly more profitable than
small/medium cement companies.
The results of the study indicate that the simple CVP model
with linear cost and revenue functions is applicable for only a
Discussion
section of companies in the cement sector, and there are
anomalies in several cases. The results of the study suggest that
nonlinear cost and revenue functions may be more appropriate
than the simple linear CVP model in explaining the cost and
revenue structure of cement sector. This may be investigated
further by considering quadratic cost and revenue functions,
extending the simple CVP model.
Despite the anomalies, the regression coefficients were found to
be in conformance with CVP theory. In particular, the
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54 IFIM International Journal of Management FOCUS October 2014 - March 2015|
regression coefficients from the model can be used to compare
company profitability performance within the sector, and
between sub-segments of the sector. Of course, the relationship
of the regression coefficients with company profitability needs
to be empirically validated.
The results of the study indicate that South India based cement
companies were significantly more profitable than their North
Indian counterparts. This could be due to cost efficiencies of
the South Indian cement companies, particularly in terms of
lower distribution costs. This needs to be investigated further.
The results of the study also indicate that large cement
companies were significantly more profitable than
small/medium cement companies. This could reflect an
economy of scale, with larger companies perhaps having a more
efficient distribution network. This also needs to be analysed
further.
There are some limitations inherent in the study. The sample
size used for the study was limited, and based on data
availability. Thus, the results of the study may not be
generalisable for the entire cement sector, particularly for small,
regional players. The study period also poses some difficulties,
mainly due to unfavorable market conditions during the global
financial crisis of 2008-09; on the other hand, there is a need to
study the applicability of the CVP under these unfavorable
market conditions. Another limitation is that the models used
in the study assume a constant product mix.
There is great scope for further research in this area. Broader
models can be developed, bringing in additional variables,
including the product mix. The analysis can also be performed
in other sectors. Also, specific models can be developed for CVP
analysis for service sectors.
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Predictors of Work-Family Conflict & Family-Work Conflict
An exploratory study among officers of defence manufacturing companies in India
ABSTRACT
Work-Family conflict (WFC) occurs when work-role activities
interfere with family responsibilities and family-work conflict
(FWC) occurs when family-role responsibilities impacts
performance at work. The purpose of the paper is to explore
how work demands like impact the family domain and home
demands like impact work domain. The role of support type in
the form of spousal support and self management in the
relationship between work demands and work-family conflict
was also investigated. The study is carried out in a different
sector – defence Central Public Sector Enterprises (CPSEs) as
limited study has been conducted in this sector. The sample was
comprised of 338 respondents from three public defence
manufacturing companies and all of them were officers at
various levels. The research instrument was a questionnaire
comprising five parts. The variables were measured under four
categories – work demands, self management, individual use of
company support policies and work-family conflict & family-
work conflict. The findings showed that work demands, self
management, number of dependents and total experience were
significant predictors of work-family conflict. Multiple
regression analysis showed that support type in the form of
spousal support and self management did not show any
moderator or mediator effect between work demands and work-
family conflict.
Nita Choudhary* Shikha Ojha** Niranjan Kumar Singh***
*Research Scholar, CMS Business School, Jain University, Bangalore, India, E-mail: [email protected]
**Faculty, CMS Business School, Jain University, Bangalore, India, E-mail: [email protected]
***Research Scholar, CMS Business School, Jain University, Bangalore, India, E-mail: [email protected]
Keywords: Work demands, Central Public Sector Enterprises
(CPSEs), Work-family conflict (WFC), Family-work conflict
(FWC), Stressors
Traditionally balancing of work and family roles was focused on
conflicts or interference between these roles (Eby et al, 2005).
The mutual interference of work and family domains has been
identified as one of the major stressors in the workplace. Work-
family conflict occurs when pressures from the work and family
domains are mutually incompatible in some respect (Greenhaus
and Beutell, 1985). Different types of stress models have been
studied that have negative impact on both work and family
outcomes like work stressors (eg. no. of hours worked, work
deadlines), non-work stressors (eg. no. of dependent children/
dependent parents, strain in marital relationships) and
interaction between work and family (eg. inter-role conflict),
(Greenhaus and Parasuraman, 1986; Frone, Yardley and
Markel, 1997). Work constraints may force employee to work
longer and harder to make up for inadequate supply of work
resources like information, training, manpower and
equipment, thus augmenting work-family conflict (Lu et al.,
2010).
Thus Greenhaus and Beutell, (1985) defined work-family
conflict as “A form of interrole conflict in which the role
INTRODUCTION
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pressures from the work and family domains are mutually
incompatible in some respect” and divided work-family conflict
into three categories: time-based, strain based and behavior
based. Literature is enriched by Gutek et al. (1991); Frone,
Russell & Cooper (1992), who stated that work-family conflict is
bidirectional and found that work stress increased work-to-
family conflict, while family stress increased family-to-work
conflict. Both work-to-family conflict and family-to-work
conflict contributes to stress for employees. Rothbard (2001)
reported that participating in multiple roles can be detrimental
and working parents and dual family earners are negatively
affected by simultaneously handling work and family roles.
Grant-Vallone and Donaldson (2001) stated that work-family
conflict is not restricted to employees with traditional
responsibilities but extends to higher level positions and
employees with all types of family circumstances experience
high levels of work-family conflict.
Combining work and family is the major challenge for the
current generation of workers today (Halpern, 2005). This has
given rise to different types of work-family conflicts: “Work –
Family Conflict” (WFC) and “Family – Work Conflict”, (FWC)
(Frone, Yardley and Markel, 1997; Netemeyer et al., 1996;
Byron, 2005). Work-Family Conflict (WFC) occurs when work-
role activities interfere with family responsibilities (eg. long
working hours interfering with home roles). Family-Work
Conflict (FWC) occurs when family-role responsibilities
impacts performance at work (eg. attending a sick child on a
busy work day). Although many researchers have recognised the
bidirectional influences and have assigned similar processes to
family-work conflict, but the greatest amount of focus has been
given to work-family conflict (Eby et al;, 2005).
This study is designed to investigate the presence of work-family
conflict and family-work conflict among officers of defence
manufacturing companies in Bangalore and the variables
associated with them. The aim of the study is to examine the
common predictors of WFC and FWC in a different
occupational setting – public defence CPUs. The study will also
examine the moderating or mediating role of support type
(Spousal support and self management) in the relationship
between work demands and work-family conflict.
The majority of research on work-family conflict has been
conducted on various occupational sectors like IT/ITES, BPOs,
Need of the study
healthcare, academics, banking and finance. But very few
studies on work-family conflict have been conducted on defence
sector in India. In India there is a general perception among
people that employees of defence CPSEs, state and central
government usually have balanced life. But results of this study
shows that even in CPSE, officers work for longer hours, face
tight deadlines, weekend work, work pressures etc. The study
also aims to find whether spousal support and self management
moderates the relationship between work demands and work-
family conflict. In literature the beneficial nature of spousal
support and self management is studied as separate entities but
not as a moderator or mediator. Also stringent security
guidelines in these companies impart a very different paradigm
for any researcher to conduct a survey investigating the work life
of employees of defence CPSEs.
Several variables will be related to WFC and FWC as per the
model proposed like: work demands, total experience, marital
status, age and number of children, number of dependents and
individual use of company support policies. Literature provides
evidence that experience of work-family conflict is more
prevalent than family-work conflict (Pleck, 1977; Greenhaus
and Beutell, 1985; Gutek et al., 1991). As per Pleck (1977), work
is permitted to interfere with family domain to a greater degree
than family is allowed to interfere with work domain. Based on
this motive, the present study aims to study work-family conflict
among officers of defence manufacturing companies in
Bangalore.
H1: Work-family conflict (WFC) is more prevalent than Family-
work conflict (FWC) among the officers.
Work demands. Literature has confirmed negative impact of
work-stressors like no. of hours worked, work deadlines and
overload on both work and non-work domains (Greenhaus and
Parasuraman, 1986; Frone, Yardley and Markel, 1997). Work
demands are the strongest predictor of work-family conflict and
are an important factor in exacerbating WFC. Research showed
that work demands like number of hours worked per week,
work overload, work schedule and overtime work were positively
related to WFC (Burke and Greenglass, 1999; Voydanoff, 1988;
Duxbury and Higgins, 2003; Hammer, et al., 2005; Yildirim
and Aycan, 2008). Work constraints may force employee to
work for longer, irregular hours and harder to make up for
Theoretical background and hypothesis
Variables predicting WFC/FWC
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inadequate supply of work resources like information, training,
manpower and equipment, thus augmenting work-family
conflict (Lu et al., 2010).Working for longer hours, weekends
and holidays restricts the time that an individual has allotted for
fulfilling family responsibilities. In the current study, the
researcher is expecting that higher work demands in the form of
longer work hours per week and working on weekends/holidays
would be associated with higher work-family conflict among the
officers.
H1a: A higher level of work demands will be positively related to
WFC.
Total experience. With experience a person acquire skills and
strategies to cope with the conflicting demands. Experience in
job helps to juggle effectively between work and home demands
(Cohen and Liani, 2009).
H1b: Total experience in job will be related to WFC. Longer
experience will reduce WFC.
Marital status. Literature provide evidence that work demands
can undermine marital quality and family responsibilities can
undermine job satisfaction (Frone, Russell & Cooper, 1992;
Parasuraman et al., 1996). A study conducted by Byron (2005),
Yildirim and Aycan, (2008); Mjoli et al. (2013) revealed that
marital status is weakly related to work interference with family
(WIF) and family interference with work (FIW), thereby
suggesting that marital status alone is poor predictor of work-
family conflict. A study conducted by Cohen and Liani (2009)
on female employees of hospitals found that marital status is not
related to any of the conflict variables, thereby concluding that
being married does not automatically add to more work
demands. Moreover marital status and quality is an important
buffer for work-related stress, especially for men because of more
resources to draw upon ie. spouse and more financial resources
(Barnett, Marshall, and Pleck, 1992; Grzywacz and Marks, 1999;
Grandey and Cropanzano, 1999 and O'Neil and Greenberger,
1994).
H1c: Being married will be related to higher levels of FWC.
Age and number of children. Parental role is the most
demanding non-work role demanding commitment and time
(Gutek et al., 1991). Age of the oldest child is an important
predictor of the work-family experience (Voydanoff,
1988).Young, dependent and number of children still living at
home (in contrast to having no children) is the primary
determinant of work-family conflict for working parents (Lewis
and Cooper, 1998; Lundberg, Mardberg and Frankenhaeuser,
1994; Grzywacz and Marks, 1999; Quick et al., 2004; Cinamon
and Rich, 2002; Eby et al., 2005; Cohen and Liani, 2009; Mjoli
et al., 2013). Moreover Mjoli et al. (2013) found that parents
with children under the age of six had the highest levels of work-
family conflict, followed by parents with school-age children.
The number of children living at home increases the difficulty
of meeting work and family demands and therefore decreases
satisfaction with work-family balance (Grandey and
Cropanzano, 1999; Valcour, 2007). Those who are having more
children under 18 have to devote more time to family rather
than career success. Thus, Goff, Mount and Jamison (1990)
advocate that supportive supervision and satisfaction with child
care arrangements (regardless of location) result in less work-
family conflict.
H1di – Children under the age of 5 will be related to higher
levels of FWC.
H1dii – Number of children will be related to higher levels of
FWC.
Number of dependents. There are basically three groups of
dependents – children, adults with disabilities and elders.
Home demands like lack of spousal support and presence of
dependents in the family exacerbate work-family conflict and
family-work conflict. Literature has confirmed that with the
increase in family size and complexity with children/ elders or
with sick children/elders, the work-family conflict increases
(Quick et al., 2004). People who are single and those with
smaller families and/or with grown children experience less
work – family tensions than those who are married, have larger
families and young children or elder care. Increase in the
number of children or elderly persons lead to more competition
for resources at home in the form of medical care and financial
security (Preston, 1984).
H1e: Number of dependents will be related to higher levels of
FWC.
Individual use of company support policies. There are various
types of family-friendly workplace supports provided by the
organizations. Neal et al. (1993) categorizes family-friendly
workplace supports into three types – policies (eg. flexitime, job
sharing), services (eg. resources and information about
dependent care and benefits (eg. childcare care options). For an
employee these family-friendly supports are meant to mitigate
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the difficulty faced in balancing multiple life roles. Only mere
implementation of workplace support policies is not important,
but its actual utilization is important. Though literature has
confirmed that use of such supports by the employees will be
associated with reduced work-family conflict and improved
balance (Kossek and Ozeki, 1998; Thomas and Ganster, 1995;
Allen, 2001), little research has been carried to examine this
relationship.
Only a few studies have studied the impact of actual utilization
of workplace supports on work-family conflict (Kossek and
Ozeki, 1999; Hammer et al., 2005). Hammer et al. (2005), in
their study focused on impact of variety of supports like
alternative work arrangements and dependent care supports on
individual's work-family conflict. In the light of literature, the
present study focus on utilization of only alternative work
schedules by the employees. It is expected that use of alternative
work schedules will reduce work-family conflict.
H1f: Individual utilization of company support policies will be
related to lower levels of WFC and FWC.
Support type. Every person do not face work demands, family
obligations and conflict to the same extent. This implies that
there are factors moderating the effects of work demands and
work-family conflict. Among various factors, the most
important factor that is widely studied is social support. Social
support is defined as information leading the subject to believe
that he is cared for and loved, esteemed, and a member of a
network of mutual obligations (Cobb, 1976). There are four
sources of social support: spouse, relatives and friends,
organisation and colleagues. Social support emanating from
work-related sources plays an important role in reducing
occupational stress than does non-work related sources (Daalen,
Willemsen and Sanders, 2006). Among non-work related
sources the prominent social support comes from family
members and family members provide both emotional and
instrumental support to individuals outside work environment.
As per the 'buffering hypothesis proposed by Cohen and Wills
(1985), social support has been treated as a buffer between life
stress and well being (Cobb, 1976). In the light of literature, the
current study takes the same theoretical concept and proposes
that social support in the form of spousal support would
moderate the relationship between work demands and work-
family conflict.
The present study considers spousal support as an important
component of social support. Spousal support is defined as the
help, advice, mutual understanding that spouses give each
other. There are two components of spousal support –
emotional and instrumental (Frone, Yardley and Markel, 1997).
Emotional support is emphatic understanding, concern,
advice, and affection for well-being of partner whereas
instrumental support from the partner deals with household
chores, child or elderly care (Adams, King and King, 1996;
Frone, Yardley and Markel, 1997). Instrumental support
mitigates an individual with family responsibilities and enables
to devote more time to work. Other researchers opined that
spousal support is associated with management of work-family
conflict (Adams, King and King, 1996; Perrewe and Hochwater,
1999; Aryee et al., 1999, Burke and Greenglass, 1999; Aycan
and Eskin, 2005).
The present study focuses on instrumental support from the
spouse as a major moderator. Studies have found that spousal
support was an important component of social support and was
effective in lowering levels of WFC (Burke and Greenglass,
1999; Anderson, Coffey and Byerly, 2002). If a person gets
support from spouse at home after a hectic day at office, then a
person can balance work and family more easily. The
importance of spousal support is given adequate emphasis in
literature and it is surely going to help employees in a large way.
Many researchers have tried to link work-family conflict with
health outcomes. The moderator role of exercise and leisure
activities between work demands and work-family conflict has
been neglected in literature. Allen and Armstrong (2006)
studied the relationship between both directions of work-family
conflict – WIF and FIW with health related behaviors like
physical activity and diet. Research shows that people who
exercise regularly experience less health problems and
psychosomatic symptoms than those who do not exercise
(Burke, 1994; Ensel and Lin, 2004). Despite importance of
exercise in one's life, individual shouldering work and family
roles restrict exercise (Allen and Armstrong, 2006)
Exercise is considered one of the elements of leisure activities
and is often neglected by individuals with both work and non-
work roles (Nomaguchi and Bianchi, 2004). Person's overall
quality of life is determined by sum of the domains of life –
work, family, community, religion or leisure (Rice, Frone and
McFarlin, 1992). People often report work schedules and
excessive amount of work, time constraints and tiredness to
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interfere with leisure activities (Staines and Connor, 1980; Rice,
Frone and McFarlin, 1992). The role
H1g: Support type in the form of spousal support and self
management act as a moderator between work demands and
work-family conflict.
The conceptual framework including all the study variables is
presented in Fig. 1. Work demands include number of hours
worked per week, working on weekends/holidays, partner's
employment and length and time of commuting and are
expected to be related to work-family conflict. Other variables
that are expected to be associated with WFC and FWC are total
experience, marital status, age and number of children, number
of dependents and individual use of company support policies.
It is also proposed that spousal support and self management
moderates the relationship between work demands and work-
family conflict. It is expected that officers who experience
higher levels of work demands will face less work-family conflict
when they receive support from their spouses and are involved
in self-management.
The sample comprised of 338 officers. The demographic profile
of the respondents has been listed in table 1.
The data for this study were collected during February 2013 to
June 2014 from officers working full time in manufacturing unit
of three public defence manufacturing CPSE at Bangalore. The
sample respondents were selected by using systematic random
sampling. Two days in a week i.e Friday and Saturday was
dedicated to collect the data in a phased manner. 634 nos. of
officers were working in the manufacturing complex of public
defence CPSE at Bangalore. Out of 635 questionnaires
distributed, 370 were returned, yielding a response rate of 58%.
Among the returned questionnaires 32 of them were discarded
due to excessive missing data.
The research instruments comprised of five parts. The first part
consists of questions pertaining to demography of respondents
like gender, age, managerial level, total experience, marital
status, partner's employment, number and age of children,
number of dependents and education.
Demographic variables under study: Total experience was
Research Methodology
Participants and procedures
Measures
measured by the actual years. Marital status was measured as a
dichotomous variable (0 = single, 1 = married). Partner's
employment was measured as (0 = employed, 1 = not employed).
The variable of age of children was measured by actual years and
number of children was measured by actual number of children.
Number of dependents was measured by actual number of
dependents.
WFC/FWC: Data was collected using WFC and FWC scales
developed by Netemeyer, et al., (1996). It is a 10 – item scale with
5 items each under WFC and FWC scales. The instructions that
preceded these items are as follows: “The given sets of questions
are about your work and non-work lives. The word 'Family' may
include your spouse, children, parents, siblings, grandparents,
in-laws or any combination of these”. All items were measured
using a 7-point Likert scale, with 1 meaning strongly disagree
and 7 meaning strongly agree. Higher score mean more conflict.
Work demands: Work hours – The total number of hours
worked per week was assessed through one question: “How
many hours in a week do you normally work?”. This variable was
measured on a scale: 1 = >60, 2 = 56 – 60, 3 = 51 – 55, 4 = 46 – 50
and 5 = <45.
Working on weekends/holidays: This variable was assessed
through one question: “Do you work on weekends/holidays?”.
There were three options to choose from: 3 = No, 0 = Yes and 1 =
Sometimes.
Carrying work to home: This variable was assessed through one
question: “Do you carry office related work at home?”. There
were two options to choose from 3 = No, 0 = Yes and 1 =
Sometimes.
Length and time of commuting: Two questions were designed
to assess commuting of respondents. The questions were “How
far do you stay from your organization's premises?”. This
variable was measured on a scale: 1 = More than 20, 2 = 16 – 20,
3 = 11 – 15, 4 = 6 – 10 and 5 = 0 – 5. The other question was
“How many hours per day do you spend on commuting (To and
fro)?”. This variable was measured on a scale: 1 = others, 2 = 91 –
120 min, 3 = 61 – 90 min, 4 = 31 – 60 min and 5 = 0 – 30 min.
Individual use of company support policies: Two questions
were designed to assess this variable. The questions were “Does
your company take any measures to balance work life?. This
question has two options a) Yes & b) No.
The other question was “Do you utilize measures taken by your
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company to balance work and family?”. There were two options
to choose from 3 = Yes, 0 = No.
Support type: There are two types of supports:-
Spousal support:. One question was designed to assess the
spousal support. The question was “Does your spouse help you
in household chores/ child or elderly care?”. There were two
options to choose from 3 = Yes, 0 = No.
Self management: Two questions were designed to assess this
variable. “Do you exercise?. There were three options to choose
from: 3 = Yes, 0 = No and 1 = Sometimes and “Are you involved
in any leisure activities?”. There were two options to choose
from 3 = Yes, 0 = No.
Table 2 & 3 presents descriptive statistics and intercorrelations
among all respective study variables. The correlation matrix
showed some significant relationship between WFC/FWC and
study variables. Work demands were strongly related to both
WFC and FWC, thus supporting hypothesis H1a. Total
experience was positively related to WFC but not related to
FWC, thus contradicting previous findings. The result of H1b,
showed that as experience in job increases, WFC also increases.
This finding of H1b was not expected in this study. H1c, which
expected that being married would increase the levels of FWC,
was not supported by the data. Instead FWC did not depend on
marital status, as evident from table 4 a, b and 5 a, b. In case of
H1c, WFC was more significant among married officers than
FWC. This means that work-role activities interfere with family
responsibilities.
H1di, which expected that children under the age of 5 would
increase the levels of FWC, was supported by the data. For
H1dii, the data did not support hypothesis. The number of
children is not related to either WFC or FWC that contradicts
previous findings. H1e, which expected that number of
dependents would increase the levels of FWC, was supported by
the data. Number of dependents was positively related to both
FWC and WFC i.e. as number of dependents increases both
FWC and WFC increases.
H1f, which expected that individual utilization of company
support policies will be related to lower levels of WFC and
FWC, was not supported by the data. Individual utilization of
company support policies was not related to either WFC or
FWC. The moderating effect of support type between work
Results
demands and work-family conflict was not supported by the
data, thus rejecting hypothesis H1g. Finally the main hypothesis
– H1, which expected that Work-family conflict (WFC) is more
prevalent than Family-work conflict (FWC) among the officers,
is supported by the data. Table 4a, b; 5a and 6 provide evidence
to this hypothesis.
While correlation analysis provided adequate support for the
hypothesis, regression analysis is more suitable to quantify the
dependent variables of the given hypothesis.
Regression Analysis: Work-Family Conflict versus Work
Demands.
The regression equation is
Work Family Conflict = 32.76 - 0.7736 Work Demands
The regression analysis between work-family conflict and work
demands in table 7 showed that these two variables are strongly
related, thus supporting H1a.
Regression Analysis: Work-Family Conflict versus Self
Management.
The regression equation is
Work Family Conflict = 23.31 - 0.7693 Self Management
Regression analysis in table 8 showed positive relationship
between work-family conflict and self management.
Regression Analysis: Work Family Conflict versus Support
type, Work Demands
Regression Equation.
Work Family Conflict = 33.74 - 0.422 Self Management - 0.682
Work Demands
- 0.0151 Self Management*Work
Demands
H1g, which expected that support type in the form of spousal
support and self management act as a moderator between work
demands and work-family conflict, was not supported by the
data as in table 9. Spousal support was not related to either
WFC or FWC as per correlation analysis. Self management was
related to WFC as per both correlation and regression analysis.
But the role of support type as a moderator between work
demands and work-family conflict was not supported by
multiple simultaneous regression analysis. Thus buffering
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hypothesis, H1g was rejected by the data of study. Support type
is not the moderator between work demand and WFC. Support
type is not the moderator between work demand and WFC.
The findings of the study supported the conclusion of Pleck,
(1977); Greenhaus and Beutell, (1985) and Gutek et al., 1991
that experience of work-family conflict is more prevalent than
family-work conflict among the officers. Work interference
into family domain to a greater extent than family is allowed to
interfere into work domain. The model tested here explained a
significant amount of variance in the two conflict variables. The
model explained that variance of WFC is more (61%) than the
FWC (38%), supporting the distinctiveness of the two conflict
variables in the study.
Other findings of the study are worth mentioning. Work
demands in the form of hours worked per week, working on
weekends/holidays, carrying work to home, length and time of
commuting and partner's employment were the strongest
predictor of work-family conflict and are an important factor in
exacerbating WFC. In this study work demands were positively
related to both WFC and FWC and confirmed the studies done
by Burke and Greenglass, (1999); Voydanoff, (1988); Duxbury
and Higgins, (2003); Hammer, et al., (2005); Yildirim and
Aycan, (2008). As for the relationship between total experience
and WFC, it seems that as experience in job increases, WFC
also increases. This finding contradicts the findings of Cohen
and Liani, (2009). This unexpected finding may be due to fact
that experience add on more responsibilities and complexities
to job.
With regard to home roles, being married was not associated
with higher levels of FWC. Instead married officers were facing
more WFC. That means work demands was interfering with
family responsibilities for married respondents. Barnett,
Marshall, and Pleck, 1992; Grzywacz and Marks, 1999; Grandey
and Cropanzano, 1999 and O'Neil and Greenberger, 1994).
Their finding concluded that marital quality is an important
buffer work related stress due to more resources to draw upon.
Children under the age of 5 were related to higher levels of
FWC. This relationship support the contention that more time
one spends in one role, the more likely he/she perceives the
other role to interfere with the first (Byron, 2005; Pleck, 1977).
This finding was in coherence with the findings of Quick et al.,
(2004); Cinamon and Rich, (2002); Eby et al., (2005); Mjoli et
Discussion and conclusion
al. (2013). The lack of significant relationship between the
number of children and FWC contradicted previous findings
that there exists stronger relationship between the two. Grandey
and Cropanzano, (1999); Valcour, (2007). Number of
dependents is significantly related to both WFC and FWC. This
signifies that increase in the number of children or elderly
persons lead to more competition for resources at home.
The insignificant relationship of individual utilization of
company support policies with either WFC or FWC
contradicted previous findings that actual utilization of
workplace supports reduces work-family conflict (Kossek and
Ozeki, 1999; Hammer et al., 2005). This finding emanate from
a study conducted among Israeli teachers that found no
relationship between non-work organizational support and the
two conflict variables (Cohen et al, 2007).
The present study hypothesized that support type would
moderate the relationship between work demands and work-
family conflict. However multiple regression analysis did not
provide evidence to the moderating effect of support type.
Thus, buffering hypothesis was rejected by the data of this study.
This finding echoed from another study conducted on nurses
that found supervisory support to play no moderating role
between work demands and work-family conflict (Yildirim and
Aycan, (2008). Future research should examine the direct effect
of support type on work-family conflict.
The study has some practical implications for human resource
professionals. The findings showed that both work and non-
work roles are more strongly related to WFC rather than FWC.
It is necessary for employers to assist employees in coping better
with pressures from work and family. It is inevitable to create
positive attitudes among employees regarding their job and
work environment, to reduce WFC and FWC. This strategy
would be more effective than investing in support policies for
coping with work and family pressures.
Finally limitations of this study need to be mentioned. First, the
study is based on a sample from one occupation i.e. defence
manufacturing consisting of officers working in three defence
CPSEs in Bangalore. In these public sector enterprises,
everybody is assigned to work for six days in a week for eight
hours daily. Here employees get extra remuneration or leave
benefits for working overtime, but officers are deprived of such
benefits. Thus the findings cannot be generalized to other
Limitations of study
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occupations or to private sector where people have different
work settings and culture. Second, the female constitute a small
percentage of the sample (15.4%). Thus, the study could not
compare findings from gender point of view as the proportion
of female was too low to have any comparison. Third, in India
conducting research on defence PSUs is quite difficult due to
security issues. These companies come under Ministry of
defence and the data are kept very confidential. Even the
employees working in these companies are restricted to carry
laptops, pen drives and mobile phones inside the companies.
Any external visiting or conducting research on these
companies has to relinquish all electronic gadgets at the
reception and all the documents are thoroughly checked on
entering and leaving the premises.
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Table 1
Table 2
Table 3
Table 4a
Table 4b
Table 5a
Table 5b
Table 6
Table 7
Table 8
Table 8
List of tables
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Concept, Practices and MeasuresCreative Accounting
Poonam Dugar* Neha Desai**
*Lecturer, Department of Accountancy, ADDRESS FOR CORRESPONDENCE: 36, Green Park, Gokuldham, Near Shantipura Circle, Sanand Road, Ahmedabad-380009
CONTACT: 91-9825000940, EMAIL: [email protected]
**Lecturer, Department of Accountancy, ADDRESS FOR CORRESPONDENCE:16, Rajpath Row Houses, Opp. Rajpath Club, Ahmedabad -380015.
CONTACT: 91-9227290686, EMAIL: [email protected], AFFILLIATION: H.L. Institute of Commerce, Amrut Mody School of Management, Ahmedabad University
OFFICE ADDRESS: H.L. Campus, Prin. S. V. Desai Road, Navrangpura, Ahmedabad- 380009
ABSTRACT
Accounting, though known as a science, can be considered to be
an art more than a science. An art in which creativity flourishes.
It would not be wrong to say that accounting starts when science
meets art where accountants use their flair to be creative.
Accounting, for the choices it offers, often gives companies the
frill of deviating from the stated rules when it is not practical to
stick to the rule of law. Creative Accounting refers to the use of
accounting knowledge to influence the reported figures, while
remaining within the jurisdiction of accounting rules and laws,
so that instead of showing the actual performance or position of
the company, they reflect what the management wants to tell the
stakeholders.
Creative accounting practices resulting into major accounting
frauds are evidence to the fact that “the science of conduct is
swayed in large by human greed, ambition, hunger for power,
money, fame and glory.” The devastating effects of creative
accounting practices on the truthfulness and fairness of
financial reports pose a serious threat to the accounting and
auditing profession. In turn, the users of accounting
information and their investment decision-making
effectiveness are also affected adversely.
In support stands an organizational ecosystem as a checkpoint
which includes the auditors, analysts, and regulators to measure
whether the departure from rules was within the permissible
limits. The accounting and auditing professionals hence, driven
by the intention to curb manipulations in financial reporting
must take into account the circumstances that allow its
expression under close supervision.
The paper focuses on nature and incidence of creative
accounting practices in financial reporting, the causes and
motivations behind their application, and the consequences of
creative accounting practices in corporations. The study also
highlights the incidences of Indian companies indulging in
creative accounting practices. It also identifies various measures
to prevent the practice of creative accounting in financial
reporting by companies.
Quoting Griffiths' assertion “Every company in the country is
fiddling its profits. Every set of published accounts is based on
books which have been gently cooked or completely roasted.
The figures which are fed twice a year to the investing public
have all been changed in order to protect the guilty.”
A company's financial statements publishing the accounting
information, providing information on the financial position,
performance and cash flows of a company, widely affect the
economic decisions of the users of financial statements.
The published accounts have an angle of information
perspective. It is presumed that the accounting disclosures
provide an information content that is of value to stakeholders.
But often, the privileged management for various reasons
INTRODUCTION:
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67IFIM International Journal of Management FOCUS October 2014 - March 2015|
misleads the remote body of stakeholders by creating
information asymmetry.
Companies and managers are tempted to resort to nifty
methods, often debatable, in order to improve the presentation
of financial statements. Overall, there is a trend and a fierce
desire to perform certain activities so as to manipulate the
figures, financial statements and performance reports, to distort
the true image (“true and fair view”). Consequences and
negative impact come quickly, first on investors who are misled
about the true overall situation of the company, as well as on
companies that actually carry out the economic activities.
The assault on a company's bottom line in such cases is harsh
and unrelenting. The devastating effects of creative accounting
practices on the truthfulness and fairness of financial reports
and hence the users of accounting information and their
investment decision-making effectiveness pose a serious threat
to the accounting and auditing profession. It is important for
the accountants and auditors to closely supervise the
circumstances that enable manipulations in financial reporting.
The paper discusses
> Nature and incidence of creative accounting practices
in financial reporting
> Reasons that drive the managers to indulge in these
practices
> Highlights the incidences of Indian companies
indulging in creative accounting practices
> Identifies various measures to prevent the practice of
creative accounting in financial reporting by
companies
Financial accounting reports are produced to show the true and
fair state of affairs of business entities so that stakeholders and
other users of such information can take informed decisions. In
order to ensure uniformity in preparation and presentation of
such reports, Generally Acceptable Accounting Practices
(GAAP) are prescribed within the accounting profession.
Accounting Standards leave room for discretionary judgments
by the accountant. This involves resolving conflicts between
competing approaches to the manner in which results of
Concept of Creative Accounting
financial events and transactions are presented. While the
tention may be good, this flexibility provides opportunities for
manipulation, deceit and misrepresentation. These activities as
negatively practiced by the less scrupulous elements of the
accounting profession are popularly referred to as creative
accounting (Jameson, 1988).
The act is characterized by excessive complication and the use of
novel ways of characterizing income, assets, or liabilities
(Ghosh, 2010) with the intent to influence readers towards the
interpretations which are desired by the authors of the reports.
Though called creative accounting in the UK, it is known as
Earnings management in the USA.
Creative Accounting refers to the use of accounting knowledge
to influence the reported figures, while remaining within the
jurisdiction of accounting rules and laws, so that instead of
showing the actual performance or position of the company,
they reflect what the management wants to tell the stakeholders.
Creative accounting practices cover a wide range of areas,
especially premature recognition of and over- or
underestimation of revenue, aggressive capitalization and
extended amortization policies, misreporting of assets and
liabilities, and getting creative with the income statement and
cash flow reporting. If an organization wishes to practice
creative accounting, there is plenty of scope for the
manipulation of accounting information. Such manipulation
may well leave external or other interested parties confused as to
what is real or unreal, or true or false, in a published set of
financial statements. This may lead to unnecessary risk taking
or wrong decision-making on part of various stakeholders,
posing a threat to the long-lasting healthy relation between
them.
Playing the number game is often and widely practiced by the
managers of corporations for a variety of expected rewards.
Companies having weak internal controls; or a family
relationship between directors and officers; or BOD dominated
by individuals with substantial equity stakes or inadequate
experience; or absence of audit committee often indulge in
reporting the financial statements creatively.
Drivers / Motivations to Practice Creative
Accounting
68 IFIM International Journal of Management FOCUS October 2014 - March 2015|
Figure1: Factors facilitating 'creativity' within company's accounts (Adapted from [13])
Avenues / Opportunities to practice Creative Accounting
The incentives for fraud are similar to that of creative accounting, but they are more extreme. It can be said that where the managers
trying to use flexibility provided by the accounting to increase its assets or increase its profits, we can speak of creative accounting,
while what goes beyond accounting flexibilities can be transformed into fraud.
Hence, creative accounting involves working within the regulatory framework, fraud involves working outside it.
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Idris, et al. in a study in 2012 under the title “The Nature,
Techniques and Prevention of Creative Accounting: Empirical
Evidence from Nigeria” have done an exploratory research
from both primary and secondary information. Under primary
research the expert opinion survey method was used whereby
the views of the experts in the accountancy profession were
sought on 10 identified variables as the reasons for creative
accounting practices. The responses indicated the level of
importance attached to each variable.
The top five variables which received the highest ranking
according to the study are summarised below:
1. Tweaking accounting numbers to personal advantage
using the existing rules
2. Gap in the GAAP promotes creativity
3. Exceptional Rewards motive of management
4. Misleading stakeholders for personal gains
5. To adjust to the economic condition of the country
Exploiting the Loopholes
Accounting standards cannot cover every aspect of business
transactions. These standards offer choice of methods for
various accounting treatments where the discretion on the
choice of method lies with the management. E.g. there is more
than one method of valuation of inventory or method of
depreciation. This provides ample opportunities to companies
to play within the legal ring. Although GAAP requires
consistency in the adoption of an accounting method, some
companies may exploit the opportunity to use more than one
over the years.
Whether creative accounting practices result in fraudulent
financial reporting depends on the intentions of the managers.
Although not all creative accounting practices amount to fraud,
it is sometimes hard to distinguish between fraud and creative
window-dressing in financial statements.
The practices of creative accounting can be summarized under
five main categories, as shown in Table:
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Practicing Creative Accounting
In good times, high profits keep all stakeholders happy, and in
bad times, accounting policy tweaks come to the rescue. Today's
business environment is uncertain, because input prices are
high, interest costs are ballooning and demand is slowing.
Keeping profitability intact, then, is a challenge. Some
companies are responding by passing up the best practices in
favour of more convenient options under India's Generally
Accepted Accounting Principles.
What motivates this behaviour? Nick Paulson Ellis, country
head of investment bank Espirito Santos, offers an explanation.
“Analysts like a company to show steady growth in profits,” he
says. “Aggressive accounting is often a way for companies to
hide any unexpected bumps in that trend.”
So some companies spread a huge gain over several accounting
periods, put off recognising losses for as long as legally possible
and, in some cases, selectively ignore accounting conventions
that might show their numbers in a less rosy light.
Creative Accounting Application Study 1: Creatively handling
Rupee vulnerability using High Court's approval for the terms
of amalgamation:
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Companies are getting creative in using the Company's Act and
Accounting Standards to avoid the loss inclined impact of
foreign currency fluctuations on their Profit and Loss
Statement. In 2008-09, the rupee depreciated over 25 %, and
corporate India's external debt went up by 20 %. Within the
legal ring the depreciation losses could either be charged to the
profit and loss account or spread it over a few years, but then the
balance sheets would have looked vulnerable. Reliance
Communications (RCom) chose the former option. But
through another entry, it neutralised the adverse effect on its
profit by transferring an equal amount from its General Reserve
(accumulated profits earned in past years).
In the following year when the exchange rate appreciated
RCom gained, and that increased its profits directly.
Setting off exchange losses against the General Reserve is by no
means allowed; the General Reserve also includes other
restricted reserves, in particular, those that have been created by
the purchase of another group company. The profits of one
company were used to adjust the losses of another. This is an
accounting standards violation.
So how did RCom manage to get past its auditors? The company
used a much-loved clause in the Companies Act — get an
approval from a High Court for all the terms of amalgamation.
Companies often use this route to slip in accounting changes
that would otherwise earn the disapproval of its auditor.
Companies often use amalgamations that have been approved
by the court to write off losses against reserves or the share
premium account. The practice has vexed the ICAI because in
the end it exposes accounting standards to abuse. “The ICAI
has been crying itself hoarse about this kind of abuse for years,”
says Y.H. Malegam, 2013, former chairman of the National
Committee for Accounting Standards.
When questioned, RCom said that it was in compliance with
the applicable accounting standards, as well as the provisions of
the Companies Act. “The company, in compliance with
relevant accounting standard, viz., Accounting Standard 5,
charges all expenses to its statement of profit and loss in order to
arrive at net profits for the reporting year and does not directly
charge any operating losses against its 'General Reserve'.”
Excerpt from the auditor ' s repor t in Rel iance
C o m m u n i c a t i o n ' s a n n u a l r e p o r t o f 2 0 0 8 - 0 9
...as approved by the Hon'ble High Court of Judicature at
Mumbai, the Company has withdrawn from General Reserve
III and credited to the Profit and Loss Account Rs 4,464.57
crore in respect of loss on account of change in foreign exchange
r a t e r e l a t i n g t o l o a n s / l i a b i l i t i e s .
Precautionary Measure:
Market regulator Securities and Exchange Board of India
(SEBI) now wants listed companies seeking court approval for
M&A transactions to get an auditor's certificate that the
proposed accounting complies with standards (does not apply
to unlisted companies).
Creative Accounting Application Study 2: Treatment of IPO
Expenses differently:
Following are the three possible options to treat IPO expenses
in the financial statements of the company:
1. Charge the expenses to the Share Premium Account
– No effect on profitability
2. Amortise them equally over five years – Marginally
affects bottom line
3. Setting off against current year's profits – Reducing
current year's profit
Bajaj Corporation, in late 2010, when floated its Rs.297 crore
IPO, was considering the appropriate treatment of its Rs.20
crore IPO expenses in the books. Given the slowdown in the
domestic economy and the sluggish stock market, the first
option seemed the best. Bajaj Corp's stock, which debuted in
August 2010 at Rs 800 per share - the offer price was Rs 665 - was
already showing signs of weakness. The Board was in favour of
the third option as it would save on taxes and improve liquidity
within the company. Amortisation would yield similar results,
but over five years. By January 2011, Bajaj Corp's stock had
dipped to around Rs 500, down almost 40 per cent from its
debut. The Sensex actually gained two per cent in the same
period. Had Bajaj charged its IPO expenses to the share
premium account, profits for 2010/11 would have crossed Rs
100 crore, and the stock would almost certainly have
outperformed the Sensex.
In another case, Indosolar, a Delhi-based solar cell
manufacturer, which had a Rs 357-crore IPO about a month
after Bajaj Corp's issue the company already had a policy of
amortising preliminary expenses. Some of the preliminary
expenses already stood outstanding at the time of IPO. But
72 IFIM International Journal of Management FOCUS October 2014 - March 2015|
post the IPO the company decided to change its accounting
policy and decided to charge the Rs.33.58 crore IPO expenses
to Share Premium account. This resulted in increasing
outstanding expenses to be set off in the Balance Sheet without
affecting the Profit and Loss Account of the current year. The
company was neck-deep in losses (Rs 57 crore in March 2011).
The decision to charge IPO expenses to the share premium
account prevented losses of a few more crores from going on the
books.
Chameleon-like policies make a company's accounts harder to
understand, and confuse investors and shareholders.
Creative Accounting Application Study 3: Creatively
smoothing the income:
Biocon, an Indian bio-pharma company, received upfront
payments from Pfizer when the deal between them was called
off. Instead of showing the amount as a one-time gain in its P/L
Account, Biocon sought to capitalise it. Biocon justified this
choice mentioning that the sum received was for long term
development and that the clinical trials of the drug would still
continue. The company points out that deferring revenue
recognition is a permitted accounting practise.
Espirito Santo raised a red flag pointing out that actually, when
this shall be used to set off their R&D costs in future, R&D
costs shall be removed from P/L Statement which will smooth
Biocom's earnings over the next three to four years and inflate
the earnings to that extent. Ideally, keeping in mind the
Matching principle of recording transactions, such revenue
must be recognised in year 1 as a one-off revenue item, as
revenue from a terminated deal should not be matched against
costs of other deal/activity.
Creative Accounting Application Study 4: Treatment of
Debenture Redemption Premium
Sometimes, though, the rules allow certain departures; the
redemption premium to be paid on debentures can be set off
against the share premium account. The treatment vexes
analysts but cannot be technically faulted.
But companies stretch that technicality. In 2011, Suzlon did not
provide for the redemption premium on its Foreign Currency
Convertible Bonds (FCCB) that were to mature in 2012 (the
company eventually defaulted). It treated it as a contingent
liability (off the balance sheet). The company's argument was
that since it wasn't clear how many bondholders would convert,
making a provision for it was difficult.
“But Suzlon's share price was a sixth of its redemption value
then,” says an expert. “It was likely that bondholders would
choose to redeem.”
“The general practice of treating redemption premium as a
contingent liability cannot be justified,” says Malegam. “As long
as the bond is convertible at the option of the holder, the
company must still treat it as a redeemable bond and provide for
the redemption premium.”
Suzlon says that if the bonds are called for redemption, it has
adequate share premium reserve to cover payments. Analysts
say given the company's finances, it would have been inclined to
present a favourable debt-equity ratio. A company
spokesperson denied this, saying, “We are of the firm view that
a degree of leverage does not — and should not — lead to a
substantially different accounting practice”.
From the auditor's report in Suzlon's annual report of 2010-11
The Phase I, Phase II, Phase I New, Phase II New, and Phase III
bonds are redeemable subject to satisfaction of certain
conditions.... The Company has not provided for the
proportionate premium... aggregating Rs 579.21 crore (Rs
377.22 crore)...
Measures preventing Creative Accounting (CA) practises:
The major threats of practising Creative Accounting (PCA) is
that the financial records become deceitful and over a long run
the management of the company may feel competent enough to
commit a financial fraud successfully. So, the organisations
must have an urgency approach to curb it at an early stage. If an
attempt is made to eliminate the factors facilitating / pressuring
the managers to indulge in such activities, measures of
preventing them can be thought of and put into practice.
It is well understood that to carry out recording of the
transactions creatively, accounting entries are played with
staying within the legal territory, but this does not enable the
practitioners to juggle the cash of the organisation. Therefore,
the financial statements should always include the Cash Flow
Statement. Such inclusion must be made mandatory for all
organisations, irrespective of their size, scope, and turnover. If
the revenues are properly recognised, the cash flow should
closely follow the revenue recognition patterns. So any CA
1. Mandatory reporting of Cash Flow Statements:
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73IFIM International Journal of Management FOCUS October 2014 - March 2015|
technique practiced can be detected from the discrepancy
observed here.
Simultaneously, there must be heavy emphasis on following the
Consistency Principle of Accounting. This shall ensure that the
areas where CA can be implemented are kept well-checked.
Valuation methods, revenue recognition norms etc. must be
consistently followed for a reasonably long period of time.
Frequent switch over of methods must not be allowed by the
management/auditors. Proper reasoning and retrospective
effect along with explanations on how will such a change affect
the numbers should be a made a mandatory disclosure.
The scope of choice of accounting methods can be reduced by
reducing the number of permitted accounting methods or by
specifying circumstances in which each method should be used.
Requiring consistency of use of methods also helps here, since a
company choosing a method which produces the desired
picture in one year will then be forced to use the same method in
future circumstances where the result may be less favourable.
Artificial transactions can be tackled by invoking the concept of
'substance over form', whereby the economic substance rather
2. Consistency Principle and Mandatory Reporting of
the Effects of Changes:
3. Reducing the Scope for choice of accounting
methods :
4. Substance Over Form:
than the legal form of transactions determines their accounting
substance.
The timing of genuine transactions is clearly a matter of
discretion of management. However, the scope to use this can
be limited by requiring regular revaluations of items in the
accounts so that gains or losses on value changes are identified
in the accounts each year as they occur, rather than only
appearing in total in the year that a disposal occurs.
There is a very thin line of margin between practising CA and
committing a financial fraud. Successfully PCA for a
consistently long duration may encourage practitioners' to take
the next step ahead and enter into the world of frauds.
Therefore, it is essential to alertly detect and prevent such
practises. We propose a three pronged approach to deal with
CAP to achieve transparency and trustworthy financial
reporting. It is only with combined efforts of the Government,
Professional bodies and the Management of the organisation
that a near full-proof environment ensuring that CA is not
implemented can be developed.
5. Timing of Genuine Transactions:
6. Three Pronged Approach:
Figure 3: Three Pronged Approach
74 IFIM International Journal of Management FOCUS October 2014 - March 2015|
i. Government and Regulatory bodies must try and
limit the choice and options made available to the organisations
for valuation processes and tighten the disclosure requirements.
A bad accounting policy can devastate a company, as the cases of
Enron, WorldCom, and Satyam have shown. By being proactive
regulatory body SEBI did investors a favour by making it
mandatory for listed companies to announce fourth quarter
results along with audited annual results. Some companies had
been conveniently filing only annual results, and not fourth
quarter results - an unhealthy practice that makes it harder for
investors to gauge quarter-to-quarter performance.
ii. Professional bodies imparting education must lay
heavy weightage on the importance of following the ethical code
of conduct within the accounting profession. This approach
shall strengthen the ethical bend of young professionals.
Professional bodies of Chartered Accountants must train their
auditors to have a sharp eye in reading the financial statements
for detection of techniques of CA implemented. The legally
permissible route of deceitfully recording transaction is to
obtain the high court's permission. This route can be drastically
narrowed if the High Court refuses to grant permissions until it
receives a detailed report and a green signal from the team of
auditors.
iii. From the Company's management, the internal
control system of the company must be so designed that it
automatically reduces the scope of implementing CA. The
pressure from Top Level Management to have favourable
balance sheets must not exists/or not be allowed to penetrate
down the employees which is one of the major factors inducing
the use of CA.
The corporate culture plays a major role in shaping the mind-set
of the employees. The culture must be loud and clear about its
stand on practising these techniques.
Conclusion:
The deadly combination of the complex and diverse nature of
the business transactions along with the latitude available in the
accounting standards make it difficult to handle the issue of
creative accounting. Creative accounting practises are not
always wrong. It is the intent and magnitude of disclosures
which determine its true nature and justification.
Creative Accounting respects the words of Law and Accounting
Standards but not their spirit. Fight against Creative
Accounting is actually a fight for true and fair view of the
company's state of affairs and for this the accountants should
pledge to perform without fear and favour.
Since creative accounting techniques are often operated on the
threshold of frauds, there is a risk of them extending to a degree
wherein they become accounting frauds.
To conclude we suggest that creative and fraudulent accounting
can be reduced by:
ü Introducing forensic accounting for white collar fraud
detection and fraud prevention;
ü Reducing the alternative choices of accounting
treatment in accounting standards;
ü Enhancing the quality of corporate governance;
ü Enforcing strong regulation, and
ü Increasing the effectiveness of audit.
When times are good people steal, when times are bad, people
steal more!
Refrences:1. Adhikari, A. (2011, September 18). Camouflage accounting Edition: September 18, 2011. Business Today. Retrieved from http://businesstoday.intoday.in/story/india-accounting-
standards-auditors/1/18354.html
2. Amat, O., & Gowthorpe, C. (n.d.). Creative Accounting: Nature, Incidence and Ethical Issues. Journal of Economic Literature.
3. Dr.Bhasin, M. (2013). CORPORATE ACCOUNTING SCANDAL AT SATYAM: a CASE STUDY OF INDIA'S ENRON. European Journal of Business and Social Sciences, Vol. 1(No. 12), p p 25–47.
4. Gherai1, D. S., & Balaciu2, D. E. (2011). FROM CREATIVE ACCOUNTING PRACTICES AND ENRON PHENOMENON TO THE CURRENT FINANCIAL CRISIS. Annales Universitatis Apulensis Series Oeconomica, 1(13).
5. Idris, A. A., Kehinde, J. S., Ajemunigbohun, S. S. A., & Gabriel, J. M. O. (2012). THE NATURE, TECHNIQUES AND PREVENTION OF CREATIVE ACCOUNTING: EMPIRICAL EVIDENCE FROM NIGERIA. eCanadian Journal of Accounting and Finance, 1(1), Pp.26–31.
6. Madumere, I., & Harcourt, P. (2013). Forensic Accounting: a Relief to Corporate Fraud. Research Journal of Finance and Accounting, Vol.4(No.14), 43.
7. Mathews, A. C. (2013, March 14). Accounting Jugglery - Companies are being creative with numbers to suit their purposes. Is anyone looking? Business World. Retrieved from http://www.businessworld.in/news/finance/markets/accounting-jugglery/806030/page-1.html
8. OKOYE, E. . ., & ALAO, B. B. (2008). THE ETHIOS OF OREATIVE ACCOUNTING IN FINANCIAL REPORTING:THE Challenges OF REGULATORY AGENCIES IN NIGERIA. The Certified National Accountant, VOLUME 16(NO.1).
9. SABÃU, L. I. (n.d.). CREATIVE ACCOUNTING - THE RESULT OF PRESSURES FROM USERS, 636–641.
10. Sanusi, Z. M., & Mat-Isa, Y. (n.d.). Creative Accounting: Auditors' Roles in the Detection of Financial Fraud. Q Finance. Retrieved from http://www.qfinance.com
11. Shah, S. Z. A., & Tariq, Y. B. (2011). Use or Abuse of Creative Accounting Techniques. International Journal of Trade, Economics and Finance, Vol. 2(No. 6).
12. Yadav, B. (2013). Creative Accounting: A Literature Review. The Standard International Journals, Vol. 1(No. 5), 181–193.
13. Moldovan, R. L., Achim, S. A., & Bota-Avram, C. (2010). Fighting The Enemy Of Fair View Principle–Getting To Know Creative Accounting. Scientific Annals of the “Alexandru Ioan Cuza” University of Iasi, Economic Sciences Section, Special Issue, 52-55.
14. Jones, M. J. (2010). Creative Accounting, Fraud and International Accounting Scandals. John Wiley & Sons.
FOCUS Research Papers
75IFIM International Journal of Management FOCUS October 2014 - March 2015|
A Study on Rural Youth's Shopping Preferences towards Mobile Phones and Personal Computers
Kavitha R Gowda* Dr.Soney Mathews**
*Research Scholar, Jain University, Asst. Professor, Centre For Management Studies Business School, Bangalore, [email protected], 9845511074
**Ex-HOD Centre For Management Studies, Jain University, Associate Professor, Faculty of Business Communication and Law, INTI International University-
Laureate International University, Malaysia, [email protected], 8861116710
ABSTRACT
1. INTRODUCTION:
A major portion of India that lives in villages has undergone a
remarkable incremental change in many areas like, improved
literacy rates, infrastructure, transportation, increased
industrialization, reformed government policies to enhance
status and livelihood of villagers. As a result of this, even
villager's purchasing power has increased, which can be noticed
from success stories of FMCG providers for the target rural
market. With many technological innovations that have been
noticed in the mobile manufacturer and service provider and a
need for computer in urban areas, rural youth is not an
exception. This study is an attempt to understand the need for
computer and mobile phones in rural youth and thus conclude
on prospective market for the shopping goods.
Government agencies from IRDA & NCAER define 'Rural' as
“a village with a population of less than 5,000 with 75% of the
male population engaged in agriculture etc.”1
The Census of India defines any habitation with a population
density less than 400 per sq.km, where at least 75 per cent of
male working population is engaged in agriculture and where
there exists no municipality or board, as a rural habitation.
Keywords: Mobile Phones, Personal computer, Purchase decision,
Rural market, Youth market.
The rural consumer is evolving from the poverty-stricken,
illiterate stereotype, with a fear of change and reluctance to
spend. Today's rural consumer is value driven. A product is
worth purchasing if it enhances his life in a meaningful way.
Either it should add to his earning capability or it should
enhance his status (like readymade clothing). Literacy is rising,
and exposure to the same commercials as urban consumers has
created a demand for typically urban products and services.
Villagers are willing to adopt new products or services if they can
clearly see the benefits that accrue. Better road infrastructure
has led to increased mobility; with people travelling, more often
further a field in search of entertainment in the form of cinema,
and not just for visiting family or pilgrimages.
The change has been greatest amongst the rural youth. They are
most educated and most savvy of all rural consumers, emulating
their urban cousins and demanding the same high quality in the
products and services they require. They are the key drivers for
expenditure on two wheelers, computers, personal care items
and education in rural areas, leading to an improved quality of
life.
A survey by the National Council for Applied Economic
Research (NCAER), India's premier economic research entity,
recently confirmed that rise in rural incomes is keeping pace
with urban incomes. From 55 to 58 per cent of the average
76 IFIM International Journal of Management FOCUS October 2014 - March 2015|
urban income in 1994-95, the average rural income has gone up
to 63 to 64 per cent by 2001-02 and touched almost 66 per cent
in 2004-05. The rural middle class is growing at 12 per cent
against the 13 per cent growth of its urban counter- part. The
rural consumers search for value in their products as well. As
described by Adi Godrej, Chairman, Godrej Group “the rural
consumer is discerning and the rural market is vibrant. At the
current growth, it will soon outstrip the urban market. The rural
market is no longer sleeping but we are”.
Rural incomes are growing, and consumers are buying
discretionary goods and lifestyle products, including mobile
phones, television sets and two-wheelers.
In 2009, the number of subscribers for mobile services across
the country has increased to 391.76 million in the quarter
ended March 2009, up by 50 percent from 261 million in the
same quarter last year, according to TRAI data.
However, competition and tariff cuts have brought down the
average revenue per user, S.K. Gupta, advisor at TRAI, said on
Tuesday. ARPU has been going down in India since 2003.
Indian mobile service providers are focusing on value added
services, including applications to boost revenue, Gartner's
Bhatia said.
2.1 In a study conducted by Shashi Prabha Singh, 2005, it is
observed that the information and communication has a vital
role to educate Indians in various territories to become an
information society. According to Cawkell (1987, p. 2), an
information society can be defined as a society in which
ultimately most of the people are engaged in “brain work” rather
than “physical work”. In such society, more attention is paid on
information activities (such as acquisition, processing,
generation, recording, transmission, dissemination and
management of information) and more expenditure is incurred
on information. This study further stated the importance of
information in cellular services as an opportunity to be
connected. This research study is focussed more on the need for
ICT to be called as a developed India with the co-operation and
involvement of government of India, but is not focussed
particularly on rural market.
2.2 Pradip Thomas, 2007, in his paper titled; Telecom musings:
public service issues in India, has suggested that in India access
2. LITERATURE REVIEW
and affordability are the important words that define the
provision of ensuring a ''phone in each village''. The availability
of mobile phone would cut the role of middlemen and
gatekeepers so that villagers or farmers can enjoy a better
earnings, computerization as a tool to eliminate corruption and
thus connecting urban-rural India at better pace of
development in many areas.
2.3 Mahavir Sehrawet and Subhash C. Kundu, 2007, in their
study titled: Buying behaviour of rural and urban consumers in
India suggested that rural and urban consumers vary
significantly in various aspects of packaging. The rural
consumers have a stronger opinion on packaging, say better the
packaging, better the quality of the product although they give
less importance to labelling. This study was carried with just one
aspect of product, say packaging which is beneficial to my
current study on 4Ps for rural area with reference to marketing
mix.
2.4 From the study conducted by Jamie Anderson based on
interview with Gurdeep Singh, Operations Director, UP, Hutch
India, in 2008, paper titled “Developing a route to market
strategy for mobile communications in rural India”, suggested
that managers need to go beyond traditional approaches to
serving the rural market in India. Jamie, based on the interview
of Gurdeep Singh further suggested that higher the population,
higher the business.
Primary objective: to understand the need and preference for
mobile phone and personal computer in rural youth.
Secondary objectives:
> To understand the need and preference for mobile
phones in rural youth.
> To analyse the need and preference for personal
computers in rural youth.
> To suggest the marketers for future growth in rural
market.
This study was conducted in Araleri village during September
2014, Malur Taluk, Kolar District, Karnataka, with the objective
of exploring the dynamics of youth buyer behavior towards
mobile phone.
3. OBJECTIVES OF THE STUDY:
4. RESEARCH METHODOLOGY:
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77IFIM International Journal of Management FOCUS October 2014 - March 2015|
The study was conducted through sample survey using
structured questionnaire/scheduling supported by interview
technique and observation.
Malur is at a distance of 43 km from Bangalore City. The places
near Malur are Whitefield, Hoskote, Hosur etc. As of 2001
India census, Malur had a population of 27,791. Males
constitute 51% of the population and females 49%. Malur has
an average literacy rate of 67%, higher than the national average
of 59.5%: male literacy is 73%, and female literacy is 61%. In
Malur, 13% of the population is under 6 years of age. The
economy of Malur is primarily dependent on agriculture,
famous for clay tile-and-brick industry and some small scale
industries. Araleri is a target village around 7 kms from Malur.
To select the samples, a non-probability sampling technique was
used. Non-probability sampling is also known by different
names such as deliberate sampling, purposive sampling and
judgement sampling. In this sampling, items for the sample are
selected deliberately by the researcher; his/her choice
concerning the items remains supreme (Kothari2011:59).i.e.,
the small mass that is chosen will be a typical representative of
the whole. The respondents for the questionnaire were selected
from Araleri village with two different age group, but preferably
youth. Educated or uneducated, married or unmarried were not
the main focus but youth with purchase preference for shopping
goods were considered. The population of Araleri Village is
approximately around 2000, with youth totalling to around
250.
4.3 Sample Size: respondent size of 86 between the age
group 25-34 yrs was considered.
There are several ways of collecting data, particularly in
surveys and descriptive researches. Important ones being:
observation method, through questionnaire, schedules, pantry
audits, mechanical devices, depth interviews, and few more.
With reference to the research objectives, the data was collected
with the help of a structured questionnaire. A questionnaire
comprises of several questions printed or typed in a particular
form supporting the objectives of the research study. It helps in
collecting the qualitative response also.
4.1 Research sight:
4.2 RESEARCH POPULATION AND SAMPLING
4.4 DATA COLLECTION
Sources of data
5. ANALYSIS AND FINDINGS
5.1) To know the occupation of the respondents
5.1 Interpretation:
This study has utilized data from both the primary and
secondary source.
> The primary data was collected by interviewing rural
youth with the help of questionnaire. A sample size of
approximately 123 was considered for the study, of which only
86 belonged to the age group of 25-34 yrs was considered. The
research was conducted on 25-34 yrs, preferably youth with the
focus on few shopping goods, under personal use; personal
computer and mobile phones was considered.
> Secondary data: Since the study is focused at rural
consumers, also due to the availability of several research studies
conducted on rural consumers, several journals have been
referred for finalizing the topic and framing of hypothesis.
A total population of 123 was surveyed, out of which 86
belonged to the age group under study.
With reference to the objectives under study, it becomes very
important to know rural youth, their awareness on mobile
phones and personal computer, its importance in their life and
their willingness to purchase them/own them and thus
concluding if the rural market is open to buy mobile phones and
personal computer, thus a potential market for shopping goods
under study.
This research was conducted for bigger size with chi square test
as a research scholar. For the journal, the analysis(250 pages)
would have been too big, thus, a simple average method for the
topic related to original research was considered.
Table 5.1: Occupation of respondents
> 57% of the respondents in this age group surveyed
were students while 43% were married and housewife/home
Respondent Response
Student 49
Married and House wife
37
Total
86
78 IFIM International Journal of Management FOCUS October 2014 - March 2015|
maker.
5.1 Inference:
> Good percentage of students and women were
surveyed.
5.2) To know the family income of the respondents
Table 5.2: Income per Month
> 57 on 86, i.e., 66% have monthly income between
Rs.5,001 to Rs.8,000., while 43% have monthly income
between Rs.8,000 to 11,000.
5.2 Inference:
> Few of the respondents own Nilgiri plantation, few
mango plantation, few own cows/livestock . Nilgiri plantation
which is cut after a minimum period of time fetches them lakhs
together, selling cow's milk fetched good money, while few of
them worked in brick and tiles factory near to the village. Thus,
any of the above income category, is a potential rural
respondent.
5.3) To know if mobile phones and personal computers were
possessed by rural respondents.
Table 5.3:Ownership of mobile phone and personal
computers
Income per
month
Respondents
Rs.5,001 – 8,000 57
Rs.8,001-11,000 29
Total 86
5.3. Interpretation:
> 100% of respondents own a mobile phone, while
none own a personal computer
5.3. Inference:
> The above table shows that all own a mobile phone
and none owns a personal computer.
5.4) To know the reasons for using mobile phones and
computers:
Table 5.4: reasons for using a mobile phone
5.4 Interpretation:
> It can be noticed that only 3.5% of the respondents
use the phone for education purpose, 3.5% for internet, while
the rest use it for basic purpose like sms, receiving/making calls
and capture images.
5.4 Inference:
> Since only 7% use for education and internet, it can
be noticed that respondents do not have exposure to other
useful benefits like knowing about what is happening in the
world, to be in par with the urban youth.
> Marketers should educate the respondents about the
online market, online complaints, and many more advantages
for using mobile phones in a much more better way. This could
be value added service and hence the potential market for
smartphones.
5.5) To know the kind of brand of mobile phones possessed
(not applicable to computers since none owns it).
Table 5.5: Brand of mobile phones possessed.
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79IFIM International Journal of Management FOCUS October 2014 - March 2015|
Mobile
Brand
Number of
respondents
Mobile Brand Number of
respondents
Samsung
8
Lava
13
Nokia
23
Micromax
7
Karbonn
29
Others
6
Total 86
5.5 Interpretation:
> 34% own Karbonn, 27% own Nokia,15% own Lava,
9% own Samsung, 8% own Micromax, while the rest 7% own
other brands.
5.5 Inference:
> It can be noticed that Karbonn sells the most followed
by Nokia, Lava, Samsung and Micromax and a few of the rest of
the brands.
> Karbonn smart phones are priced relatively low, and
hence sells most in rural market.
> Nokia being a customized product having lifetools
sells due this fact in rural market.
5.6) Criteria for owning a mobile phone:
Table 5.6: criteria for choosing a mobile phone:
5.6 Interpretation:
69% preferred mobiles based on price.
10% preferred mobiles based on brand.
21% preferred mobile phones based on both options.
5.6 Inference:
The youth belonging to this category, preferred buying mobile
phone based on price more than a brand. Thus, they were price
sensitive.
Criteria No. of respondents
Based on Brand 9
Based on Price 59
Both Brand and
Price
18
Total
86
5.7.a) To know the price of the mobile phones possessed by
the respondents?
Table 5.7.a: to know the price of the mobile phones
5.7.a Interpretation: 31% had mobile phones between the
price Rs.2,001 to Rs,3,000, 21% had mobile phone priced
between Rs.3,001 to Rs.4,000, 21% owned mobile phone
priced between Rs.4,001 to Rs.5,000,10% owned mobile phone
between Rs.5,001 to Rs.6,000. 8% owned between Rs.6,001 to
Rs.7,000, while the rest owned mobile phone above Rs.7,000.
5.7. a Inference: For marketers selling mobiles, Araleri is a very
potential market, since the minimum affordability itself is
between Rs.2,000 to Rs,3000. Since many respondents have
mobile phone priced between Rs.3,001 to Rs.5,000, it would
not be difficult to sell smartphones with customized features for
this market.
5.7.b How much satisfied are you about your mobile phone?
Table 5.7.b: Satisfaction level of respondents on existing
mobile phones.
5.7.c To understand the preference in mobile phone due to
dissatisfaction in the existing mobile phone .
Table 5.7.c: Preference due to dissatisfaction of existing
mobile phone.
Price Range No. of
respondents
No. of
respond
ents
Between
Rs.2,001-3,000
27 Between Rs.5,001-6,000 9
BetweenRs.3,00
1– 4,000
18 BetweenRs.6001-Rs.7,000 7
Between
Rs.4,001-5,000
18 Above Rs.7,000 7
Total 86
Degree of satisfaction No. of respondents
Extremely satisfied 10
Very much satisfied 50
Satisfied 12
Not very much
satisfied
14
Total
86
80 IFIM International Journal of Management FOCUS October 2014 - March 2015|
5.7.d To understand the source of awareness and major
influencer in decision-making amongst target market
Table 5.7.d: To understand source of awareness and
influencer in decision-making.
About personal computers in continuation with the 5.3 and
5.4 observations:
5.8) To understand if the respondents wish to have a personal
computer.
Table 5.8: If you do not own a personal computer, would you
wish to have one?
5.8 Interpretation: 16% wished to have a personal computer at
home.
5.8 Inference: this village under study, Araleri, can be a
prospective market for computers. It can be also noticed that in
villages, WOM acts as a biggest influencer. If the few who buy,
are satisfied, that may generate more sales.
5.9 To understand the reason for not having a PC in spite of
wishing to have one.
Table 5.9: Hurdles in having a computer at home.
Preference in
mobile phone
No. of respondents Preference in mobile
phone
No. of respondents
Samsung
10
Nokia ----
Lava
----
Karbonn ----
Micromax
----
others ----
Preference to own a
computer
Yes 14
No
72
5.9 Interpretation: 100% of the respondents gave the reason to
be no encouragement and unconvinced parents to buy a
computer.
5.9 Inference: if awareness is created by the manufacturer of
personal computers through awareness programmes in schools
and colleges, supported by teachers/faculties, computers can
probably be sold in this village.
5.10) To understand if respondents are willing to buy a better
mobile phone or a computer on EMI.
Table 5.10: Response to EMI option
5.10 Interpretation:
> 12% of the total respondents were open to the EMI
option
> 57% on a total of 14 who wished to have a computer
were open to EMI option.
5.10 Inference:
> In spite of possessing a mobile phone few were willing
to have a different one with EMI option. This indicates that
rural market is prospective market for smartphones.
> Even if the demand for computers is comparatively
lesser when compared to the demand for mobile phones, it can
be inferred that through WOM, marketers can benefit if EMI
option is provided.
6. CONCLUSION AND RECOMMENDATIONS:
Araleri is a village rich in power supply compared to many
villages. Since it is just 7 Kms away and well connected by road
from Malur, transportation for marketers will not be a problem.
From the above ten tables we can conclude that:
> All had mobile phones.
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81IFIM International Journal of Management FOCUS October 2014 - March 2015|
> Rural youth is price sensitive, since a majority prefer
spending Rs.2,000 – Rs.3000 on mobile phones. Thus, price
can be considered as a factor influencing purchase decision-
making.
> Most of them had Karbonn, 69% preferred buying a
mobile phone based on price, rest based on price and brand as
well.
> 31% had mobile in the range Rs.2,000 to Rs.3,000,
21% had between the price Rs.3,001 to Rs.4,000, 21% between
Rs.4,001 to Rs.5,000, 10% had between Rs.5,001 to
rs.6,000,8% between Rs.6,001 to rs.7,000, and few above
Rs.7,000. The statistics show that it is a potential market for
smartphones for this age group.
> Since from the table 5.10, it is clear that EMI options
acceptable among rural youth, marketers can customize the
features in the mobile phones and computers to price between
Rs.4, 000 to Rs.6, 000 and Rs.15,000 respectively. EMI options
can also be customized for phones and computers.
· Few from the age group 25-34 yrs preferred owning a
computer. May be due to parents in this category, for the
children's education they were prepared to buy a computer.
RECOMMENDATIONS:
Advantages to marketers:
> Since Malur has literacy rate 67% higher than
national average according to 2001statistics, Araleri being closer
to it, with both the segments showing students (and many were
educated) rate high, will be an effective market to design
promotion mix.
> Well-connected roads.
> Good electric/power supply
> Many factories like tiles, brick, fabrication,
engineering are located in Malur to which many from Araleri
travel to work, thus is an indicator for purchasing /disposable
income. Malur also has Honda and Volvo plant in Malur taluk,
providing employment to many and opportunities for ancillary
industries/entrepreneur.
Recommendations based on research findings:
> Since Araleri is a potential market for mobile phones,
incorporating value added services to the mobile phones and
helping them use it better through retailers or through self-help
easy procedure in mobile phone, can generate good sales.
> Mobile phones designed for 25-34 yrs will be more
productive since all 100% had mobile phones and wished to go
for buying Samsung due to its benefits. Due to the presence of
too many retailers (from observation)selling mobile phones in
Malur , the retailers can be encouraged to sell more by offering
good commission to the retailers and training to their
salesperson. Since entire population was not covered in the
research, due to the observation it can be predicted to be a
prospective market for mobile phones.
> Parents of India being more concerned about their
children's future and wellbeing can be focused by marketers to
sell more of computers. Since institutions have computers,
companies should tie up with schools/colleges/government to
create awareness of computer and internet connectivity. They
can convince the schools/colleges to provide their center as a
venue to conduct a training programme to show the benefits to
be connected to external world and thus create empowerment.
Educating on computer with internet benefits can be taken as a
CSR initiative also.
> Previous studies carried out in various parts of Indian
rural markets have addressed in common the following:
o Rural market is price sensitive
o They also prefer brands with the kind of affordability
they have
o They are influenced through relatives, friends and
neighbor
The same was noticed in Araleri. India may vary in geography,
socio-cultural reasons, but are finally the same on above lines.
Thus, due to the need for mobile phones and personal
computers existing in Araleri, it can be suggested for marketers
to have customized marketing mix programme to enhance retail
opportunities for shopping goods.
7. LIMITATIONS
> Even when a questionnaire was constructed in
Kannada, all the respondents opted to answer verbally.
> Had to spend 15 minutes per respondent while
collecting data thus time consuming.
82 IFIM International Journal of Management FOCUS October 2014 - March 2015|
> 3 to 4 days was spent in travelling and reaching
respondents.
> Few were asked questions through telephone, thus
lack of observations.
> Few of them showed fear while answering
> Questionnaire being too long, taking photocopies of
it was expensive.
> Since one village was considered, the response may
not be valid for entire Kolar District.
8. RESEARCH GAP:
> The study can be further carried out to the entire rural
population or can be categorized into different age group for
overall or better understanding of the respondents.
> The study can further be carried out for different
products under shopping goods.
> The study can further be carried out at different
villages in the same district and the state for further customizing
marketing mix for Karnataka region.
6. REFERENCES:
1. Jamie Anderson, (2008), “Developing a route to market strategy for mobile communications in rural India”, International Journal of Emerging
Markets Vol. 3 No. 4, 2008 pp. 339-347 q Emerald Group Publishing Limited.
2. Sushil Vachani, and N. Craig Smith, 2008, University of California, Berkeley vol. 50, no. 2 winter , cmr.berkeley.edu.
http://www.pcworld.com/article/168354/article.html
3. ,India's Rural Mobile Phone Users Hit 100 Million, Jul 13, 2009 10:50 PM
4. Ajith Paninchukunnath, (2010), “3P framework: Rural Marketing in India”, SCMS Journal of Indian Management, January – March.
5. 6. Praveen K. Kopalle, Donald R. Lehmann, John U. Farley, 2010, Consumer expectations and culture: the effect of belief in karma in India, Journal
of consumer research, vol. 37, august 2010
7. Rajesh K. Aithal, 2011, Marketing channel length in rural India, Influence of the external environment and rural retailer buyer behaviour,
International Journal of Retail & Distribution Management Vol. 40 No. 3, 2012
8. C. Samuel Craig and Susan P. Douglas, (2011), “Empowering rural consumers in emerging markets”, International Journal of Emerging Markets ,
Vol. 6 No. 4,
9. Falguni Vasavada-Oza, Aparna Nagraj and Yamini Krishna(2012) , “Marketing to Rural Women: How Various Leading Brands Are Doing It?”
The IUP Journal of Brand Management, Vol. IX, No. 2.
10. Ali, Thumiki and Khan,2012,Factors Influencing Purchase of FMCG by Rural Consumers in South India, International Journal of Business
Research and Development, ISSN 1929- 0977 Vol. 1 No. 1, pp. 48- 57 , 2012
11. Dr.Ashfaque Ahmed, (2013), “Rural Marketing Strategies for Selling Products & Services:Issues & Challenges” , Journal of Business
Management & Social Sciences Research, Volume 2, No.1, January. http://www.assocham.org
12. Sunday, January 27, 2013, With rural push, FMCG sector set to witness robust growth, says ASSOCHAM EcoPulsestudy .
http://www.rediff.com/money/report/indias-rural-markets-are-a-powerful-economic-engine/20130711.htm
13. India's rural markets are a powerful economic engine', July 11, 2013
http://www.ibef.org/industry/indian-rural-market.aspx
14. Indian Rural Market, IBEF, November 2013
15. 1 http://www.bms.co.in/rural-marketing-notes/,4th June 2014.
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83IFIM International Journal of Management FOCUS October 2014 - March 2015|
Use of Social Networking Websites as an Emerging Marcom Tool
Charu Bharti*
*Research Scholar, Haryana School of Business, Guru Jambheshwar University of Science and Technology, Hissar, Haryana. [email protected]
Keywords: Marcom (Marketing Communication), Promotion,
Social Networking Websites (SNWs)
ABSTRACT
It is no exaggeration to say that that marketing is undergoing a
paradigm shift, in large part, to the Internet and social media
and social networks. The evidence is everywhere, for example,
many consumers no longer look up items in the Yellow pages;
they search for them on the Internet.
Using Social Networking Websites, as marketing tool, is more
than just marketing because it includes requires the
development of relationships based on shared interests.
We are still in early stages of the transformation social media
and social networking is having on marketing. Traditional
marketing is undergoing a transformation due, in large part, to
the Internet and social networks and social media.
While social networking has gone on almost as long as societies
themselves have existed, the unparalleled potential of the
Internet to promote such connections is only now being fully
recognized and exploited, through Web-based groups
established for that purpose.
With two thirds of the world's internet population visiting a
social network or blogging website, and the sector now
accounting for over 10% of all internet time, websites such as
Facebook, LinkedIn and Twitter are channels that marketers
can really tap into.
Social networking can be an excellent way to acquire new
customers and retain existing ones. The real value is the way
marketers can engage with their audience on a personal level.
Instead of simply 'sell sell sell', social networking is about the
kind of two-way communication which helps to build a long
term relationship. Of course, this form of interaction may not
be suitable for all brands, but many organizations are benefiting
from making their brand more personable.
This Paper analyses the opinion of potential consumer who are
the internet users, on their attitude towards Social Networking
Websites (SNWs) to be used as a Marcom tool (Marketing
Communication tool). As the SNWs are the upcoming
platforms that people have started using, to build networks.
How can the marketers take the use of these Internet based
platforms, as the tool for 'Customer engagement, viral
marketing, Word of the mouth promotion, etc'.
The Study is based on Survey conducted where the opinions of
the “Internet users” have been collected, with a Sample Size of
approx. 300, using 'Questionnaire' as a Research Tool. The
Findings are expected to give the conclusion for the marketers,
to look the SNWs as an emerging marcom platform. The
recommendations have been given on the basis of Findings.
A survey commissioned by the American Marketing
Association reveals a positive outlook for likelihood of e-
commerce on social networking sites, in that 47% of consumers
said they would visit social networking sites to search for and
discuss holiday gift ideas, and 29% said they would buy
products there (Horovitz 2006).
Social networks have geared up to provide shopping services.
Facebook added a shopping application that enables users to
search for products they want to buy, and then share their
opinions of those products with other Facebook members
(Forbes 2007).
It is no exaggeration to say that that marketing is undergoing a
paradigm shift, in large part, to the Internet and social media
and social networks. The evidence is everywhere, for example,
many consumers no longer look up items in the Yellow pages;
they search for them on the Internet.
“Social Network Marketing is the use of social media software to
create or maintain connections.”
INTRODUCTION
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84 IFIM International Journal of Management FOCUS October 2014 - March 2015|
It is more than just marketing because it includes requires the
development of relationships based on shared interests.
“Social network marketing is the practice of expanding the
number of one's business and/or social contacts by making
connections through individuals.”
It can be undoubtedly said that the Social Media are the
emerging tool for an effective marketing. It has been rightly said
by Matt Dickman, that “Social media is not an island.
It's a high-power engine on the larger marketing ship.”
A c c o r d i n g t o t h e r e c e n t r e s e a r c h b y
www.internetworldstats.com, the total numbers of users on
Facebook, as on June 30, 2011, worldwide are 6,930,055,154,
with a penetration of 10.3%. That is a huge figure. Ready-to-
consume free information in the form of age, likes, email, is
available before the marketer. However, thinking out-of-the box
requires, for leaving a trail of the so-called Word-of-mouth
promotion i.e. the Viral part of the marketing. For instance the
song “Why this Kolaveri Di.”, is the recent example of effective
social media marketing. The Kolaveri number has taken in
people, especially youngsters and though they do not know the
exact meaning and whether they follow the lyrics (which the
promoters of the Video have done in scrolls in English)...the
number is on the lips of all these youngsters and that speaks
volume of its acceptance amongst youngsters converging from
different states. Yes, it is the Viral part that help spread the
leaked video like anything, with the help of Social Media like
Youtube & Facebook.
Social Networking Sites are emerging as a boom for the
marketers. It is being used as an innovative marketing strategy.
Social media has become a platform that is easily accessible to
anyone with internet access, opening doors for organizations to
increase their brand awareness and facilitate conversations with
the customer. Therefore, the Social networking sites, not
initially formed with these objectives, would help marketers to
achieve objectives like better customer understanding,
knowledge sharing, informing about and promoting products.
Social networks and social media are part of a phenomenon that
is changing the way we communicate with our members and
potential members. Consumers are using online tools to take
charge of their own experience and connect with others. They
are using blogs, wikis, pod casts and YouTube, to name only a
few. The real value is the way marketers can engage with their
audience on a personal level. Instead of simply 'sell sell sell',
social networking is about the kind of two-way communication
which helps to build a long term relationship. Of course, this
form of interaction may not be suitable for all brands, but many
organizations are benefiting from making their brand more
personable. Social networking is opening up exciting new ways
of communicating with audiences; like some marketers like
Make my Trip, Yatra etc., have recently used Twitter in
conjunction with their website to document their clients' travels
to many domestic and foreign locations, and gained many new
fans/followers along the way. There is no doubt that the further
development could be seen in this arena in the near future, and
it would be surprising to see just how much of a benefit social
networking can be to so many organizations.
“A study without objectives is like a tree without roots”. In any
area of study, the first and the foremost task is to define the
objectives of the research i.e. the reason why the research study
need to be conducted.
A research study may have many objectives but all these
objectives revolve around one major objective which is the focus
of the study. In this study, the focus is the use of the Social
Networking Websites (SNWs) as a marketing tool.
The Social networking is an innovative marketing tool which is
being adopted by so many marketers now-a-days. And so this
study will be based on studying the emergence of Social
Networking Sites as an efficient marketing tool.
The following are the objectives of this research study:-
1. To study the use of the Social Networking Sites as an
innovative marketing strategy.
2. To study the reactions of potential customers about
marketing through SNWs
3. Review of Literature
Research suggests that consumers rely on two different sets of
values in making their shopping decisions: hedonic and
utilitarian (Babin and Darden 1995; Babin, Darden, and
Griffin 1994). Batra and Ahtola (1990) define these values as
follows: "(1) consummatory affective (hedonic) gratification
from sensory attributes, and (2) instrumental, utilitarian
reasons.”
Online shopping services lack multisensory attributes. The
2. Objectives of the study
85IFIM International Journal of Management FOCUS October 2014 - March 2015|
Table 5.1 Chart 5.1
5.2. Do you have a profile on any Social Networking Website(SNW)?
Table 5.2Chart 5.2
primary utilitarian values that online shoppers seek include the
convenience of locating and comparing merchants, evaluating
price/quality ratios, and conserving temporal and psychological
resources (Grewal et al. 2003; Mathwick, Malhotra, and Rigdon
2001).
Godes and Mayzlin (2004) suggest that online conversations
(e.g., Usenet posts) can offer an easy and cost-effective way to
measure Word of Mouth. Online conversations offer the firm
an attractive opportunity to learn about its environment by
directly observing the flow of interpersonal communication. By
looking at activity across different online communities, firms
are able to infer measures of social structure.
Online social networks are platforms, which allow individuals
to connect and communicate with others with common
interests termed as friends (Boyd and Ellison, 2007). According
to Urstadt (2008), social networking is the fastest growing
activities on the new user centered Internet, Web2.0, which has
spread to sites of all sizes, and are increasingly intertwined as
platforms open.
A recent US study (Corporate Executive Board, 2008)
categorized five key objectives of social networking strategies,
namely (i) improve customer understanding, (ii) promote issues
of social concern, (iii) promote products and services, (iv)
facilitate internal knowledge sharing, and (v) increase brand
awareness. Leading companies such as Unilever, Xerox, P&G,
Virgin, Toyota, JP Morgan, CISCO, IBM, Burger King and
Honda had successfully utilized social networking websites.
Michael Trusov, Randolph E. Bucklin, & Koen Pauwels (2009)
explained that …Because social network sites record the
electronic invitations from existing members, outbound Word
of Mouth can be precisely tracked. Along with traditional
marketing, Word of Mouth can then be linked to the number of
new members subsequently joining the site (sign-ups).
4. Research Methodology
4.1 Research Design of the study
4.1.1 Data Sources:
o Primary Data Sources : The primary data i.e. the first
hand data was collected from the people who are the member of
one or more Social Networking Website(SNW).
o Secondary Data Sources : The second hand data was
collected from the sources like Books, Journal, Newspapers,
Internet, discussions, etc.
4.1.2 Research Approach: The Research study was
'Exploratory' in nature. The study was based on taking out
insights and ideas into the problem i.e. analyzing the marketing
opportunities on the social networking sites.
4.1.3 Data Collection Tools : The tool that was used for the
data collection was Structured Questionnaire
4.2 Sample Design of the study
The Sample design include the decision of the sample i.e. the
respondents who represent the whole population. The Sample
Design included:
4.2.1 Sample Unit : The sample units were the people who
are the members of one or more Social Networking Websites
like Facebook, Tweeter, LinkedIn, etc.
4.2.2 Sample Size : The Sample Size for this research study
comprised of 300 respondents.
4.2.3 Sample Area : The data was collected from the Delhi
and NCR regions, in India.
4.2.4 Sample Technique : The respondents were selected on
the basis of Probability Sampling technique i.e. Random
Sampling.
5. Analysis
The following is the analysis of the data collected from 300
respondents:-
5.1. Are you aware of any websites where you can make friends
and socialize (Social Network Websites)? A
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86 IFIM International Journal of Management FOCUS October 2014 - March 2015|
5.3. How long have you been using the SNW?
Table 5.3Chart 5.3
5.4. Have you ever used SNWs for searching an Internship or Job?
Table 5.4 Chart 5.4
5.5. How many hours do you spend weekly on the SNW?
Table 5.5 Chart 5.5
5.6. Which SNW(s) are you a member of?
Table 5.6 Chart 5.6
5.7. Kindly indicate what information have you included on
your Social Network websites?
Table 5.7 Chart 5.7
5.8. Do you believe companies save money by using SNWs to
market their products?
Table 5.8 Chart 5.8
5.9. Do you notice any offers/Advertisement for the Product/
Services on a SNW?
Table 5.9 Chart 5.9
5.10. Do you think that in this busy lifestyle, the information
received via advertisements on SNWs regarding the new offers
help you keep up-to-date?
Chart 5.10Table 5.10
87IFIM International Journal of Management FOCUS October 2014 - March 2015|
5.11. Have you ever purchased any product after collecting the
information from any SNWs?
Table 5.11
5.12. If Yes, What category of product have you purchased ?
Table 5.12
5.13. Have you ever switch off from one brand to another after
being influenced by the number of “Likes” on a brand?
Table 5.13
5.14. Do you think SNWs are a good way of providing feedback
to the company regarding its product/service?
Table 5.14
5.15. Have you ever felt like your privacy was violated through
sharing information with marketers on SNWs?
Table 5.15
5.16. Have you ever recommended any specific brand to any
of your friends etc on SNWs?
Table 5.16
5.16. Have you ever recommended any specific brand to any
of your friends etc on SNWs?
Table 5.16
6. FINDINGS
After analyzing the collected data, the followings
interpretations can be made in the form of Findings:-
6.1 With advent in the internet revolution, more and
more number of people are coming into the access of the
same.
6.2 The number of members on various Social
Networking Sites is increasing at a very high pace, day by day.
6.3 2 % of the respondents have been accessing the
Social Networking Sites from 1-6 months, 37 % of the re
respondents have been accessing the Social Networking Sites
from 12-24 months, showing that this is a latest trend amongst
the people.
6.4 57 % of the respondents access the Social
Networking Sites 10-20 hours every week, showing that there
is a lot of time for the marketers to act.
6.5 90 % of the respondents are the members of
Facebook, 33% of them are the members on the YouTube,
67% of them are the members on the Linkedin and 77% of
them are the members on the Twitter, making them most
popular Social Networking Websites.
6.6 24 % of the respondents have searched for a
job/internship through any SNW, explaining the scope of
SNW for HR oriented companies like Recruitment Firms,
Consultancies, etc.
6.7 67 % of the respondents have mentioned their
Email ID, 26% have mentioned their Phone Numbers, 83%
have mentioned their Home Town/City, 38% have
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88 IFIM International Journal of Management FOCUS October 2014 - March 2015|
mentioned their Music Interests, 22% have mentioned their
Favourite Movies, 33% have mentioned their interests in
Books, 77% have mentioned about their Passion areas, 20%
have mentioned their Favourite Sport, 29% have mentioned
their Interest Activities, 40% have mentioned their favourite
T.V. Shows, 76% have mentioned their relationship status and
50% of them have mentioned any other information, on their
respective Social Networking Sites.
6.8 63 % of the respondents believe that the companies
can save money by using SNWs as a marketing tool.
6.9 5 5 % o f t h e r e s p o n d e n t s n o t i c e a n y
offer/advertisement for any Product/Service that highlights on
their Social Network Website.
6.10 30 % of the respondents took purchase decision on
the basis of the information that they received on their Social
Network Website.
6.11 Out of 89 respondents(30 %) who purchased any
product after getting information from SNW, 13% (% of total
i.e. 300)purchased FMCG, 9% purchased Daily use item, 3%
purchased Jewellery, 1% purchased Insurance Policy, 2%
purchased Bank A/C, 2% purchased any other product
category item.
6.12 16 % of the respondents agree that they have switch
off from one brand to another after being influenced by the
number of “Likes” on a brand. Therefore, Information search
on SNW plays an important role in consumer decision-making
process.
6.13 74 % of the respondents think that SNWs are a good
way of providing feedback to the company regarding
product/service, stating it clear that SNW are a good source for
the marketers to get involved in to “Interactive Marketing”.
6.14 27% of the respondents agree that the advertisements
are an intrusion on their privacy.
6.15 61% of the respondents agree that due to their busy
lifestyle, advertising on Social Networking Sites can be useful to
them in gaining knowledge about interesting offerings, stating
it clear that SNW can be a good source specially in Urban areas,
where both husband-wife are working.
6.16 30 % of the respondents told that they had
recommended a brand to another person, for use, via SNW.
Therefore, SNWs are a good source of viral marketing &
publicity. The word-of-mouth promotion, which is considered
as the best source of promotion, can be held via SNWs.
7. RECOMMENDATIONS
Based on the findings, the following are my recommendations
to the marketers, who use or would like to use the Social
Networking Websites as a part of their marketing strategy, :-
7.1 The marketers should use Social Networking Sites as
the part of their marketing strategies, as using SNWs is a recent
trend amongst the people and more and more number of
people are coming into the access of the same.
7.2 There should be strategic planning that should be
made before advertising on the Social Networking Sites.
7.3 The users/members mention a large set of their
personal information and interests like Music, Passion,
Relationship Status, etc. So the marketer should use one-to-one
marketing in case of using Social Networking Sites as per the
interest areas of the member of the Site.
7.4 The marketer should create their own communities
in the name of their Brand or Business and attract the members
to join the same.
7.5 A huge quantum of time is being spent by the people
on the Social Networking Sites and so marketers should take
the advantage of the same.
7.6 Marketers' information or offerings etc. should not
prove to be an intrusion to the privacy of the people and so they
should be able to provide compact and relevant information.
7.7 Marketers also need to beware of cheting the
customers, as the communication via SNWs spreads very fast.
7.8 The Marketer should try to increase their online
presence on different SNWs, as the customer prefer it as a good
source of information, while taking a purchase decision.
7.9 The access to the information available on the Social
Networking Sites regarding the marketers' offerings should be
convenient and short on details.
7.10 The marketers can also create their own Blogs, Write-
ups, and communities etc. to communicate regarding their
offerings and also receive feedback.
7.11 The marketers should try to maintain healthy
Customer relationship with the help of Social Networking
Sites.
7.12 Social Networking Sites cost no or very less to the
marketers, but the marketers have to take proper utilization of
the huge opportunity available before them. So they have to
plan strategically and then act.
7.13 Social media strategies must target certain groups in
order for your plan to be successful. The question for your
business is how you manage all of your social media accounts.
You want to streamline, consolidate, and analyze your social
media marketing plan in the most efficient way possible.
Online businesses have originated over the past five years to do
just that.
7.14 With the rapid burgeoning of social media websites,
your business needs to find a way to consolidate social media
marketing efforts to save money and time. Engage Sciences has
developed a platform that allows your business to view
messages, comments, and post replies across all of your
Facebook and Twitter channels.
89IFIM International Journal of Management FOCUS October 2014 - March 2015|
8. CONCLUSION
In conclusion, it can be said that the Today in the era of globalization and internet revolution, the marketing is undergoing a
paradigm shift from the conventional marketing practices to the online marketing practices.
Social Networking Sites are a boom for the marketers. It could be used as an innovative marketing strategy. SNWs have become the
platforms that are easily accessible to anyone with internet access, opening doors for organizations to increase their brand awareness
and facilitate conversations with the customer. Additionally, SNWs serves as a relatively inexpensive platform for organizations to
implement marketing campaigns. With two thirds of the world's internet population visiting a social network or blogging website,
the Word-of-mouth, which is considered the strongest promoter, is present in case of marketing innovatively through Social
Networking Sites. The Viral part of the SNWs make it more interesting for the marketers to use it as a marketing tool.
9. REFERENCES9.1 Babin, Barry J. and William R. Darden (1995), "Consumer Self Regulation in a Retail Environment," Journal of Retailing, 71 (1), 47-70.
9.2 Batra, Rajeev and Olli T. Ahtola (1990), "Measuring Hedonic and Utilitarian Sources of Consumer Attitudes," Marketing Letters, 2 (2),159-170
9.3 Boyd, D. M., & Ellison, N. B. (2007), “Social Network Sites: Definition, History, and Scholarship.” Journal of Computer-Mediated Communication, 13(1), 210-230.
9.4 Compete.com (2008), “Site Analytics. Profile: MySpace.com and Facebook.com” available at http://siteanalytics.compete.com/facebook.com+myspace.com/ ?metric=uv.
9.5 F o r b e s ( 2 0 0 7 ) , " N e w S h o p p i n g A p p l i c a t i o n A l l o w s U s e r s t o S h o p O n l i n e w i t h F r i e n d s , " J u l y 2 0 , http://www.forbes.com/businesswire/feeds/businesswire/2007/07/20/businesswire20070720005396r1.html.
9.6 Grewal, Dhruv, Gopalkrishnan R. Iyer, R. Krishnan, and Arun Sharma (2003), "The Internet and the Price Value-Loyalty Chain," Journal of Business Research, 56 (5), 391-398.
9.7 Godes, David and Mayzlin Dina (2004), “Using Online Conversations to Study Word-of-Mouth Communication”, Marketing Science, 23, 545–60.
9.8 Horovitz, Bruce (2006), "Survey: Social Network Sites Could Also Lure Shoppers," USA Today, November 23, http://www.usatoday.com/tech/news/2006-11-23-social-shopping_x.htm.
9.9 Market Watch (2008), "Jupiter Research Finds That Social Media Has Emerged as Important Marketing Platform for Retailers During Back-to-School Shopping Season," Market Watch, August 18, http://www.marketwatch.com/news/story/jupiterresearch-finds-social-media-has/story.aspx?guid=%7B5D4FA471-3AB4-453B-A15D-7174BD0D3D93%7D&dist=hppr.
9.10 Trusov Michael, Bucklin E. Randolph, & Pauwels Koen (2009), “Effects of Word-of-Mouth Versus Traditional Marketing: Findings from an Internet Social Networking Site” , Journal of Marketing, 73, 90–102.
9.11 Urstadd (2008), “Social Networking Is Not A Business — But It Might Be Soon”, available at: http://www.rimmkaufman.com/rkgblog/2008/07/14/social-networking-is-not-a-business-but-it-might-be-soon/.
Copy of the Questionnaire1) Are you aware of any websites where you can make friends and socialize (Social Network Websites)? a) Yesb) No
2) Do you have a profile on any Social Networking Website(SNW)?a) Yesb) No
3) How long have you been using the SNW?a) Less than 1 monthb) 6-12 monthsc) 12-24 monthsd) More than 24 months
4) Have you ever used SNWs for searching an Internship or Job?a) Yesb) No
5) How many hours do you spend weekly on the SNW?a) 0-5 b) 6-10c) 10-20d) 20-30e) More than 30
6) Which SNW(s) are you a member of?a) Facebookb) LinkedInc) My Spaced) Orkute) Youtubef) Twitter g) Others
7) Kindly indicate what information have you included on your Social Network websites? a) Emailb) Phone No.c) Home Town/Cityd) Musice) Moviesf) Booksg) Passionh) Sportsi) Activitiesj) TV showsk) Relationship Statusl) Others
8) Do you believe companies save money by using SNWs to market their products?a) Yes
b) No
9) Do you notice any offers/Advertisement for the Product/Services on a SNW? a) Yesb) No
10) Do you think that in this busy lifestyle, the information received via advertisements on SNWs regarding the new offers help you keep up-to-date?a) Strongly Agree b) Agree c) Neither Agree Nor Disagree d) Disagree e) Strongly Disagree
11) Have you ever purchased any product after collecting the information from any SNWs?a) Yes b) No
12) If Yes, What category of product have you purchased ?a) FMCGb) Daily use necessity itemsc) Jewelleryd) Insurance Policye) Bank A/Cf) Any other
13) Have you ever switch off from one brand to another after being influenced by the number of “Likes” on a brand? a) Yes b) No
14) Do you think SNWs are a good way of providing feedback to the company regarding its product/service?a) Yes b) No
15) Have you ever felt like your privacy was violated through sharing information with marketers on SNWs?a) Yes b) No
16) Have you ever recommended any specific brand to any of your friends etc on SNWs?a) Yes b) No
FOCUS Research Papers
90 IFIM International Journal of Management FOCUS October 2014 - March 2015|
Convergence of AS 14 Amalgamation to IND AS 103
Business Combination and carve outs from IFRS 3.
Vibha Tripathi*
*Lecturer, Department of Accountancy
ADDRESS FOR CORRESPONDENCE: 6, Siddhivinayak Appartment, Nr. Opera Upashray, Opp. Vikas Gruh Paldi, Ahmedabad -380007.
CONTACT: 91-9825058739, EMAIL: [email protected]
AFFILLIATION: H.L. Institute of Commerce Amrut Mody School of Management Ahmedabad University
OFFICE ADDRESS: H.L. Campus, Prin. S. V. Desai Road, Navrangpura, Ahmedabad- 380009
ABSTRACT:
With the integrated global economies and cross border mergers
and acquisitions, the uniformity of financial reporting by Indian
companies is inevitable for the authenticity of their financial
statements worldwide. The emergence of International Financial
Reporting Standards (IFRS) marks the biggest revolution in
financial reporting, though, not without posing challenges of
convergence. In order to harmonise with the Financial Reporting
worldwide the ICAI (Institute of Chartered Accountants of India)
has issued 35 Ind AS –the converged accounting standards which
are in line with IFRS subject to certain carve outs (differences) due
to tax related issues, as notified by the MCA. The paper focuses on
one of these converged IND AS 103 Business Combination. At
present in India, though the AS 14 lays out specific treatment for
Amalgamation it is not matching the global reporting standards
requirements, so ICAI has converged the present standard AS 14 to
Ind AS 103 Business combination which is in line with IFRS 3. The
transition to Ind AS as and when it happens is likely to have impact
on the accounts of companies involved in such acquisitions and
mergers. With reference to this convergence, the study provides an
insight on the treatment of goodwill and its impairment, bargain
purchase, non controlling interests, reverse acquisitions and
identifiable net assets & liabilities at fair value through various
examples. Also, Ind AS 103 is more stringent about the accounting
method to be used. The study also shows the major difference
between IND AS 103 and As 14 Amalgamation with the help of
different case studies. It also focuses on the carves outs of Ind AS
103 from IFRS 3 and its reasons.
INTRODUCTION
WHAT IS IFRS?
IFRS stands for “International Financial Reporting Standards” and
includes International Accounting Standards (IASs) until they are
replaced by any IFRS and interpretations originated by the
International Financial Reporting Interpretations Committee
(IFRIC) or its predecessor, the former Standing Interpretations
Committee (SIC).
Meaning And The Need Of Convergence To IFRS
Convergence can be described as “to design and maintain national
accounting standards in a way that financial statements prepared in
accordance with national accounting standards draw unreserved
statement of compliance with IFRSs.” The ICAI (Institute of
Chartered Accountant of India) realized that full and immediate
adoption of IFRS would be a challenge in the Indian environment
in view of the conflicting legal and regulatory requirements and the
technical preparedness of the industry and the accounting
professionals. Hence India has chosen Convergence to IFRS over
Adoption to IFRS. This gives the standard setters the scope to
modify accounting standards to better reflect the local economic
environment and this flexibility has been utilised by the standard
setters while formulating the Ind ASs. Currently, differences
between IFRS and Ind ASs can be classified into four categories:
(1) Elimination of options provided under IFRS
(2) Addition of options not available under IFRS
(3) Inclusion of additional guidance in Ind AS not found in
IFRS and
(4) Prescription of accounting rules that are different as
compared to IFRS
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IFRS in INDIA:
The following are the existing facts about IFRS status in INDIA
ü Convergence to IFRS will be done in a phased manner
from April 1, 2011 as decided by MCA. It will be applicable at
different dates for listed and non listed companies, banking and
insurance companies, medium and small sized companies
(according to their net worth).
ü At present there are two sets of Accounting Standards
1. IFRS Converged Indian Accounting Standards – Ind AS
2. Existing Accounting Standards – AS
ü The effective dates for implementation and applicability
of Ind AS may differ from the dates announced in the original
roadmap and is subject to satisfactory resolution of tax issues.
ü The final Ind AS include several 'carve outs' (deviations)
from IFRS as issued by the (IASB).
As on date: Budget 2014
Finance minister Arun Jaitely has, in his Budget 2014-15 speech
said that the converged accounting standards will become
mandatory from FY 2016-17. However, it can be voluntarily adopted
by companies from FY 2015-16. The convergence will improve
financial reporting by Indian companies which is critical for
attracting foreign capital into the country. "While the details are to
be known, the announcement is in line with the ICAI proposal on
the revised convergence roadmap and would fulfil India's
longstanding commitment to the G 20 nations for convergence
wi th Internat iona l F inanc ia l Repor t ing St andard
(IFRS),"(Source:Economic times)
Need of converged IND AS 103 Business Combination
The necessity of a standard on Business Combinations in India
assumes importance considering the fact that Indian companies are
increasingly stretching their business in foreign countries for best-fit
business combinations. With the global mergers and acquisitions
of companies like Tata Motors acquiring the Jaguars and
Landrovers and Tata steel acquiring the Chorus, the uniformity in
accounting standards and the authenticity of the accounting
reports is inevitable. The compatibility of Indian accounting
standards with the IFRS is challenging but necessary for a true and
fair view of the financial statements worldwide. When Vodafone
took over Hutchison Essar there were a number of tax related issues
in India. Inspite of such complex reporting , it triggered the interest
of small and medium sized companies for such acquisitions.. The
present standard does not give specific treatment for complex
business combinations. The following difference between As 14
Amalgamation and Ind AS 103 Business combination justifies the
convergence and the need to match the global reporting standards.
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92 IFIM International Journal of Management FOCUS October 2014 - March 2015|
IND AS 103 Business Combination
1. Objective:
The objective of the Indian Accounting Standard 103 is to improve
the relevance, reliability and comparability of the information that
a reporting entity provides in its financial statements about a
business combination and its effects. To accomplish that, this
Indian Accounting Standard establishes principles and
requirements for how the acquirer:
ü recognises and measures in its financial statements the
identifiable assets acquired, the liabilities assumed and any non-
controlling interest in the acquiree
ü recognises and measures the goodwill acquired in the
business combination or a gain from a bargain purchase
ü determines what information to disclose to enable users
of the financial statements to evaluate the nature and financial
effects of the business combination.
2. Scope:
Ind AS 103 defines business combination which has a wider scope.
It includes both amalgamation and acquisition including common
control transactions
Inclusion of Common Control transactions
• Assume M and N are subsidiary companies that are
owned by the same parent entity O. Does the transaction constitute
a business combination within the scope of IFRS 3 and Ind AS 103?
· Here M and N are under common control of O. Business
combinations involving entities under common control are
excluded from the scope of IFRS 3 but in Ind AS 103, Common
control transactions are included in the scope
Reverse Acquisition
· Reverse acquisition takes place when a private entity
wants to become a public entity but does not want to register its
equity shares. In such case, private entity approaches a public entity,
i.e. the one which is listed, to acquire its (private entity's) equity
interests in exchange for the equity interests of the public entity.
· In a reverse acquisition, the entity issuing equity interests
is legally the acquirer, but for accounting purposes is considered the
acquiree. Accounting for business combination is done from the
perspective of accounting acquirer and not legal acquirer.
· Accounting for reverse acquisition are bit complex but
Ind AS 103 deals with reverse acquisitions unlike AS 14 which is
s i l e n t o n t r e a t m e n t o f r e v e r s e a c q u i s i t i o n s
Exclusions
However, IND AS 103 excludes:
1. Formation of a joint venture
2. Acquisition of an asset or group of assets not constituting
a business combination of entities
3. Business combinationA business combination is a
transaction or other event in which an acquirer obtains control of
one or more businesses
Identifying a Business Combination
If the assets acquired are not a business, the reporting entity shall
account for the transaction or other event as an asset acquisition.
For example, acquisition of a “shell” or “shelf” company is not a
business combination because no business is being acquired.
4. Business:
The Standard defines the business as an integrated set of activities
and assets from which economic benefits are gained by the investor
or other owners. It also explains that, for determining whether a
group of assets and liabilities is a business, one must examine the
three ingredients, viz. Inputs, Process and Outputs. In other words
a business consists of inputs and processes applied to those inputs
that have the ability to create outputs.
5. Acquirer
An acquirer is the entity that obtains control of the entity – the
acquiree.
6. Control
93IFIM International Journal of Management FOCUS October 2014 - March 2015|
In the above definition control means the power to govern the
financial and operating policies of an entity so as to obtain benefits
from its activities
7. Acquiree
The business or businesses that the acquirer obtains control of in a
business combination
8. Method of Accounting
Under Ind AS 103 only acquisition method is used for business
combination. The Standard eliminates the now- optional pooling-
of-interests method and mandates the Purchase Method in
accounting for a Business Combination.
Purchase method requires the Acquiring Company to fair value all
the identified Assets and Liabilities and also recognise additional
liabilities if any, at fair values on balance sheet. It requires allocating
the Purchase Price to all the items on the balance sheet and also off
the balance sheet i.e. contingent liabilities. Under this method, the
10Acquirer has to recognise various components of business
combination like non-controlling interest, consideration and the
goodwill or bargain purchase on the date of acquisition.
9. Fair value
The International Accounting Standards Board (IASB) defines fair
value as "... an amount at which an asset could be exchanged
between knowledgeable and willing parties in an arms length
transaction".
Steps in acquisition method
10 Step 1: Identifying the acquirer:
For each business combination, one of the combining entities shall
be identified as the acquirer. The entity that issues equity shares in
exchange for the net assets of other entity is usually identified as
acquirer
Step 2: Determining the acquisition date
Measurement of assets, liabilities, intangible assets, non-controlling
interest, recognition of goodwill etc in case of business
combination is acquisition-date sensitive. Hence it is very critical to
determine acquisition date.
Acquisition date is the date on which the acquirer obtains effective
control of the acquiree. Usually, the date on which the acquirer
legally transfers the consideration, acquires the assets, and assumes
the liabilities of the acquiree - the “closing date”. (See CASE
STUDY 2)
Step 3 : Identifying and measuring consideration (See CASE
STUDY 1)
• Consideration is the sum of the acquisition-date fair
values of:
t h e a s s e t s t r a n s f e r r e d
– the liabilities incurred by the acquirer
– the equity interests issued
• Acquisition- related costs
Consideration should be measured at fair value.
Acquisition-related costs are costs the acquirer incurs to effect a
business combination. They are as under:
ü Finder's fees
ü Advisory, legal, accounting, valuation and other
professional or consulting fees
ü General administrative costs, including the costs of
maintaining an internal acquisitions department
ü Costs of registering and issuing debt and equity
securities.
The acquirer shall account for acquisition-related costs as expenses
in the periods in which the costs are incurred and the services are
received, with one exception. The costs to issue debt or equity
securities shall be recognised in accordance with Ind AS 32 and Ind
AS 39.
CASE STUDY 1
Accounting treatment of consideration at fair value, contingent
consideration and acquisition related costs
Entity Manuplastics Ltd. acquired controlling interest in Entity
Autoplastics Ltd and issued 2,00,000 shares to its owners as a
consideration for the acquisition. The fair value of the shares issued
by Manuplastics Ltd was as follows:
ü Rs. 8,00,000 as at the date of the acquisition agreement
ü Rs. 9,50,000 as at the date of the acquisition as identified
by the agreement Manuplastics Ltd incurred the following expenses
in relation with the acquisition:
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94 IFIM International Journal of Management FOCUS October 2014 - March 2015|
o Legal and consulting fees of Rs. 60,000
o General administrative costs of Rs. 40,000
o Costs related to issuance of equity Rs. 50,000
ü Entity Manuplastics Ltd also agrees with Entity
Autoplastics Ltd that if it meets certain performance based targets
within next two years, an additional consideration (in cash) of Rs.
1,60,000 will be paid to it.
ü Entity Manuplastics determines the fair value of this
additional consideration as Rs. 1,00,000. Computation of the
a m o u n t o f c o n s i d e r a t i o n p a i d i n t h e a b o v e
transactionParticularsAmt (in Rs.)Fair value of equity issued as at
the date of Acquisition9,50,000Fair value of the contingent
consideration1,00,000Total consideration paid10,50,000
Treatment of acquisition related costs
Other expensesAccounting treatmentLegal and consulting fees
Rs.60,000To be charged to expenses as incurredGeneral costs of
Rs. 40,000To be charged to expenses as incurredCosts related to
issuance of equity Rs. 50,000To be recognized in accordance with
Ind AS 32 and 39.Exceptions:
“The acquirer shall, at the acquisition date, allocate the cost of a
business combination by recognising the acquiree's identifiable
assets, liabilities and contingent liabilities that satisfy the
recognition criteria, at their fair values at that date, except for
noncurrent assets (or disposal groups) that are classified as held
for sale in accordance with IND AS 105, Non-current Assets Held
for Sale and Discontinued Operations, which shall be recognised
at fair value less costs to sell.”
Step 4: Recognising and measuring goodwill (Case Study 2-Table
2)
Goodwill: An asset representing the future economic benefits
arising from the other assets acquired in a business combination
that are not individually identified and separately recognised.
CASE STUDY 2
Acquisition in two stages (step acquisition) and resulting in
goodwill
X Ltd acquires Y Ltd in the following two stages:
· On 1st Feb 2009 it purchased 20% of the equity shares
of Y Ltd for Rs. 20 crores
· On 1st Dec 2013 X Ltd purchased 50% of shares for Rs.
200 crores As on the acquisition date :
The carrying amount of net assets is 280 crores and the fair value
of identifiable net assets is Rs. 300 crores. The fair value of the
original investment of 20% equity shares is Rs.80 crores and the
fair value of remaining 30% non-controlling interest is Rs. 120
crores.
Table 1: Acquisition break up
Important conclusions and findings of Table 2
ü The acquisition date is in the year 2013 and not in 2009
ü Goodwill is identified and measured in a different way
under Ind AS 103 compared to AS 14. Under Ind AS 103, the
goodwill of Rs. 100 crores as per first option and Rs.70 crores as
per 2nd option is not amortised but tested for impairment on
annual basis in accordance with Ind AS 36
ü If less than 100% of the equity interests of another
entity are acquired in a business combination, non- controlling
interest is recognised. (In the above example it is 30%)
95IFIM International Journal of Management FOCUS October 2014 - March 2015|
ü Also there is a choice in each business combination to
measure non-controlling interest The following figure shows
the effect of using two different options for measuring NCI.
Option 1 : NCI measured at fair value
Goodwill
Total charge for goodwill impairment
Option 2: NCI measured at
proportionate share of net identifiable assets
Goodwill
Total charge for goodwill impairment
ü It is clear from the above figure that if NCIs measured at
fair value, goodwill and its impairment will be valued
higher and if NCI is measured by proportionate share
method it shows a downward trend
ü The general measurement principle in the acquisition
accounting is fair value
ü Also, previously held interests are measured at fair
value
Bargain purchase (paragraph 36 of IND AS 103)
Bargain purchase occurs if the fair value of the identifiable net
assets of the acquiree exceeds the aggregate
ü of the consideration transferred
ü the non-controlling interests and
ü the fair value of any previously held equity interest.
Gain on bargain purchase or simply bargain purchase may
arise because of:
· Forced sale
· Recognition or measurement exceptions for particular
items discussed under IFRS 3
· Error in the valuation of identifiable assets, non-
controlling interest and/or equity interest.
Conditions to be fulfilled
In case if bargain purchase arises, then before this gain is
recognized the acquirer must review the calculations
to make sure that everything is arithmetically correct and no
mistakes are made in measurement of differentelements as
bargain purchase does not arise normally and IND AS 103
requires that the reassessment is done to make sure that no
mistakes are made.
The following explanation with case study will clear the treatment
of bargain purchase
CASE STUDY 3
(Based on acquisition at one go and resulting in bargain purchase)
· A pays Rs. 3000 crs to purchase 80% of the shares of B.
· Fair value of 100% of B's identifiable net assets is Rs.
4000 crs.
· Fair value of the non-controlling interest is Rs.1000 crs
Table 3: Treatment of Bargain Purchase
Major carve out of Ind AS 103
Business Combinations from IFRS 3
Carve out: Treatment of bargain purchase
As per Ind As 103 Gain on bargain purchase of Rs.200 crores in
option 2 is recognised in Other comprehensive income (OCI)
and accumulated in equity as capital reserve
ü As per IFRS 3 it is recognized in the profit and loss at
the acquisition date in the books of acquirer.
It is pertinent to note that Ministry of Corporate Affairs has
carved out the treatment of bargain purchase, while converging
Indian Standards towards IFRS 3. It will create a GAAP
difference in which Converged Indian AS 103 will recognise the
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96 IFIM International Journal of Management FOCUS October 2014 - March 2015|
bargain purchase in other comprehensive income (OCI) and
accumulated in equity as capital reserve if there is a clear evidence
of the underlying reason for classification of the business
combination as a bargain purchase; otherwise, the resulting gain
is recognised directly in equity as capital reserve.
Reasons for such treatment of bargain purchase in IND AS 103
IND AS 103 recognises it in OCI or as capital reserve because
recognition of such gains in profit or loss would result into
recognition of unrealised gains as the value of net assets is
determined on the basis of fair value of net assets acquired.
ü H i g h l i g h t s o f I N DA S 10 3 B U S I N E S S
COMBINATION
The following apparent conclusions can be made from the above
converged standard Ind AS 103:
ü Ind As 103 requires expensing of acquisition-related
costs whereas the existing practice in India is to capitalize such
expenses as cost of investment.
ü Performance-related consideration paid to the
acquiree, known as contingent consideration, is accounted at fair
value under Ind AS 103, with subsequent changes included in the
profit and loss (P&L) account.
ü Ind AS 103 will require disclosure of information to
assist the users of the financial statements with the understanding
of the nature and financial effect of a business combination
ü Even though IND AS 101 provides exemptions
regarding retrospective application of IND AS 103 for the first
time adopter, the standard will pose many challenges for the
Chartered Accountants.
ü Also IND AS 103 is associated to the measurement of
many other standards like Ind AS 37, 39, 19 individually so, the
understanding and applicability in India will require lots of
deliberation which need to be weighed in view of facts and
circumstances.
17
ü It adopts a “business fair value” measurement approach
a s o p p o s e d t o t h e t r a d i t i o n a l “ c o s t - b a s e d ”
profits under the converged standard.The concept of fair value is
debatable and its implementation will question the financial
statements results.
Lastly, Indian companies are listed on overseas stock exchanges
and have to recast their accounts to be compliant with GAAP
requirements of those countries. Foreign companies having
subsidiaries in India, are having to recast their accounts to meet
Indian & overseas reporting requirements which are different.
Also, Foreign Investors will be attracted to economies where IFRS
compliant financial statements are the norms. So the robust
change of converged IND AS which are in line with IFRS is
probably the most complicated issue for the current Indian
accounting scenario but necessary for the authentic financial
reporting worldwide.
References:
1. IFRS Convergence in India: Some Progress on Implementation. (2011, March 5).Economic Times, Opinion. Retrieved from
http://economictimes.Indiatimes.com/opinion/policy/ifrs-convergence-in-
India-some-progress-on-implementation/articleshow/7631924.cms
2. Bhattacharyya, A. (2010, February 8). IFRS: transition date will be April 1, 2011. Retrieved from http://www.business-standard.com/India/news/ifrs-transition
date-will-be-april-1-2011/384940/
3. http://www.mca.gov.in/Ministry/press/press/press_release_04May2010_06may2010.pdf
4. Bhattacharyya, A. (2011, July 11). India moves towards IFRS convergence. Retrieved from www.business-standard.com › Home › Economy & Policy
5. Concept paper on convergence. Retrieved from www.icai.org/resource_file/12436announ1186.pdf
6. Ind AS-103. http://www.icai.org/post.html?post_id=7543. Retrieved from http://220.227.161.86/23704IndAS-16.pdf
7 Mergers and Acquisitions. Retrieved from http://macabacus.com/accounting/noncontrolling-
interesthttp://www.livemint.com/Opinion/CegExu9wCgfqYmpH4dArFO/How-IFRS-will-impact-financial-
8. statements.h
97IFIM International Journal of Management FOCUS October 2014 - March 2015|
Shoe Polish Dr. Pankaj Jain* Prof. (Dr.) V. S. Dahima**
*Assistant Professor, Amity Business School, Amity University Rajasthan **Director – Amity Business School, Amity University Rajasthan
Mr. Saura Panigrahi, a post graduate in mass communication,
has been working as Creative Director of a New Delhi based ad
agency – Cocoon Ideas. He is contemplating about the ad
campaign for wax polish account of Shoe Care Ltd who primarily
operates in Northern India. Its shoe polish brand “Easy Care” is
giving a tough time to him as the advertising campaigns had
bring no significant changes in the sales in last five years. For
past five years he has been observing the almost stagnant sales of
Easy Care. He knows that a new entrant would find it difficult to
create brand preference. A company wanting to launch a new
brand must do a good marketing exercise for at least three years to
create brand preference. Now he has been entrusted for more
than five years but could not deliver the results. He is worried
about the flattened sales curve of the brand which may result in
the loss of the account of Shoe Care Ltd. He knows that
consumers have positive attitude towards wearing polished shoes
but their attitude towards polishing shoes was a big concern. He
strongly believes that sales can be increased by improving the
attitude towards polishing shoes. But how is he to achieve that?
The shoe polish industry in India is a small industry worth
around Rs. 110 Crore. It is largely concentrated in Urban India
contributing around 70% of total sales. Though wax polish
constitutes the major share (around 70%) but it is on decline as
liquid polish picking up sales because of the benefit of
convenience it offers to customers. The stagnation in shoe polish
industry was a global phenomenon. In India, although the
category is slow moving, its insensitivity to price allows
manufactures to tide along profitably. While a small five paisa
increase in the bread price impacted every user immediately, any
hike in the price of shoe polish goes unnoticed. The
manufactures know very well that they are operating in an
inelastic price zone and that they can increase the price at will.
That's how they have survived so far.
Leather shoe and shoe polish are complementary products. As
leather shoe industry is facing tough competition from other
Industry Background
kind of shoes in the market. Fifteen years ago, leather shoes were
important parts of a person's attire. But today, there are a lot
more variety available. Apart from the formals, customers have
evening suedes, nubuck, trekking shoes, sports shoes etc. Indian
domestic footwear market is worth around Rs. 15,000 crore and
has witnessed a growth of 8.8% over the last couple of years.
Men's footwear constitutes almost 50% of the total market,
whereas women's shoes accounts for around 40% and kids
footwear for the remaining. Shoes wearing habits were largely
confined to metros and towns in Northern India. In the rural
areas of the north, shoes were worn generally in the winter. The
domestic market is substantially price driven (See Exhibit1 and
Exhibit 2), with branded footwear constituting less than 42
percent of the total market size. While the average spend on the
footwear by urban consumers is Rs 240/annum, consumers in
rural areas spend just about Rs 100/annum. Despite all this shoe
polish remained a relevant product, since those who wore leather
shoes did need to polish them.
Panigrahi knew that shoe polish is not very frequently
purchased product and consumer involvement is very low for
this category. To gain further consumer insights Panigrahi
decided to do some research. He went to his friend, Mr. Somnath
Vyas who specialize in consumer research, for help. Vyas agreed
to help him out and together they planned to conduct a quick
focus group interview. They called up seven participants - two
summer training interns pursuing MBA – Deepak Kumar and
Vivek Singh; a male sales executive in late 20s – Paresh Mishra; a
branch manager of a bank - Nitin Bansal; An entrepreneur in
Shoe Manufacturing – Dev Shetty; a university professor –
Bhawna Sharma; and a house wife - Samreen Abidi.
During the focus group interview, Deepak Kumar commented
on enquiring about the usage of shoe polish, “my tin of wax
generally lasts around six months to one year as I polish my shoes
3 to 4 times a month.” Don't you need to polish your shoe every
day?” inquired Vyas. “I do use duster everyday” He replied
Consumer Research
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98 IFIM International Journal of Management FOCUS October 2014 - March 2015|
promptly. Paresh Mishra responded to this “I used to polish my
shoes every night. Then in the morning I'd take a bus up to the
railway station, take a train, have four dozen people stepping on
my shoes and by the time I reached my client's office, my shoes
looked like rubbish. So I just gave up polishing.” Dev supported
this by saying, “Moreover polishing shoe is drudgery. You sit on
the floor, and then you get a rag, the brush, the tin… A man who
drives a fancy car, lives in a well appointed house and wears
designer labels will not want to sit on the floor and polish his
shoes.” He further added, “People did not even want to bend
down to tie their laces so we had to made pump shoes,”
Panigrahi agreed to this, because that was just why Shoe Care
Ltd. and other manufactures of shoe polishes had come up with
the instant shine and liquid wax polish. Observing the
discussion, Panigrahi thought the real challenge before him was
to make the market grow by making people polish their shoes
more often. If the frequency of shoe polishing could be increased
from once in 12 days to once in seven days, Shoe Care Ltd. could
achieve an 80% jump in sales. One way of doing this was to
mount social pressure on existing consumer and use an
appropriate communication strategy to convert the users of
competitive products. He further focused on the discussion.
“I think polishing shoes daily is necessary, both for
care and as part of overall grooming. Ask a person how he would
judge someone on grooming and many would say “by his shoes”.
That's because if a person puts in that kind of effort on his shoes,
it shows that he cares to that level of detail” said Bhawna – a
university professor. “Then why many people do not polish their
shoes? That's something I just can't understand!” inquired Vyas.
“One reason could be that shoes figure last in the dressing
routine. Shoes are worn at the end of your body which is least
visible or which you have traditionally least cared for. Therefore,
it tends to be the most neglected,” Bhawna reasoned. At this
point, Samreen who was sitting quietly intervened, “but polished
shoes do evoke certain desirable responses. You would all agree
that polishing shoes is a good habit. When I see my son polishing
his shoes, I feel reassured that he is forming good habits. I would
say that it is the ultimate indicator of good habits – discipline.”
Bhawna supported, “yes…research had proved that a person who
polishes his shoes felt happy, confident, encouraged and
cheerful. On the other hand, a person who didn't polish his
shoes felt defensive, guilty and withered.”
“But the response of the wax polish market is totally paradoxical
to the research findings. Though research shows positive attitude
towards polishing shoes yet the use of show polish is far from
being a daily routine. However, if a person has a forewarning that
he will come under scrutiny, like during an interview for a job, or
at a meeting with an international boss, he will certainly polish
his shoes,” said Vivek.
“Yeah…. I remembered those school days where the discipline at
the morning assembly was enough to force me into a habit of
polishing shoes. But after that college began and, all those
pressures were gone. Then one day I was 23 and looking for a job.
Life returned with demands on me to polish my shoes. I was
attending interviews and meeting with people. The mere act of
polishing used to remind me of the drudgery of schools days.
Today my job requires intensive travelling so I use liquid polish or
shoe shiner for quick shine, whenever I have meetings with my
client. I really like the idea of “handy shine” through a sponge
with impregnated silica gel. I need to just dust my shoes and
apply the sponge”, Paresh said.
“But silica gel evaporated very fast and the shine disappeared
with an hour or two. Therefore, the shoe had to be sponged four
to five times a day. That is hardly convenient and so this “handy
shine” failed to click in the market. Moreover other products that
offer convenience are not good for shoes like low wax content of
liquid polishes does not nourish the lather and the topping the
shine with lacquer is damaging for the shoe. Like anybody who
invests couple of thousands rupees on shoes, I also want more
than just handy shine. I am really concerned with shoe care and
when it comes to shoe care there is no getting away from the wax
polish and rag routine.” said Nitin.
Well….we would all agree that when it comes to delivering total
shoe care, there is no replacing the dibbi or the tin of polish.
Everything else is only an attempt to give people handles along
one or two of the attributes while sacrificing the others. And
while the liquid polish had found some acceptance and even
usage, the dibbi or tin is still preferable for those looking for total
shoe care. And despite the fact that polishing shoes is considered
good habit and wearing polished shoes generates positive feeling,
it is an irony that people buy a shoe polish tin once in six months
or a year. Sometime they don't even know when the polish has
finished.
The whole discussion revolved around these issues for some
time.
FOCUS Case Study
99IFIM International Journal of Management FOCUS October 2014 - March 2015|
Discussion on Message Strategy
After the focus group discussion, Panigrahi and Vyas
decided to discuss the message strategy. Panigrahi told Vyas that
for last five years he has tried on the opportunities that a well
polished shoe offers. But it seems just not enough to convert
consumer habits. He also told him that this time he is thinking
trying the guilt route like showing a man caught unawares on a
public place or social gathering with unpolished shoes….. “That
moment of discovery, when a man finds his shoes are unpolished,
would be the highlight of that ad” exclaimed Panigrahi.
“You need to look at the urban and rural markets differently.
While the liquid polish is more an urban product, it is in small tin
that is relevant to the rural market. That is exactly how the
shampoo sachets cracked open the market, got people to use the
product and served as a bridging pack to get people into the
mainstream purchasing habit”, said Vyas.
“I am not sure if the strategy would work. I think instead of being
able to pioneer a change in the consumer attitudes, the shoe care
industry had become a victim of people's habits. Consumers
spend their lives falling between stools getting their shoes
polished at the railway station, or outside the office by a shoe
shine boy. And sometimes they simply run a cloth over their shoes.
The industry has not been able to pull people back to a
regimented shoe care habit by giving them strong enough
propositions. That's despite the fact that they had so many
emotions to play on competence, guilt, encouragement, good
grooming…even some advertisements have tried the usually
successful sex appeal”, said Panigrahi. He further added,
“Moreover since the category is inherently slow moving, any new
communication strategy had to run consistently for a long period
of time for it to pay off. And I am afraid of losing the Shoe Care
Ltd. account if I did not produce results by the end of three, or
maximum six months.” If sales do not go up within this time
period, I will surely lose this account,”
“Your ad campaign need not trigger off an immediate purchase.
For this product, purchase is on the basis of need. No one even
gets excited for trial or discount deals. Trials are painfully slow in
this category. Trials in a Coke or a Kit Kat can enable a market
penetration of 60% within two months. But in shoe polish, to
penetrate 60% of the market you would take much longer
period”, commented Vyas.
By this time, Panigrahi were clear on two major challenges faced
by the shoe polish market. Firstly, there was a general lack of
interest in polishing among consumers. Secondly, convenience
polishes did not offer total shoe care. He was sure that
consumption had to be increased by improving the attitude to
polishing. But how is he going to achieve that?
Exhibit 2
Exhibit 1
100 IFIM International Journal of Management FOCUS October 2014 - March 2015|
Mr. Ramachandran R.V
In FOCUS Interview
Profile Study of Mr. Ramachandran R.VHead–Marketing, Communications & Customer Care, Tyco India
A selfmade marketing
professional
Interviewer
Dr. Hari Krishna Maram
101IFIM International Journal of Management FOCUS October 2014 - March 2015|
What is your experience with Tyco India as Head Marketing, Communications and Customer Care?
It has been a great learning journey for me in Tyco. My present assignment gives me a
360 degree preview of marketing and has immensely helped me moving towards
becoming a complete marketing professional. The experience& exposure I have gained
here helps me understand the industrial and commercial B2B industry space and
industrial marketing in depth like customer decision making, Tender processes, key
players in decision making and how to ensure your brand reaches the key personnel /
target group. Security is a very sensitive subject and one needs to be very thoughtful
when you place details in advertisements or marketing materials. One important thing
I learnt over the years in my marketing career is to be very strong in fundamentals and
ensure you personally check the details. The marketing essentials always remain the
same, but the tone, tenor and pace differs from industry to industry.
In FOCUS Interview
How your past marketing experience in other organisations helped you to understand the need of your current role, and bring in the results quickly?
I have been fortunate to work across industry segments. Starting my career in pharma
industry way back in 1997 with Novartis and later moved to a startup marketing Food
Grade Plastic containers – Rubbermaid, even before food grade plastics were
fashionable or norm, before progressing to Godrej with Real Good Chicken brand. All
of my initial organisations helped me enormously as I learnt the market both urban and
rural, understood about consumer behavior across industries and helped me as I
moved ahead in my career. Pharma industry exposed me to various selling techniques
both direct & indirect. It gave me insights in to a salesman's mind when he meets his
customer. I also learnt the role of distribution channel (both urban and rural) in
marketing. To succeed in FMCG marketing you will have to be quick and think on your
feet. You need to be on your toes to exploit every opportunity to showcase your
product/brandto the consumer. It taught me the importance of placement and
positioning both in ATL and BTL segments, especially shop floor. I was able to
enhance my knowledge of shopper preferences and choices. As a marketer of food
products I learnt about the tastes and preferences of the Indian consumer and how
customers make their choices. My assignment with Sony was all about the brand and
how technology plays a very important role in getting a market premium especially in a
fiercely competitive consumer durable industry. I had a great team to work with and
wonderful leaders who not only guided us but opened us to newer aspects of enhancing
our work efficiency. I was guided in my present assignment more from my earlier
relationships be it marketing collaterals, PR, setting up customer care etc. Being
Industry connected helped me bring quick results in getting market coverage, helping
set up quick events and facilitating projection as “Thought leaders” by bring
102 IFIM International Journal of Management FOCUS October 2014 - March 2015|
technology and global profile to the Indian market space. Getting to the consumer be it
any industry is very important and maintaining the customer connect is a very
important aspect of how I enhance efficiency of our works.
What were the challenges and opportunities in a new industry as you changed organisations?
When you change organisations, the fundamental challenge is to understand the
organisation's philosophy, vision and markets they operate. Then comes the product
and market dynamics i.e.
1) In depth understanding of the products & brands belonging to new
organisation
2) Customer perceptions about the brand and its products
3) Key stakeholders in the decision making process
4) Building a top-notch team of business partners who would provide support in
all marketing activities
The key opportunitiesI have had are
1) Setting up customer tough points to enhancing Customer experiences
2) Bringing in International standards in marketing project execution
3) Bringing down costs and enhancing efficiency
4) helping expanding the geographical presence
5) helping build a great team of partners who are willing to go an extra mile to
ensure your team is successful under any conditions
What is the role of your family in your career growth?
Family support and guidance plays a very important role in your career growth. In my
formative years I had the opportunity to interact with world class leaders thanks to my
family's pharma background. I was fortunate to interact with people who were always
ready to guide and help me become a better individual, wanted me to set higher goals
and work towards it. Without family support and guidance from my father I would not
have made it this far. I started my career in pharma thanks to my father's guidance and
later moved up the ladder thanks to his constructive criticism and inputs on how I can
do better. When I started my career, he had asked me to look at a few leaders and be
inspired by their growth story and how they have made it big in corporate world. I
learnt a lot from my Father, the most important being hard work and honesty that goes
a long way in establishing you as an Individual and builds your brand.
103IFIM International Journal of Management FOCUS October 2014 - March 2015|
How different is to operate in India in comparison with rest of the world?
In my view, marketing or sales in India and rest of the world is no different. The
audience is different but the strategy remains the same. The end goal is making the
name on the top of the mind of the customers. Having said that there are a few priority
items when one looks at the Indian market. India as a market truly defines “Unity in
Diversity”. India is a land of ample opportunities and you have to be careful to choose
what you want and work towards that with confidence. You can be easily distracted by
the enormous opportunities you have in this country and spread thin and be a part of
each or be a leader in your chosen industry and make a mark. The market is a varied mix
of different cultures, tastes, preferences and aspirations. One needs to be extremely
sensitive to the local influences when we design a marketing campaign for Indian
markets. You need to be sure you cater to the local tastes and are able to ensure you
communication reaches them in the manner required to ensure your objective is met.
Each market has to be treated individually within your overall brand ambit and care to
be taken to ensure communication is customised accordingly. Technology is
developing fast and you can reach out to customers across any spectrum in quick time.
We are learning from our global counter parts all the time on enhancing efficiency,
bringing in global quality and adopting to latest processes.
How you are able to continuously monitor and assess the ever changing customers' needs and satisfy them to achieve sustainable growth?
Customer's needs changes with changing times and the situation they are in. Proactive
customer engagement and interactions help us getting key insights into their
requirements and aspirations. Customer feedbacks, channel feedbacks and sales teams'
inputs have to be viewed seriously and understood within the given framework and
responded to at the earliest possible avenue. By being in constant touch with your Sales
staff and channel partners, By keeping your eyes and ears open to the competition and
being present in forums/events relevant to the Industryyou can monitor the market
and customer needs continuously. With changing technology, you have a plethora of
ways to stay in touch with the customer without being intrusive.
What are your major accomplishments in your corporate career?
With hands on experience in various industries, I am sure; I am able to make a mark in
all the responsibilities I have taken in my career. Be it Pharma, FMCG, Lifestyle
Electronics and now B2B marketing, I have given my best and able to meet the
organisational objectives. I had the wonderful opportunity to build teams, develop
marketing organisations and build careers for my team members. Some highlights
104 IFIM International Journal of Management FOCUS October 2014 - March 2015|
include being part of the brand team awarded the outstanding brand award in Godrej,
led the team to Outstanding Team award in Sony and being awarded the “Outstanding
Support & Development award” for two consecutive years for my contribution to
marketing, brand building and sales support in Tyco. The best accomplishment is to
see your team members grow up and lead other teams in their chosen organisations.
What is your view on CSR activities?
It is a very important part of the corporate life. You have an organised way of giving back
to the society in which you are living and helping in community development. In India
still the same is not very prevalent in an organised way, but the new initiative of the
government of India will help it in a big way.
What is your advise to MBA students?
To succeed in marketing today you will have to learn to adapt to changes quickly.
Change is happening around you every day. Your ability to drive the change and deliver
better customer experiences will take you a long way up the corporate ladder. Also be a
good collaborator, expand your skill sets continuously,and look for innovative
solutions. Always be a good student, learn from your surroundings and bring the
learning on board with your knowledge and objective, it will guide you in your way
ahead.
MBA is a challenge. On completion of your MBA, you will become the face of your
organisation in the market place. Selling and marketing gives you more satisfaction as
you will be dealing with a brand or service. Your success is the success of the brand in
the market place.
What is your advise to B-Schools?
The great books in the library help us develop a good foundation, but by developing a
curriculum that is contemporary, relevant to todays and foreseeable future industry's
needs will help students develop their knowledge accordingly It is important to
enhance industry interaction and update students on their expectation from Industry
and vice versa. Inculcate more of case studies rather than regular studies. Case Studies
will make students understand the market dynamics and they will understand the
competitive ness in the market place.
InterviewerDr. Hari Krishna Maram, Director- PR, IFIM Business School, #8P & 9p, KIADB Industrial Area, Electronics City 1st Phase, Bangalore-560100, Karnataka, India. Email: [email protected], Phone:- 080-41432871, Mob: 9845382308
105IFIM International Journal of Management FOCUS October 2014 - March 2015|
JUGAAD INNOVATION
Navi Radjou, Jaideep Prabhu, Simone Ahuja
“Jugaad”….the word is often used by Indian in many situations. Some time it is used and appreciated as a positive solution in
troublesome situation where as it is also used to refer improper way for getting things done such as bribing and yes….there also exists a
vehicle with the name Jugaad where an engine is fixed on to a cart to create an affordable motorized transport.
However, in this book written by Navi Radjou, Jaideep Prabhu & Simone Ahuja, the word Jugaad is used all in positive way. Authors
define the word Jugaad as "gutsy art of improvising an ingenious solution." The three co-authors, Navi Radjou, Jaideep Prabhu and
Simone Ahuja have diverse backgrounds in innovation, leadership and strategy consulting and two teach business at University of
Cambridge. Unlike most other books on Innovation, which more or less revolves around business process re-engineering, this book
for sure has a different perspective for Innovation.
In FOCUS Book Review
Publisher: Random House India, 2012
ISBN-13: 9788184002058
Think Frugal, Be Flexible, Generate Breakthrough Growth
106 IFIM International Journal of Management FOCUS October 2014 - March 2015|
The book challenges the status quo of traditional way of systematic innovation as practiced
in organizations. The authors argue the need of the time is a frugal and flexible approach to
innovation rather spending mindlessly on R&D to succeed in hypercompetitive market
places. They criticize the tradition innovation process labeling it as “industrialized”,
“standardized”, “homogenized”, “expensive”, “insular”, “resource-consuming” and “elitist”.
They claim that Jugaad Innovation is the most fitting reply to the five realisms i.e. scarcity,
diversity, inter-connectivity, velocity, and breakneck globalization which business leader
across the world are facing today.
They strongly advocate in favor of Jugaad Innovation citing multiple case studies from India,
China, Brazil, Kenya and a whole lot of other places, focusing on six principle of Jugaad
Innovation. These are
i. Seek opportunity in adversity
ii. Do more with less
iii. Think and act flexibly
iv. Keep it simple
v. Include the margin
vi. Follow your heart
To show the applicability of these principles the book has featured many cases from SMEs to
fortune 500 companies. There are examples from Renault – Nissan, Facebook, Siemens,
Google, Philips, 3M, Apple, Yes Bank, Nokia, P&G and Tata Nano among many others as
practitioners of Jugaad Innovation.
The book is forwarded by Kevin Roberts, CEO of Saatchi & Saatchi. First chapter is devoted
to the need and glorifying Jugaad Innovation. Thereafter each of the six principles of
Innovation has been demystified in six different chapters. Each chapter opens up with a real
world example of the principle in operation with descriptions of elements of the principle.
Further authors have also prescribed Do's and Don'ts of Jugaad Innovation emphasizing
that it can't be done in a systematic top down fashion. Multiple solutions are proposed on
how to implement the Jugaad principle and a successful Western implementation is featured
with a conclusion.
As nothing is perfect, this book also has certain limitations. First, Some opinions and
assumptions are presented as facts such as “people in general are worse off than they were in
the prior decades”. In this way, there are other claims with which avid readers may not agree.
Second, as this book has been contributed by many authors, the writing style is different in
different chapters. Some chapters have been written in 3rd person and others in 2nd person.
Third, many readers would find that inferences from certain cases are either “not-
convincing” or “not-apt”. Fourth, if while reading this review, you find the word “Jugaad”
being overused, for sure, while reading book, this word would irritate you. Fifth and the last,
if you consider a new book as innovation, composing and marketing of this book for sure
doesn't represent “Jugaad Innovation” rather traditional way of innovation.
Despite all these limitations, this book offers a different perspective for innovation and
worth reading once by those who are responsible for managing and fostering innovation.
Dr. Pankaj Jain
Assistant Professor – Amity Business School
Amity University RajasthanJU
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AD
IN
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Thin
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ugal
, Be
Flex
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, Gen
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Gro
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107IFIM International Journal of Management FOCUS October 2014 - March 2015|
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109IFIM International Journal of Management FOCUS October 2014 - March 2015|
IFIM Business School, Bangalore was founded in 1995 with its first batch of students graduating in 1997. It is an
AICTE approved institution which today finds its place among the Top 20 from amongst the 500+ Business Schools
that were started post 1990 in the private sector. Today students from across the country have come to IFIM to go on to
graduate as one of the fine managers at corporate India.
IFIM Business School offers 4 distinct PGDM programs:
1. Two year full time Post Graduate Diploma in Management (PGDM) program
2. Two year full time Post Graduate Diploma in Management- Finance program
3. Two year full time Post Graduate Diploma in Management- International Business program
4. Two year full time Post Graduate Diploma in Management (PGDM) program for working professionals
IFIM Business School has acquired a unique ‘institutional equity’ with all its incumbent attributes: excellent
Curriculum and Faculty inputs, Infrastructure, Industry Internship Program, Academia-Industry interface and
Placements. IFIM Business School is persistent in its endeavour to be the best and therefore has taken many bold and
progressive initiatives to include collaboration with leading academic, research and corporate bodies for conducting
Continuing Education programs, Research, Corporate Training, Consultancy and offering a Ph. D program in
Management.
IFIM Business School has achieved a unique distinction. It has probably become the first management institute in the
country to make sports and wellness a compulsory activity for its students. A certified fitness trainer monitors the
progress of the students. This is supported with a Centre for personality development which works in the holistic
development of the students. Overall, IFIM provides a three pronged platform for its students to excel. The two year full
time Post Graduate Diploma in Management (PGDM) program for working professionals being offered by IFIM is a
unique program. This allows the working professional to continue with their respective jobs whilst they study for a full
time PGDM degree at IFIM Business School. The program is designed to accommodate the job environment of the
professional. The program is designed in a manner in which the working professional can aim to move up the echelons
of management.
The Centre for Developmental Education, under the aegis of which IFIM Business School operates, has a new member-
IFIM College. IFIM College was started in year 2010 and is successfully imparting graduate programs in the areas of
Commerce, Management and Computer Applications. These programs are approved by the Bangalore University.
IFIM Campus is located in the IT hub of Bangalore- Electronics City. With an environment-friendly campus situated
among the top blue chip companies, IFIM has made a steady progress. The placement record of the college has been
very impressive and the students have carved a niche for themselves in the corporate world. The B-School has a strong
alumni network and the illustrious alumni look up to their alma mater for the sound management foundation they
have received.
IFIM Business SchoolAn ISO accredited Institution
#8P & 9P, KIADB Industrial Area, Electronics City 1st Phase, Bangalore-560 100Tel: 91-80-41432888 41102820/ 21/ 22/ 23 Direct: 41432825 Fax: 91-80-41432844
www.ifimbschool.com
Published by Dr. R. Satish Kumar on behalf of Institute of Finance and International Management, No-8 (P) & 9 (P),KIADB Industrial Area,Ist Phase, Electronics City, Bangalore - 560100.
RNI No. MAG/(2) CR/PRB/102/02/05-06KARENG/03083/10/1/04-TCEXCEPT/CO/NO-7&8