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SeatNumber

DIOTI
202
Case Studies in Strategic Management (New) (From June 2017)
(712020)
P. Pages: 8
Time: Three Hours Max. Marks: 60

Instructions to Candidates:
1. Do not write anything on question paper except Seat No.
2. Graph or diagram should be drawn with the black ink pen being used for writing
paper or black HB pencil.
3. Students should note, no supplement will be provided.
4. All questions carry equal marks.
5. Attempt any three cases out of five.

1. On June 13, 1999 Coca - Cola recalled over 15 million cans and bottles after the 20
Belgian health ministry announced a ban on Coke's drinks, which were suspected of
making more than 100 school children ill in the preceding six days. This recall was in
addition to the 2.5 million bottles that had already been recalled in the previous week.
The company's products had been bottled in Antwerp, Ghent and Wilruk Belgium,
while some batches were also produced in Dunkirk, France.
Children in 6 schools in Belgium had complained of headache, nausea, vomiting
and shivering which ultimately led to hospitalization after drinking coke beverages most
of them reported an "Unusual Odor" and an off - taste in the drink.
In the same week, the Governments of France, Spain and Luxembourg also
banned Coke's products while Coke's Dutch arm recalled all products that had come
from its Belgium plant. The entire episode left more than 200 Belgians and French
school children ill. The company had to assure its British customers that the products
made in its UK factories were safe. By June 15, 1999 Coke had recalled about 30
million cans and bottles, the largest ever recall in its 113 year history for the first time,
the entire inventory of Coke's products from one country were banned from sale.
As part of a damage control exercise, coke send a team of scientists to Europe,
The CEO Michael Douglas apologized to its European customers. Coke Belgium
announced that it would reimburse the medical costs for the ill. The recall had a
significant negative impact on Coke's financial performance with its second - quarter
net income coming down by 21% to $ 942 mn. Moreover, the entire operation cost
coke $103 mn while its European Bottling venture showed a 5% fall in revenues.
Analysts felt that the Belgium recall was one of the worst public relations problem
in Coke's history. It was alleged that the company had information about people who
had become ill weeks prior to the above incidents. Coke had an opportunity to disclose
this information but chose not to do so and was accused of being unethical another
issue that worried analysts was the illness caused to the innocent school children.
They blamed coke's promotion strategy to sell soft drinks to school children, which had
raised a lot of controversies in the US.
After the crisis, coke investigated the problem by testing the suspect batches of
chemicals. The company claimed that the tests showed nothing toxic in the beverages.

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The company said there had been a separate odor as some fungicide had accidently
fallen on the exterior ofthe cans. In addition they had determined that the strange taste
was the result of a substandard gas used to carbonate the products.
Analysts said that coke had not handled the situation well and its media message
was confusing, inconsistent and muddled. Coke alternatively claimed that pesticide
residue on the can or bottle, or a bad batch of carbon dioxide was to be blamed for the
"off' taste. On the other hand, the company also insisted that there was never any
health threat. A company spoke man assured consumers, "It may make you feel sick,
but it is not harmful."
In August 1999, the European commission reprimanded coke, asserting that the
company had not co-operated adequately and its explanations were not entirely
satisfactory. It also said that errors were committed in the selection of plants or the
dosage of extracts in Coke's own concentrate. While no deaths were linked to the coke
problems, it had a significant negative impact on the public confidence in Europe.
Questions:
a) Analyze the case from the perspective of ethical issues involved in country risk
analysis.
b) Analyze the actions taken by coke during and after the crisis.

2. The challenge for ITC is to grow in the face of rising taxes, local competition and the 20
downturn in its business environments. On the face of it ITC should be in a strong
position to ensure growth. In a nation where only 15% of the people smoke cigarettes
ITC has invested over Rs. 8.5 billion in its cigarettes business and hold 70% of the
filter cigarettes market in India. In the FMCG business it has one of the largest
networks in India - servicing two million outlets from the smallest Panwallas to the
largest stores. In FY 2002 it produced over 65 billion sticks and grossed Rs. 9840
crore, growing 13% over 2001. Yet it is seized by challenges from all sides.
The ban on advertising of tobacco products prompted it to diversify into retarliring
and merchandising to keep alive the names of its famous brands like Wills. Sitting on
large cash reserves made this even easier, The 44 stores operating by May 2002
grossed over Rs. 20 crores in FY 2002 but were still incurring operating losses due to
heavy startup costs. Its expressions greeting cards are sold via 7,000 outlets in 180
Indian cities but are yet to make money. ITC welcome Group Hotels account for 1.6%
of the sales but the hotel industry is presently passing through a very lean phase and
ITC Welcome Group is no exception. ITC has also ventured into the ready to eat foods
segment.
ITC also faces the issue of luxury taxes ranging from 10- 20% imposed by several
states in 2001-02 as revenue source for the exchequer. Moreover, luxury taxes ad
valorem and cannot be easily passed on to the consumers.
On the brighter side, lTC's product mix is switching towards the more profitable
filters segment, which now account for 75% of sales, The ban on gutka in several
states is not expected to hit ITC. ITC Bhadrachalam - lTC's paper venture is also
looking up and is being merged with ITC and will enhance lTC's top line by at least
Rs. 600 crore. Moreover ITC will also benefit from the massive distribution reach of
ITC Bhadrachalam. .
Questions:
a) Analyze the business portfolio of ITC.
b) What is the present strategy of ITC.
c) Do you suggest any change in strategy in the light of the SWOT profile of ITC.

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3. Chem Phos Ltd. was selling chemicals. Its Chief Executive Officers, Mr. Shah believed 20
in top to bottom style of management. The company incurred losses to an extent that
it reached the stage of liquidation. A new chief executives officer, Mr. Mehrotra was
appointed who took the following steps:

i) He adopted turnaround strategy to convert the loss making company into profit
making one
Ii) He developed a man powers planning process to review policies with respect to
appointment dismissals and performance appraisals.
iii) He implemented a management accounting system to cut down costs at divisional
levels.

In the personnel department, change in strategy resulted in reduction in workforce

by about 15%. A new policy of promotions from within was also introduced to provide
incentives to the existing workforce to increase their efficiency. As a result, sales
doubled and return on equity almost tripled.

Questions:

a) Which grand strategy did the new chief executive officer adopt.
b) What other alternative strategic options were available to him
c) Which was the appropriate strategy if the company carried on more than one line
of business.

4. In May 2001 the car marker Vauxhall announced losses of around 190 Million Pounds 20
resulting from heavy restructuring costs involving the ending of car production at the
Luton site.

The UK subsidiary of General Motors was also hit hard by increased pressure on
new car prices and a decline in output caused by falling demand for the Vectra model.

The company made operating profits of about 25 million pounds in 2000 but these
were wiped out by one- off charges of about 200 million pounds to cover the costs of
its withdrawal from Luton.

Output from Vauxhall's Luton and Ellesmere port plants fell by more than 10% in
2000. The reduction was largely due to falling sales of the Vectra which was being
replaced by new model at the start of 2002. The strength of sterling also affected
exports to the continent. Vauxhall exported almost 60% of production and car derived
Vans in 2000.

General Motors as a whole lost a total of 190 Million Pounds in Europe in 2000
compared with a profit of 300 Million Pounds in 1999. The sharp reversal was one of
the reasons for the cutback in production, which also affected plants on the continent.

Discuss the following questions:

a) What factors have led General motors to restructure.
b) Why was it decided to close down the Luton Plant.
c) How does this restructuring programme help Vauxhall to survive.
d) What effect will these changes have on the structure of General Motors.

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