Business Marketing

CASE
8
Sparkle Edusolutions: Business Marketing by Startup Firms*
Ramendra Singh and Imran Rashid Education in India has shown a tremendous change from the traditional guru(a teacher who dispels darkness of ignorance) shishya (student) parampara (tradition) to e-learning based education system comprising of formal and informal network of educational institutes. In India, education in schools can be of two types-formal and informal. The formal education system broadly comprises schools (often known as K12- Kindergarten to class 12th) followed by higher education. The school caters to 3-18 years age group, where as higher education institutes cater 18-22 years and above age group. The informal education segments anking the formal ones includes pre-schools, coaching classes, multimedia/ IT to schools and colleges (catering to both private and public institutions), vocational training and the books market. In the year 2008, the total Indian education market (formal and informal combined) was as big as $50,110 million, and expected to grow up to $ 84,858 mn by 2012, as per the research conducted by IDFC-SSKI. (See Table 1).
Table 1: The Indian Education Market (IEM)
($ m) Formal IEM K12 Higher Education Informal IEM Preschool
Revenues (2008E) % share of total Revenues (2012E) 40,000 20,000 20,000 10,110 300 80 40 40 20 0.60 64250 33779 31470 19,608 1,026
This case has been prepared by Ramendra Singh, Indian Institute of Management, Calcutta-India & Imran Rashid, *** . It is intended as a basis for class discussions rather than to illustrate either the correct or incorrect handling of business situations
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($ m) Multimedia in private schools ICT in govt schools Coaching classes Vocational training Books Total IEM
Source: IDFC-SSKI Research
Revenues (2008E) % share of total Revenues (2012E) 70 90 6,400 1,500 1,750 50,110 0.14 0.18 12.77 2.99 3.49 459 752 11,194 3,662 2,516 84,858
Use of multimedia in schools, a constituent of informal education market, has shown remarkable increase in terms of market growth and revenue growth compared to previous years. The multimedia market in India is very competitive, and it is increasingly becoming difficult for any new entrepreneur to establish in this segment. In this environment, an educational technology new venture started by a group of IIT engineers under the name Sparkle Edusolutions entered the market of informal education. Imran Rashid, the founder of Sparkle Edusolutions, mentioned, The key challenge with our venture is presence of the big players in the different segments of K-2. Reputed Schools do not want to go with newcomers. Another key challenge is training the teachers of tier2 and tier3 schools to understand this technology. For such kind of schools neither the school management nor the teachers want to go for any innovation in their mode of teaching. These two issues are further making the task difcult for Sparkle Edusolutioins (SE henceforth), which provides supplementary educational programs for schools & educational institutions, to compete in the lucrative but competitive market.
Indian School Education System

There are the two main types of schools India: Government run, and Privately owned The government schools are working for higher literacy rate but it takes time to reach a level of satisfaction. Immensely rise in private schools show that people are much in need of quality education. Imran Rashid says, Although at this time the
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158 CASES IN BUSINESS MARKETING market is dominated by private schools, yet SE is facing problems with A grade Schools not wanting to go with new entrants while B&C grade schools are not interested in our kind of products. Mainly governments schools are in rural area and people from there can neither migrate to urban areas not afford the very high fee charged in the corporate and private schools. Therefore, it seems to be a good proposal in education sector to improve the chances for rural good education on par their urban counterparts in the village themselves. In this globalized era, when many rich and fortunate urban children are becoming technologically savvy, their rural counterparts do not know even about computers. However, government lack funds to enhance the quality of rural schools. So this problem can be resolved by public private partnership only. Imran Rashid suggests, To form the public private partnership, the private company must be established one then only it can be chosen. SE was not in a state to form public private partnership. Indian education system in general comprises of formal and informal network of educational institutes.
Formal education system

The formal education system in India broadly comprises schools (often known as K12Kindergarten to class 12th) and higher education (colleges, universities, institutes, and polytechnics). The school caters to 3-18 years age group, where as higher education institutes cater 18-22 years and above age group. There are broadly four stages of school education in India, namely preprimary, primary, secondary, and senior secondary. The preprimary level is usually composed of Lower Kindergarten (LKG) and Upper Kindergarten (UKG), where primary reading and writing skills are developed. After nishing upper kindergarten, a child enters Class one of primary school. In the primary level, students form an idea of their own of the different subjects. Primary school (class 1-6) includes children of age six to eleven. After completing primary level, student enters into secondary school (class 7-10) and then senior secondary school (class11-12). However, there are considerable differences between the various states in terms of the organizational patters within these rst 10 years of schooling.
Informal education system

The informal education segments anking the formal ones include pre-schools, coaching classes, multimedia/ IT to schools and colleges (catering to both private and public institutions), vocational training and the books market. Formal education
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in India is inadequate, so it forms platform for informal education for its backing. The K-12 education market in India is inadequate in itself, and therefore has given a large space for informal education e.g. pre schools, coaching classes, multimedia/ IT to schools, thus this informal market is known as K12 informal market.
Sparkle Edusolutions: An Overview

SE was founded in 2010 by a constellation of IITians studying at IIT-BHU Varanasi (a premier engineering college in northern India) with the motive of shaping the next generation of students. Arvind Duhan, a member of SE, mentioned At Sparkle we strive to reform school education in India. Within a very small time span SE has established a presence in different segments. Under Imrans leadership, SE has collaborated with several reputed schools for competitive examinations like NTSE (National Talent Search Examination) & KVPY (Kishore Vaigyanik Protsahan Yojana), managing and developing web portal, and providing educational content in multimedia ash-based animation for better understanding of concept. Imran Rashids rst steps towards an entrepreneurial career started in 2009, when he started Sparkle Edusolutions with the aim of shaping the next generation of students. They began by providing study materials for competitive examinations such as NTSE/KVPY. It was Imrans idea to enter in the eld of multimedia, which was a very innovative way of teaching even during that time. Faced with growing competition from bigger players, small schools were not in the position to become tech savvy and efcient, said Keshav, one of the key members of SE. He admitted that the product was not high on innovation, but did reasonably well as an application. The K-12 market size in India is large. There are 11,30,000 government and, 1, 00,000 private schools in India. It is estimated that total size of this market is $ 20 billion. The informal K-12 education segment is contiguous to the K-12 education for their business. The business segments for SE are shown below: SPARKLE EDUSOLUTIONS School projects for competitive examinations NTSE/KVPY and Olympiads Spark digital classroom Multimedia in private schools
Online coaching
Complete online support for competitive examinations

Figure 1: SEs business segments
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160 CASES IN BUSINESS MARKETING The product line of Sparkle Edusolutions consists of the following: Multimedia classroom Online coaching School projects for competitive examinations
Sparkle Edusolutions Offerings

SE was started with the aim to prepare the students for scholarship examinations such as NTSE, KVPY, etc. SE provides books covering complete syllabus as well as teaching support material in the form of power point presentations and multimedia ash. SE collaborated with several reputed schools to prepare their students for such examinations. Imran Rashid mentions, This was the segment where brand name was not obstacle and so on was the results that SE got very good response in the market. SE is having edge over other competitor because of their low price of study material. Another breakthrough was launching of their online web portal for such examinations www.sparkleforntse.com. We ensure that technology is at its peak in terms of user maturity, i.e., an amateur and a frequent user would take the same amount of time to study through our on line courses. says Imran. In todays techno-savvy world, web is ourishing and dotcom industry a boon to the society. According to Imran Rashid, This segment was our next target, so with this aim we collaborated with a leading IT company, TWC, to provide quality services. We offer comprehensive website design services boasting of highly scalable designs, well thought of graphics, layouts, and search engine optimized content. SE also undertakes website hosting and provides regular website maintenance services. It is time to think beyond basic website and schools are using the web to communicate running information such as performance of students to parents. The web will be delivery model. SE also provides following module-based services: School news and articles update School events image gallery Notice board on website Result update Discussion forum Online magazine Alumni information Forms and brochure will be available Online tests and evaluation
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FAQ Digital asset library Organization Calendar Media
SE e-Learning solutions turn class into a high-tech multimedia classroom where animated ash-based visuals are shown for better understanding and grasping of content. The lecture is distributed in accordance with the CBSE/ICSE syllabus, and consists of deep theory related to the topic followed by practice problems for better understanding. This is the most competitive segment because of the existence of established players, realizes Imran.
Spark Digital Classroom- A Technology based classroom

SE now targeted on multimedia classroom, which is new wave in the Schools. SE named their Multimedia classroom as Spark Digital Classroom. Imran said, In order to have complete world class experience we insist for a complete package our offering which includes infrastructure, hardware and software setup. The components of SEs multimedia classroom were: White board for projection display Black/green board for teachers note Speaker for perfect digital sound clearly Teachers table along with security cup board for hardware Teachers chair Projector (min 2400 lumens) for great experience while viewing digital content. Well congured computer or laptop Uninterrupted power supply (UPS) system with power backup to allow classes to run uninterrupted even in case of power failures.
Sparkle appoints a regional expert, who acts as the interface between the school and sparkle in their region. The Sparkle expert will be an equivalent to a bachelor of engineering from a well-reputed engineering college.
Overview of the Market

Multimedia Classroom Experience
As per Imran Rashid, Multimedia inside school is a new wave. If we consider the technology adoption life cycle then we can say that educational technology adoption is in the early majority in the rural area and late majority in the urban area. Early
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162 CASES IN BUSINESS MARKETING Majority are sometimes called pragmatists, and represent the bulk of the market. They tend to buy in to new technologies only after they perceive solid references and safety measures that guard against potential failures. Securing the pragmatist buyer is the most important marketing challenge. Both urban and rural educational market has achieved this segment. As Rani Rai, the principal of Aryan International School, situated in Varanasi remarks: Multimedia teaching is quite interesting and interactive. The 3D pictures and animation helps in better understanding of concepts. The best thing about multimedia teaching is that it is able to grab the attention of the students for much longer duration. On the part of user end, (teacher) multimedia provides the attention grab of the class, as students pays more attention and it makes easy for the teacher to explain any critical concept using 2D/3D videos. Multimedia teaching makes use of natural information in a creative way. Using multimedia software can create a dynamics 3D shape projection process. It increases student interests, makes them fearless and open. On a further note it is time saving as well asserted a teacher. Undoubtedly, students will be the biggest beneciaries of this union of technology and education. A student of a reputed private school says, Multimedia helps us understanding certain gures and concepts that are difcult to understand in classroom. The visual part often shows working of machines that we dont learn in classroom. However, there are certain hurdles faced by the school in installing multimedia equipment these are the extra expenses on the school budget, interest of teachers, and in the packed schedule of school hours, it becomes tough to give time to multimedia teaching. Rani Rai maintained that multimedia teaching is a powerful tool if educators use it to achieve educational effectiveness. Provision of these tools does not in itself lead to successful outcomes. Imran explains, This is the one of the most benecial segment of K-12 market. So, lots of multinational companies are targeting this segment. A large chunk of the market is covered by Educomp, followed by other competitors such as, Edurite, NIIT, Mexus education, next education, and others.
Competitors
Educomp
They have covered total 26, 000 schools including government and private both. They have reported the prot of INR221.87cr in 2010 from INR13.90CR INR 2006.
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Educomp is the one of the established player in multimedia segment. Educomps multimedia class is known as smart class. The smart class is offered with a contract life of ve years, after which the hardware belongs to the school. Multimedia classes accommodate 60% of Educomp revenue. They are expanding worldwide and having 27 ofces worldwide. In addition, Educomp has set up various online initiatives (such as Mathguru a mathematicshelp online programme catering to grade 6-12 students). Based on an annual subscription fee, the portal has 28,929 paying subscribers and is expected to see robust growth in near future. Educomp is further building up presence in the coaching class market with online tutoring portals called ThreeBrix and Learning Hour. Educomp has also acquired a 51% stake in AuthorGen Technologies for Rs 27m. Authorstream.com, an initiative of AuthorGen, is a web platform for connecting students and teachers. Educomp also has a 70% stake in Savvica for $2m, an e-learning company in Canada, which builds online communities around e learning. Educomp has acquired 51% stake in US-based Learning.com for $24.5m in May 2008, a premier provider of Web-delivered curriculum and assessment with more than 2m students in its portfolio.
Niit@ School
NIIT@SCHOOL is the effort of NIIT, which is among the top 25 IT companies worldwide and a trailblazer in computer aided education system. While NIIT has implemented multimedia products in 2,000 private schools until date, they have been primarily pure IT content products. NIIT is strengthening its product portfolio with newer content. Under the brand e-guru, NIIT now offers a bouquet of products such as IT Labs, MathLab and others labs (English, Science, etc), and has recently launched an interactive classroom product (an integrated product with hardware and software similar to Smart Class by Educomp Solutions). The schools can choose from the bouquet or opt for the entire product offering at Rs40-250 per student per month. While the high-yield integrated product has been implemented in 100 schools so far, it holds scale-up potential.
Erudite
It has been acquired by the Pearson Education Service and Manipal K-12, promoted by Manipal group, a leader in higher education in India. Erudite provides online tutoring, selling study material in the form of CDs, classroom coaching and multimedia classroom into schools.
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164 CASES IN BUSINESS MARKETING
Mexus Education
They provide e-learning solutions for primary and secondary school students that integrate mind maps, slideshows, animations, assessments, and lms to make learning interactive. Main Ofce is located in Mumbai and mainly effective in that region only.
Next Education
Next Education is a growing, technology driven company providing e-learning content to schools. The company has primarily focused on the market of Bihar, where it sees many opportunities.
Classroom Coaching
India already has an inadequate education system, which is being further stretched due to its increasing population. So much so that a $6.4bn segment (64% of the total informal education system; next only to K-12 and HE) coaching classes have sprouted around formal education system. Coaching classroom have emerged as the prominent mode of seeking informal education in India. Market consists of providing tuitions and entrance test preparation. Market is highly fragmented and regional in nature. The major players of this segment are:
Fiitjee
FIITJEE is the leading player in coaching market in India. In nancial year 2011-12 FIITJEE is poised to cross a turnover of ` 2000 crores. FIITJEE provides training to school students for the prestigious IIT-JEE, NTSE, KVPY, All India Engineering Entrance Examination, Olympiads, and State Level Engineering Exams via classroom as well as distance education programs. They are having centers in almost every city in India. They are also associating with several schools for the integrated classroom programs.
Aakash Institute
They provide training for medical, engineering and school level competitive examination. Just like FIITJEE, they are also having centers in almost every city in India. Since 1988, Abash has come a long way in clutching the ocean of opportunities, which exist in Education and Training. Their 23 years of experience, more than 18,000 selections in Medical Entrance Exams., a country-wide network of over 47 centres
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across India, collective annual student base of more than 25,000 classroom course students every year and above all, trust of millions of parents, has made Aakash a household name for focused and quality coaching.
Resonance
Resonance is a leading coaching institute for preparation of competitive entrance exams for Engineering and medical like IITJEE, AIEEE, AIPMT, and Scholarship/ Talent hunt Exams like NTSE, KVPY & Olympiad. Apart from the classroom and distance learning, they are also going to launch e-learning programs in association with HCL- career development centers.
Career Point
They are tutorial service providers. They provide tutorial services to high school and post high school students for various competitive entrance examinations including All India Engineering Entrance Examination, IIT-JEE and All India Pre-Medical and PreDental Test. The tutorial services are provided in their classroom training programmes conducted through a network of company operated and franchisee centers. As on July 31, 2010, they had 17 Company Operated Training Centers and 16 Franchisee.
Online Coaching
Online tutoring is starting to take off in a big way. Many online portals are starting to offer educational support to students that have further lead to a win-win situation for students, teachers and parents of students who are working for such portals. Imran Rashid states, Online assistance for studies is a very good initiative. It will help a student to do self-study and get online help when queries arise as compared with a coaching class where one has to study as decided by the tutor. Online tutoring in India seems to be a good proposition as Indian students are internet savvy although online tutoring can become a big distraction to kids of age 12-18 years. Some major players of this segment are:
TCY Online
TCY provides online coaching from K-12 to MBA, MCA, GRE, GMAT, SAT, NTSE. They have enrolled 450,000 students until now. www.TCYonline.com is one of the most used testing platforms in India. Apart from these students can download practice papers free and check their mental ability by giving an exam online. The company has
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166 CASES IN BUSINESS MARKETING also been engaged in one-on-one Math live tutoring K-12 students in North America. The company has a tutoring experience of over 280,000 hours during this period after having trained over 2500 students. The company is also broadening its afliate network in the US.
Vriti
This is another big name in the eld of online preparation. They have many partner brands in the form of content partner and distribution partner. Content partner creates online course and test series while distribution partner launch courses on their website. Vriti is a knowledge exchange targeted at bringing teachers, students, content providers and the larger community together for exam preparation. The knowledge exchange provides every brand the capability to launch its own website and paper based classroom tests for its students, providing them with the most detailed and largest assessment. Vriti caters to competitive, curriculum, job-preparation, and skill enhancement landscapes. Team Vriti is a diverse mix of IIT Alumni, with veterans from online and scalable technology solution space. Vriti has been backed by leading technology investors - Intel Capital & JAFCO Asia. Vritis assessment engine is its a unique proposition and a state-of-the-art proprietary technology engine that offers a 360 degree gauge of a students performance. The Accelerate Engine has been vital in assessing and beneting almost a million students since its inception.
Ntse Gyan
Aabhigyan Educational Academy, the institute in north India imparting training for engineering and medical entrance examinations like IIT JEE / AIEEE / PMT have started an online portal for the preparation of NTSE.
K-12 e-Learning in other countries

E-Learning is gaining more and more popularity all over the world. Apart from educational sector, other companies are also using e-learning to train their employees. E-learning is one of the most important and potentially signicant new instructional approaches available for supporting the improvement of teaching and learning in K-12 schools. Several virtual schools (or virtual schooling services) in the UK, USA, Canada, and Japan are specically designed to assist disadvantaged school-age
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students. With the help of virtual schools, students can learn from any place, where there is a computer and an Internet connection. The Virtual High School (VHS) is Americas rst public virtual high school, a consortium of high schools offering online courses taught and designed by cooperating teachers who are accredited in their respective States. Online classes in USA were rst offered during the 1997-98 year, for 30 online courses to about 500 students in 27 schools in 10 states. The Liverpool Virtual School, UKs rst virtual school opened in the year 1999, and is an online school that gives students from deprived areas of Liverpool, access to their own computers and e-learning packages. Yet another virtual school, Briteschool, is an online school that uses the British national curriculum to help students who want to go back into mainstream education at any time, or who wish to successfully complete the International General Certicate of Secondary Education (IGCSEs). K-12 e-Learning have been implemented in almost all developed and developing countries.
SEs Marketing Strategy

Marketing strategy of SE revolves around 4Ps-Presentation, Product, Price, and Promotions. Presentation: It is the building block of all the operations. After getting the appointment from school administration that sometimes becomes a tough task, SE team visits school for their presentation in front of school administration, teachers, and students along with their parent. SE arranges talk to build interest and propagate the knowledge about multimedia education. Everyone who works in school market agrees that educators are more relational than other professionals. It makes sense that relationship sellingmaking a comfortable eld is important to sell successfully. Product: The quality of product is most important aspect for long run. SEs multimedia product consists of: Multimedia 2D/3D content Installation of hardware and software Script of the content is written by top academicians and used by highly skilled ash developer and their immense effort lead towards high-quality content for students. In order to have error free content, several round of correction took place.
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168 CASES IN BUSINESS MARKETING Price: Budget is also one of the major concerns for school administration. SEs pricing strategy is quite exible depending upon the area where school is located i.e. rural or urban area. Equipments were installed as per the budget of the schools. It should not overload the school administration, so SE charges a nominal fee from students on per month basis. Promotion: SE uses print as well as electronic media for promotions. In the early stages, SE got lots of media coverage free of cost in newspaper since the founder came from a premier institution. SE also regularly organizes workshops, seminars, and different activities where students and teachers are involved. Once the deal with any school is nalized, the remaining steps to be carried out are as following: 1. 2. 3. 4. 5. 6. 7. 8. Singing of the contractual agreement with school and payment of advance. Client service team to visit school and begin orientation program. Dispatch of Performa invoice Dispatch of materials for installations and implementations. Process implementation team to visit schools for setting up the systems. Training team to visit schools. The SE team exits after initiating the system. Support and development extended as agreed.
SE enters into a contract with schools for a period of 3 years to provide content, infrastructure, and training to teachers to use spark digital class. Apart from this SE provides complete support in the form of books, and animated contents for competitive examinations. Monthly fee is INR 105 per student per month. To continue it further, schools need to renew their contract with SE. After rst tenure, school becomes the premium customer, so students have to pay only INR 90 per month. It becomes benecial for both schools and SE, as there is no need to setup infrastructure further. Moreover, to increase visibility, and generate higher revenue in the extremely competitive and cluttered education sector, SE has to employ innovative marketing solutions. SE therefore helps schools to maximize program participation and build brand equity through various activities and strategic marketing partnerships. Marketing aggressively also helps SE in building good relationship with schools, and create the platform for their other products. SE provides following marketing solutions to schools: Brand building Promote your School in a positive way among target markets. Event management Organizing and sponsoring events that will increase visibility.
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Student acquisition Creating a data base and attract higher student enrollments Corporate planning Successful forecasting and organizing of revenue yielding resources. The success of the SEs marketing efforts came from the voices of the different stakeholders in the market, which showed the increasing openness of the school administrators, principles and teachers, as well as students to learning using multimedia (See Exhibit 4).
Source: Company web portal. Exhibit 1: Home page of website for online preparation.
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Source: Hindustan times newspaper. Exhibit 2: Print media coverage.
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Source: physicse learning content. Exhibit 3: Snap shot of Spark digital classroom content.
Decision Makers (School administration) Multimedia teaching is a powerful tool if educators use it to achieve educational effectiveness. Provision of these tools does not in itself lead to successful outcomes. Optimal use of multimedia technology in education and its full potential will only be realized if it is adopted as an instructional tool. Major hurdles in order to implement multimedia teaching are, installation of the infrastructure, and teacher orientation & development. Both the above have to accommodate in the tight school schedule. Not only are the above two time taking things but an added overload on the school budget. End Users (Teachers) Multimedia teaching makes use of natural information in a creative way. Using multimedia software can create a dynamics 3D shape projection process. It increases
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172 CASES IN BUSINESS MARKETING student interests, makes them fearless, and open. On a further note it is time saving as well. Schools that have realize the importance of technology and incorporated it in their curriculum. Students will be the biggest beneciaries of this union of technology and education. Consumers (Students) It helps us understanding certain gures and concepts that are difcult to understand in classroom. The visual part often shows working of machines that we dont learn in classroom. We us multimedia teaching only when we have completed a chapter, so it is good for the revision as well.
Exhibit 4: Voices from the Stakeholders
1800 1600 1400 INR (bn) 1200 1000 900 600 400 200 0 2005-06 2006-07 2007-08 2008-09 963 1147 1356 1606
Source: Ministry of Education; World Bank.
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SPARKLE EDUSOLUTIONS: BUSINESS MARKETING BY STARTUP FIRMS Exhibit 5: public expenditure on edcation
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600 500 400 INR bn 300 200 100 0 2008 2009 2010 2011E 300.6 349.3 406.7 477.5
557
2012E
Source: Ministry of Education; World Bank. Exhibit 6: coaching market size and growth
3% 17% 6th to 12th and tertiary education (tution market) Graduate test preparation Post gtraduate test preparation 80%
Source: Angel broking; CLSA; IDFC-SSKI INDIA, Indian Education Sector, January 2009. Exhibit 7: Coaching calss market break-up.
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CASE
9
Meher Enterprises1
Ramendra Singh and Srikrishna Srinivas
Introduction to the Case Study

This case study is about the evolution and development of the business-to-business (B2B) relationship between Meher Enterprises and Tamesh Institute of Management Asansol (TIMA). Meher Enterprises has been providing catering service to TIMA student hostels for more than 30 years now. Over the years, it has delivered excellent value to TIMA that has helped sustain this relationship. The case highlights the aspects of business relationships such as starting and developing relationships in B2B transactions and how a coordinative behaviour by both parties involved helps to sustain and strengthen these relationships. The case begins with the most recent transaction between Mr. Meher and TIMA, i.e. the negotiations over awarding the WH Mess contract to Mr. Meher. Next, the case delves into the history of the start up of the business by Mr. Meher, and his own background. The case also reects the perspective of TIMA on what value has Meher offered to them and why they have stuck to Meher as a catering vendor. Next, the case focuses on a few of the problems that have arisen over this long period and how and why the relationship between the two parties stood up to these tests. The development of the relationship between TIMA and Meher Enterprises can be illustrated as a framework on the next page.
Disclaimer: This case has been prepared by Ramendra Singh, Indian Institute of Management, Calcutta-India & Srikrishna Srinivas, ***. It is intended as a basis for class discussions rather than to illustrate either the correct or incorrect handling of business situations
1
This case has been prepared by the Ramendra Singh and Srikrishna Srinivas solely for the purpose of classroom discussion of a business situation and does not intend to highlight either effective or ineffective handling of the case situation by any company or persons. Some names, i.e. of the case characters, business entities, and the companies have been either disguised or altered to protect identities. The authors are indebted to several PGP2 students of IIM Calcutta (200911 batch) for their initial efforts in case writing.
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MEHER ENTERPRISES
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MEHER ENTERPRISES Organizational Influence (None) One Man Show
TIM ASANSOL Organizational Influence - Favor continuity - tendering processes can be managed Negotiation Behaviour Coordinative
Individual Influences - High on enterprise and learning - Good at building personal relationships - Skilled at managing labour -well respected
Individual Influences - Students favor Meher - Faculty has good relationship with Meher - The administration is cooperative with Meher
Negotiation Behaviour Coordinative
Negotiation Outcome - Profits - Stability
Negotiation Outcome - Trust - Quality service
Joint Outcome Long Term Relationship In 1976, Mr. Meher started a snack shop outside the gates of TIMA. Many years later, he became the proprietor of Meher Enterprises, which now provides catering services in the Tagore Hall, Guest Mess and the Lake View Mess at TIMA. He has slowly and steadily with persistent efforts, focussing on building strong bonds with TIMA has been able to build a strong relation with TIMA. On his way, he has seen
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176 CASES IN BUSINESS MARKETING many difculties, which brought him enormous experience. TIMA on the other hand realising his honesty and faith towards the organisation has helped him in many ways be it nancing him in dire situations or in proving him brand which has helped him expand the business and in forming ties with many reputed institutions in Asansol. Meher now looks forward to start a private limited company and start a chain of restaurants by which he says he would be able to provide quality service to the people. Recently, he has a contract to run hostel messes at IMI in Asansol. He has been trying since long to expand his business beyond TIMA. His rst big step to expand his business was by entering into sheries business back in 1996. This was the time when he used to run all the hostel messes at TIMA. By entering into sheries business, his concentration on the hostel messes at TIMA faded and the managers he appointed to run the business, started taking advantage of this by misusing their authority, and nally taking over the hostel messes. Later he suffered losses even in the sheries business. This came as a shock to Meher and even now, he is not able to recover all the messes he once owned. With plans of starting a chain of restaurants, which is the next big step towards expanding the business beyond TIMA, Meher has to be cautious not to weaken the relations with TIMA. He has already appointed managers at each of the hostel messes. Now whether to expand the business or to concentrate strengthening the ties with TIMA is the next big question for him.
Background
Meher Enterprises is responsible for the mess catering services in the Tata Hall, Tagore Hall and Lake View Mess within the campus of TIMA. Tata Hall is the guesthouse in the campus where sometimes students are also provided accommodation. Lake View Mess is the newest mess, which is recently started. White House (WH), Old Hostel (OH) and New Hostel (NH) are the three main hostels where students reside. Students who eat at these hostels are supposed to register at the messes a xed amount each month and then depending on certain food items tagged as extra, pay for the extra food they have had. There is a night canteen in each mess, which means that other than the three regular meals breakfast, lunch and dinner, students can have food items/tea in the night (11:00 pm to 4:00 am). The food items are charged extra for night canteen. The workers in the mess are not employees of the contractor, but work under the purview of the labour union and would remain workers of WH Mess even when the contractor changes. There is a student council, a student run body that takes care of hostel life and various aspects of student life at TIMA. The mess representative of each hostel is also a part of students council.
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Back in 1975, there was only one hostel in TIMA, the Roman Hostel also known as Old Hostel (OH). Unlike now, it had just a normal mess where meals were served 3 times a day and there was no night canteen. Meher Enterprises started in 1976 with a small shop outside the entrance gate of TIMA. Other than the mess food, during the non-mess timings, the students had to go to the snack shop outside the gates and have snacks. The popularity of the shop among the students was so high that even the administration took notice of it. Meher was then invited to run a coffee shop inside the campus in 1978. This was the beginning of the long-term relationship of Meher Enterprises with TIMA. In 19821983, TIMA upgraded its infrastructure and a new hostel came up. The popularity of Mr. Meher was already high in TIMA. The popularity of the coffee shop run by him was even high among the faculty members. Knowing his popularity, Meher Enterprises was given the contract for this new hostel. Moreover, during this time, the existing mess workers refused to work, demanding permanent employment status, which made TIMA administration to outsource the contract. Mr. Meher showed his astute accounting skills by pricing the contracts at a substantial level, yet at a sustainable discount rate as compared to the prevalent mess contract, which was run by the college itself. Mr. Meher was known to maintain a very pleasant relationship with administration as well as staff. With this pleasant behaviour, he built himself the reputation of integrity and astute business sense. He was often seen working in the mess, clearly showing that he would ensure every effort to ensure service. His leadership, by example lead his employees to pore in their entire effort into enterprise. In 1984, the contract for Guest Faculty Mess also came up. His reputation convinced the faculty members and then the director at that time to help Meher Enterprises with funds and thus start the mess. He ensured every effort to focus on the quality of the service offered. The Guest Mess brought in better margins than the other, allowing Meher Enterprises to improve his service. Mr. Meher had a perfect bonding with the workers. Staff rarely ever had concerns, which were never addressed. Mr. Meher ensured every effort to groom the workers and the cooks, and made every effort to provide them with better utensils and uniforms. By 19931994, Meher had all the mess contracts under him, and Meher Enterprises was in charge of hostel mess, Guest Mess and Coffee Corner, which moved further inside. This is the time when Mr. Meher was comfortable with all the works in the messes. Mr. Meher, led by ambition and a sense of pride in catering to a premier institute like TIMA, outlined a bold plan for his business expansion. The region offers resources, both natural and manmade to aid the sheries business. Fisheries and nurseries are predominantly an unorganised industry in the state, thus offering great incentive to
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178 CASES IN BUSINESS MARKETING enter the business. Meher Enterprises thus, wanted to diversify into the sheries and nurseries business. Further, Mr. Meher found himself strained for time coordinating activities of the messes in the hostels, with new plans on the horizon requiring his constant attention. It was thus decided to bring in managers to supervise each of the hostel messes. To keep a closer eye on the managers, Mr. Meher got his brother more involved in the day-to-day running of the mess operations; coordinating closely with the newly appointed managers. The coffee house was moved under direct supervision of another family member. The Guest Mess in TIMA, however, was where Meher Enterprises made most of its money. Margins here were high enough to subsidize the low margins in other messes. Mr. Meher thus decided to keep the mess under his direct supervision rather than appoint managers to take care of it. However, the managers took advantage of Meher being very busy with the sheries business. They started taking up the mess contracts; his brother himself took over one of the messes at lower rates. By losing the mess contracts one by one, Mr. Meher felt devastated. The coffee shop was also shut down given the low prot margins. However, the only hope was that the Guest Mess was still in his hand and he knew that his credibility and persistent hard work to build a strong bond with TIMA would pay-off some day. In 1998, Meher Enterprises won one of the students mess contracts. Balancing between maintaining quality and service given near-zero margins remained a constant worry for him. In 2000, Meher Enterprises walked away from the hostel mess after being ned ` 10,000/- for falling short on food preparations for eight students. The relationship between Meher Enterprises and TIMA faculty members could not be of much help then because he has fallen short on the core product. In 2001, he suffered substantial losses in the sheries business and decided to quit. Now, he was left with only the Guest Mess contract and he made all his efforts to impress the faculty members as well as the student community. His dedication in his work was outstanding. In 2006, with his efforts and inuence, he was able to win the contract for the Tagore Hall but due to some complaints from students side, he moved out of the contract in 2008. He was again left with only the Guest Mess where he consistently gained popularity by his industrious work. In January 2009, Mr. Atanu Ghosh, the proprietor of Destiny Caterers was roped in at a time when his predecessor decided to quit. Atanu as a mess contractor had great credibility and his credentials for the position were very impressive. He had earlier worked for a number of high prole names. Thus, the decision to hire him was never seen as a questionable one and the food quality was satisfactory in the beginning. Later
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on, in mid-2009, things started taking a negative turn. The quality of food started degrading because of ination in food prices, and the increasing number of student defaults. This was in fact a cyclic process one thing leading to another ending up in poor quality food, and very less student registrations. Later on in the last month of the academic year, i.e. February 2010 was almost like a probation period for him. The food quality did not improve but nothing much could be done, as there was no point ring the contractor towards the end.
The Turning Point

In June 2009, the contractor demanded an increase in basic prices citing reasons such as liquidity problems. However, this time the president and WH Mess representative thought enough was enough. Before any negotiation could happen, the contractor called a strike, which put the whole hostel into disarray. The new batches of students were to join in a weeks time and this was the worst possible time for such an event to occur. Since the contractor by acting in haste, and not going for negotiations, had in a way annulled the contract, it was just a matter of time, that he could be replaced. Hence, the contractor was red. This led to the joblessness of the workers who pushed the student council hard for salaries/new jobs. They were asked to write down on paper the complaint against the old contractor but they refused for the fear of not getting the pending dues back from the contractor. Now a new contractor was required immediately. However, the question was who could be ready to take up the ownership at such a short notice. The word spread around quickly and soon few interested parties approached. A decision had to be made at the earliest. This time around, a rm decision was taken that outsiders in spite of their previous work credentials cannot be relied upon for two reasons: (a) Though they are able to produce results at other events and places like resorts, where there is huge protability, a hostel mess is not such an attractive proposition and hence a lack of interest starts building up. (b) A hostel mess was also a very different proposition in the sense that here, day in, day out food had to be prepared, the customers (students in this case) remain the same, and hence a high chance of they getting bored. Therefore, it was pre-decided that an insider would be the best for the job. But who would that be?
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Possible Options
OH Mess Contractor
The OH Mess contractor was a name that would immediately come to everyones mind. OH food was very popular among the student community. Some of the advantages were: 1. The contractor was able to manage OH Mess well with absolutely no complaints. 2. He maintained a very hygienic atmosphere both in the dining area and the kitchen area. 3. The food was very appealing and there was a lot of variety in terms of extras. 4. The contractor was young and enthusiastic and would readily lap up any idea given by students in his hostel for a special dish, etc. 5. After negotiations he was ready to provide vegetarian food at ` 2050 and nonvegetarian for ` 2100. The disadvantages were: 1. Once he would be taking over WH, he would have to increase OH workers since there cannot be a differential pay scale under the same contractor. 2. There were apprehensions over his capability to handle both the hostels at the same time.
NH Mess Contractor
This option was rejected primarily because of the negative reviews given by the NH student community.
Meher Enterprises
Some of the factors, which made Meher an obvious choice, were: 1. He had immense amount of experience at TIMA (since 1976). 2. He had high level of credibility associated with him. 3. He was already managing Tata Hall Mess, convocation dinners, among other events satisfactorily. 4. He is perceived to possess a very positive attitude, and has an optimistic approach towards any problem.
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Some of the factors that could have gone against Meher were: 1. He was not favoured highly by mess workers because of his strict attitude as they could have got some leeway with other contractors. 2. Risk of too much of interventions of worker unions if some worker is red by the contractor. Other factors favouring Meher Enterprises were: Such is the image of Meher Enterprises that TIMA administration thinks of him to be over qualied for the contract of a single mess. He was the prime choice for the contract of the new hostel coming up in the campus. The hostel offers not only regular mess but also a 24-hour cafeteria. Not only that, he puts his wholehearted effort in deciding the latest designs in kitchenware for the new kitchen. He always believed in great service to the customers and he wanted to brand himself very well. Even though he is in the business for so many years, he used to think big and was open to new ideas. He was highly rated by even the faculty members. Most of the faculty members and even alumni were great fans of his food. In 2011, he got the contract for the newest hostel that is also called the Lake View Hostel. The mess started operating from 4th June 2011 and Mr. Meher is able to gel up well with the students and faculty and is now running Tagore Hall Mess, Lake View Mess and the Guest Mess successfully. The continued business with the Guest Mess of TIMA has helped Meher expand operations to other business schools. Senior management from one of Indias leading business conglomerates were on campus for a training exercise. Impressed with Meher Enterprises service, it was given the mess contract for their business school in a nearby town. Meher Enterprises has also expanded into personal catering for social occasions. His relationship with the TIMA faculty and the students continues to be stronger than ever. His endeavour to keep innovating, changing with time, and experimenting with new cuisines will ensure that he keeps providing TIMA value over the years to come. The interesting thing to see would be how he would be able to bring experienced workers at nominal cost and with intake of students increasing year by year, how he will maintain the quality of food taking bare minimum margins.
TIMAMeher Enterprises Relationship Development

Mr. Meher ensured every effort to build trust with the organisation. One of the examples shows his indomitable spirits in strengthening the bond with the faculty members
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182 CASES IN BUSINESS MARKETING and hence with TIMA. In 1991, the rm was offered to cater to a private marriage party for a TIMA faculty members relative. Eager to build on his relationship with the faculty and administration of TIMA, Mr. Meher offered best of class services at a 60 per cent discount to reputed caterers. The food arrangement surpassed expectations. When called in for the nal payment, Mr. Meher worked down the cost saying he was able to avail materials at lower costs than expected. This sequence of events further strengthened Mr. Mehers reputation as a man of integrity and one who lays absolute stress on relationship over transaction. Another event shows Mr. Mehers efforts in strengthening the bonds with the student community. The student community was organising the annual business school meet when a curfew was enforced due to the Babri Masjid demolition in 1991. He volunteered to manage food arrangements for the guests for all the three days the curfew lasted. The student community had then thanked him profusely for his efforts. TIMA has also helped him in tight nancial situations at many occasions. Such coordinating behaviour by both the parties helped groom the relationship between them. There were other reasons why Meher enjoyed a great relationship with TIMA and with Tata Hall in particular. One major reason, according to Mr. Atanu Ray, the manager of the Tata Hall, was the clear superiority Meher had in terms of both quality and cost. The quality of the food was well appreciated by the TIMA community. In addition to the guests to TIMA campus including participants in short term managerial development courses, seminars, conferences and events the Tata Hall Mess was regularly used by some of the faculty and staff of TIMA. Due to the excellent food and service quality, the Tata Hall Mess also had a small, steady base of student customers. All these customers were generally very satised with the quality and prices. Over the years, the prices had to be increased a few times to reect the rising costs, however the prices were very reasonable. Meher placed a high premium on hygiene and this was considered an essential requirement for Tata Hall. The chefs employed by Meher were all very good and experienced in various cuisines. This helped TIMA in arranging for hosting guests from academia and industry from various backgrounds and cultures on campus. Mehers style of maintaining the dining halls, use of aprons, caps and gloves by his staff gave a very professional look to his business that was appreciated by the guests. Trust was another very important factor. There were contractors before Meher who had run away after taking advance from students and administration. This risk was not there with Meher.
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Even though the Tata Hall business was not a very protable one, Meher Enterprises continued to serve the college. Over the years, he built a very good relationship with the college. Citing one such incident, Mr. Meher remembers The faculty members and the staff of TIMA help me a lot. They regularly suggest me new dishes that they had elsewhere. This way I kept on improving the quality and variety of the dishes. Even the alumni who come to visit the campus do ask for certain dishes and appreciate me. Lot of people who have stayed in Tata Hall even for a day or two, like professors from other management institutes, disciples of Sri Sri Ravishankar, seem to be impressed by the quality of the food provided by Meher Enterprises. However, there have been some major and minor issues in the past between Meher and TIMA, but each time the two parties have been able to reach a compromise. One such issue was regarding the payment of wages and provident fund according to the government set rules. Meher was not complying with the minimum wage rules and deed the unions. He used to pay his workers lower than minimum wage but give them meals twice a day. According to him, this was an adequate compensation. The unions tried to ban Meher, but they could not hurt him as he had a strong presence in the local area. The administration understood Mehers side of the issue. They did not want to let Meher go despite the pressure from the unions. It was decided that Meher will comply with the minimum wage requirements and in return, the administration will allow him to raise the charges. The contract was also modied to make a license of catering necessary to bid for mess contract thus creating an entry barrier for some of the other parties. The value that Meher was providing TIMA was clearly greater than the extra charges that they had to pay.
Tendering Process
The administration of TIMA invited fresh tenders for the Tata Hall Mess every year. Thus, every year there was an open bidding process to award the Tata Hall Mess contract. Bids from competing parties were evaluated based on vendor reputation, and quoted prices. However, Meher won the bid every time, because of his excellent record of accomplishment and high popularity, he enjoyed among the staff and students. The administration often went out of its way to ensure that the relationship with Meher continued uninterrupted in the Tata Hall Mess. Exhibit 9.1 shows the balance sheet and Exhibit 9.2 shows the salary sheet of Tata Hall Mess workers.
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Student Community
Student community at TIMA plays a lead role in judging the performance of the contractors. Student opinion is a key component of decisions made in the campus. The reputation and credibility that Mr. Meher builds with the organisation is incomplete to an extent, if some levels of trust and comfort are not maintained with the students. It is the student council which is responsible for selecting the contractor. The student councils president negotiates with the contractors to follow the West Bengal minimum wages criteria while providing wages to the employees and provide PF, etc. Every contract is signed on per annum basis. Initially, the contracts are signed on a two months probation period. If everything goes well, it is extended for next ten months. Mr. Meher has put in assiduous efforts to ensure his relation with student community and hence with TIMA. Annexure 9.1 shows the contract details of Tagore Hall Mess.
Recruitment and Training

The workers are selected personally by Mr. Meher based on their experience and competency. The training of the employees takes place at the Tata Hall. Tata Hall being the Guest Mess, everything, from tea to meals has to be served on time and hence the workers there have to be prudent in their work. Initially, the new employees are trained under the old employees of the Tata Hall and then they are given permanent status. It is believed that once they are trained to work in Tata Hall, they are capable of working in any mess. Once they are comfortable, workers then are sent to the messes where there is shortage of employees. The permanent status given to the employees is not compulsory. This is only to ensure that the workers are satised and they work to their maximum capabilities.
Meher Enterprises Businesses Outside TIMA

Mr. Meher has been working since long to expand the business beyond TIMA. He has been successful to some extent to win contracts in some of the prestigious institutions based on his reputation in TIMA. He got contract for a mess at IMI when Mr. Talukdar was impressed by his work and dedication and called Meher to his ofce to offer the mess contract. Mr. Talukdar, the Executive Director of Finance at IMI, Asansol saw his work when he visited TIMA during an annual business meet. Initially, Meher
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started taking up catering services at marriage functions and now he is running mess contracts at IMI and Asansol Business School (ABS). Though mess at IMI is running successfully with good prot margins, mess at ABS is running with bare minimum margins. He now looks forward to get mess contracts from ESI hospital in Kolkata where there is a good scope of business with the strength being 360 students. Exhibit 9.3 shows the current contracts under Meher Enterprises and Exhibit 9.4 shows the estimated annual prot share of each contract.
Future Plans
Should Meher Enterprises focus on catering to other colleges? Meher Enterprises already has contracts for two business schools in addition to TIMA. Could Meher Enterprises leverage experience of the last 32 years to negotiate better contracts with other colleges in and around the region? Will strong positive feedback and a good personal relationship with TIMA work in favour of Meher Enterprises against other bigger and more reputed competitors would be another interesting thing to see. Mr. Meher aspires to form a private limited company and start a chain of restaurants initially starting in the major cities in India. For this, he would like to join some of his close friends. He is also in search of people whom he can trust and whom he can join in his company to expand the business. He believes that by starting the chain he can provide quality service to people by making use of the enormous experience he has gathered over all these years. He is now looking into the legal aspects and the trusted partners to start the company. An interesting thing to see would be from where he pools out the money to start the private limited company and how he will be able to coordinate his work to excel in the business and not disturb his ties with TIMA. Moreover, if he starts the company, his successor, who would take care of the business after him is still a big question in his mind. His future plans also include setting up of an old age home. He nds himself becoming old and plans to setup an old age home where he can stay and supervise all the activities. Moreover, he nds much prot margin in this business. For this, he plans to buy a land near the railway station and build an old age home. He already owns a small piece of land near a temple for this purpose, but the temple association wants him to sell the land to them, as they want the land to be in the temple premises. Will he be able to manage the old age home and the catering service at TIMA?
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Exhibit 9.1 Balance Sheet for Tata Hall Mess
LIABILITIES As per last account: 1,154,161.58 Add. Net Prot: 550,315.38 1,704,476.96 Less: Drawing 292,000.00 1,412,476.96 Secured loan: 671,700.09 (SBI JOKA BRANCH) Current Liabilities Sundry creditors: 75,200.00 P.F & E.S.I contribution: 183,986.00 TOTAL: ` 2,343,363.05
ASSETS Fixed assets: Current assets: Closing stock: Sundry debtors: T.D.S: Cash in hand: 597,335.65 1,048,445.00 508,834.00 103,188.00 85,550.40
Computation of Income tax:

Net prot during the year:550,315.00 Tax on ` 550,315.00: 63,095.00 Education @ 2%: 11,006.00 H. Education @ 1%: 5503.00 ` 69,704.00
Exhibit 9.2 A Monthly Salary Sheet of Tata Hall Workers
Worker Days Daily Basic Over Over Gross Name Worked Wages Pay time Time Salary Amt. W1 27 193 5211 11 2123 7334 W2 26 193 5018 11 2123 7141 W3 23 193 4439 4 772 5211 W4 26 193 5018 3 579 5657 W5 24.5 193 4729 4.5 869 5598 W6 21 193 4053 6 1158 5211 W7 21 193 4053 8 1544 5597 W8 25 193 4025 0 000 4025 W9 15 193 2895 5 965 3860 W10 25 193 4825 6 1158 5983 W11 26 193 5018 3 579 5597 W12 24 193 4632 3 579 5211 W13 25 193 4825 5 965 5790 W14 16.5 193 3185 8 1544 4729 W15 25 193 4825 12 2316 7141 W16 24 193 4632 7 1351 5583 W17 18 193 3474 8 1544 5018 Manager 7000 7000
E.S.I P.F Total
Net Salary 7453 1823 5927 6435 6368 5927 6366 4578 4413 6806 6367 5928 6518 5380 8121 6351 5708 7963
129 125 91 99 98 91 98 70 54 105 98 92 101 83 125 98 88 123
880 1009 857 982 625 716 679 778 672 770 625 716 671 769 483 553 463 533 718 823 672 770 625 717 695 798 568 651 855 980 670 768 602 690 840 963
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MEHER ENTERPRISES Exhibit 9.3 Current Mess Contracts Held By Meher Enterprises
187
Mess Name Tata Hall Tagore Hall Lake View IMI Mess ABS Mess
Institute TIMA TIMA TIMA IMI Asansol ABS
Capacity 225 150 380 250 350
Exhibit 9.4 Estimated Annual Prot Share of Catering Contracts with Meher Enterprises
TAGORE HALL 21%
ABS MESS 2%
IMI MESS 14%
LAKE VIEW 28% TATA HALL 35% Annexure 9.1 Tagore Hall Mess Contract This contract is between Tagore Hall Mess Committee and M/s Meher Enterprises to operate Tagore Hall Mess affecting from 21st June, 2011, for a period of 1 year, subject to renewal. The terms and conditions of the contract are: Scope of Work: 1. To manage the operation of Tagore Hall Mess and serve high quality food to the students by deploying the required personnel. 2. All the vessels and the necessary utensils are to be provided by the Contractor. 3. All products used in food preparation should be of premium quality and BIS/ISI/ FPO, etc. certied. Vegetables, cheese (paneer), sh & chicken/mutton should be fresh and properly dressed.
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188 CASES IN BUSINESS MARKETING 4. The breakfast would be served from 7:45 AM to 10:45 AM, lunch from 1:00 PM to 3:00 PM, tea, coffee with snacks from 5:00 PM to 6:30 PM and dinner from 8:00 PM to 10:00 PM. 5. Food has to be prepared as per the menu decided after due consultation between the contractor and the Mess Secretary. 6. Apart from the above, there has to be la carte of food being made available too. The students can then choose what they want to eat. Students, who choose la carte item, will need to bear an extra cost, which shall be clearly displayed. 7. The cost of la carte dishes will be decided in agreement with the Mess Secretary and will be priced reasonably. No ready-made item can be sold above the MRP. 8. Only those students who are a resident of Tagore Hall, Annexe Hostel or NH Hostel are permitted to register in the Tagore Hall Mess. 9. For students registered in Tagore Hall Mess, mess charges on monthly basis should be collected by the Mess Committee in advance. The Contractor shall maintain a register and conrm the order for la carte (extra) items by getting the students signature. These charges will be collected through the monthly mess bill. 10. For non-registered students, the canteen will be operated on a pay as you eat basis. The Contractor shall collect cash for such orders and the Mess Committee will not be responsible for collection of the same. 11. The monthly registration charges for the package that includes breakfast, lunch, evening snacks and dinner will cost ` 2050/- for Vegetarian and ` 2150/- for Nonvegetarian. 12. The monthly mess bill will be handed over to the Mess Secretary in the last week of every month (billing cycle being 25th to 25th of consecutive months). This bill will include the package cost and extra ( la carte) charges. Terms and Conditions: 1. The Contractor shall maintain duty register indicating the names and addresses of the persons engaged by him and other relevant records and produce them for inspection as and when required. Such a register should be periodically certied by mess representative. 2. Persons employed by the Contractor shall not be below 20 years of age or above the age of 50 years, except for the position of Head Cook/Manager. 3. The personnel deployed by the Contractor shall be the employees of the Contr actor and not of Tagore Hall Mess Committee and the Contractor shall solely be responsible for such employees, pay the minimum wages stipulated by the
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4. 5. 6. 7.
8.
9.
10. 11.
12.
13.
State Government and abide by the prevailing social security and other labour laws, etc. The Contractor should have proper registration for food/health license, labour license, ESI, PF, Pan Card, IT Clearance, etc. under Contract Labour Act/Rules. The Contractors staff shall not use the bathroom, common room and any other facilities, which are meant for the students. The Contractor will provide salaries, uniforms and other expenses of his staff. The Contractor shall be solely responsible for the conduct and behaviour of the personnel deployed by him. In case the work or any conduct of any of the personnel deployed by him is found unsatisfactory or the misbehaviour/misconduct of his staff is noticed, the Mess Committee will have the right to issue orders to the Contractor to remove such persons forthwith and the Contractor shall provide replacement without any extra cost and compensation in a timely manner. The Contractor should get the antecedents of the persons deployed by him veried through the Police and the verication reports be made available to the Mess Committee. The Contractor shall be liable for losses due to theft or otherwise if manifestly due to his personnel and the value of the materials so lost/damaged shall be made good by the Contractor without prejudice to any other course of action that may be taken by the Mess Committee, if such loss/damage is proved in the opinion of the Mess Committee. The Contractor indemnies and keep indemnied the Mess Committee from all claims, demand proceeds, arising during tenure of Contractor, or thereafter. The Mess Committee bears the right to inspect the canteen area and for disservice/ improper hygiene, etc. to impose penalty. It is further claried that the Contractor will be directly under the control of the Mess Committee for all the purposes. Any party (Mess Committee or Contractor) in the condition of discontinuing the mess catering service will have to inform the other party at least one month in advance. However, in case of breach of contract on part of the Contractor, the Mess Committee reserves the right to terminate the Contract with immediate effect after imposing a penalty on the Contractor, up to a maximum of 10 per cent of the contract value. The Contractor will have to deposit a refundable security amount of ` 20,000/- to the Tagore Hall Mess Committee on the day of signing the contract.
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190 CASES IN BUSINESS MARKETING 14. There will be a probation period for rst 2 months from 20th June 2010 to 20th August 2011. The Contractor will have to abide by the provisions contained in the labour laws and rule as applicable in the State of West Bengal, viz. Payment of Wages Act, Minimum Wages Act, Contract Labour (Regulation and Abolition) Act, Employees Provident Fund and Miscellaneous Provision Act, Payment of Bonus Act, Employees State Insurance Act, etc. and rules made thereunder along with the notications and orders issued from time to time by the authority/Government of West Bengal, Statutory deductions of Sales Tax/VAT and Income Tax will be made at source against such payments as per rule.
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CASE
10
Prime Transport Limited: Exploring Long-Term Relationships in Logistics Industry Logistics Industry1
Ramendra Singh and Rohit Ghosh
Introduction to the Case: Nature of B2B SupplierBuyer Relationships in the Logistics Industry
The relation of suppliers with their purchasing rms is a matter of contention. Even after several years of relationship, the element of the relationship appears to show a mix of transactional and relational elements. Considering a time-based approach of the relationship from the buying rms perspective in this case, we notice that the buying rm wants to renew contracts annually. While from the suppliers point of view, this is a long-term relationship. There may be two main outcomes if two parties have different negotiation behaviour: 1. If the parties use different negotiation behaviour in the short term (i.e. one uses competitive and the other uses cooperative behaviour, no long-term relationship will develop. 2. If the parties use different negotiation behaviour in the long term (i.e. one party is in a position to use command behaviour), a long-term association rather than a relationship will occur. This forms the background of the case study on Prime Logistics Limited, which is a supplier of logistics services to a large metal mining rm Super Resources Limited.
1 This case has been prepared by the Ramendra Singh and Rohit Ghosh solely for the purpose of classroom discussion of a business situation and does not intend to highlight either effective or ineffective handling of the case situation by any company or persons. Some names, i.e. of the case characters, business entities, and the companies have been either disguised or altered to protect identities. The authors are indebted to several PGP2 students of IIM Calcutta (2009-2011 batch) for their initial efforts in case writing.
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192 CASES IN BUSINESS MARKETING Suresh Aggrawal, Executive Director of Prime Transport, was sitting back at his ofce late into the night. Tomorrow he has got a presentation, followed by a meeting scheduled with Mr. S. D. Bajaj, Logistics Head (East), for extending Primes logistics services to the Super Aluminum Co. Ltd. located in Orissa. For the past 20 years, Super has outsourced its inland (production site bound) logistics for its zinc venture (Super Resources Pvt. Ltd.) to two 3PL logistics rm on an annual contract basis, and Prime Transport was one of them. The problem is that, till date, operations in and around Orissa has been carried out by hiring trailers and trucks from spot markets. To provide Super with proper logistics services would mean having a permanent set-up there that would in turn require taking a huge nancial loan. However, that option can spell trouble for Suresh if Super does not renew the contract after a year or two. Then it could be a huge burden to the transport companys balance sheet to pay off the loan. However, having such an illustrious name as Super in their client list would pave the way for future contracts with other mega power players in India. Even their dream of establishing themselves as transnational logistics powerhouse would not be then far away. Moreover, having Super as one of the long-term customer would mean a xed amount of revenue being generated every scal year. However, the hitch lies even if Super is looking to hedge a long-term deal as that also has its consequences. As Super holds the command in the relationship, it would be looking to gain maximum customer value out of the relationship, driving down the price line for maximum protability. Therefore, it is a tough decision that Suresh has to contemplatewhether diverting a majority of his resources to the project would be a good idea.
Prime Transport Limited

Of all the services that a transportation company can provide to its customers, the most important one is the peace of mind. With this exact motto in his mind, Mr. Rakesh Aggrawal started out 27 years ago from a single-roomed ofce Prime Transport Ltd. in 1979 in Mumbai. Almost single handedly, he soon set up four branches, with project transportation as the core business activity. The rst project, a sugar plant for Walchandnagar Industries Ltd. for Nepal, was a great success. One success after another set the way for Prime Transport to become one of the most widely recognized names in and around Mumbai. A good 7 years later in the year 1986 joined Mr. Suresh Aggrawal. A livewire that he is, it was under his leadership that Prime Transport gained prominence all over India. In the past 20 years, he has succeeded in converting Prime into a modern and
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PRIME TRANSPORT LIMITED: EXPLORING LONG-TERM RELATIONSHIPS IN LOGISTICS INDUSTRY RELATIONSHIPS
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vibrant transportation and logistics company worthy of success in todays fast paced world. Currently, the Managing Director of Prime Transport, he is actively involved in marketing, team building, and providing a clear future course for the company. Today, it is a ` 1200 million organization providing efcient, cost-effective, innovative, and tailor-made solutions to a discerning list of clientele in India and across the globe. At present, it employs over 250 employees. These employees are professionals from every sector of the industry and their combined strength brings a wealth of expertise.
Indian Transportation and Logistics Industry

Healthy economic growth in India since 2000 has been increasingly supported by robust industrial growth. One of the relatively lesser known but signicant sectors that supports almost all industrial activities is the logistics sector, which is also witnessing this growth as a follow through. The ` 4000 billion Indian logistics industry, growing at an average rate of 20% annually, is driven by robust economic growth, rising export and import, government infrastructure investment and logistics outsourcing. Logistics cost accounts for nearly 13% of GDP, higher than that in the United States (10%), Europe (11%) and Japan (10%). The US$58 million Indian 3PL (third party logistics) industry caters to around 55% of Indian companies that outsource logistic services such as supply chain management and warehousing. Indias outsourcing of 3PL is expected to grow into a US$90 million business by 2012.The annual size of Indias multimodal transportation segment is around 3 million containers, which is still considered nascent with an attractive potential. The Indian road and rail industry grew by 10.8% in 2010 to reach a value of $90.9 billion. In 2015, the Indian road and rail industry is forecast to reach $137.3 billion, an increase of 51% since 2010. The Indian road and rail industry grew by 9.2% in 2010 to reach a volume of 1689.3 billion FTKs. Road freight is the largest segment of the road and rail industry in India, accounting for 84% of the industrys total value (also see Annexure 1 ).
So Why This Sudden Boom in the Logistics Sector?

Competition is prevalent in every industry and companies try to nd a source that gives it a competitive advantage over its competitors. Earlier this competitive advantage used to with cost or product differentiation. Differentiation to the end consumer is difcult through variations and value adds in the product itself. Companies often try to differentiate themselves from each other using pricing methods (bulk discounts) or superior service in logistics. Logistics is a source of competitiveness in the industry as the demand can be uncertain sometimes and lead times are low. Many companies have used logistics to gain an advantage over others, such as Wal-Mart using VMI, Toyota using JIT and so on.
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194 CASES IN BUSINESS MARKETING A factor that has contributed to the growth is the production cost. It involves two aspects: the cost of raw materials and the cost of converting the raw materials into the nished product, this being affected by local factors such as energy and labour costs where the production site is located. Let us take an example of zinc production in India to examine how reduction in production cost is crucial in gaining edge over other rms. Typically, in 2008, the cost of production of zinc was $1462/ton, raw materials accounting for $827/ton and conversion $635/ton. Therefore, we nd that the cost of producing zinc involves the operational cost up to 40%, and during 2008, the prices were skirting around this level (lower than the total cost or at par with it) in most of the metal exchanges. It is evident that even 1% reduction in cost is very signicant for a company involved in the production of zinc. Other than the production costs, transportation costs can further increase the total costs. Therefore, decision pertaining to outsourcing logistics function becomes crucial. Outsourcing logistics to a 3PL logistics service provider means that the company will not require owning eet, especially when the rm needs specialized transportation. 3PL reinforces supply chain management, widens market share, reduces conventional logistics costs, and makes it possible for companies to expand into new markets, decreasing logistics challenges. The need for quick service has catalyzed the growth of Indias US$1.6 billion express service cargo industry, growing at a 2025% and expected to more than double by 2012. Moreover, globalization has prompted Indian companies to integrate their supply chains with international markets, thus increasing the demand for relevant logistics services. The reason for road transport to gain prominence compared to other modes such as railways and shipment is the greater coverage that occurs compared to other modes of transport. Moreover, it brings higher exibility in terms of door-to-door delivery, giving it an edge despite higher effective cost and lower risk of handling loss due to lesser loading and unloading of good. Other reasons for this growth can be attributed to the opportunities for growth it provided for someone starting from scratch as Suresh did 27 years ago. This industry is considered attractive as it is not capital intensive, does not require considerable working capital and generates a reasonable return on employed capital.
Industry Structure and Nature of Competition

In a natural outcome of the benets and the easy returns available from the industry, it is obvious that there would be numerous players in the market, leading to a fragmented market structure. It is estimated that while outsourced logistics accounts for 54% of total logistics spending in India, organized players have only 10% of the
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total pie. In road transportation, which accounts for the biggest portion (36%) of logistics spending, 74% of operators are small-time players owning a single vehicle. In outsourced warehousing, 92% of players are from the unorganized sector. Two-thirds of the total trucks are owned and operated by transporters with eets smaller than ve trucks. The result is intense competition, low freight rates and thin protability. The entry of global logistics players in India is helping local companies benchmark with global standards that is making it tougher for the local players. Lack of adequate infrastructure and complex taxation and regulations are other major problems. Movement of cargo on roads has several loopholes; for example, national highways constitute only 2% of Indias road network, but they handle more than 40% of road freight trafc. This inevitably leads to trafc congestion. With the increased spending by the government in building and maintaining national highways and the completion of the golden quadrilateral which is expected to connect the far-ung regions of the country and reduce the transit time, the overall efciency of road transportation is expected to improve considerably.
Is the Industry Organized and Where Will It Go from Here?

An organized structure in this industry holds the key to overcoming the hurdles mentioned above and it is the approach to surviving in this highly competitive industry. An organized structure implies an own eet of vehicles and properly trained professionals working in respective teams and handling different proles. Most companies outsourcing logistics to 3PL players have cargoes of varying shapes and sizes, which need trailers of different capacities. Other than the abovementioned general cargoes, there are also ODCs (over dimensional consignments), dened as the cargoes that are extremely large in dimension and used in megaprojects, such as construction, turbines and mills, and have to be transported by road to the project site. ODC is transported by long trailers (typically double decks). Based on the different types of cargoes, companies go for different kinds of contracts. In the annual contracts, the shipment usually involves goods of standardized specications. These goods having xed dimension and weight (such as 3.5T) are carried in tempos, open trucks, and so on. Vehicles are mobilized in advance in case of standard (annual) contracts. On the other hand, ODC shipment involves variable contracts where rates are decided by different dimensions and weights. In this case, enquiries are sent to 5 to 8 major transporters who quote their prices based on availability of eet, market conditions (demand), and the size of shipment. The demand uctuates in these cases and is usually higher at the end of the nancial year. A higher demand means lesser availability of vehicles, leading to a higher price. This is where owning a eet provides
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196 CASES IN BUSINESS MARKETING the edge over the small-time operators because the latter borrow from spot markets and hence are unable to procure these services. Moreover, during peak demand seasons when there is a fall in the supply of trucks, self-owned eet results in huge prot. An organized structure also help get rid of middlemen or intermediaries. The unique ownership prole in the industry has created middlemen who act as liaison agents. Small trucking operators do not have the geographical reach to tap business on a continuous basis and hence are forced to rely on these middlemen. In the case of general freight where the small operators dominate, it is observed that intermediaries play a crucial role in both price xation and allocation of quantum of movement. An organized transportation would not depend on middlemen to facilitate contracts with rms as they have enough geographical reach to tap these rms. Hence, they decide their price and quantum movement on their own merit. Another important advantage of setting up an organized structure is that it opens up avenues for expansion. Most of the small-time operators are restricted to in their respective regions due to the unavailability of intermediaries and lack of proper inventory to strike a deal.
Prime Transports Offerings

Considering the industry structure and market competition, Rakesh started out 27 years ago to set up a pan-Indian logistics company having a proper structure and a motto to provide peace of mind to all his customers. Today his dreams have been realized as Prime Transport maintains 35 independent and interconnected ofces, each completely manned by professionals and connected by latest technology to every major city, port, and industrial town in India. Each ofce is located in the heart of its business zone and independently capable of managing megaprojects from over 100 industrial towns, cities, and districts across India. Currently, it also has set up over 25 site ofces, which operate only for need-based projects. These ofces also have full communication and conveyance facilities and are situated in close proximity to the projects they manage. Furthermore, to cater to the ever-increasing demand for projects, ofce network is undergoing an expansion plan and with an aim to have over 100 ofces by the end of the next scal. Over 1000 trucks, 400 trailers, 10 forklifts and 10 heavy-duty cranes are attached to their services at any given point of time. Moreover, some of their prized possessions include four 460 HP Volvo prime movers, eight especially designed and engineered semi/low bed mechanical trailers for ODC and heavy equipment weighing up to 150 tons and ve heavy-duty mechanical 30 long low bed trailers of 40 tons capacities (for more details, see Annexure 2).
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With all these carriers, the different loads and cargoes that it can carry vary and it has solutions to the demand of every customer. It fulls the varying needs of the customer. Some of the main services offered are discussed next.
Integrated Project Logistics

The major challenges of project logistics include minimizing costs, improving transport efciencies, overcoming trade, technical and paper obstacles, and constantly improving technologies to ensure completion of project in time. At Prime, single-window services are offered that covers all aspects of integrated project logistics and aim to offer 3PL and SCM services to meet the various demands of its customers.
Heavy Lifts and Over Dimensional Consignments

In addition to its own capacity to lift single consignments up to 240 tons, Primes alliances with Indias reputed hydraulic axle owners have enabled it to lift single consignments up to 600 tons without time or mechanical delays. A special team of professionals and technicians preplan the transportation process and ensure that the consignments arrive at the predetermined place on time. It is noteworthy that this business-to-business (B2B) marketing strategy, one of those important relationship marketing (RM) policies undertaken by Suresh, proved fruitful for Prime. The longterm deal has helped Prime move ahead of its contemporaries.
Route Survey
Route survey services and feasibility study ensure that there is no hindrance to transportation by road ahead. The technical team examines the route and creates a feasibility report that provides them a peek into all possible obstacles and snags likely to be present on the route much before the consignment moves out. Building of roads, where no roads exist, reinforcement to weak bridges and extra pullers/pushers for difcult terrain ensure that there are no hurdles to the nal destination. This is an example of providing increased customer value at the same price.
Project Tracking
Since all the vehicles are manned by personnel having all India roaming cellular phone facilities, they provide real-time reports about the progress of the consignment on a daily basisyet another example of extra value addition for the customer satisfaction.
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Site Management
This crucial aspect of transportation offers on-site management of cargo to completely avoid any possibility of error and delay. The site managers ensure smooth functioning of loading, unloading, and warehousing services at all given time. They offer vehicles HSE norms and policies strictly and ensure all aspects of safety.
General and Break Bulk Cargo

Prime also offers general and break bulk cargo transportation for projects from any one point to another. Its expertise ensures seamless transition of cargo, whether import or export, and has the capacity to manage single shipments up to 20,000 freight tons at a time.
Customs Clearance
Prime also offers services in arranging inbound/outbound customs clearance, documentation, insurance coverage, and survey to ensure complete well-being of the freight to the smallest details.
Port Handling
Services in port handling include local movement of import and export cargo within the port premises and receiving, shifting, stufng, de-stufng, loading, unloading, storing and dispatching all import and export shipments with complete safety and care.
Looking at the Past and Future

With such improvised services to its credit, Prime has attracted some illustrious names over the past few years from all sectors. Their association with mining rms started way back in 1993 with an Integrated Steel Project at Bellary, followed by a Copper Project at Bharuch in the next year. Next, it was followed with another steelmaker hiring Prime Transport for their Integrated Steel Plant at Raipur. Soon the big leap came during 19981999 when Prime Transport was in charge of transportation of the 7000 tons strip mill from Australia to a location in Haryana for another steel major. The next few years saw it bagging projects in cements and allied industries until in the year 20042005 when Super offered Prime Transport their rst project. It was a smelter project in Madhya Pradesh, followed by the 270 MW power plant at the same venue. More recently, they got the project from a private steel major in which they were offered the 3PL logistics service for the expansion of steel plants at their two
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locations during 20052006. As part of the clients strategic collaboration policy to go for a long-term alliance with Prime Transports, they also outsourced their logistics to Prime for their Integrated Steel Plant in Orissa. The last megaproject they handled was that of a zinc major, where they were among the two logistics companies which handled the 3PL logistics for the zinc plant in Rajasthan. As of now, their plans include increasing the number of employees through a welldesigned recruitment policy. An increased strength of unskilled labour will facilitate their expansion plans and serve the need of the hour, that is, provide logistics services to more rms. An increase in the skilled labour would, on the other hand, help Prime to provide better value-added services to its customers. For instance, it would enable Prime to provide customers with buyers team or may be more technical insight into demand forecasting, including understanding markets and evaluating the value of the service. As of now, they have also set their sight on foreign shores. Their rst partially successful project was way back in 19981999 when they were involved in transnational logistics operation from Australia to India for a steel strip rm. Since that megaproject, they have not been involved in any major international project. One of the major future policies of Prime is to take advantage of the globalization and enter the international market in a big way. As most buyer rms prefer to go for an increased value but locked-in price model, it is imperative for rms to a provide b uyer rm with an added customer value so that it exceeds their expectations for the price paid. Customers are satised when they are aware that value is in excess of the price paid, it does not matter by how much. Therefore, they have planned a steady value addition policy, which the company plans to bring into effect in the next scal. Some of the schemes they are planning to roll out are as follows: Geographical information systems and continuous move routing: These systems would allow rms to track the movement of the goods and plan their production and transportation schedules and other tasks appropriately. In addition, continuous move routing results is improved asset utilization and more desirable and costeffective routes for carriers, drivers, shippers, and consignees. Inbound/outbound integration: Though integrating the inbound logistics and the outbound logistics would require more control of the logistics system, it can help increase the utilization of resources. That would in turn result in more return on investment and impact shipment planning, vehicle scheduling and routing.
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200 CASES IN BUSINESS MARKETING Freight consolidation: Shipments are routed and scheduled independently of each other or can be combined to achieve economies of scale. Freight consolidation can be carried out by vehicle routing, pooling, or scheduling. Just in time movements: This ensures that there is less emphasis on storage costs and it involves effective shipment planning and supply chain design. Freight collaboration: The main advantage of freight collaboration can be the difference between meeting and exceeding cost and service goals. It enables carriers to transcend their own operations and achieve performance levels that were seemingly unobtainable. In addition, collaboration has proven to be a timely strategy for meeting capacity and cost challenges. The problem lies in the fact that all these expansions and policies require a huge nancial support. This is where Suresh has to decide the reallocation of the resources in the best possible interests of Prime Transport.
Super Resources
Super Resources Pvt. Ltd. is a diversied FTSE 100 metals and mining company, and one of Indias largest non-ferrous metals and mining companies based on revenues. With assets and operations in India, Zambia, and Australia, it is primarily engaged in copper, zinc, aluminium, and iron ore businesses. Recently, it has ventured into commercial power generation business. It has experienced signicant growth in recent years through various expansion projects for copper, zinc, iron ore, and aluminium businesses. Revenue from businesses touched $8 billion in scal 2010, representing a compound annual growth rate of 21%. Super operates in the following ve sectors in the metal and mining industry: copper, zinc, iron ore, aluminium, and power generation businesses. Supers products have been well received in overseas markets. During 20082009, 60% of the total production was exported with major global clientele based in South Asian countries. The registration with London Metal Exchange (LME) is expected to boost footprint in the international market further. This would also provide the companywith the global exposure, which is central to its expansion plans.
Logistics Model Followed by Super

Super enters into an annual freight contract every year. These contracts are awarded on the basis of volume of the business. This transportation contract is only for inbound logistics (raw materials and work in progress). For outbound logistics (nished goods),
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they have different suppliers and an altogether different working model. Economic capability and prior relationship with the company are also taken into consideration while awarding the transportation contract. Super gives special focus on long-term relationship with suppliers. Super receives most of the consignments at the Mumbai port and from there these are transported to Supers mining locations. Almost all the consignments are transported to locations in Rajasthan. Therefore, this is the typical route where in-bound logistics of Super is outsourced to a transport supplier company. The pricing model of Super in relation to its supplier is based on the current demand in the market. It is seasonal and typically it is as per the terms and condition of the annual contract between Super and its supplier.
Why outsource logistics?

The options available before Super related to managing its logistics function are as follows: 1PL: The supplier takes care of its logistic functions. This is slowly disappearing as suppliers concentrate on core competency. 2PL: This is a dedicated logistic by a third party and provides exclusive services to one manufacturer. This reduces exibility in the relation and thus it is not so popular. 3PL: The logistics is outsourced to a third party which owns its assets and is not dedicated to one supplier. This is prevalent with large industries and is generally a long-term commitment and strategic partnership. 4PL: This is 3PL logistics where the carrier does not own the assets and provides only services. This is generally not found in this industry. The core competence of Super lies in mining and metal industry. They do not believe in-house logistics, as they intend to keep focusing on their core competency. Outsourcing logistics appears to be a sound business decision as it not only reduces overheads but also leads to service improvement. In addition, it ensures that their expansion projects meet high conservative nancial norms and do not place an unwarranted burden on their balance sheet and nancial resources. In addition, time to market is one of the important drivers for Super. Can the logistics provider deliver the companys goods on time? this has always been the primary consideration. As railways, road transport, and aviation services get suspended in several states during bandh, suppliers sometimes face a major problem in delivery, and this is another concern. Another challenge for Super is that the consignments received at Mumbai
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202 CASES IN BUSINESS MARKETING port are of varying sizes and of distinct nature and they have to be transferred under a certain temperature. Hence, the supplier handling the logistics has to take care of this aspect and provide trucks which have refrigeration facilities as well as the capability to carry consignments of different sizes.
The Service Provider Policy

Super has maintained strategic relationship with its small-time suppliers. This is quite evident from the logistics policy it has followed for its zinc venture. Being more powerful than the suppliers has helped it in getting the maximum value from the suppliers at the least possible price. These contracts are normally awarded to two different transporters, both small-time players on an annual basis. The benets are multifold as there is an intense competition for getting annual contract renewed at the end of the year with increment in the amount of consignments to be handled.
How Does It Help Super?

It helps Super as the intense competition assures them of on-time delivery of goods. This becomes vital as large important projects can get stalled due to any shortcoming in timely delivery. Moreover, it provides them the required exibility and removes dependency on one service provider. It provides technical exibility as 3PL players adopt technology advancement in a fast and cost-effective way just to stay a step ahead of the competitor. This leads the way for Super to gain the maximum value out of the relationship.
Prime TransportSuper Resources Pvt. Ltd. Relationship

For the past 20 years, Prime has been one of the 3PL service providers to Supers plant in Rajasthan. For handling the logistics operations and providing value-added services to the customer, Prime Transport Ltd. has also a sister company called Prime Global Logistics Ltd., which has independent operations and takes care of the freight handling, importexport duties, and customs clearing. There are separate contracts oated for both the operations (transportation and logistics) and it is up to the company to hire these services. In the case of Super, however, only Prime Transports Ltd. takes care of the transportation services. One of the most crucial components of the purchasing function is supplier selection and gauging the possible value addition from the side of the supplier. Super requires following value-added services: loading and unloading of materials, availability of special vehicles based on the size of containers, refrigerated
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transport facility for selected materials, and centralization (all these are currently being provided by Prime Transport). Suresh needed to decide on his priorities at this stage of business as to which customers to serve and which requirements to satisfy. Rather than pursuing the same relation with all customers, he must direct his resources to areas which deliver the greatest value. In order to determine these, he need to rst segment the market using progressive bases, such as customer application, business priorities, and usage situations. After segmenting the market, he should target segments in which their services would have more value for collaborative emphasis or segments in which it is not good for transactional mode to deliver superior value.
Market Segmentation
Oil renery industry: Large players having business over the entire world and have large revenues. As oil renery plants are already huge, maintaining an own eet of trailers and trucks would be an implausible option for oil renery giants. Moreover, the value delivered increases considerably because the items transported are highly inammable at times and need extra attention during packing and warehousing. On usage terms, it is one of the leading users of transports and logistics services because of the extensive area covered by each plant and its allied plants. Considering business opportunities, this segment ranks high because of the allied by-product industry whose raw materials are to be transported from the plants to these industrial sites. Coming to chances of advancement in future, there is a high probability of advances in technology which may help in expansion of business for Prime Transport. Mining rms: These are big players as they are part of established multi-national rms having huge turnovers. In order to focus on mining and allied activities, affording a transport system of their own would mean extra nancial burden on them, and thus a 3PL logistics and transport would reduce their costs considerably. Mining rms need containers of varying dimensions with specic requirements. As far as usage is concerned, the use of transport and logistics services is heavy in this industry as there is a need for regular transportation of raw materials to plant site and allied plants. Moreover, they have power plants associated with them on certain occasions. The chances of advancement in technology are high in this industry, though they are not as high as those in power plant industry. Power plants: The power plants are also large players though not as large as mining rms. So far, these plants and the cement industry have an equal share of Prime Transports business. In terms of value provided for power plants also it is an
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204 CASES IN BUSINESS MARKETING expensive option for power plants to have their own transport. Transportation is a very important for power plants and timely arrival of raw materials can help to considerably reduce the cost of power plants. Here also there are large load operations, that is, heavy usage of transportation. The chances of technological advancements and modications in the mode of transport are highest in this industry. Cement industry: It is characterized by relatively small but numerous players with quite a few of them having dominance in the market. Coming to value delivered, the fact that some of the major players have their own transport system clearly indicates that the value delivered is not as high as that in the previous two cases. The mode and amount of transport involved in this industry do not require specializationit needs timely arrival to avoid unnecessary expenses. Usage is considerably high in this industry as well though chances of any breakthrough advancement of technology are lower in this industry compared to the above two. Food and other perishable food items industry: Small and numerous players make this industry prole less protable. The value delivered is high though it is best to go for a transactional relation in this case, as there is no huge gain from the collaborative effect. Considering technological advancements and usage situation, this industry ranks lowest in scope and prospects for investment of Prime Transport (for the comparison in chart form, refer to Annexure 3). After segmenting the market, the next step is targeting the segments where their transport services offer the greatest value. From the above discussion, it follows quite reasonably that a collaborative relationship would be more protable in mining and power plant segments because the value delivered is greatest. Moreover, Super is a lead user when it comes to mining across the globe. The present requirement of Super will reect the segments needs in following months and years. Because of collaborative relation with Super, developing solutions to their problems will also help Prime Transport in serving other customer. As Super also owns power plants of their own, it would a growth of the collaborative relation that could help them move on to bigger projects in the power plant segment, where value delivered is highest. Therefore, it makes lot of sense for Suresh to direct a major chunk of his resources to the upcoming project at the new site to strive for a collaborative relation with Super.
Super and Prime Transport: Present Scenario

The relation has existed for 20 years, as Prime Transports has been the 3PL transport provider for Supers zinc venture in Rajasthan. In these years, Prime Transport has bagged two more projects from Super: one 270 MW power project at Korba and a
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smelter plant at the same location. The above-mentioned relationship was based on an annual contract that Super offered to two transporters for the plant, Prime Transport being one of them. While Super had a command behaviour in this negotiation, Prime Transport always had a coordinative behaviour in this relationship. The relationship from the Supers point of view is of short term, as it always renews contracts annually. While from the Primes point of view, the relationship is of long term. At the core of all successful relationships are two essential behavioural characteristics: trust and commitment. Leading rms demonstrate dependability over time. By starting on a small scale through pilot projects, they gradually increase the scope of alliance over exchange episodes; a rm can fulll larger and larger promises. The various steps needed to grow a collaborative relation include the action of one of the rms in the best interest of the other rm. Obviously, this has not been the case with Super and Prime Transportsthe trust levels are low in this case. The main reason for this lack of honesty in the relation is the power imbalance of the two rms involved. Super, on the one hand, is a mining giant with annual revenue of $8 billion and having investments in other industries as well. Prime Transports, on the other hand, has no major market dominance. The relative size obviously gives Super more bargaining power in the relationship, an advantage they did not let go. So it is quite reasonable for Prime Transports to make legitimate sacrices in their own interest. However, given the long-term association of these companies, it does not augur well for any of them to continue with the same lack of trust. As for Super, this lack of trust has resulted in a lack of commitment from Prime Transports to serve Super better. There has been an absolute lack of cooperation in their relation, which means a lack of coordination to deliver cargoes and good on time. Moreover, the collaborative relation would have meant an increased commitment level from Prime Transports and even developing solutions jointly to cater the need of Super. The process would have promoted sharing norms about working together, jointly creating values, and sharing benets, entailing an overall benet for both the rms.
Working towards a Collaborative Relationship

To approach Super for the collaborative relation, Suresh assessed the existence of levels of collaboration in the transport and logistics industry. He found out some reasons why collaboration is not a very popular choice among the customers and ways in which a collaborative relation is applied to the mining industry. The starting point was the reasons why collaborations are less pursued in the industry. One of the main drivers of this market trend was undifferentiated product and product dispensability. This consequently led to larger buyer independence and lower switching costs. Therefore,
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206 CASES IN BUSINESS MARKETING to start with, Suresh should offer relationship-specic offeringa differentiated product offering specic to Supers needsaring out of the industry bandwidth with augmentation. For this, operations researchers should be hired to build a distributors model based on Supers physical distribution requirements. Based on this model, Prime Transport should make offerings aimed at providing end to end supply solutions to Super. Relation-specic offers can include options for Super to be able to select models for transport, optimal sequence for off-loading. The other option of risk sharing gain sharing can also be extended to Super, which can include ways to provide faster means of transport with included clauses of late delivery and damage of goods. The present contract includes the clauses as liabilities on Prime Transports without any benets for improved performance. To reduce buyer independence and increase switching costs for Super, Prime can also propose an increased correspondence between the two rms across various functions and this can be a key step towards promoting open and honest communication between the rms and bridging the gap that has existed between them for the last 20 years. In this way, both rms would minimize the detrimental effects of untimely departure of a key employee who often possesses strategic contacts in the other rm. Benet for Super: They can save on order expenses. Prime Transport at the site would make sure a timely delivery of goods as an account of the inventory that should be kept. Moreover, Prime can be instrumental in providing solutions to transports and logistics problems that may arise. Benet for Prime Transports: The advantages of being associated with a lead account in the industry can be availed properly. The latest trends in the industry can be studied more accurately, and the aws in the transport system can be understood and rectied. Finally, the most important concept that can be proposed by Suresh would be single sourcing and multi-sourcing. First, it is important to make Super realize the value of single sourcing at each plant site regardless of the supplier. The problem of Super trying to promote competition and rivalry between the supplier rms can be circumnavigated by proposing multi-sourcing, that is, single sourcing at all plants with different suppliers at different plants. This idea would also both keep Supers interests alive and serve Prime Transports idea of increased collaboration retaining the same power equation. The next step would be convincing Super that selecting them for single sourcing will deliver added value. The point at which providing consistently the same value at a constantly decreasing price level (due to the power advantage that Super possesses) becomes unprotable for
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207
Suresh is the critical moment of truth for the relation. At that point, he should freeze the contacts at the present level, that is, not offer anymore collaborative efforts that it may be offering to its collaborative partners. The solution to the power imbalance and its misuse would be a proper documentation on Prime Transports behalf to make it apparent to Super that high investments are at stake on both sides of the relationship. This interdependent balancing action would be intended to equalize the importance of the relationship to Super. As of now, the best bet for Suresh would be to go for a long-term collaborative relation with Super. In case Super does not offer the provisions for collaboration, the other option would be to go for an annual contract, provided it is single sourced to them. The other options would apparently bear no fruit in the long run!
Annexure 1: The Indian rail and road industry volume and % market share (in billion FTKs, 20062010(estimated))
1,800 1,600 1,400 1,200 1,000 800 600 400 200 0
billion FTKs
% Growth
2006
2007
2008 Year
2009
2010(e)
10 9 8 7 6 5 4 3 2 1 0
billion FTKs
Rail Freight 16.0% Road Freight 84.0%
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% Growth
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Annexure 2 Current eet of Prime Transport Limited
Four 460 HP Volvo Prime Movers Four 380 HP Volvo Prime Movers Two 340 HP Volvo Prime Movers One 260 HP Ashok Leyland Hippo Prime Mover Twenty-ve 280 HP MAN 4028 Prime Movers Twenty-ve 180 HP TATA 4018 - EX Series Prime Movers One hundred and ten 160 HP TATA 3516 - EX Series Prime Movers Sixty Hydraulic Axles (5 units of 6 axles, 6 units of 4 axles, and 3 units of 2 axles) Eight especially designed and engineered semi/low bed mechanical trailers for ODC and heavy equipments up to 150 tons of weight One hundred and ten heavy-duty mechanical 40 long semi-bed trailers of 40 tons capacity Thirty heavy-duty mechanical 40 long at bed trailers of 40 tons capacity Twenty heavy-duty mechanical 50 long semi-bed trailers of 40 tons capacity. Five heavy-duty mechanical 30 long low bed trailers of 40 tons capacity. Over 1000 trucks, 400 trailers, 10 forklifts, and 10 heavy-duty cranes attached to our services at any given time
Annexure 3: Comparison of different market segments for Prime Transport
Value delivered
Business opportunities
Technology advancement (scope for expansion ) Chances are there but not too much innovation in mode of means of transportation expected
Usage requirements
Mining rms
Huge as owning an own eet can cause a huge expenditure which might prevent expenditure in core mining issues
These rms are generally big players and hence a long-term collaboration can create opportunities; moreover, they tend to own power plant, which is another scope
Heavy usage as transportation of minerals to and from the site is involved
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209
Value delivered
Business opportunities
Technology advancement (scope for expansion ) High and actually there is a huge changeover possible in the process of transportation and unloading Maximum chances in advancement of technology of transportation involved
Usage requirements
Oil renery rms
Huge again as having an own eet of vehicles will divert the resources from core issues which are far more costly Quite an amount though lesser than last twoowning a eet is going to hamper the competency of these plants Far less and is quite evident from the fact that a large number of rms do possess their own eet Value delivered is high, but it is associated with far more risks at almost the same prot margin
Again large players and allied industries create opportunities for further business Not that big players and thus quite a few players, making product specialization for long-term collaboration tough Too many small players and hence product specialization is tough to achieve
Heavy and careful usage as there is danger involved in carrying inammable substances High as timely delivery is crucial for functioning of the plants
Power plants
Cements and engineering rms
Lower chances Again high involved here
Sugar and other perishable items
A large number Chances are of players and there but not even includes extremely high individual players
Timely delivery is the most important factor here but usage is generally one time
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