THE INTERNATIONALISATION OF KALYANI GROUP

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Page 1of 12
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CASE: 1 THE STRATEGIC ASPIRATIONS OF THE RESERVEBANK OF INDIA
The Reserve Bank of India (RBI) is India’s central bank or ‘the bank of the bankers’. It was
established on April 1, 1935 in accordance with the provisions of the Reserve Bank of India
Act, 1935. The Central Office of the RBI, initially set up at Kolkata, is at Mumbai. The RBI is
fully owned by the Government of India.
The history of RBI is closely aligned with the economic and financial history of India. Most
central banks around the world were established around the beginning of the twentieth
century. The Bank was established on the basis of the Hilton Young Commission. It began its
operations by taking over from the Government the functions so far being performed by the
Controller of Currency and from the Imperial Bank of India, the management of Government
accounts and public debt. After independence, RBI gradually strengthened its institutionbuilding capabilities and evolved in terms of functions from central banking to that of
development. There have been several attempts at reorganisation, restructuring and creation
of specialised institutions to cater to emerging needs.
The Preamble of the RBI describes its basic functions like this: ‘….to regulate the issue of
Bank Notes and keeping of reserves with a view to securing monetary stability in India and
generally to operate the currency and credit system of the country to its advantage.’ The
vision states that the RBI ‘….aims to be a leading central bank with credible, transparent,
proactive and contemporaneous policies and seeks to be a catalyst for the emergence of a
globally competitive financial system that helps deliver a high quality of life to the people in
the country.’ The mission states that ‘RBI seeks to develop a sound and efficient financial
system with monetary stability conductive to balanced and sustained growth of the Indian
economy’. The corporate values of underlining the mission statement include public interest,
integrity, excellence, independence of views and responsiveness and dynamism.
The three areas in which objectives of the RBI can be stated are as below.
1. Monetary policy objectives such as containing inflation and promoting economic
growth, management of foreign exchange reserves andmaking currency available.
2. Objectives set for managing financial sector developments such as supervision of
systems and information access and assisting banking and financial institutions to
become competitive globally.
3. Organisational development objectives such as development of economic research
facilities, creating information system for supporting economic decision-making,
financial management and human resource management.
Strategic actions taken to realise the objectives fall under four categories:
1. The thrust area of monetary policy formulation and managing financial sector;
2. Evolving the legal framework to support the thrust area;
3. Customer service for providing support and creationof positive relationship; and
4. Organisational support such as structure, systems, human resource development
and adoption of modern technology.
The major functions performed by the RBI are:
• Acting as the monetary authority
• Acting as the regulator and supervisor of the financial system
• Discharging responsibilities as the manager of foreign exchange
• Issue currency
• Play as developmental role
• Related functions such as acting as the banker to the government and scheduled
banks
The management of the RBI is the responsibility of the central board of directors headed
by the governor and consisting of deputy governors and other directors, all of whom are
appointed by the government. There are four local boards based at Chennai, Kolkata, Mumbai
and New Delhi. The day-to-day management of RBI is in the hands of the executive directors,
managers at various levels and the support staff. There are about 22000 employees at RBI,
working in 25 departments and training colleges.
The RBI identified its strengths and weaknesses as under.
• Strengths A large body of competent officers andstaff; access to key data on the
economy; wide organisational network with 22 regional offices; established
infrastructure; ability to attract talent; and financial self sufficiency.
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• Weaknesses Structural rigidity, lack of accountability and slow decision-making;
eroded specialist know-how; strong employee unions with rigid industrial relations
stance; surplus staff; and weak market intelligence.
Over the years, the RBI has evolved in terms of structure and functions, in response to
the role assigned to it. There have been sweeping changes in the economic, social and political
environment. The RBI has had to respond to it even in the absence of a systematic strategic
plan. In 1992, the RBI, with the assistance of a private consultancy firm, embarked on a
massive strategic planning exercise. The objective was to establish a roadmap to redefine
RBI’s role and to review internal organisational and managerial efficacy, address the changing
expectations from external stakeholders and reposition the bank in the global context. The
strategic planning exercise was buttressed by departmental position papers and documents on
various subjects such as technology, human resources and environmental trends. The
strategic plan of the RBI emerged with four sections dealing with the statement of mission,
objectives and policy, a review of RBI’s strengths and weaknesses and strategic actions
required with an implementation plan. The strategic plan reiterates anticipation of evolving
external environment in the medium-term; revisitingstrengths and weaknesses (evaluation of
capabilities); and doing away with the outdated mandates for enhancing efficiency in
operations in furtherance of best public interests. The results of these efforts are likely to
manifest in attaining a visible focus, reinforced proficiency, realisation of shared sense of
purpose, optimising resource use and build-up of momentum to achieve goals.
Historically, the RBI adopted the time-tested technique of responding to external
environment in a pragmatic manner and making piecemeal changes. The dilemma in adoption
of a comprehensive strategic plan was the risk of trading off the flexibility of the pragmatic
approach to creating rigidity imposed by a set model of planning.
Questions:
1. Consider the vision and mission statements of the Reserve Bank of India. Comment on
the quality of both these statements.
2. Should the RBI go for a systematic and comprehensive strategic plan in place of its
earlier pragmatic approach of responding to environmental events as and when they
occur? Why?
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CASE: 2 THE INTERNATIONALISATION OF KALYANI GROUP
The Kalyani Group is a large family-business group of India, employing more than 10000
employees. It has diverse businesses in engineering, steel, forgings, auto components, nonconventional energy and specialty chemicals. The annual turnover of the Group is over US$2.1
billion. The Group is known for its impressive internationalisation achievements. It has nine
manufacturing locations spread over six countries. Over the years, it has established joint
ventures with many global companies such as ArvinMeritor, USA, Carpenter Technology
Corporation, USA, Hayes Lemmerz, USA and FAW Corporation, China.
The flagship company of the Group is Bharat Forge Limited that is claimed to be the
second largest forging company in the world and thelargest nationally, with about 80 per cent
share in axle and engine components. The other major companies of the Group are Kalyani
Steels, Kalyani Carpenter Special Steels, Kalyani Lemmerz, Automotive Axles, Kalyani Thermal
Systems, BF Utilities, Hikal Limited, Epicenter andSynise Technologies
The emphasis on internationalisation is reflected in the vision statement of the Group
where two of the five points relate to the Group trying to be a world-class organisation and
achieving growth aggressively by accessing global markets. The Group is led by Mr. B.N.
Kalyani, who is considered to be the major force behind the Group’s aggressive
internationalisation drive. Mr. Kalyani joined the Group in 1972 when it was a small-scale
diesel engine component business.
The corporate strategy of the Group is a combination of concentration of its core
competence in its business with efforts at building, nurturing and sustaining mutually
beneficial partnerships with alliance partners and customers. The value of these partnerships
essentially lies in collaborative product development with the partners who are the original
equipment manufacturers. The foreign partners are not intended to provide expansion in
capacity, but to enable the Kalyani Group to extendits global marketing reach.
In achieving its successful status, the Kalyani Group has followed the path of integration,
extending from the upstream steel making to downstream machining for auto components
such as crank-shafts, front axle beams, steering knuckles, cam-shafts, connecting rods and
rocker arms. In all these products, the Group has tried to move up the value chain instead of
providing just the raw forgings. In the 1990s, it undertook a restructuring exercise to trim its
unrelated businesses such as television and video products and concentrate on its core
business of auto components.
Four factors are supposed to have influenced the growth of the Group over the years.
These are mentioned below:
• Focussing on core businesses to maximise growth potential
• Attaining aggressive cost savings
• Expanding geographically to build global capacity and establishing leading positions
• Achieving external growth through acquisitions
The Group companies are claimed to be positioned ateither number one or two in their
respective businesses. For instance, the Group claims to be number one in forging and
machined components, axle aggregates, wheels and alloy steel. The technology used by the
Group in its mainline business of auto components and other businesses, is claimed to be
state-of-the-art. The Group invests in forging technology to enhance efficiency, production
quality and design capabilities. The Group’s emphasis on technology can be gauged from the
fact that in the 1990s, it took the risky decision of investing Rs. 100 crore in the then latest
forging technology, when the total Group turnover was barely Rs. 230 crore. Information
technology is applied for product development, reducing production and product development
time, supply-chain management and marketing of products. The Group lays high emphasis on
research and development for providing engineering support, advanced metallurgical analysis
and latest testing equipment in tandem with its high-class manufacturing facilities.
Being a top-driven group, the pattern of strategic decision-making within seems to be
entrepreneurial. There was an attempt to formulate a five-year strategic plan in 1997, with the
participation of the company executives. But no much is mentioned in the business press
about that collaborative strategic decision-making after that.
Recent strategic moves include Kalyani Steels, a Group company, entering into a joint
venture agreement in may 2007, with Gerdau S.A. Brazil for installation of rolling mills. An
attempt to move out of the mainstream forging business was made when the Group
strengthened its position in the prospective business of wind energy through 100 per cent
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acquisition of RSBconsult GmbH (RSB) of Germany. Prior to the acquisition, the Group was
just a wind farm operator and supplier of components.
Questions:
1. What is the motive for internationalisation by the Kalyani Group? Discuss.
2. Which type of international strategy is Kalyani Group adopting? Explain.
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CASE 3: THE STORY OF SYNERGOS UNFOLDS
Synergos is a young management and strategy consulting firm based at Mumbai. It was
established in 1992 at a time when there were a lotof expectations among the industry people
from the liberalisation policies that were started the previous year by the Government of
India.
The consulting firm is an entrepreneurial venture started by Urmish Patel, a dynamic
person who worked with a multinational consulting firm at the time. He left his comfortable
position there to venture into the management consultancy industry. The motivation was to be
‘the master of his own destiny’ rather than being an employee working for others. Urmish
comes from an upper middle-class Gujarati family, settled in a small town in Rajasthan. His
father was a government servant who retired with a meagre pension. His mother is a
housewife. His other siblings are all educated and well-settled in their respective careers and
professions. Urmish is a creative individual, uncomfortable with the status-quo. During his
student days at a college at Jaipur, he was continually coming up with bright ideas that some
of his friends found to be preposterous. To him, however, these were perfectly achievable
ideas. He studied biotechnology and then went to the US on a scholarship to do his Masters.
After a semester at a well-known university there, he lost interest and switched to pursue an
MBA. He liked it and soon settled down to work withan American consultancy firm and toured
several countries on varied assignments during the seven years he worked there.
In 1992 came the urge to Urmish to chuck his job and be on his own. It was risky, yet an
exciting step to take. His accumulated capital was limited—just enough to rent office space,
buy a few computers and hire an assistant. There were no consultancy assignments for the
first three months. But an acquaintance soon came to his aid, introducing him to the CFO of a
major family business group who needed advice on a performance improvement project they
wanted to launch. The opportunity came in handy though the returns were nothing to write
home about. That project was the first step to many more that came gradually. Synergos
started gaining presence in the competitive management consultancy industry and attracting
attention from the people whom they worked for. Word-of-mouth publicity led them from one
project to another for the first three years till 1995. Synergos took up whatever came its way,
delivering a cost-effective solution to its clients. A team of four had formed by now, each
member of the team specialising in services rendered to the clients. For instance, one of the
members is a specialist in engineering projects, while another has expertise finance. The third
one is a service sector specialist, also having experience in dealing with government matters.
The phase of rapid growth started some time in 1995when the Synergos team decided
to focus on the small and medium enterprises (SMEs). These were firms that realised they had
problems needing specialist advice, but were apprehensive to approach the big firms on
account of their limited outlay and inexperience ofdealing with such firms. Synergos came to
their aid by tailoring their services as near as possible to their needs. Another differentiation
platform Synergos offered to its client was a fully-integrated consultancy service where it got
involved right from the stage of planning down to its implementation and monitoring.
Presently, Synergos has grown to be a medium-sized consultancy firm, serving clients in
India and abroad, working for industries ranging from auto components to financial services
and for manufacturing organisations to service providers. Some-how, nearly half of the
assignments it has worked on have been for mid-sized, upcoming, family-owned businesses, a
niche it has served well. These organisations typically need a boutique sort of consultancy that
can offer customised services dealing with a broad range of practices related to strategy,
organisation design, mergers and acquisitions and operational matter such as logistics and
supply-chain management. Synergos fits in with their requirements owing to its personalised
service and reasonable commission structure.
The organisational structure at Synergos has a board at the top, consisting of seven people,
including the four founding members and three indep endent directors. One of the independent
directors is the chairman of the board. Urmish, as the founder CEO, also heads an executive
management committee with each of the founding members, leading three other top-level
committees dealing with business portfolio, servicemanagement and executive recruitment.
The management team is called the professional group. The rest of the employees are
referred to as the staff. The professional group has young women and men who are graduates
from some of the best institutions in India and abroad. They are assigned to taskforces based
on their qualifications, experience and interests. The departmentation at Synergos is flexible,
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based on an interplay of the three categories: skill, service and specialty. For instance, a
professional may have IT skills, may have worked to provide supply-chain management
services and developed expertise in handling operational assignments for medium-sized food
and beverage firms. There is a lot of multi-taskinghowever, to utilise the wide range of skills
and special expertise that the professionals have. For administrative matters, the professionals
are assigned to client-service departments of industry solutions, enterprise solutions and
technology solutions. The flexibility that such an organisational arrangement affords seems to
have been the major reason for the evolution of the organisation structure at Synergos over
the years.
The staff group of employees consists of the support people who provide a variety of
services to the professionals. Among these are research assistants, industry analysts,
documentation experts and secretarial staff. There is no set pattern for assignment of staff to
the administrative departments and generally, a need-based approach is followed, depending
on the workload at a particular time.
Recruitment for professionals is stringent. Synergos typically looks for a good
combination of education and experience and lays much emphasis on the compatibility of the
prospective employee with the shared values. Creativity, broad range of professional interests,
intellectual acumen, team-working and physical fitness to undertake demanding tasks and
work for long hours are the criteria for hiring. There are not many training opportunities
except the on-the-job learning. New professionals are assigned to a mentor for some time till
they are ready to handle assignments autonomously. The staff members are usually recruited
from fresh graduates, with good degrees from reputed institutions, in arts, sciences and
commerce. The staff positions are also open for persons wanting to work on part-time or
project-bases. Emphasis is given to the ability of the prospective staff to undertake multitasking and work with documentation and word processing and presentation software
packages.
The compensation system consists of a base salary with commission and bonus
depending on performance. There are other usual elements such as medical reimbursement,
loan facility and gratuity and retirement benefits. the performance appraisal is informal, with
at least one of the four founding members being part of the evaluation committee for a
professional. Usually, the founding member closest to the work area of the employee is
involved in determining the rewards to be given. The time-cycle for appraisal is one year.
Management control is discreet and performance-based rather than behaviour-based. The
means for control are informal, such as direct supervision.
Urmish is a strong proponent of the emergent strategy and is not in favour of tying
Synergos to a fixed strategic posture. So are the other founder members, though at times
they do talk about deciding on a niche such as SME organisations as clients and enterprise
solutions as the core competence. In the highly fragmented consultancy industry where it is
possible for even one person to set up an office ina commercial area and leverage connections
to secure projects, Synergos is open to opportunities as they emerge, while trying to maintain
the flexibility that has made it successful till now.
Questions:
1. Identify the type of organisation structure being used at Synergos and explain how it
works. What are the benefits of using this type of structure? What are the pitfalls?
2. Express your opinion about whether the structure isin line with the recruitments of the
strategy that Synergos is implementing.
3. Based on the information related to the information, control and reward systems
available in the case, examine whether these systems are appropriate for the type of
strategy being implemented.
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CASE: 4 EXERCISING STRATEGIC AND OPERATIONAL CONTROLS AT iGATE GLOBAL
SOLUTIONS
The Bangalore-based iGATE Global Solutions is the flagship company of iGATE Corporation, a
NASDAQ-listed US-based corporation. Known earlier as Mascot Systems, it was set up in India
in 1993, to offer staffing services. It acquired business process outsourcing (BPO) and contact
centre businesses in 2003, making it an end-to-end IT and ITES service provider. Its service
portfolio includes consulting, IT services, data analytics, enterprise systems, BPO/BSP, contact
centre and infrastructure management services. iGATE has over 100 active clients and centres
based in Canada, China, Malaysia, India, the UK andthe US. Chairman, Ashok Trivedi and CEO
Phaneesh Murthy, an ex-Infosys IT professional and their partners hold a major stake, with
some participation by institutional and public investors. The revenues for 2006-2007 are over
Rs. 805 crore and net profits, Rs. 49.6 crore.
The corporate strategies of iGATE are offering integrated IT services and divesting the
legacy IT staffing business and possibly making acquisitions in the domain expertise for
financial services businesses. The business strategy is focused differentiation based on the
focal points of testing, infrastructure management and enterprise solutions. The competitive
tactic is avoiding head-on competition with the formidable larger players in the industry by
carving out a niche. The business definition is serving large customers and staying away from
sub-contracting work.
iGATE adopts a differentiation business model based on an integrated technology and
operations model which it calls as the iTOPS model.This is an advancement over the prevalent
model in the ITES industry based on low-cost arbitrage model. iTOPS is based on transactionbased pricing for services and supporting the clients by providing the platform, processes and
services.
The strategic evaluation and control has both the elements of strategic as well as
operational controls.
The functional and operational implementation is aimed at achieving four sets of
objectives:
(a) Shifting from small customers to large customer (Fortune 1000 companies)
(b) Shifting away from stocking to project-consulting assignments
(c) Working directly with clients rather than with system integrators
(d) Moving from a local to international markets
Some illustrations of the performance indicators that reflect these objectives are:
1. On-shore versus off-shore mix of business revenues: In 2004, this ratio was
55:45 and in 2007, it has improved to 27:73, indicating a much higher revenue
generation from off-shore business.
2. Billing rates: Revenue charged from clients on assignments. With project
consulting assignments from off-shore clients, where the revenues are typically
higher, with lower costs and higher productivity in India, the realisations from
billing have to be higher. The industry norms for ITES are US$18-25 per hour for
off-shore and US$ 55-65 per hour for on-shore assignments.
3. The number of large clients from Fortune 1000 companies: Presently, iGATE has
nearly half of its more than 100 clients from Fortune 1000 companies, of which
the top 10 account for 70 per cent of its business.
4. Controlling employee costs: This is an area where concerted effort is required
from the HR and finance functions. Hiring less experienced employees lowers the
compensation bill. In the IT and ITES industry, attracting and retaining wellqualified and experienced employees is a critical success factor. The performance
indicator for this objective is the cost per employee.
5. Human resource metrics such as the hiring and attrition rates: In the IT and ITES
industry, the human resource metrics such as hiring and attrition rates are critical
indicators. Increasing the number of employees and lowering the attrition rate by
retaining the employees is a big challenge. There are presently about 5800
employees, likely to go up to 8500 in the next two years. The attrition of 20 per
cent presently at iGATE is on the higher side. But such attrition is common in the
industry where the employee mobility is high and employee pinching a widespread
trend.
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The human resource management function being critical in an industry where so many
challenges exist, needs a strong emphasis on training and development, motivation, autonomy
and attractive incentives. iGATE has an integrated people management model focusing on
developing technical, behavioural and leadership competencies. The three metrics by which
the HR function is assessed are: human capital index, work culture and employee affective
commitment. The reward system at iGATE consists of meritorious employees across all levels
being granted restricted stock options, thus providing an incentive to remain with the
company till they become due. The company, though, is an average paymaster, which
disadvantage it tries to trade-off offering a more challenging work environment, quicker
promotions and chances for practising innovation.
Critics say that that iGATE lacks the big-brand appeal of the larger players such as
Infosys and Wipro, cannot compete on scale and is still under the shadow of its original
business of body-shopping IT personnel.
Questions:
1. Analyse the iGATE case to highlight how it could apply some of the strategic controls
such as premise control, implementation control, strategic surveillance and special alert
control.
2. Analyse and describe the process of setting of standards at iGATE.
3. Give your opinion on the effectiveness of the role of reward system in exercising HR
performance management at iGATE and suggest what improvements are possible,
given the environmental conditions in the IT/ITES industry in India at present.
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CASE – 5 Avon Product and Guardian Life Insurance: Successful Management of IT
Project
It’s déjà vu again at many companies when it comes to track record in using IT to help
achieve business goals. Consider the following:
• At companies that aren’t among the top 25 percent of IT users, three out of 10 IT
projects fail on average.
• Less than 40 percent of IT managers say their staffs can react rapidly to changes in
business goals or market conditions.
• Less than half of all companies bother to validate an IT project’s business value after it
has been completed.
Those are just a few of the findings from a survey of IT managers at about 2,000
companies, including more than 80 percent of the Fortune 1,000, released in June 2003 by the
Hackett Group in Atlanta. However, top-tier IT leader didn’t reach the top of their professions
by being softies.
Indeed, a vast majority of them regularly rely upon hard-dollar metrics to consistently
demonstrate to top brass the business value IT investments are expected to yield. That’s what
sets them apart from so many of their colleagues. “Good business-case methodology leads to
good project management, but it’s amazing how many companies fall short here,” says
Stephen J. Andriole, a professor of business technology at Villanova University and consultant
at Cutter Consortium. The lack of good project management at such companies may also lead
to business units taking on IT development projects without the knowledge or oversight of a
company’s IT department. Business units may initiate such “rogue projects” because they see
the IT department as too slow, or a source of too much red tape and extra costs.
Avon Products. “We apply all of the analytical rigor and financial ROI tools against each or
our IT projects as well as other business projects,” says Harriet Edelman, senior vice president
and CIO at Avon Products Inc. (www.avon.com) in New York. Those tools include payback,
NPV, and IRR calculations, as well as risk analyseson every investment, she says.
The $6 billion cosmetics giant also monitors each IT project to gauge its efficiency and
effectiveness during the course of development and applies a red/yellow/green coding system
to reflect the current health of a project, says Edelman. A monthly report about the status of
projects that are valued at more than $250,000 and deal with important strategic content is
presented to senior line managers, the CEO, and thechief operating officer. In addition, Avon
uses an investment-tracking database for every IT project to monitor project costs on a rolling
basis. The approach makes its easier for the company’s IT and business managers to quickly
determine whether a project should be accelerated, delayed, or canceled and assists the
finance organization in forecasting requirements.
Guardian Life Insurance. Dennis S. Callahan says he has “put a strong emphasis on
governance” since becoming CIO at The Guardian Life Insurance Company (www.glic.com)
two years ago, Callahan has done so, in part, by applying NPV and IRR calculation to all IT
projects with a five-year cash flow. “The potentialfallout from inaction could result in loss of
market share,” says Callahan, who was promoted to executive vice president recently. So
Guardian’s approach to IT investments “is very hare-dollar- and metrics oriented, with a bias
toward action,” he says. Still, Callahan and his team do have a process for incorporating “soft”
costs and benefits into their calculations. They do that, Callahan says, by encouraging their
business peers “to discuss how an investment can impact market share and estimate how
those numbers are going to change. Same thing with cost avoidance – if we invest in a project
that’s expected to help us avoid hiring 10 operations staffer to handle growing business
transaction volumes.”
Callahan also keeps close tabs on capital spending throughout the course of a project. New
York-based Guardian has a project management office that continually monitors the scope
time, and cost of each project valued at more than $100,000, according to Callahan. Guardian
also has monthly reviews of variances of scope, time, and costs on all projects costing more
than $100,000.
Using return-on-investment calculations to cost-justify and demonstrate the value of IT
investments to senior management is only of the techniques top IT leaders use to win project
approvals, says Callahan and others. “We approach everything that we do in terms of
payback.” President and CEO Dennis Manning and other board members “really relate to that
kind of justification,” Callahan says. “So we turn that into hard-dollar returns and benefits for
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application development and infrastructure investment.” “One of the biggest things we do in
demonstrating value to the CEO and the board is showing that everything we do reflects the
company’s business strategy,” says Rick Omartian, chief financial officer for Guardian’s IT
department.
Questions
1. What are several possible solutions to the failures in IT project management at many
companies described at the start of this case? Defend your proposals.
2. What are several key ways that Avon and Guardian assure that their IT projects are
completed successfully and support the goals of the business?
3. If you were the manager of a business unit at Avon or Guardian, what are several other
things you would like to see their IT groups do to assure the success of an IT project
for your business unit? Defend your suggestions.
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1. At the beginning of a month, a lady has Rs. 30,000 available in cash. She expects to
receive certain revenues at the beginning of the months 1, 2, 3 and 4 and pay the bills
after that, as detailed here:
Month Revenue Bills
1 Rs. 28,000 Rs. 36,000
2 Rs. 52,000 Rs. 31,000
3 Rs. 24,000 Rs. 40,000
4 Rs. 22,000 Rs. 20,000
It is given that any money left over may be invested for one month at the interest rate
of 0.5%; for two months at 1.0% per month; for three months at 1.5% per month and for
four months at 1.8% per month. Formulate her problem as linear programming problem to
determine an investment strategy that maximizes cash in hand at the beginning of month 5.
2. A company has determined from its analysis of production and accounting data that,
for a part number KC-438, the annual demand is equal to 10,000 units, the cost to
purchase the item is Rs 36 per order, and the holding cost is Rs 2/unit/pear
Determine
a. What should the Economic Order Quantity be?
b. What is the optimum number of days supply per optimum order?
3. A TV repairman finds that the time spent on his jobs has an exponential distribution
with a mean 30 minutes. If he repairs sets on the first-come-first-served basis and if
the arrival of sets is with an average rate of 10 per 8-hour day, what is repairman’s
expected idle time each day? Also obtain average number of units in the system.
4. A salesman makes all sales in three cities X, Y andZ only. It is known that he visits
each city on a weekly basis and never visits the same city in successive weeks. If he
visits city X in a given week, then he visits city Z in next week. However, if he visits
city Y or Z, he is twice as likely to visit city X than the other city. Obtain the transition
probability matrix. Also determine the proportionate visits by him to each of the cities
in the long run.
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