2013-06-30, Rashesh Amit Dave - Literature Review Rev 1.5

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Rashesh Amit DaveMaster Thesis - Literature Review

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2013-06-30- Literature Review Rev 1.5

How will Generation Ys Skill in Network

Marketing impact Purchase Social

Responsibility in the Automobile Sector in

India?


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Is growing Indias energy

directed in the right direction?

Is CSR an obstacle for any

company to earn more?

Is Indian automobile sector

still growing or saturated as

European market?

Are the brick countries-an

emerging economy of the world

the building block and major

supplier of any industry?

INDIA!!!

CHAPTER 2

LITERATURE REVIEW

What if a company faces corporate social responsibility as a hindrance to earn more? Can purchase

social responsibility be a solution?

Is growing India and the change in demographic shift forcing all the companies to think differently

with regards to the marketing of their product?

PSR (PURCHASING SOCIAL RESPONSIBILITY)

The pressure from the society, customers, employees, government and various other organizations

have been continuously increasing day by day.

Nowadays company not only provides a financial report but

along with it the company also publishes an environmental

report and a social report, giving a rise to Global Reporting

Initiative.1CSR can not only be referred to as the compliance

of human rights, labor and social security, but also to the fight

against global warming, efficient management of natural

resources and consumer protection.2

Corporations have responded well to these demands in various

forms and not just by providing funds to the non-profit

organizations but by directly involving in the activities. People

indeed need help in solving their problems and not just the

funds. Firms choice ofinvolvement includes marketing-based

activities (such as sponsorships, cause-related marketing, and

1

Global Reporting Initiative, accessed 24 June 2013, https://www.globalreporting.org/Pages/default.aspx.2Corporate Social Responsibility(CSR) & Sustainable Development Organized by SERD | CSR 2013,

accessed 24 June 2013, http://www.csr2013.serd.org.in/.


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social marketing), employee volunteering, alliances with nonprofit organizations, and adoption of new

business practices that support community initiatives.3But as we know the firms ultimate goal is to

gain more and more profit to grow and sustain in the market. This ultimate goal of the company

conflicts with the pressure held by corporate social responsibility because money would flow like

water from an open tap.

Organization like United Nations Global Compact is forming strategic policy strategies for any

business who intends to align their operations in the 10 universally accepted principles of human

rights, labour, environment and anti-corruption which are as follows:

Human Rights

Principle - 1: Businesses should support and respect the protection ofinternationally proclaimed human rights.

Principle - 2: Make sure that they are not complicit in human rights abuses.Labour

Principle - 3: Businesses should uphold the freedom of association and theeffective recognition of the right to collective bargaining.

Principle - 4: the elimination of all forms of forced and compulsory labour. Principle - 5: the effective abolition of child labour. Principle - 6: the elimination of discrimination in respect of employment andoccupation.

Environment

Principle - 7: Businesses should support a precautionary approach toenvironmental challenges.

Principle - 8: undertake initiatives to promote greater environmentalresponsibility.

Principle - 9: encourage the development and diffusion of environmentally friendlytechnologies.

Anti-Corruption

3

Hess, David and Danielle E. Warren The Meaning and Meaningfulness of Corporate Social Initiatives -J.1467-8594.2008.00317.x.pdf, Business and Society Review, 113:2 p. 163-197 accessed 20 June 2013,

http://deepblue.lib.umich.edu/bitstream/handle/2027.42/73133/j.1467-8594.2008.00317.x.pdf?sequence=1.

UNITED NATIONS GLOBAL COMPACT, GLOBAL REPORT

INITIATIVE AND GLOBAL SULLIVAN PRINCIPLES.


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Principle - 10: Businesses should work against corruption in all its forms,including extortion and bribery.

4

All these organizations help in forming an implementable strategy for the company with various

guidelines. For example there are various standards ISO26000, SA8000, ISO14000 and AA1000. 5

These standards are not certifications but they are simply the documents which may help them to

become a sustainable and reliable company in the market.

According to Friedman (1970), in a free society, there is one and only one social responsibility of

businessto use its resources and encourage in activities designed to increase its profit so long as it

says within the rules of the game, which is to say, engages in open and free competition without

deception or fraud And according to the study concluded by Margarita Tsoutsoura from Haas school

of Business under University of California at Berkley indicates that CSR is positively related to the

companys financial performance and the relation is verified and noted through statistic means

proving it to be highly accurate leading to a conclusion that socially responsible corporate

performance can be associated with a series of bottom-line benefits.6

In the article, Does Corporate Social Responsibility Lead to Superior Financial Performance? by

Caroline Flammer from MIT Sloan School of Management, she has done a study on CSR and CFP

(Corporate Financial Performance) with respect to two database RiskMetrics and Factset, where

RiskMetrics covers database of shareholders vote and proposals for 1500 companies at S&P whereas

Factset includes 5600 U.S traded companies from 2001-2010. Flammer sugest that on implementing

eco-friendly initiatives the company sees an increment in the stock prices initially but eventually there

is a loss in retained earning which eventually decreases the CFP performance of the company. 7

Along with this globalization of production networks and increased competition has made brand

image the only lasting base for differentiation in the marketplace. For the same one must find a way to

capture both the things at the same moment and here is the situation when the picture of purchasing

social responsibility comes into the big picture.

4The Ten Principles, accessed 24 June 2013,

http://www.unglobalcompact.org/AboutTheGC/TheTenPrinciples/.5Socially Responsible Purchasing - Penn Purchasing Services, accessed 17 May 2013,

http://www.purchasing.upenn.edu/social/.6

Margarita, Tsoutsoura Final Paper on CSR_PDF II.doc, accessed 24 June 2013,http://responsiblebusiness.haas.berkeley.edu/documents/FinalPaperonCSR_PDFII.pdf.7

Ibid.

CORPORATE SOCIAL RESPONSIBILTY AND CORPORATE

FINANCIAL PERFORMANCE ARE RELATED BUT

POSITIVELY OR NEGATIVELY?


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In the next part of the chapter we would be looking towards some of the important facts and figures of

automobile industry worldwide.

AUTOMOBILE INDUSTRY AND SUPPLY CHAIN

MANAGEMENT

Over a past century the automobile industry has evolved from a scratch to 84,141,209. 8 If we compare

to the automobile sector in India, Car sales in India continued to fell for the sixth consecutive month

with a 10.43% decline to 1,50,789 units sold in April, due to the sluggish interest rates on car loan.9

But on the same side the hope in the growth of Indian Automobile sector is not weak as domestic

market growth is observed to be 10.11% as compared to last year in the same period. During April

March, 2012 industry exported 2,910,055 vehicles registering a growth of 25.44 % (passenger car14.18%, commercial vehicles 27.13%).10

Having a bright future of automobile sector in India in coming nearby future the company needs and

tends to develop a bright brand image in front of stakeholders in order to compete and sustain in the

market. As stated above one of the way of liberalizing the pressure for this has given birth to social

purchasing social responsibility which is nothing but the purchasing functions portion of CSR of any

companys supply chain.

Suppliers in the developed nations are facing losses while suppliers in the growing countries like India

and China are booming in market with huge profits. As concluded in the article, On the road: U.S.

automotive part industry annual assessment, the BRIC (Brazil, Russia, India, and China) countries

are expected to have growth in the automotive sector while developed nations are likely to observe a

saturation point in the sales or even declines. The article also indicates that the supplier industry will

8Automotive Industry, Wikipedia, the Free Encyclopedia, 22 June 2013,

http://en.wikipedia.org/w/index.php?title=Automotive_industry&oldid=560932709. 9Indias Car Market on Worst Sales Streak in History, The Economic Times, accessed 22 June 2013,

http://articles.economictimes.indiatimes.com/2013-05-10/news/39169218_1_renault-india-car-sales-indian-

automobile-manufacturers.10Automobile Industry Statistics of India by Automobile Association of India., accessed 22 June 2013,

http://www.siamindia.com/scripts/IndustryStatistics.aspx.

75% OF RAW MATERIAL AND SPARE PARTS IN A

MORDERN CAR ARE MANUFACTURED BY INDIA, CHINA

AND THAILAND.


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When SAP & Ziff Davis

combines, compliant with

local market, optimization

more depends

sustainability, cost

processing and reliability

and optimize use of

software which will help to

provide a visibility from

the supplier giving a better

picture on purchase social

SAP & ZIFF DAVIS

try and consolidate and restructure itself in order to compete and sustain in the market due to drastic

reduction in the capacity and lower breakeven points.11

In the webinar by Joshua Gingold, Richard Howells and Andres Botero on, The top ten

considerations for real time supply chain management they have cleared explained ten considerations

and their importance which are as follows,

1. Market Globalization: Partners can be anywhere Their partners could be anywhere Expect the unexpected Always have a plan B,C and even D Visibility, management and control

2. Just in time Production: Thin margin, high demand Peak planning

3. Supply and Demand: Double sided sword Be nimble and quick

4. Accurate Planning: Good planning depicts half story Question, confirm and validate

5. Resource Optimization: Provisioning Manufacturing Transportation and Distribution

6. Partner Coordination: Increasing complexity in supplies Interdependencies in everything

7.

Performance Analysis Adapt or die Taking stock of relationships

8. Risk Management: Know what to do when problem arises in future Embrace policies and procedures

9. Regulatory Compliances:11

International Trade Administration, 2011 Spare Parts Study.pdf, accessed 24 June 2013,http://www.trade.gov/mas/manufacturing/oaai/build/groups/public/@tg_oaai/documents/webcontent/tg_oaai_00

3660.pdf.

Lesser Cost of Goods

Sold


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After understanding the requirements of supply chain management in general, we would now moving

towards the SCM in automobile industry.

In the research work by Kamal, Yousuf and Ferdousi, it has been clearly described that a good supply

chain can only be achieved when there is trust and information sharing between the supplier and

manufacturer. Although technology and strategic management in acquiring material plays a big role in

supply chain management but ultimately its the trust and the clarity in all the dealings helps to result

a good supply chain for a company. It also suggests to align the company with its supplier and have a

product focus helping to earn more on low margin products like small city cars.14

The buyer and suppliers relationship has never been simple and easy going, it is always complex one.

The buyer supplier relationship can be created by focusing three main points according to one of my

professor, Dr. Ashish Kothari and which are as,

1. Compliance with local and international regulation2. Conduct that breeds honesty, respect and open dialogue3. Strategic financing that benefits both parties

The working of an automotive industry can very easily understood from the following figure. From

the figure it can be easily said that an automotive industry basically depends on four major ideas,

1. The challenges faced by the company.a. Volatile economyb. Uncertain gas pricec. Green energyd. Ethical responsibility

2.

The future/solutions of the problems faced.a. Sustainable developmentb. Less dependence on gasc. Green energy reformsd. High moral standards

13Haghandish, Ingelgaard Purchasing Social Responsibility in the Au. - 5584_Haghandish-Ingelgaard.pdf,

accessed 17 May 2013,

http://www.lth.se/fileadmin/tlog/Utbildning/Examensarbete/2006/Exjobb/5584_Haghandish-Ingelgaard.pdf.14

Kamal, Yousuf and Ferdousi, Moriom, Supply Chain Management Practices in Automobile Industry: Study ofFord vs. Toyota (December 1, 2009). Dhaka University Journal of Business Studies, Vol. 30, No. 2, pp. 75-90,

2009. Available at SSRN: http://ssrn.com/abstract=1944512

IS TRUST EQUALLY OR MORE INPORTANT THAN

STRATEGY FORMATION AND INFORMATION

TECHNOLOGY?


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3. Current low cost purchasing and outsourcing strategy anda. Low supplier R&D supportb. Low cost and High control of qualityc. High inventoryd. Low employee cooperation

4. Triple C-Strategya. Low R&D costb. Strong supplier technical supportc. Agile and low inventoryd. High employee cooperation

It could also be interpreted that supply chain management plays a vital role in the company.


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15

15Emerald | Management Decision | Sustainability in Supply Chain Management: Suggestions for the Auto

Industry, accessed 26 June 2013, http://www.emeraldinsight.com/journals.htm?articleid=1921730&show=html.


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The below figures and graphs are

measured by IBM global in one of its globally issued magazine.16

As shown in the above figure automotive industry has always shown a greater visibility in supply

chain management, cost containment and globalization whereas in the areas of risk management and

support for customer needs it lacks as compared to other industries but now then these figures leads

out attention to the cost control in logistics in the industry and which is shown in the following figure:

16IBM Global, THE SMARTER SUPPLY CHAIN OF THE FUTURE,IBM, n.d., accessed 25 June 2013.,

http://www-07.ibm.com/sg/manufacturing/pdf/manufacturing/Auto-industry.pdf

Figure 2.1Sustainable factors automobile industry

Figure 2.2 - The top five challenges for the automotive supply chain


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The entire value of supply chain relies on the lesser

inventory and reducing obsolesce and better part utilization. By analysing production and customer

locations, order quantities, transportation costs and delivery times, a manufacturer can determine the

right number of distribution centres and their ideal locations. The optimized network reduces

warehousing and transportation costs, while still maintaining high service levels.

With the globalization, the automotive industry has responded the maximum in this field. The below

facts and figures describes the story in detail.

Figure 2.3Logistic cost control

Figure 2.4Automotive industry and Globalization.


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The study taken by IBM also shows that automotive industrys supply chain officers should also

consider whether their current goals differ or are hindrances to their broad scope of responsibility?

This was concluded from the following observation made by IBM Global,

The job role can be very well understood by the following graph which is a comparison of automotive

industry and the top supply chain management industry.

Figure 2.5Contrasts in thought process.

Figure 2.6Role play of supply chain officers in different industries.


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Worlds largest democracy

with oldest and continuouscivilization.

Second largest pool of

engineers and scientists in

the world.

A country where Zero,

Martial Arts, Yoga and

Shatranj(Chess) were

invented.

Largest English speakingnation in the world.

A country with worlds

biggest railway and postal

network.

The only country other

than US and Japan, to have

built a super computer

indigenously.

Still India is growing andunder developing stage.

The world's second-largest

heavy commercial vehicle

market.

INDIA

NETWORK MARKETING AND YOUTH IN INDIA

India is much diversified country with a change in demographics. The median age of India is 25.1

years and it shows that India is young and emerging. 17 At an

average rate of 2.4%, people are migrating from rural areas to

urban areas in search of new job opportunities where only 30.1%

of Indias population is in urban area.18

With this emerging India,

we come across couple of questions, Is this new and young

emerging India learning from present (2G, 3G Scandals, bribery,

corruption, etc), or would be repeating the same things in future?,

What if this opportunity is lost by the young guns of India A

nightmare? and What if the young mind changes the mind-set of

the country and leads towards a bright futureSuperpower?

With the growing India the need of new and trending way of

marketing. In the article by Dr. R Kuselar, M. Senthil and Dr.

N.R.V. Prabhu on Network marketing through Buzz Marketing

explains that word of mouth marketing amongst friends and

relatives play a crucial role for marketing in companies like

Amway and Hindustan Unilever. Above that many external

factors also didnt played much role in influencing them.19

But do marketing style actually relates youth and their new way ofseeing the world? What if company just focuses only on youth

while marketing? What happens if the mass concentration and

17Demographics of India, Wikipedia, the Free Encyclopedia, 28 June 2013,

http://en.wikipedia.org/w/index.php?title=Demographics_of_India&oldid=561729099.18

India Demographics Profile 2013, accessed 29 June 2013,

http://www.indexmundi.com/india/demographics_profile.html.19

SENTHIL, M. "Network Marketing through Buzz Marketing Strategy." IJM2, no. 1 (2011): 106-

116.Network Marketing through Buzz Marketing.pdf, accessed 29 June 2013,http://www.iaeme.com/MasterAdmin/UploadFolder/Network%20marketing.pdf.

WHERE IS INDIA LEADING WITH A POPULATION OVER

1.21 BILLION AND A MEDIAN AGE OF 25.1 YEARS?


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market diversification fails by experienced executives in judging youth?

Big names like Porsche, Rolls Royce, Volvo Audi, BMW, Bentley, Bugatti, General Motors, Ferrari,

Jaguar, Lamborghini, Land Rover, Mercedes and Mini have already started huge market campaigns in

India after their successful launches.

Most commonly used marketing strategies adopted by automobile sector in India are as follows:

1. Advertisements on audio visual medium are to develop desire to buy the car as wellgives an opportunity for the car manufacturer to flaunt their cars.

2. The digital medium providing great stimulation facility to develop and designcustomer aided interiors for the car.

3. Print media helps the manufacturer to explain the salient as well as unique features ofthe car to the customers.

4. Celebrity endorsement and testimonial advertisements helps to do a bit more of salesgiving an upper hand for sales force of the manufacturer.20

Other than the above mentioned strategies of marketing, test drives, road shows and service check-up

campaigns are also held by many manufacturers in India.

In the article Separation-A Better Tomorrow-Economy A Study of Marketing Strategies On

Automobile by Ekta Chakravarty, she has clearly mentioned that companies like Bajaj have

succeeded in India due to their strong distributor network and companies like Hero Motor Corps have

succeeded through celebrity endorsements.21

All the international brands in order to establish a better market it needs to develop good relations

with local suppliers and dealers. Automobile manufacturers would have to install virtual learning

solutions and increase communication solutions. In order to increase popularity and to satisfy

customer needs with the changing market manufacturers have decreased shelf life of the automobiles

20Public Relations: Marketing Strategies Adopted by Automobile Industry in India, accessed 30 June 2013,

http://prjukebox.blogspot.de/2011/04/marketing-strategies-adopted-by.html.21

Ekta Chakravarty, Separation-A Better Tomorrow-Economy A Study of Marketing Strategies OnAutomobile,ISSN2, no. 1, 2319-5479 (January 2013): 8892;

http://www.irdindia.in/Journal_IJRDMR/PDF/Vol2_Iss1/15.pdf.

WHAT DRIVES AUDI TO OVERTAKE THE SALES OF BMW

IN INDIA?

WHO LEADS INDIAN AUTOMOBILE INDUSTRY?

ARE 4 PS OF MARKETING STILL VALID FOR AUTOMOBILE

INDDUSTRY?

WHAT IF THE AUTOMOBILE INDUSTRY IS AFFECTED BY

WORD OF MOUTH MARKETING?


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with new variants coming every couple of years. Companies adapt themselves to the change in focus,

responsiveness, variability and resilience.22

Have the companies already started adopting marketing strategies concentrating youth? Is luxury and

brand identity the only success factor for any company to succeed in the automobile industry? What if

the strategies developed by executives for the youth fails due to the unstable and indigenous minds of

young India? Can the company only concentrate on youth while developing marketing and

networking strategies? Can the skills of youth help to develop a new and innovative way for

marketing in automobile industry?

To find the answers we shall look upon the next chapters.

22

Sumit Jain and Dr. R.K Garg, Business Competitiveness:Strategies for Automobile Industry,IIMK IIMLConference on Global Competition & Competitiveness of Indian Corporate , IIML (n.d.): 299303, accessed 30

June 2013 http://dspace.iimk.ac.in/bitstream/2259/488/1/.

2013-06-30, Rashesh Amit Dave - Literature Review Rev 1.5

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