Table of Contents Articles · Assistant Professor Joseph School of Business Studies, Sam...

Volume:01, Number:03, Jan-2012 : RJEBS Page 1 www.theinternationaljournal.org

Table of Contents

Articles Role of Crop Insurance and its future prospects in India

RAJEEV SINGH

Competence Gaps In Company Directors In New Zealand

Graeme Cocks, Jens Mueller, Coral Ingley

Marine Products Exports : GDP Growth Prospect With Special Reference to Coastal aquaculture in India

Aslam Chinarong

Impact and influence of tourism in Mauritius: The Case Of Flic en Flac

Rajen Suntoo

A proposed conceptual TQM model for implementation to enhance business excellence for North Karnataka manufacturing SMEs

SHEKHARAPPA BHEEMAPPA MALLUR

INDIAN BPO- A STEADY GROWTH IN RECESSION PERIOD -WITH RESPECT TO REVENUE GENERATED

Suryakant D. More, Dr. U. M. Deshmukh

International Stock Market Integration: A Study of the US and the BRIC Markets

Sudhakara Reddy Syamala, Kavita Wadhwa

Search Engine Optimization – A Tool for Advertising in India

Venu Gopal Koppala, Santosh Ranganath Neelam


ROLE OF CROP INSURANCE AND ITS FUTURE PROSPECTS

IN INDIA

Dr Sebastian. T. Joseph

Sr.Assistant Professor Joseph School of Business Studies,

Sam Higginbottom Institute of Agriculture,

Technology & Sciences,

Allahabad, Uttar Pradesh.

Mr.Abhishek Janvier Frederick

Assistant Professor Joseph School of Business Studies,

Sam Higginbottom Institute of Agriculture, Technology & Sciences,

Allahabad, Uttar Pradesh.

Dr Rajeev Singh

Assistant Professor (Business Management)

Sr. Scale,

C.S. Azad University of Agriculture & Technology,

Kanpur, Uttar Pradesh.

Abstract

Revolutionary work by agriculture scientists and the efforts of farmers have helped to achieve

a breakthrough in the agriculture sector in the 1960s, popularly known as the „Green

Revolution‟. Higher agricultural production and efficient productivity achieved in subsequent

years has been the main reason for attaining food security to a larger extent. The country has

not witnessed any immense technological breakthrough in agriculture since then. The food

safety net requires enhanced agricultural production and productivity in the form of a Second

Green Revolution. Further, India is an agricultural country which is tantamount with risk and

uncertainty because the agriculture in India depends upon the natural input factors, i.e.

adverse weather conditions, flood, draught, peril etc. Uncertainties of nature have leaded

various problems to farmers as well as Indian agriculture. These problems can be reduced by

providing various kinds of securities and assurance to them. Crop Insurance is one and very

important of them. It helps in providing stability to farm production and increases the income

of the farmers. Crop insurance helps in stabilization of farm production and income of the

farming community. It helps in optimal allocation of resources in the production process.


Introduction:

Indian agriculture began by 9000 BC as a result of early cultivation of plants, and

domestication of crops and animals. This traditional technique was soon followed with

implementation of some modern techniques being developed for agriculture. Double

monsoons led to two harvests being reaped in one year. Indian farm products soon reached

the world via existing trading networks and foreign crops were introduced to India. In the

Middle Ages irrigation channels reached a new level of sophistication in India. Land and

water management systems were developed with an aim of providing uniform growth.

Despite some stagnation during the later modern era the independent Republic of India was

able to develop a comprehensive agricultural program.But it is not so easy to do agriculture in

India. It is totally full of risks and uncertainty. Agriculture in India is dominated by natural

factors. Monsoon is a gamble for Indian farmers. It has never been a stable phenomenon in

deciding and determining the fluctuating fate of farmers. Thus, farmers have been playing

with the diversified fluctuating conditions of climatic vagaries of untimely, uncertainty and

unequal distribution of rainfall. These characteristics of rainfall throughout the monsoon

regions, have determined the diversification of economy in general and enterprise systems in

particular. In fact, development of science and technology has widened the course of man‟s

life on the earth and has enhanced the quality of living organism. At the same time it has also

provided better conditions for the development of bacteria, pests and insects to grow and

sustain lives in millions and millions causing environmental damage. The consequences are

seen in a risk. The changing cropping pattern is not only the response to the science and

technology but also to the changing environmental conditions harnessing the growth and

development of various plants. The plants, originally find it difficult to grow in natural

environment (losing grounds) but find it convenient to take root in changed conditions (more

productive), more easily. But their effects and reactions are rarely realized at this stage by the

planners in the wake of developmental efforts, causing great risk. Low productivity and high

loans taken for agriculture are forcing the farmers to commit suicide. They are living a

stressful life even after giving others a peaceful life by fulfilling their most wanted need in

the form of farm products. India is a country where agriculture is one of the main dominant

forms of occupation. The role of the agriculture sector, however, remains critical as it

accounts for about 58 per cent of employment in the country (as per 2001 census). Moreover,

this sector is a supplier of food, fodder, and raw materials for a enormous segment of

industry. Hence the growth of Indian agriculture can be considered a necessary condition for

inclusive growth of other sectors. The growth of agriculture and allied sectors is still a critical

factor in the overall performance of the Indian economy. As per the 2010-11 advance

estimates released by the Central Statistics Organisation (CSO) on 07.02.2011, the agriculture

and allied sector accounted for 14.2 per cent of the gross domestic product (GDP), at constant

2004-05 prices. During the period 2004-05 to 2007-08, the GDP for agriculture and allied

sectors had increased from 565.426 thousand Crore to 655.080 thousand Crore, at constant

2004-05 prices; thereafter it stagnated at this level for two years (2008-09 to 2009-10)

(Figure1). In 2009-10, it accounted for 14.6 per cent of the GDP compared to 15.7 per cent in

2008-09 and 19.0 per cent in 2004-05. Its share in GDP has thus declined rapidly in the

recent past. This is explained by the fact that whereas overall GDP has grown by an average

of 8.62 per cent during 2004-05 to 2010-11, agricultural sector GDP has increased by only

3.46 per cent during the same period .

http://en.wikipedia.org/wiki/Republic_of_India


Website: http://indiabudget.nic.in

So coping up with these problems, crop Insurance Schemes are launched for the farmers.

Economic growth and agricultural growth are directly related to each other. Crop insurance

helps in stabilization of farm production and income of the farmers. It helps in optimal

allocation and utilization of resources in the production process. Indian Government has been

concerned about the risk and uncertainty prevalent in agriculture.

History of Crop Insurance in India:

In our country crop production has been subjected to the vagaries of the climate. Some of the

other problems that the Indian agriculture is constantly tackling with are the large-scale

damages that are caused as a result of the attack of pests and diseases. It is in a scenario such

as this in India that the issue of crop insurance assumes a vital role in the stable growth of the

agricultural sector. From 1972-73 to 1978-79, crop insurance schemes for crops such as

cotton, groundnut, potato etc, was implemented in selected places on "individual approach"

basis. During the period from 1979 to 1984-85, a pilot crop insurance scheme was

implemented for Food crops & Oilseeds on "Area approach" basis. Based on the experience

of the pilot scheme, a Comprehensive Crop Insurance Scheme (CCIS) was implemented from

Kharif 1985 till Kharif 1999. This scheme was introduced by Prof.Dandekar in 1976 and it

was implemented in 1985 on all India level. In fact this period of introduction also coincided

with the introduction of the Seventh-Five-year plan. This initial scheme was of course later

substituted and replaced by the National Agricultural Insurance Scheme.

The present crop insurance scheme, i.e., National Agricultural Insurance Scheme (NAIS),

launched by the Hon'ble Prime Minister on 22nd June 1999 replaced the CCIS from Rabi

1999-2000 seasons. In the crop insurance history, the question of introducing a crop

insurance scheme was taken up for examination soon after the Indian independence. The first

aspect that was examined related to the modalities of crop insurance. The issue under

consideration was about whether the crop insurance should be offered under an Individual

approach or on Homogenous area approach.The Individual approach of the scheme

indemnifies the farmer to the full extent of the losses. Also the premium that is to be paid by

him is determined with reference to his own past yield and loss experience. The Individual

approach for these schemes necessitates reliable and accurate data of crop yields of individual

farmers for a sufficiently long period, for the fixation of premium on actuarially sound basis.

The Homogenous area approach on the other hand was aimed at envisaging a homogeneous

area from the point of view of crop production and similarity of annual variability of crop

production. The homogenous area approach was found to be more favourable. This is


because it would facilitate the provision of a single unit treatment to various agro-climatically

homogenous areas and the individual farmers and allow them to pay the same rate of

premium and receive the same benefits, irrespective of their individual fortunes.

Crop Insurance Schemes in India:

According to Economic Survey 2010-11 four crop insurance schemes, namely the National

Agricultural Insurance Scheme (NAIS), Pilot Modified NAIS (MNAIS), Pilot Weather Based

Crop Insurance Scheme (WBCIS), and Pilot Coconut Palm Insurance Scheme (CPIS) are

under implementation in the country.

National Agricultural Insurance Scheme:

A Central Sector Scheme namely, National Agricultural Insurance Scheme (NAIS) is being

implemented in the country since Rabi 1999-2000, as a part of risk management in

agriculture with the intention of providing financial support to the farmers in the event of

failure of crops as a result of natural calamities, pests and diseases.

The scheme is available to all the farmers – loanee and non-loanee - irrespective of their size

of holding. Loanee farmers are covered on compulsory basis in a notified area for notified

crops whereas for non-loanee farmers scheme is voluntary.

The Risks Covered Under the NAIS are:

a. Fire & Lightning

b. Storm, Cyclone, Hailstorm, Typhoon, Tempest,

c. Hurricane, Tornado

d. Flood, Inundation & Landslide

e. Drought, Dry spells

f. Pests / Diseases

The Scheme envisages coverage of all the food crops (cereals, millets and pulses), oilseeds

and annual commercial/horticultural crops, in respect of which past yield data is available for

adequate number of years. Crops covered by the implementing States/UTs during Kharif and

Rabi seasons under NAIS. The premium rates are ranging between 1.5% and 3.5% per cent

(of sum insured) for food and oilseed crops. In the case of commercial/horticultural actuarial

rates are being charged. Under the scheme, at present, 10% subsidy in premium is available

to small & marginal farmers. All financial liabilities under the scheme are shared by the

Central and State Governments on 50: 50 basis. The scheme is at present being implemented

by 25 States and two UTs.It is a yield guarantee scheme operating on “Area approach” basis.

The implementing States/UTs can notify any unit area of insurance i.e. block, mandal, tehsil,

circle, phirka, gram panchayat etc. keeping in view the availability of past yield data and

capacity of the State to undertake requisite number of Crop Cutting Experiments (CCEs).

Research Methodology:

Agricultural insurance is one of the appropriate ways to overcome the risk in agricultural

production and to increase farmers‟ income security. In this study, the influence of insurance,

on farmers‟ risk attitudes in India have been investigated as a case study. Thus sugarcane


insurance type is closer than wheat insurance type to one of the main aims of agricultural

insurance system study, which is increasing farmers‟ tendency to take risks. Insurance for

farmers helps greatly in reducing risk horizontally across the states (a drought in Rajasthan is

mitigated by a bumper crop in Andhra Pradesh) and vertically across big and small farmers.

In fact, states which have accepted the scheme require that any farmer borrowing from any

financial insists take insurance too. Unfortunately, data from the scheme so far shows that

only 4 % of the Rabi (winter) crop and 11 % of the more risk-prone Kharif (monsoon) crop

holdings are insured. On the positive side, the %age of the holdings covered is more than the

%age of area covered indicating better penetration among the small land-holders, the most

vulnerable farmers. Most of the crops covered were food crops (summer paddy, wheat)

indicating that food security is the primary concern for India‟s small farmers.

Data Collection:

Data have been collected using stratified multi-stage cluster sampling method. The sample

included wheat and sugarcane farmers in India. Results of estimating risk aversion

coefficients of farmers, using Safety First Rule (SFR), showed that insurance along with

giving inputs, mechanization services, and lookout of farms by sugar plants led to continuous

insurance purchase by farmers in consecutive years. Therefore farmers tended to welcome

insurance and the effect of insurance on their risk aversion coefficients was positive.

However, discontinuity of insurance purchase by wheat farmers in consecutive years and

farmers‟ lack of confidence in insurance system caused the influence of insurance on wheat

farmers‟ risk aversion coefficient to be insignificant.


Source www.aicinsurance.org

The above illustration depicts the crops which are covered under NAIS which are further

bifurcated in Kharif and Rabi seasons prevailing in the country.

http://www.aicinsurance.org/


Source www.aicinsurance.org

The above illustration depicts the Business Statistics of NAIS for 19 Rabi seasons prevailing in the

country and the various states union territory coming under the beneficial ambit of the scheme.

The below graph clearly depicts the present numbers of farmers covered and farmers benefited

under the NAIS in the State and UT which are availing the scheme till Rabi Season 2009 since the

launch of the policy.

http://www.aicinsurance.org/


The Pilot Modified NAIS (MNAIS):

Keeping in view the limitations/shortcomings of the existing scheme, the Government has

approved the Modified NAIS for implementation on pilot basis in 50 districts from rabi 2010-

11 season. The major improvements made in the MNAIS are: actuarial premium with subsidy

in premium at different rates, i.e. 40 per cent to 75 per cent depending upon the slab,

provided to farmers, all claims liability on the insurer, unit area of insurance reduced to

village panchayat level for major crops, indemnity for prevented/sowing/planting risk and for

post harvest losses due to cyclone, payment up to 25 per cent advance of likely claims as

immediate relief, more proficient basis for calculation of threshold yield, minimum indemnity

level of 70 per cent instead of 60 per cent, and private-sector insurers with adequate

infrastructure allowed (at present, ICICILombard, IFFCO-Tokio and Cholamandalam-

MS).Only upfront premium subsidy is shared by the Central and State Governments on 50:

50 basis and claims are the liability of the insurance companies. Seven States have already

notified the areas for implementation of the scheme during rabi 2010-11. It is expected that

the scheme will be notified by 14-15 States.

Weather Based Crop Insurance Scheme (WBCIS):

Efforts have been made to bring more farmers under the fold of crop insurance by

introducing a Weather Based Crop Insurance Scheme (WBCIS) as announced in the Union

Budget 2007 in selected areas on pilot basis. The WBCIS is intended to provide insurance

protection to farmers against adverse weather incidences, which are deemed to unfavourably

impact crop production. It has the advantage of settling claims within the shortest possible

time. The WBCIS is based on actuarial rates of premium but to make the scheme attractive,

premium actually charged from farmers have been restricted on a par with the NAIS. In

addition to the Agriculture Insurance Company of India Ltd. (AIC),private insurers have also

been included for implementing the scheme in selected areas. During kharif 2007 to kharif

2010, about 81 lakh farmers have been covered under the pilot scheme.

Coconut Palm Insurance Scheme (CPIS):

The CPIS is being implemented on pilot basis since 2009-10 in selected areas of Andhra

Pradesh, Goa, Karnataka, Kerala, Maharashtra, Orissa, Tamil Nadu, and West Bengal. The

scheme is administered by the Coconut Development Board (CDB) through the AIC. As on

30 July 2010, 14.33 lakh palms of about 27,023 farmers have been covered under the scheme.

VARIOUS OTHERS SCHEME

Rubber Plantation Insurance:

The scheme will be applicable to both mature and immature plantations. The policy will be

issued for a period of 7 years from the last day of the month of planting for immature plants.

It will provide Risk cover against Fire, Lightning, Riot, Strike & Malicious Damage, Bush

Fire, Forest Fire, Flood, Storm, Tempest, Inundation, Land Slide, Rock Slide, Earthquake and

Drought provided the Block /Taluka concerned is declared as drought affected by the

competent authority of the State Government. The policy is also extended to cover the loss or

damage caused by road/rail vehicles and wild animals.


Rainfall Insurance Scheme for Coffee (RISC) – 2010:

Rainfall Insurance Scheme – Coffee (RISC) is a insurance product specially designed for the

coffee growers of Karnataka, Kerala and Tamilnadu. This product is designed in consultation

with Coffee Board, Central Coffee Research Institute and the Coffee Growers of Karnataka.

RISC is expected to provide effective risk management aid to those coffee growers likely to

be impacted by adverse rainfall incidence.

The most important benefits of RISC are:

1. Trigger events like adverse rainfall can be independently verified and measured.

2. Parameters considered in designing this insurance product are relevant, appropriate

and to a large extent captures the rainfall induced risks affecting Coffee production.

3. Allows for speedy settlement of indemnities.

Any coffee grower, cultivating Robusta / Arabica variety of coffee in the selected Sub zones

of Karnataka are eligible to buy the insurance

Rabi Weather Insurance:

1. Provides protection against adverse deviations in a range of weather parameters like

frost, heat, relative humidity, rainfall etc. between December and April

2. Generic insurance product insuring crops like wheat, potato, barley, mustard, gram

etc.

3. Maximum liability is linked to cost of cultivation and varies from crop to crop

4. Allows for speedy settlement of claims, say within 4 – 6 weeks after the insurance

period.

Varshabima/Rainfall Insurance:

Sixty five percent of Indian agriculture is heavily dependent on natural factors, particularly

rainfall. Studies have established that rainfall variations account for more than 50% of

variability in crop yields. Its known that yields are variable, however, it‟s now being realized

that the weather, particularly rainfall is also becoming increasingly unpredictable and

uncertain. Although there is no way of controlling weather-factors, there is now a hope of

mitigating the adverse financial effects that rainfall can have on the rural economy,

particularly farm incomes. Varsha Bima covers anticipated shortfall in crop yield on account

of deficit rainfall. Varsha Bima is voluntary for all classes of cultivators who stand to lose

financially upon adverse incidence of rainfall can take insurance under the scheme. Initially

Varsha Bima is meant for cultivators for whom National Agricultural Insurance Scheme

(NAIS) is voluntary.

Conclusion:

Effective demands of small farmers in developing countries for a combination of a safety net

against yield risk and price risk coverage are essential. Such a type of revenue coverage as

used in the USA, and other agricultural economies of the world are assisting commodity

producers in developing countries with market-based risk management instruments

strengthening concept of protecting a floor price level through the purchase of put options


,growing potential of involving viable local agricultural and rural banks as well as other non-

financial intermediaries like agricultural input suppliers, traders agribusiness companies,

farmer producers organizations and mutual insurance associations as local transmission

mechanisms ,proposed revenue coverage farmers investment decisions leading to high farm

productivity and efficiency.

References:

Agriculture Insurance Company of India, Performance of NAIS, Country Profile,

(www.aicofindia.org).

Hazell P, Pomareda C & Valdes A, Crop Insurance for Agricultural Development:

Issues and Experience, (Baltimore: John Hopkins University Press, 1986)

India Development Gateway, Weather Based crop insurance Scheme

(WBCIS),(www.indg.in/agriculture )

Agriculture Today magazine 2010-2011

Economic Survey of India 2009-2010,2010-2011,(www.indiabudget.nic.in)

Government of India, Crop Insurance,(www.indiaagronet.com)

Raju, SS and Ramesh Chand, Agriculture Insurance in India: Problems and Prospects,

NCAP Working Paper No. 8, March 2008

Sinha, Sidharath, Agriculture Insurance in India: Scope for Participation of Private

Insurers, Economic and Political Weekly, June 19, 2004, P 2605-2612

World Bank, Piloting Weather Insurance Scheme in India, August 27,

2003,(web.worldbank.org)

Ahsan,S.M.,A.Ali and N. S. Kurian.1982 Toward a theory of agricultural insurance.

American Journal of Agric. Econ. 69(3) 520-529

***

http://www.aicofindia.org/


COMPETENCE GAPS IN COMPANY DIRECTORS

IN NEW ZEALAND

Associate Professor Graeme Cocks,

Melbourne Business School,

Melbourne,

Australia

Associate Professor Jens Mueller,

University of Waikato Management School,

Hamilton,

New Zealand

Associate Professor Coral Ingley,

Auckland University of Technology,

Auckland,

New Zealand

Abstract

The well-published downturns of presumably stellar organizations worldwide, from Enron

and WorldCom in the USA, Siemens in Germany, Satyam in India, San Lu in China through

to South Canterbury Finance Corporation in New Zealand has created the foundation for a

growing interest in corporate governance and the accountability and importance of directors.

Many of the arguments now proposed for a greater focus on governance were advanced long

before these high-profile cases emerged, but it is a reality that governance has now moved to

a more central role when debating firms‟ performance and leaders‟ accountabilities in the

future. Aside from the popular headline-grabbing discussion, e.g. for Feltex in New Zealand,

or what individual directors did - or did not do - to advance their firms‟ fortunes, it is clear

that directors occupy a central position in the development of long-term strategies for a

sustainable future of enterprises.

Through effective governance strategies, owners seek to limit managerial „opportunism‟ and

prioritise owner and equity holder interests that, themselves, may have inherent conflicts due

to differences in their prioritization of long-term stakeholder interests. A key strategy to

marginalize potentially overbearing self-interest of management is for governance to involve

a board of directors to represent the owners‟ interests and instruct and evaluate management‟s

performance (Jensen and Meckling, 1976; Fama and Jensen, 1983 as cited in Cocks, Rennie,

Ingley and Mueller, 2010). Moreover, a firm‟s owners may not be in accord amongst

themselves in their priorities and interests (Cocks et al., 2010). These authors define the

agency relationship as one where a group of heterogeneous owners, of which each may have

conflicting interests and priorities, entrusts the firm‟s success to a managerial body. Thus, it

is even more important that governance strategies are put in place to protect the interests of

not just single owners but also multiple owners, each of whom may have somewhat unique

interests. In summary, our current economic climate has placed more emphasis on the

importance of governance, especially in relation to the separation between the owners‟

interests and those of management.


We have collected self-evaluations from more than 700 company directors in New Zealand

over 5 years (2006-2010) to determine whether these directors are qualified to perform such

elevated governance services. In key functional areas of corporate governance, such as

understanding corporate strategy, being knowledgeable about legal requirements, having

leadership skills and being able to work in a team, directors indicate significantly lower

competency score than in the only other area - “Commitment” - where the self-reported

competence level is much higher.

We believe this raises significant issues of how directors can be upskilled in functional

governance performance areas, or whether there is another pool of more qualified directors

available from which firms can satisfy their demand for better governance. Being very

„committed‟ to otherwise perform at quite an average competence level cannot be the best

best solution to infusing better governance skills in our organizations.

Background

As noted above, the recent financial downturn and the subsequent demise of many companies

have highlighted the importance of good corporate governance (Bhimani, 2008). For many

years, legislation around corporate conduct has stipulated direct and/or indirect compliance

requirements for businesses in many developed countries. These have increased in number

since the accounting scandals at the beginning of the millennium (Abdel – Kahlik, 2002;

Benston and Hartgraves, 2002). Changes to corporate governance legislation include

adjustments to the auditing process, refining financial reporting standards, strengthening

internal managerial controls, monitoring compensation packages and observing online

security and other technology standards. In 2002, Canada‟s Ontario Securities Commission

passed Bill 198 aimed at achieving „better corporate governance‟ (Ferris, 2007, p. 31).

Generally, the requirements of corporate governance legislation are aimed at encouraging

ethical corporate behaviour.

Mainly, corporate governance research addresses the issue of formulating and implementing

codes of business practice that protect the interests of passive shareholders (Aguilera and

Jackson, 2003). In fact, the protection of owners/shareholders interests is often woven into

the definition of good corporate governance: „If we follow the traditional Anglo-American

conception of the firm as a device to further the well-being of its owner-shareholders, good

governance is a matter of ensuring that decisions are taken and implemented in pursuit of

shareholder value‟ (Keasey, Short a& Wright, 2005, p. 2). The definition of corporate

governance in international research is greatly influenced by US formulations of corporate

governance which thus raises the issue of the extent to which these governance-related rules

are an appropriate fit for the rest of the world and for New Zealand. US definitions of

corporate governance are based upon agency theory and managerial capitalism and are

largely preoccupied with structuring governance codes of practice to ensure that managers act

in the interest of the owners and shareholders rather than their own best interests (Shleifer

and Vishney, 1997).

A recent definition of corporate governance is given by Colley, Stettinius, Doyle and Logan,

(2005, p.5), „Today, the public corporation itself operates as a form of representative

government. The owners (shareholders) elect directors as their representatives to manage the

affairs of the business. The directors, who as a group are referred to as the board of directors,

then delegate responsibility for actual operations to the Chief Executive Officer (CEO),whom


they hire. The CEO is accountable to the board of directors, which, collectively and

individually, is accountable to the shareholders. In addition to its role in selecting the CEO,

the board also advises on and consents to the selection of business and strategies of the firm,

as well as oversee results. In sum, this system of authoritative direction, or government, is

known as corporate governance‟.

The Financial Reporting Council combined code of 1998 (revised in 2006 and again in 2009)

combines the main tenets of the Cadbury Report, the Hampel Report and the Greenbury

Report. Each listed company was required to disclose how they formulated and structured

corporate governance, and out of this report came a set of best practice principles. The

influence of agency theory and a focus on owner/control separation is clearly seen in the

following three principles of the combined code (FRC, 2006). For example:

A. „Every company should be headed by an effective board which is collectively

responsible for the success of the company‟.

It is the responsibility of the board to lead the company with appropriate controls to assess

and manage risk. The board should formulate the strategic aims of the firm and make sure

that the necessary financial and human resources are in place for the achievement of the

firm‟s objectives. „The board should set the firm‟s standards and values and ensure that its

obligations to its shareholders and understood and met‟. Furthermore, all courses of action

and decisions that directors take ought to be in the interests of the company. Also stated in

this principle is the board‟s responsibility to hire and dismiss CEOs where necessary.

B. „There should be a clear division of responsibilities at the head of the company

between the running of the board and the executive responsibility for the running of the

company‟s business. No one individual should have unfettered powers of decision‟.

The chairperson of the board leads the board and ensures the board meets all its objectives.

The chairperson also acts as a source of information for the directors and must make sure that

the directors are kept well informed in a timely manner on significant aspects of company

business. Reports to the director must be clear and accurate. The chairperson must also liaise

with the owners/shareholders and maintain clear lines of communication with them. The

individual roles of the chairperson and the firm‟s CEO must be agreed by the board, put into

writing, and clearly delineated and understood. A CEO must not become the chairperson of

the board at any time unless major shareholders are consulted in advance.

C. „The board should include a balance of executive and non-executive

directors (and in particular independent non-executive directors) such that no individual or

small group of individuals can dominate the board‟s decision making‟. To prevent the board‟s

decision making from being dominated by one person, the board should include both

executive and non-executive directors. The board must ensure that the director is independent

in character and judgement and consider the significance of any potential conflicts of

interests such as any director haveing been employed by the firm in the last five years or

representing a significant shareholder.


Board Composition

The traditional view of the board of directors is of a group of individuals (traditionally

middle-aged men) with significant experience in the market within which that company

operates and with significant experience of the workings of that company. Consequently, the

membership of such boards was also traditionally and overwhelmingly constituted by

insiders, who might include family members (if a family company) friends, professional

advisors (lawyers or accountants) or substantial shareholders or their nominees. Even as late

as the 1980s when the idea was more likely to be debated in political and business circles, the

very notion that outsiders should be included was to some conservative thinkers an anathema.

After all, what could such individuals possibly contribute to a company they didn‟t

understand?

Consequently, such a presence was resisted in some other jurisdictions dominated by the

Anglo-American model of a unitary board (having the roles of both supervision and

management). Amongst those can be listed Australia and New Zealand as well as the United

States and the UK. Critics of the idea cited a range of reasons for their position. Some

objections to the idea of independent directors are likely to be very similar to those voiced 20

years ago. Inter alia, those include the fact that for many such directors their interests are

artificial (lacking strong links between the company‟s wellbeing and their own) a

characteristic that reduces their motivation to maximise performance; they may lack

experience and understanding of the business environment; they may well have a seat on a

range of boards, reducing loyalty and adversely affecting their focus on the company and its

wellbeing. In addition, and depending on the individual, they may perceive the position of

director as a chance to strengthen or maintain social or business networks, affecting the

degree to which they are truly independent.

Despite such objections, however, and as stated earlier, the independent director is a must for

the boards of public companies in a range of jurisdictions, increasingly mandated or

encouraged by legal and quasi-legal rules. As pointed out before, the OECD‟s promulgation

of guidelines in 1999 was the first trans-national display of determination to have

independent directors on the boards of Public companies. However, that does not mean it was

the first move to promote their presence. In order to provide an overview of these earlier

steps while not being too complicated, three exemplar legal/regulatory frameworks will be

considered, these being in turn the UK, United States and Europe.

Board Competence Research Findings

This research was designed to capture a broad cross-section of responses throughout New

Zealand and for a period of several years. In order to reach New Zealand business of all sizes

and industry classifications, the survey instrument was distributed to the client lists of several

supporting organizations. Further supporting the argument that the discussion of

„Governance‟ is highly relevant in New Zealand, more than a dozen national organizations

participated in the survey distribution, creating one of the largest data sets on governance in

the country.

Using distributors from different industries and in many locations throughout New Zealand

was intended to reduce bias in the sample group.


Distributing organizations were:

BNZ, ANZ, National Bank, Simpson Grierson, Business New Zealand, Employer and

Manufacturers Association (Northern), Otago Southland Employers,

PriceWaterhouseCoopers, 3 Media Group, Cameron Partners Investment Bankers, Swann

Recruiting, The New Zealand Shareholders Association, Venture Taranaki, NZ Institute of

Management, Unitec, Waikato Chamber of Commerce, Business Mentors of New Zealand,

Employers and Manufacturers Association Central, Canterbury Employers Chamber of

Commerce, New Zealand Venture Capital Association, Ministry of Womens Affairs, Te Puni

Kokori, Chartered Secretaries of New Zealand, Human Rights Commission, Crown Company

Monitoring Advisory Unit, Waikato Management School.

More than 700 director responses were collected from New Zealand businesses, representing

most industries and all sizes. Given that more than 98% of New Zealand businesses are

SMEs, this survey is applicable mainly to SMEs.

A direct connector to the inclusion of independent directors in firms is their competence in

matters relating to governance. Using the approach for directors to self-evaluate the

performance of themselves and that of their fellow directors, with all replies being

anonymous and thus more reliable, this research wishes to identify whether directors consider

themselves above-average competent in areas which relate directly to the discharge of their

governance duties.

When given the opportunity to select in which of the traditionally applicable governance

skills areas directors were most competent (strategic leadership, finance/auditing, group

decision making, commitment, etc.), directors in New Zealand firms Directors consider their

level of commitment exceeds their level of competence in all other areas. More directors self-

reported that they have „excellent‟ “commitment” to their firms than directors in any of the

other skills categories, for which the majority of directors only self-reported „very good‟

skills. This raises issues as to the ability of SME directors to perform to an acceptable level in

the key functional areas of governance. While “commitment” is a less tangible contribution

and thus is easily over-interpreted, specific skills areas such as “finance/auditing”, “strategic

planning”, etc. require detailed sub-skills that many directors do not seem to possess in

abundance.

Conclusion

We believe that the interest in independent directors may be tempered by their lack of skills

commonly associated with governance competence. As the development of formal boards for

SMEs appears to accelerate, more directors will be required to perform to an increasingly

demanding level of governance. Our research suggests the need to develop programs to

upskill directors in functional governance performance areas, to make good use of the pool of

directorship candidates. Being very „committed‟ to otherwise perform at quite an average

competence level cannot be the best best solution to infusing better governance skills in our

organizations.


Bibliography

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of Trustees and the auditor. Journal of Accounting and Public Policy, 21, 97–103.

Aguilera, R., and Jackson, G. (2003). The cross-national diversity of corporate government:

Dimensions and determinants. Academy of Management Reviews, 29(3), 447–485.

Cocks, G., Rennie, M., Ingley, C., Mueller, J. (2010). Innovating from the top down:

Sustaining better governance through reformed boards.

Colley, J., Stettinius, W., Doyle, J., and Logan, G. (2005). What is corporate governance?

London:McGraw Hill.

Fama, E. G., and Jensen, M. C. (1983). Separation of ownership and control. Journal of Law

and Economics, 26, 301–325.

Ferris, M. (2007). Applying bill 198. CMA Management, 81(4), 30–34.

FRC. (2003). The combined code on corporate governance. Retrieved June 2, 2010 from

http://www.ecgi.org/codes/documents/combined_code_final.pdf.

Jensen, M. C., and Meckling, W. H. (1976) Theory of the firm: Managerial behaviour,

agency costs and ownership structure. Journal of Financial Economics, 3, 305–360.

Keasey, K., Short, H., and Wright, M. (2005). The development of corporate governance

codes in the UK. In K. Keasey, S. Thompson and M. Wright (Eds.), Corporate

governance, (pp. 21–42). West Sussex, UK: Wiley

Shleifer, A., and Vishny, R. (1997). A survey of corporate governance. The Journal of

Finance, 52, 737-783.

***

http://www.ecgi.org/codes/documents/combined_code_final.pdf


MARINE PRODUCTS EXPORTS: GDP GROWTH PROSPECT

WITH SPECIAL REFERENCE TO COASTAL AQUACULTURE

IN INDIA

Aslam Chinarong,

Research Scholar,

Dept.of Management studies,

Sathyabama University,

Chennai-119.

Dr.B. Yamuna Krishna

Research Supervisor,

Principal,

Sri Ramachandra College of Management,

Porur,Chennai

1.0: Abstarct:

Indian marine exports have crossed the $2-billion mark during first nine months of a

fiscal. Marine exports touched $2.028 billion during April-December 2010, registering a

growth of 6.60 per cent in quantity, 18.92 per cent in value and 24.70 per cent in dollar

realisations. What is noteworthy is the fact that the feat could be achieved in spite of

recession in global markets, a strengthening Indian rupee against major currencies and

economic tremors in Greece, Spain and Portugal which triggered all-round depreciation of

the euro against the dollar, the Marine Products Export Development Authority (MPEDA)

pointed out. There was considerable increase in export of frozen shrimp and squid during the

period. The trigger for this growth came from increased export of Vannamei shrimp, whose

introduction and cultivation in India's coastline was a recent phenomenon as well as increased

landing of squid from Indian waters. Frozen shrimp continued to be the major export item

accounting for over 48 per cent of the foreign exchange earnings.

Shrimp exports increased by 12 per cent in quantity, 34 per cent in value and 40 per

cent in dollar earnings. Unit value realisation for shrimp surged over 25 per cent during the

period. Frozen shrimp export also showed a smart increase to major destinations such as the

US and Japan. Export of Vannamei shrimp grew to 7,363 tonnes during the period. Frozen

fish was the principal item of export in quantity and second largest export item in terms of

value: accounting for 36 per cent of the total quantum of export and 18 per cent of the value

realization. Export of frozen squid accelerated by close to 88 per cent in terms of dollar

earnings, 78 per cent in rupee realization and 60 per cent in quantity. Despite rapid growth in

unit value realization of frozen cuttlefish by 30 per cent, the volume of exports declined by

21 per cent and rupee realization fell by 2 per cent.

The year 2011-12 has been a record year for the Sea Food Export sector. The Export

touched US$2.86 billion (an increase of 33%) amounting to Rs.12901 crore. Quantity

increased to 830,000 tons (growth of 19%). This has been one of the most successful years

not only in terms of performance for the sector but also this has been a very fruity year for

almost all the exporters. During the course of this historic year , the Indian Seafood Export

Sector was greatly distressed at the great tragedy that struck Japan, one of the pioneering and


key trading partners which has contributed very significantly to our sector’s growth during

the formative years, and even till recently has been the largest importers of marine products

from India. The present paper is

The present paper is focused on review of aquaculture trends in the production of

shrimp and scampi production in India. The data required for the study is collected from the

secondary sources and the author is in the aquaculture products related business. The

observations made in the market are presented as findings and suggestions and those are

correlated with the secondary data. Simple comparative techniques are used to compare the

results of the market and accordingly suggestions are presented. This paper can help in

assessing the importance of aquaculture in improving the GDP and economic growth of the

country.

Keywords: Aquaculture Performance, Economic overview, India GDP, Vannamei shrimp,

foreign exchange.

1.1 Overall export of marine products

During 2010-11 for the first time in the history of Marine product exports, the export

earnings have crossed 2.8 billion US dollars. This is also first time export has crossed all

previous records in quantity, rupee value and US$ terms. Export aggregated to 8, 13,091

tonnes valued at Rs.12, 901.47 crore and US Dollar 2,856.92 million. Compared to the

previous year, seafood exports recorded a growth of 19.85% in quantity, 28.39% in rupee and

33.95% growth in US$ earnings respectively. Average unit value realization has also gone up

by 11.87%.

There is a considerable increase in export of Frozen Shrimp and Frozen Squid during

the period. Large-scale production of Vannamei in addition to better productivity of Black

Tiger shrimp and increased landing of Squid contributed for the increased. This was

supported by better price realization of major items like Cuttlefish, Shrimp and Squid. The

figures must be viewed in the light of the scenario of continuing recession in the international

market, debt crisis in EU economies, continuing antidumping duty in US the sluggish growth

in US economy.

1.2. Major items of export

Frozen Shrimp continued to be the major export value item accounting for 44.17% of

the total US$ earning. Shrimp exports during the period increased by 16.02%, 36.72% and

42.90% in quantity, rupee value and US$ value respectively. Fish, has retained its position as

the major export item in quantity terms and the second largest export item in value terms,

accounted for a share of about 38.42% in quantity and 20.42% in US$ earning. Fresh

Cuttlefish recorded a growth of 19.56% in rupee value and 25% in US Dollar terms. Unit

value also increased by 34.18%, however, there is a decline in quantity (6.84%). Export of Fr.

Squid showed a remarkable increase in quantity 42.53%, 62.31% in rupee value & 69.14% in

US dollar realization. Unit value also increased by 18.67%.

1.3. Major export markets

European Union (EU) continued to be the largest market with a share of 26.78% in

US $ realization. Followed by South East Asia 16.43%, China with a share of 15.41%, USA


15.35% , Japan 13.06%, Middle East 5.19% and Other Countries 7.79%. The Marine

Products exports have strengthened India’s presence in Southeast Asia and Middle East

where the increase in quantity has been 57% and 26% respectively. There is a significant

increase in exports to African countries in comparison to previous year, although the total

exports to Africa remains very low compared to other regions.

2.1. Export production through aquaculture

During the year 2010-11, production from aquaculture has continued to contribute

significantly to the seafood exports from the country. The increased production is attributed

to a marginal increase in average productivity per unit area in the case of black tiger,

comparative reduction of disease occurrence and adoption of better Management Practices.

With introduction of exotic SPF L.Vannamei, the aqua farmers in Andhra Pradesh, Tamil

Nadu, Gujarat and Maharashtra have utilized an area of 2930.32 ha during 2010-11 for

farming of L.vannamei shrimp which has also contributed significantly to the increase of

seafood export from the country.

2.2 Shrimp Production

During the year under report the total tiger shrimp production has been estimated to

be around 118575.00 MT from an area of 113852.39 ha. State wise details of shrimp farming

are and production are given in Table-2. Compared to the previous year production of

95,918.89 MT 102259.98 ha area, shrimp production has increased by 22656 MT that is

23.62% while addition area of 11,592.41 ha was brought under culture which contributed the

addition production as well as increase of 11.34% in terms of area utilization. This was

attributed to adoption of better management practices by aqua farmer, and increasing demand

for cultured shrimp resulting in increased unit value and better raw material prices being

offered to the producers. It is estimated that shrimps worth Rs.682.00 crore over 2009-10

(Table-3).

Efforts taken by Marine Product Export development Authority (MPEDA) in

motivating the aqua farmers in adoption of better management practices and adopting bio-

security protocols have contributed significantly in improving the average production of

shrimp per unit area from 940 kgs per hectares to 1040 kgs per hectare resulting in increase

of productivity of 10.6% per hectare.

2.3 Total Aquaculture Production

Aquaculture production from export –oriented aquaculture during the year 2010-11

has improved significantly over the previous year with increasing number of aqua farmers

attempting to revive the activities by investing in the sector. The total production from

aquaculture is estimated to be 1,45,600 MT with a total value of Rs.3585 crore (Table-4) that

works out to an average farm gate price of Rs.246.00 per kilogram of wet weight. The

Production has grown an increase of 39.71% (41381.19 MT) in volume and 41.66%

(Rs.1054.30 crore) in value respectively over the previous.

Though it is anticipated that all the shrimp/scampi/L.vennamei produced from aqua

farms would be exported, some quantities produced would have found its way to the


domestic markets due to increasing demand for the seafood with attractive and remunerative

prices even in the domestic market that are being realized for the produce.

2.4 Outlook for 2011-12

MPEDA envisage an ambitious target of 4 billion US$ Marine products exports for

the year 2011-12. Increased production of L.Vannamei shrimp, increase in infrastructure

facilities for production of value added items and the regaining pace of Japanese market after

tsunami etc. are the helping factors to achieve this target.

5.0: Suggestions to Improve Aquaculture Contribution to GDP:

1. The sector can be recognized as allied agriculture activity and funding can be

provided on the quantum merit basis.

2. The direct subsidies can be given to farmers to improve the interest towards industry.

3. The firm subsidies should not be given to traders.

4. Processing infrastructure needs to be improved and mechanization is need of the hour.

5. Organised sector is to enter into industry to improve its contribution and to have mass

production.

6. Unorganized players need to be focused on quality and timely delivery of the products

to the processing unit for better quality preservation.

6.0: Conclusion:

Market potential of the industry is high and appreciable. Growth had remained

relatively strong until the quarter ending March 2011-but clear signs of slowdown have

emerged over the last 3-4 months. It was believed that the combination of factors-including

persistently high inflation, higher cost of capital, cut in fiscal spending to GDP, weak global

capital markets environment and slow pace of investment-will cause a further slowdown in

growth.

It was believed that over the next six months, support from all the major growth

drivers will wane at the same time. A deeper slowdown in growth than estimated earlier.

Hence, The F2012 GDP growth estimate was cut from 7.7% to 7.2% and FY2013 growth

estimate from 8.5% to 8%. On a calendar-year basis, The new growth estimates are 7.3% and

7.8%, down from the old forecasts of 7.7% and 8.5% for 2011 and 2012 respectively.

References:

1. Datt, Ruddar; Sundharam, K.P.M. (2009). Indian Economy. New Delhi: S. Chand

Group. p. 976. ISBN 978-81-219-0298-4.

2. Drèze, John; Sen, Amartya (1996). India: Economic Development and Social

Opportunity. Oxford University Press. p. 292. ISBN 978-0-19-564082-3

3. Morgan Stanley Research Asia Pacific ,August 1, 2011 P.2-11

4. Krishnan &Pratap S. Birthal ,Aquaculture Develop in India (2008) : An economic

overview

5. MPEDA Newsletter , July 2011, Vol.VIX No.7

6. Seafood Export Journal, Vol.XLI No.08 , August 2011.


Table-1: Export during 2010-11 compared to 2009-10

Export details April-March 2010-11 April-March 2009-10 Growth %

Quantity Tones 813091 678436 19.85

Value Rs.crore 12901.47 10048.53 28.39

US$ Million 2856.92 2132.84 33.95

Table-2: State wise details of shrimp farming 2010-11

S.No State Area

Developed(ha)

Area Utilised

(ha)

Production

(MT)

Productivity

(MT/ha/year)

1 West Bengal 51.659.00 47588.00 40725.00 0.86

2 Orissa 15174.00 5324.00 7520.00 1.41

3 Andhra Pradesh 58,145.00 42055.00 49030.00 1.17

4 Tamil Nadu 6,109.00 2281.16 4020.00 1.76

5 Kerala 15,099.39 11787.90 8075.00 0.69

6 Karnataka 3708.84 1715.00 2090.00 1.22

7 Goa 867.00 305.00 320.00 1.05

8 Maharashtra 1,329.56 829.88 1120.00 1.35

9 Gujarat 2,247.92 1965.65 5675.00 2.89

Total 1,54,339.91 1,13,852.39 118,575 12.4

Table-3: Shrimp Production through Aquaculture

Year Live weight (MT) Product weight

(MT)

Estimated Value

(Rs.Crore)

2009-2010 95,918.89 60,429.00 2,398.00

2010-2011 1,18,575.00 74,702.00 3,080.00

Increase 22,656.11 14,273.00 682.00

Difference % 23.62 23.62 28.44

Source: Secondary data/ Seafood Export Journal/ Various issues.

Table-4: Total shrimp & scampi production through Aquaculture

Year Live weight

(MT)

Product weight

(MT)

Estimated Value

(RS.crore)

2009-2010 1,04,217.81 64,664.96 2,530.70

2010-2011 1,45,600.00 90,038.00 3,585.00

Increase 41,382.19 25,373.04 1,054.30

Difference 39.71 39.24 41.66

Source: Secondary data/ Seafood Export Journal/ Various issues.

***


IMPACT AND INFLUENCE OF TOURISM IN MAURITIUS:

THE CASE OF FLIC EN FLAC

RAJEN SUNTOO

LECTURER IN SOCIOLOGY

UNIVERSITY OF MAURITIUS

ABSTRACT

Purpose – The purpose of this paper is to provide an insight on the impact and influence of

tourism development in Mauritius, more particularly at Flic en Flac which is considered to be

a major tourist area. This paper aims at highlighting the metamorphosis caused by tourism

development on the rural community and also taking stock of the influence of tourism on the

culture and lifestyles of the inhabitants.

Design/methodology/approach – In this paper use of both primary and secondary data has

been made. Research methods used include document analysis, internet search, field

observation, informal talks and interviews with fishermen, visitors, elderly inhabitants,

youths, local businessmen, new settlers and community leaders.

Findings –The principal findings of this research indicate that considerable amount of

infrastructural development has taken place in the village. However, the majority of the

inhabitants are of the view that although tourism development has brought certain changes in

their lifestyles yet there has been very little improvement in their living conditions as quite a

large number of the locals are still struggling to make both ends meet.

Research implications – This paper has much relevance in the fast developing Mauritian

society as it may help the authority at reviewing its strategies for tourism development

throughout the country. Future sustenance of tourism development requires satisfaction of all

participating stakeholders.

Originality/Value – The results of this study will be helpful to assist tourism planners in

developing policies for tourism development that will be beneficial not only to the

investors and the state but also to the locals with a view to improve their welfare and living

conditions.

Keywords: Tourism, Tourism Development, Rural Community, Culture and Lifestyles.


INTRODUCTION

Mauritius is one of the most beautiful islands in the world. It is normally referred to as the

rainbow nation. Travellers and visitors consider the island, set in its turquoise sea, as an oasis

of peace and tranquillity in the Indian Ocean. Tourism is a major pillar of the Mauritian

economy. Since 1970s, it has contributed enormously to cause economic growth and

development in Mauritius. Tourist arrivals have been constantly increasing over the past

years and the country is expecting to welcome about two million foreign visitors annually by

2015. Tourism causes changes in almost all spheres- economic, social, cultural, political or

environmental- of the host community.

This paper is drawn from an on-going research on the impact and influence of tourism

development in Mauritius. In this study, the focus will be on a major tourist area which is Flic

en Flac. The main objectives of the paper, amongst others, are:

(a) To highlight the metamorphosis caused by tourism development on the rural

community and

(b) To take stock of the influence of tourism on the culture and lifestyles of the

inhabitants.

In this study use of both primary and secondary data has been made. Research methods used

include document analysis, internet search, field observation, informal talks and interviews

with 2 fishermen, 2 visitors, 4 elderly inhabitants, 4 youths, 2 local businessmen, 2 new

settlers and 2 community leaders. The qualitative approach to data analysis resorted to in this

paper and discussion help to get a better understanding and insight of the tourism

development and its impact and influence in the village of Flic en Flac.

The first part of this paper deals with a brief review of tourism development and the positive

and negative effects of tourism. Then follows, an overview of tourism development in

Mauritius and more particularly at Flic en Flac. In the second part, data collected through

informal talks and interviews will be analysed and discussed. Finally, a conclusion based on

the paper will be stated and two recommendations made.

Tourism and Tourism development

The World Tourism Organisation defines tourism as comprising activities of people

travelling to and staying in places outside their usual environment for not more than one

consecutive year for business, leisure and other purposes. Tourism has become a major

industry in all parts of the world. In Mauritius 871,356 tourists visited the island in 2009 and

in 2011 tourists arrival has been estimated to be around 950,000 according to the Central

Statistical Office (www.africanews.com/...tourism/). Tourism contributes to the extent of

10% of the Gross Domestic Product in Mauritius (business.mega.mu/.../tourist-arrival-

mauritius).

Goeldner and Ritchie (2006) argue that tourism development should aim at providing a

framework for improving the living standard of the people through the economic benefits of

tourism. For them, tourism development must create the necessary space for recreational

infrastructure that provides facilities to both tourists and residents. The local community


should be made aware of any innovation or development of infrastructure that cause

disturbances in the area. Vivienne et al (2002) clearly state that responsible tourism

development attempts to balance the needs of the locals with those of the promoters and

tourists. The participation of the rural community leaders must be encouraged to ensure

proper tourism development, thereby avoiding or at least limiting negative impacts. In his

model of tourist development, Miossec’s (1976) (cited in Pearce, D. 2006, Tourist

development) stresses changes in the provision of facilities and in the behaviour and attitudes

of both the tourist promoters and the locals. As the tourist industry expands, the local

attitudes towards such development may lead to the acceptance of tourism, resentment

towards it or simply its rejection.

Positive and negative effects of tourism

Tourism development has significant impact on the economy and culture of the host

population. It is a fact that such development is accompanied by positive and negative effects,

both economic and social.

For Elliott (1997), Governments are a fact in tourism as they provide essential services and

the necessary basic infrastructure for tourism development. The state involves in tourism

mainly because of its economic importance. It is an undeniable fact that the tourism sector

makes enormous contribution to cause economic development of a country. Many direct and

indirect employments are created and tourism generates considerable amount for the host

society. The economic benefits of tourism development such as the improvement in

infrastructure and services, employment opportunities and increased business activities in the

rural areas help to raise the quality of lives of the inhabitants. Doswell (1998) claims that

tourism, promotes cultural exchange and creates an audience for the local arts, particularly

for music, dance and handicrafts. Tourism enables locals to meet new people and learn new

culture and lifestyles.

However, some people consider tourism as a curious modern disease that may negatively

change the ways of life of the locals. For Mac Naught (1982), tourists may have undesirable

‘demonstrative effects’ on the residents. The culture of the tourist may cause cultural shocks

to the locals. The behaviour and dress codes of the visitors are not always welcome by the

natives, more particularly by the traditional inhabitants. Vivienne et al (2006) are also of the

view that tourism can cause considerable social and cultural cost to the community.

An Overview of Tourism Development in Mauritius

Tourism is a main industry in Mauritius. It has been an important vehicle for socio-economic

growth in the country. Tourism is growing and developing fast as the country is expecting to

welcome around 2 million tourists by the year 2015. Consequently much importance is

attached to tourism development which is thought to bring benefit to all tourism stakeholders.

Tourism in Mauritius has always generated large amount of foreign revenues and the tourist

industry has provided many direct and indirect employment to the Mauritian population.

Tourism development means a holistic approach to the development of the tourist industry

where all the stakeholders, that is, the investors, the clients, the employees and the

community, gain out of the business operation. In fact, it involves broadening the ownership

base such that more people benefit from the tourism industry, skills development, job and


wealth creation and ensuring the geographic spread of the industry throughout the country

(www.capegateway.gov.za › ...> Economic Sector Development)

Tourism development requires a very good planning on the part of the authority and the

promoters. There are many factors that account for Mauritius as being a success story in

attracting tourists. The fact that the country has a socio-economic and political stability

remains the sine qua non for the constant increase in tourist arrivals over the last three

decades. As a safe and stable holiday destination, Mauritius, with its subtropical climate,

offers its excellent white sandy coral beaches beautiful lagoons to attract foreigners. The very

hospitable nature of Mauritian population is an added value to welcoming tourists. The

concern and marketing strategies used by the state also help tourism development in the

island. According to the Country Report on Mauritius

(www.fao.org/DOCREP/004/AB586E/AB586E03.htm0), tourist arrivals have been rising by

more than 8 percent a year and the tourism industry has become one of the most dynamic

sectors of the economy, accounting for 19 per cent of gross export earnings and providing

employment directly and indirectly for about 50,000 people.

Given that the tourism continues to expand and that the country is expecting future growth in

tourist arrivals, necessary investment should be done to develop and innovate further the

infrastructure like the airport services and the building with up-to-date amenities that can

accommodate international conferences, seminars and cultural events amongst others. The

sustainability of tourism development necessitates a review of the tourism policies and

developmental plans to make them more effective to respond to emerging challenges in the

tourist area. Sustainable tourism development is premised on the responsibility of the

government, the tourist industry and private tourism promoters to ensure that long-term

prosperity and quality of life of the future generation is not placed at risk

(www.unescap.org/ttdw/Publications/TPTS.../Toreview_No22_2141.pdf). In Mauritius, the

Tourism authority has already started to consider the effects of tourism on the environment

and all precautions are being taken to avoid environmental degradation due to tourism

development. The environment impact assessment is carried out rigorously before permit and

licences are issued for the construction and innovation of buildings, in particular hotels and

restaurants.

Tourism in the rural community of Flic en Flac

Flic en Flac is one of the most popular and renown places in Mauritius. It is in fact a small

village which is found on the west coast of island with a population of around 1500 people

comprising mostly Hindus and Christians. The village has one of the most beautiful beaches

and an excellent lagoon where swimming is safe and various water sports can be practiced.

Thousands of Mauritians and foreigners spend at least a day at the beach annually. During

school holidays many Mauritian families rent apartments and bungalows which are located

within a walking distance to the beach to spend memorable time with their children.

The first big and beautiful hotel namely La Pirogue Hotel was constructed in the midst 1970s.

During that period, the inhabitants were given priorities by the hotel management when the

recruitment exercise was done. Thus locals, both literate and illiterate, could get an

employment at the hotel. Besides, the village of Flic En Flac has also witnessed considerable

amount of infrastructural development and improvement since the start of the construction of

La pirogue Hotel. The constructions of new roads and improvement of the existing ones and


the provision of safe water, electricity and telecommunication services were very much

appreciated by the inhabitants.

The hotel was inaugurated in June 1976. The Government, under the leadership of Sir

Seewoosagur Ramgoolam, showed much commitment to go for tourism development in the

island. Since then many hotels have been built. Today, there are many big hotels like Hilton,

Sugar Beach, Sofitel and several small hotels in the region of Flic en Flac. The scenery of the

village has completely changed with the coming of the new buildings, luxurious apartments,

bungalows, beautiful restaurants, supermarkets and shops selling both handicrafts and trendy

clothes. The state has recently invested much to market Flic en Flac as a safe place for both

locals and tourists. CCTV cameras have been placed nearly everywhere in the village.

Besides, facilities like cybercafé, banking, post office, casino, pharmacy, clinic and massage

saloons are available to both locals and foreigners. The latter can also enjoy the sunny

climatic condition, the calm sea and facilities like diving and deep sea fishing.

Tourism development at Flic en Flac has always been controlled and well managed by the

District Council of the region as compared to such development in other parts of the island.

Certain obligatory and strict rules had to be followed by business men and investors for the

construction of buildings and for obtaining licences to operate small businesses and

commercial outlets.

Transport services have also been considerably improved in the village. Residents and

tourists can move easily from Flic en Flac to the major towns like Quatre-Bornes and

Curepipe. There are also regular buses to and from the capital city of Port Louis. Taxis

facilities and renting of cars are available but such services are not always within the reach of

the locals.

Gentrification as a consequence of Tourism Development

Gentrification is a term that was coined by the sociologist Ruth Glass in 1964. He explained

the process of gentrification as an invasion of working class quarters of London by

middleclass people. For Ruth the process continues until all or the majority of the working

class people are displaced (members.multimania.co.uk/gentrification/whatisgent.htm).

Gentrification is the movement of affluent people into areas that were previous occupied by

working class people. Normally the rich people buy property and land there. The Collins

Concise Dictionary defines gentrification as a process by which middle-class people take up

residence in a traditionally working –class area. With the development of tourism at Flic En

Flac, a process of gentrification has taken place. Hundreds of people from the middle and

upper classes, who are either locals from other regions or mauritians living abroad, have

acquired land, bungalows, luxurious apartments and studios at Flic en Flac. However, the

process of gentrification in Flic en Flac is different as most affluent people have acquired

property not to reside there but to rent to foreigners or to the host population. Normally

gentrification leads to the displacement of locals and poor natives. At Flic en Flac this has not

happened. The reason behind it is that the majority of the inhabitants live in crown lands

which have been leased to them by the authority against the payment of a relatively lower

annual fee. The new comers have bought lands that belonged to the sugar estates or to the

private land owners. Gentrification has lead to the creation dual type of residents, one very

rich and one relatively very poor.


Analysis and Discussion

To get a better insight of the impact and influence of tourism development on the rural

community of Flic en Flac, field work was carried out. Some questions were prepared to get

information on the extent to which locals welcomed tourism development during the midst

1970s, their views on the infrastructural improvement, their experiences of living in one of

the most famous tourist areas and the feelings about the changes brought in their culture and

lifestyles.

To carry out the investigation, the methodology used included observation, informal talks and

interviews with 16 locals and 2 visitors. Although such a methodology has its weakness and

is often regarded as unethical, given that the researcher does not always reveal his identity,

yet the strong point lies in the fact that respondents feel more at ease to interact and answer

questions. Moreover, the possibility of probing becomes easier by using such a technique.

The language used was mainly Creole with the exception of two cases where French was

preferred as the respondents were visitors from Reunion island.

The first question put forward to the respondents was about their opinions and views of

tourism development in their rural area. The majority of the respondents showed positive

attitudes towards tourism. The elderly respondents recounted that inspite of some resistance

at the initial stage of tourism development during the 1970s, most inhabitants were satisfied

to see tourism coming to their village. The promoters and the government authority marketed

the tourist project well and the native population was given hopes that employment creation

in the hotel would be beneficial for people in the locality. The locals were happy and some 15

inhabitants, with little or no education, were trained and recruited by the la Pirogue hotel. As

tourism development expanded during the 1980s with the construction of more hotels,

bungalows and apartments, more jobs were created and many women were employed as

maids. According to the respondents, many locals were having two jobs. Men who were

working in the tourism sector were also part-time fishermen or agricultural labourers.

However, when the tourist sector became stabilised after some years, the hotels preferred to

get more skilled workers who came from other regions. Locals were no more given priorities

as it was the case initially.

When asked about their views on tourism development, nearly all the respondents welcomed

the improvement in infrastructural development in the area. Inhabitants felt certain

improvements in their living conditions as many facilities were put to their disposal.

Respondents availed themselves of the different facilities offered in the village. They could

easily move to the different parts of the country as the public transport system was quite

regular. However, all the four youth respondents were of the view that the village lacked

spaces for youth development. For them, there was a lack of recreational activities in the

region. The disco clubs and the restaurants were unaffordable for most of the youngsters of

the village according one youth respondent. However, the two visitors from the reunion

island were of different views. They claimed that Flic en Flac was a nice region to spend

holidays as all the necessary infrastructures are available. When asked to name some, they

gave examples of the massage saloons, the casino, the beautiful beach, the local restaurants

and the spar supermarket where provisions could be bought at low prices.

On the question regarding how they feel about living in one of the most prestigious tourist

regions of the country, all the native respondents felt that they had become strangers in their


own local communities. For them, the new residents who have bought lands, bungalows and

apartments treat them as low class and backward people. Whenever there is a robbery and

any crime committed, the locals are blamed in the first instance. The respondents cited

various cases where after authority inquiry it was found that in most cases the culprits were

people who worked in Flic en Flac but were citizens of other villages. Gentrification and the

influx of middle class people in areas where the poor live normally lead to the division of the

society between the ‘us and them’ phenomenon. New residents would not mix with the poor

locals and the latter are taken as scapegoats for any misfortune that hits the former. Besides,

the majority of the local respondents, particularly the four elderly ones, stated that it is the

native population of Flic en Flac who have facilitated the development and growth of so

many hotels in the village yet they have neither been recognised nor given the opportunity to

get involved in the tourism development. One of the elderly respondents, who was formerly a

community leader, argues that the authority and the tourism promoters have fooled them at

the initial stages of tourism development by promising the inhabitants that many advantages

that would be accrued to them with the development projects. The locals believed them and

accepted tourism and other related activities without resistance or complain.

When asked about the impact and influence of tourism on their culture and life style, the

youth respondents felt that due to tourism they have learnt new lifestyles and new culture.

They consider themselves to be modern. However, the majority of the respondents are of a

different view. For them, tourists’ behaviour and their dress codes have negatively affected

the traditional culture and values. Many a time, according to two respondents, their relatives

had some form of cultural shock near the beach on seeing topless female tourists. The

respondents go further to explain how some youngsters in the village do not listen to their

parents. They want to stay trendy as the visitors and they spend all their money on

fashionable products. Consequently, tensions and quarrels between children and parents have

become frequent, which in some cases lead to family breakdown.

Conclusion

From the study, it has been found that tourism is a success story in Mauritius. Since

independence, the state has given all the necessary infrastructural support to the growth and

advancement of the tourist sector for the socio-economic development of the society.

Tourism development in the rural areas has generated thousands of direct and indirect

employment for the population, particularly for the locals in coastal villages. The paper

shows that the residents of Flic en Flac welcomed the development and improvement of

infrastructure taken place in the village due to tourism development. Inspite of the positive

economic impact of tourism in the village, the local people are not given the opportunity to

participate or to get involved in the tourism development projects. Practically nothing is done

to improve the standards of the livings of the locals once the hotels start their operations. The

inhabitants also note that tourism has had some negative effects on their cultural values and

living conditions.

Recommendations

Based on the study, it is recommended that government should encourage the use of

the 2% mandatory Corporate Social Responsibility (CSR) Tax paid by the hotels and

other tourism related operators of the Flic en Flac region for the purpose of financing

local projects that will improve the welfare and living conditions of the members of

the local communities. For instance, the CSR may be used to support schooling of the


children from poor families and creating up to date recreational facilities for the

young people. The Ministry of Social Integration together with the Ministry of

Education and that of Gender can work in collaboration to help the local communities

to come up with viable social projects to be financed by the CSR money.

Tourism Development Policies should include training facilities and job placement

opportunities to be offered to the locals with a view to facilitate their recruitment in

the tourist sector. During school holidays, secondary level students of the rural areas

could be given the opportunities to go for job placement in the hotels against the

payment of some stipend.

.

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***


A PROPOSED CONCEPTUAL TQM MODEL FOR

IMPLEMENTATION TO ENHANCE BUSINESS EXCELLENCE FOR

NORTH KARNATAKA MANUFACTURING SMES

S B Mallur,

Research Scholar & Asst Prof,

M.E.D, STJ Institute of Technology,

Ranebennur-561115, Karnataka.

N L Hiregouder,

Principal,

K C College of Engineering & IT,

Nawanshahr-144514, Punjab

Bhimasen Soragaon,

Faculty Member,

Dept of Mechanical Engineering,

Ballari Institute of Technology and Management,

Bellary-583104, Karnataka.

ABSTRACT

The purpose of this paper is to present a proposed conceptual total quality management

(TQM) model for implementation to enhance business excellence for north Karnataka

manufacturing small medium-sized enterprises (SMEs). The development of this model is

based on the TQM literature review, the structured interviews, and general characteristics of

295 Manufacturing SMEs in the northern Karnataka firms. This model provides the users

with a number of practices, drawn mainly from the northern Karnataka firm‟s experiences in

general and their failures and problems in particular. The present study attempts to fill the

gap by identifying the critical factors of managing the manufacturing SMEs quality, and

proposes a holistic conceptual framework for the implementation of TQM in the

manufacturing industry. The benefits of this model helps its users in evaluating the strengths

and weaknesses of their TQM implementation, targeting their improvement areas, setting up

an action plan for improvements, and tailoring a special part to the needs of their firms. The

conceptual model for TQM implementation dedicated to the manufacturing SMEs and

guides them through from the start to end of the TQM implementation process.

Key words- Total Quality Management (TQM), Manufacturing small and Medium- Sized

Enterprises (SMEs), North Karnataka (NK), Business excellence, critical factors


1.0 INTRODUCTION

Total Quality Management (TQM), an evolutionary concept, has evolved with human

civilization. In recent years TQM has received attention worldwide. TQM has evolved

because of continuous change in global economic structure and hence changes in

expectations of customers. The recent trend can be attributed to the recognition of importance

of quality in global competition. TQM is viewed as an organization wide philosophy

requiring all employees at every level of an organization to focus his or her efforts to help

improve each business activity of the organization [21]. Since TQM underlines the

involvement of whole organization, it is affected by the whole organization. Whether it is

people who are working in and for the organization, the activities going in the organization or

the infrastructure facilities, everything affects TQM environment. Viewing from customer‟s

side it is the quality of product; value for the money spent and post sales facilities.

Commitment and involvement are the key issues for employer and employee. Conducive

work environment demands attitudinal changes. Similarly synchronization of activities

among departments is desirable.

Self-sassement is a compréhensive, systematic and regular review of an organization‟s

activities and results referenced against the EFQM excellence model. The self-assessment

process allows the organization to discern clearly its strengths and areas in which

improvements can be made and culminates in planned improvement actions that are then

monitored for progress. In the USA, self assessments are carried out against the Malcolm

Baldrige National Quality Award (MBNQA) model, Europe uses the European Quality

Award (EQA) model and Japan uses the Deming Prize (DP). A comparative study was

accomplished by [1] on four major quality awards: the Deming Prize, the European Quality

Award (EQA), the Malcolm Baldrige National Quality Award (MBNQA), and the Australian

Quality Award (AQA). They describe three factors that encouraged many western countries

to introduce quality awards. Thèse factor are: quality is a significant contributor to

competitive superiority; benchmarking and self-assessment are essential techniques to

improve performance; and the success of the Deming prize in Japan.

This paper presents the development of implementation model TQM in SMMEs of north

Karnataka region. The development of this model was based on the TQM literature review,

the structured interviews, and general characteristics of SMMEs in the northern Karnataka

firms. This model provides the users with a number of practices, drawn mainly from the

firms‟ experiences in general and their failures and problems in particular. The model can

assist its users in evaluating the strengths and weaknesses of their TQM implementation,

targeting their improvement areas, setting up an action plan for improvements, and tailoring a

special part to the needs of their firms.

2.0 DEFINITIONS OF TQM

Defining of what TQM really is does seem to be a tough job by itself. For instance, [23]

says TQM is “an approach to improving the effectiveness and flexibility of business

as a whole”. It is an essential way of organizing and involving the whole organization, every

department every activity every single person at every level. [14] defined TQM as a total

system approach, and an integral part of high level strategy which works horizontally across

functions and departments, involving all employees, top to bottom, and extends backwards

and forwards to include the supply chain and the customer chain. [6], considers the


importance of TQM for a number of reasons, viz., TQM is increasingly taught as an academic

subject; there is broad based developing body of research on TQM; TQM and quality

management are often confused; and evidence reading the „success‟ of TQM is mixed. [10]

[11] defined it as a management approach that encourages everyone in the organization to

focus exclusively upon serving the customer. [8] Defined quality management as approach

to management comprising mutually supported principles, where each of them is supported

by a set of practices and techniques. ISO 9000:2000 defined TQM as coordinated activities

aimed at the control and direction of the organization towards quality [15]. It is visible from

the various definitions that there is no unique definition of the TQM but there is a common

thread of customer satisfaction and continuous improvement in all most all definitions of

TQM.

3.0 CRITICAL SUCCESS FACTORS (CSFs) OF TQM

The critical factors of TQM are almost invariant across countries. The leaders, policy makers

and strategists, human resource managers, process managers, information managers,

marketing and supply chain managers focus on certain factors of TQM, of course, with

suitable adaptations, as critical factors that contribute to the success of TQM. The critical

factors of TQM identified are Leadership & Top Management Commitment (LTMC), Vision

and Plan Statement(VPS), Supplier Quality Management (SQM), System Process Quality

Improvement (SPQI), Total employee involvement (TEI), Education and Training(ET),

Performance appraisal, Recognition(PAR), Customer Focus Satisfaction and(CFS),

Evaluation (En), Work Environment and Culture (WEC), Continuous Improvement (CI),

and Communication(Co), with a perspective on how to use critical factors as the foundation

for driving transformational orientation in order to create a sustainable performance of

business excellence. Although, TQM is a well-established field of study for business

excellence the success rate of TQM implementation is not very high. The major reason for

TQM failure is owing to the tendency to look at TQM as tool and not as a system.

Critical success factors are indicators of what must be achieved if an institution is not only to

satisfy its customers but also move ahead on the paths of its vision statements. The past

decade has seen many firms focusing on Total Quality Management (TQM) as a means of

improving profits, market share and competitiveness. Although TQM is a proven approach

for success in manufacturing, services and the public sector, several organizations failed in

their campaigns because of many reasons like lack of top management commitment, ignoring

customers etc. It is necessary to understand what are the reliable and valid critical success

factors of TQM, and how these factors influence operational and business performances and

excellence. The most commonly used critical TQM factors cited in the literature are top

management commitment and support, customer focus, supplier‟s quality management,

design quality management, quality data reporting, usage of quality control tools, training,

work environment and culture, employee involvement, employee empowerment, quality

related training, product quality, and supplier‟s performance. Each of these critical factors has

more than one dimension.

3.1 Independent variables

Several attempts have been made to review, study, identify, justify and evaluate the critical

factors that constitute TQM strategy. As reported in the TQM literature, several review

papers have been published by researchers such as [28], [13], [3], [25], [2], [5], [31], [9],

[16], [18], [26], [30], [20], [22], [27], [24], [17], [1]and the most recent review of TQM

literature is by [4].


3.2 Dependent variables (business excellence)

The literature review indicated that different researchers adopted different variables for

measuring overall business excellence. To date, no uniform measures have existed.

Therefore, the constructs of overall business performance had to first be identified so that this

research could be conducted. Researchers have identified different variables used for

measuring organizational business excellence shown in Table 1.

Table1: Performance measure proposed by literature

Author(s) Measure Variables

Brah et al. (2002)

[7]

Quality

Performance

Product/service quality, Employee and

service

quality Process quality, Supplier

performance

Lakhal et al.

(2006) [19]

Organizational

Performance

Financial performance, Operational

performance

Product quality

Tari et al. (2007)

[32]

Quality outcome Customer result, People result, Quality

performance

Feng et al. (2008)

[12]

Organizational

Performance

Operational performance, Business

performance

Su et al. (2008)

[29]

Organizational

Performance

Quality performance, Business

performance

R&D performance

4.0 METHODOLOGY

The objective of this study is to development of a conceptual total quality management

(TQM) model for introduction and implementation of TQM and also to investigate the

relationship between TQM and Business Excellence (B E) in small and medium sized

manufacturing enterprises (SMMEs) in the north Karnataka region. To that end, a survey

questionnaire was developed. A total of twelve constructs were proposed, which were felt to

be important for TQM implementation. For scoring purposes, a five-point Likert scale was

employed with a score of 1= strongly disagree; 2=Disagree; 3= Neutral; 4= Agree; 5=

strongly agree, for practice (The level of perceived importance to the factory) and 1= Not

important at all; 2=Not important; 3= Neutral important; 4=Important; 5= very important for

Importance (The level of perceived importance to the factory). Having validated the

questionnaire through expert validation and pilot testing, a sample of 950 companies of small

and medium enterprises in north Karnataka region, were randomly selected from the Directory

of the north Karnataka small scale industries association (NKSSI) and the data base of the

Karnataka Small and Medium Industry Development Corporation (KSMIDEC). The full

survey, through the mailed questionnaire, and personally visited the some companies was

carried out. Although the response rate was initially not encouraging, various techniques were

used to improve the response rate including providing a stamped self-addressed envelope, and

personalization (a hand-written note) on the covering letter in the follow-up stage. As a result

responses of 315 being returned. 10 of the 315 returned responses were incomplete, resulting

in only 295 (48 medium and 247 small) responses considered for final study, i.e. 31.05% valid

response rate which the authors felt to be reasonable for this kind of study. The responses

were analyzed using the SPSS Version 11.5 statistical package


5.0 SURVEY RESULTS

5.1 General profile of the company

Table 1 shows that the respondents of small and medium sized companies. Respondents from

small-sized companies, defined in this study the investment in plant and machinery is more

than twenty five lakhs rupees but does not exceed rupees 5 cores. This is followed by

medium-sized companies the investment in plant and machinery is more than rupees 5 cores

but not exceeding Rs.10 cores.

Table: 1 Classification of respondents by type of company

Type of Company Respondents

Number Percent

Small 247 83.7

Medium 48 16.3

Combined 295 100.0

Source: Research Survey Data

Table 1 indicates the classification of respondents by type of companies. It is evident from

the finding that higher percentage (83.7%) of small type of companies established as

compared to 16.3% groups of industries focused as medium manufacturing enterprises.

Table.2 indicates the classification of respondents by type of group of industries. It is evident

from finding that straightly higher percentage (76.6%) of non ISO groups of industries

focused as compared to ISO (23.4%).

Table: 2 Classification of respondents by type of groups

Groups Respondents

Number Percent

ISO 69 23.4

Non ISO 226 76.6

Combined 295 100.0


6.0 RELIABILITY ANALYSIS

Using the SPSS reliability analysis procedure, an internal consistency analysis was performed

separately for the items of each critical factor. Cronbach‟s alpha is commonly used for this

purpose. Values of Cronbach‟s alpha range between 0 and 1.0. Higher values indicating

higher reliability. The value of each variable, as measured by each statement on the scale

of 1 to 5, is computed using the reliability analysis procedure shown in Table 3. The

alpha values range from 0.8259 to 0.9148, which indicates an internal consistency with

the alpha value of more than 0.70, so no items were dropped from each variable. These

results are therefore acceptable and are a reliable.

Table: 3 internal consistency analyses

Quality management

practice

No. of

items

Alpha

value

Item for

deletion

Alpha if item

deleted

LTMC 7 .8818 none .8833

VPS 7 .8511 none .8532

SQM 6 .9023 none .9019

SPQI 6 .9064 none .9065


TEI 7 .8506 none .8546

ET 7 .8653 none .8606

PAR 7 .8639 none .8608

CFS 7 .9188 none .9193

En 9 .9019 none .9017

WEC 9 .9270 none .9262

CI 7 .9090 none .9089

Co 5 .8421 none .8437

Total 84 0.885 none 0.885


7.0 A THEORETICAL TQM IMPLEMENTATION MODEL From extensive review of total quality management literature, the external and internal

environment affecting an organization‟s quality performance and the twelve critical success

factors of TQM are identified. Based on the critical success factors of TQM, a theoretical

TQM model is developed. This model describes the primary quality management methods

which may be used to assess an organization‟s present strengths and weaknesses with regard

to its use of quality management methods.

Fig.1: Theoretical TQM implementation model on TQM extension practices and BE Using this model as a basis for this research, a proposed TQM implementation model in small

and medium sized manufacturing enterprises is shown in Fig.1. The degree of

implementation of quality principles (84 variables) has been measured using a five-point

ELEMENTS OF BE

SOE

QOP

SBP

SOC

F1. LTMC

F3. SQM

F2. VPS

F6. ET

F5. TEI

F4. SPQI

F11. CI

F7. PAR

F8. CFS

F10. WEC

F9. En

F12. Co

BUSINESS EXCELLENCE

(BE)


scale. The level of implementation of twelve TQM factors will then be determined by

calculating the averages of the scores of the corresponding variables.

8.0 DEVELOPMENT OF THE CONCEPTUAL TQM MODEL FOR

IMPLEMENTATION

Of all the critical success factors considered, leadership and top management commitment is

of critical importance. The present work, based on the foregoing thorough review of the

prescriptive, conceptual, practitioner and empirical literature on TQM spanning over many

research articles, identifies twelve critical factors of quality management as critical for the

institution of a TQM environment in manufacturing organizations. The following critical

success factors (CSFs) are identified from the literature survey and through discussions with

the CEO and managers of small and medium manufacturing enterprises of northern

Karnataka and experts from management and engineering institutions.

Leadership & Top Management Commitment (LTMC).

Vision and Plan Statement (VPS).

Supplier Quality Management (SQM).

System Process Quality Improvement (SPQI).

Total Employee Involvement (TEI).

Education and Training (ET).

Performance Appraisal, Recognition (PAR).

Customer Focus and Satisfaction (CFS).

Evaluation (En).

Work Environment and Culture (WEC).

Continuous Improvement (CI).

Communication (Co).

Thus, the proposed TQM model consists of twelve critical factors (independent) of

TQM that are identified, help to understand on how to use critical factors as the foundation

for driving transformational orientation in order to create a sustainable performance of

business excellence. Following are the four elements (dependent) of business excellence.

Satisfaction of Employee (SOE).

Quality of Product (QOP).

Satisfaction of Customer (SOC).

Strategic Business Performance (SBP).

Independent critical factors can be broadly grouped under four categories as follows.

Step 01: Drive to preparation and awareness

- Leadership & top management commitment.

- Vision and plan statement

- Total employee involvement

- Continuous improvement

Step 2: Focus to asses & develop

- Customer focus and satisfaction

Step 3: Standardize, improve and review

- Education and training

- Work environment and culture

- Supplier quality management

- Communication


Step 4: Prepare to implement

- Performance appraisal and reorganization

- System process quality management

- Evaluation and measurement analysis

The conceptual TQM model helps to understand the overall business excellence in

terms of Satisfaction of Employee (SOE), Quality of Product (QOP), Satisfaction of

Customer (SOC), and Strategic Business Performance (SBP). North Karnataka SMMEs can

optimize the use of this model by blending it with and applying it to their own situations,

because SMMEs are different in terms of their people, goals, structure, products, services,

and processes, allowing their own methods to better suit their situations and consequently

develop their own ways to business excellence. Thus this model shows that the application of

critical factors of TQM practices in combination can lead to improvements in overall

business excellence.

The conceptual TQM model is divided into four main steps, all of which need to be

addressed once the motivation for TQM has been identified from top management

commitment. The motivation will set the overall strategic direction of TQM and influence the

relevant importance of each part of the TQM model. Of the four steps of the TQM model the

first one: „drive to preparation and awareness‟, includes leadership & top management

commitment, vision and plan statement, total employee involvement, continuous

improvement; the second one: „focus to asses and development‟, include customer focus &

satisfaction; the third one: „standardize, improve and review‟ includes education and training,

work environment and culture, communication, supplier quality management; and the fourth:

“prepare to implement”, includes performance appraisal & recognition, system process

quality improvement, evaluation & measurement analysis. These independent critical factors

are, in essence, are tools of the intellect that have been forged in the administrative theory,

tempered in manufacturing quality management. „Business excellence‟ and „Changing the

culture‟ are the elements which must be considered at all stages, not only in the initial

organizing activities, but also primarily results from the other initiatives described, interacts

with them throughout the process, and will evolve with the organization‟s operating

experience of TQM. People, both as individuals and working in teams, are core to TQM and

without their skills and endeavors continuous improvement will simply not occur.

A diagrammatic representation of the TQM model is given in fig. 2. The performance

of the system (output or business excellence) should be constantly measured using metrics,

and should be evaluated and analyzed with respect to benchmarks that are set up, and a

feedback is given to the system for taking corrective steps. The comments (feedback) from

the customer, regarding the delivered products, along with their suggestions and new

requirements, are again fed into the system for its enrichment. All the factors that are

discussed above are vital components for quality improvement, and are derived from the

literature and through interaction and discussions with the managers.

9.0 TQM IMPLEMENTATION METHODOLOGY

There are four major steps that TQM typically implemented. TQM is a process that never

ends and establishing organization wide TQM generally takes three or more years. The

various steps involved in attaining total quality management in small and medium sized

manufacturing enterprises are explained as below.

9.1 Step 01: Drive to Preparation and Awareness

It is concerned with gaining thorough knowledge of what can and what should be expected

from introduction of TQM and its implementation.


At this stage, particular attention is required first at management‟s commitment for quality in

all aspects through a vision and plan statement which describes how a company wants to be

seen in its chosen business, by total employee involvement and continuous improvement and

by creating working environment for quality management.

9.2 Step 2: Focus To Asses & Develop

A successful organization recognizes the need to put the customer first in every decision

made. The key to quality management is maintaining a close relationship with the customer,

in order to determine fully the customer‟s needs, as well as to receive feedback on the extent

to which those needs are being met. Thus, it is very important to find customer satisfaction

and customer perception of quality. The insights gained can clearly help the organization to

improve quality.

9.3 Step 3: Standardize, Improve and Review In this stage step up the planned implementation programme, step by step quality is people &

if any institution is really people oriented, it needs plenty of words to describe the way the

people ought to treat one another. Communication is on expression of teat and confidence in

people and inducer cooperation involving people assisting the trust and confidence in people

and inducers cooperation involving people assisting the each other not because they perceive

their long term goals to be identical but because they seem to realize that their own welfare

lies in not harming each other‟s interest.

Communicating the company‟s total quality management performance to vendors involve

some basic principles that care used to communicate the programme intentionally, i.e.

Vendors must be led to appreciate the benefits to be gained by using TQM. For this purpose

companies can publish alternative brochures and even conduct vendors clean it for

encouraging their supplies to join with them in specific quality improvement and quality

management programmes. All these programmes are based on the principles & benefit from

good purchaser vendor relationship.

For improving production and quality in any organization key techniques are based on

quantities data. There are many quantities techniques for the process control and

improvement but these are generally referred as seven basic tools. Some of these techniques

are data related to input, process and output are obtained in respect of certain parameters for

quantities analysis facilities decision making in improvements in the process for better

production quality, efficiency and cost effectiveness.

9.4 Step 4: Prepare To Implement Rewards are the form of employee‟s involvement in which the organization identifies and

recognizes the employees who have made positive contribution in the success of the

organization. The reward should be commensurate to the situation and level of achievement,

i.e. the higher the achievement, the higher the reward. Recognition and rewards can be in

many forms but it is always better to develop new ideas to suit the local situation for

recognition. In many of the responding companies, rewards range from simple handshake or

pat on the back to banquets in honor of the individual or team. The rewards are appropriately

presented so that fellow employees know about it.

Thus integrating the efforts at various levels and using the above factors of TQM

implementation as the foundation and pillars of an implementation strategy an organization

can plan a transition to total quality management culture. By using the above model, it is

hoped that north Karnataka companies shall be able to implement TQM in a systematic

manner.


Fig. 2: A conceptual TQM implementation model for implementation in the small and

medium sized manufacturing enterprises (SMMEs)

IMPROVEMENTS IN

Results

(Dependent

variables)

Legend: SOE: Satisfaction of Employee

QOP: Quality of Product

SOC: Satisfaction of Customer

SBP: Strategic Business Performance

CSFs: Critical Success Factors

CF: Critical factors

QOP

SBP

SOC

SOE

Elements of

Business

Excellence

--Leadership & Top Management Commitment.

--Vision and Plan Statement. --Total Employee Involvement

--Continuous Improvement

--Customer Focus & Satisfaction

--Performance Appraisal & Recognition

--System Process Quality Improvement.

--Evaluation &Measurement Analysis

--Education and Training.

--Work Environment and Culture.

--Communication. --Supplier Quality Management.

.

STEP I

DRIVE TO

PREPARATION, AND

AWERENESS

FOCUS TO ASSES

&DEVELOP

STANDARDISE,

IMPROVE & REVIEW

PREPARE TO

IMPLIMENT

FEED

BACK

C

S

Fs

Critical factors

for TQM

implementation.

(Independent

variable)

LEADS TO

BUSINESS EXCELLENCE

Out put

STEP IV

STEP II

STEPIII

CUSTOMER

NEEDS


9.5 Elements of Business Excellence

Total quality management (TQM) has been proposed to improve business excellence and

received considerable attention in recent researches. Business excellence (B E) is a

systematic approach to achieving and sustaining business improvement and organizational

growth. The business excellence way of working is based on total quality management

principles, particularly the focus on balancing stakeholder‟s interests, collaboration and

continuous improvement.

This study empirically examines the extent to which TQM and business excellence are

correlated and how TQM impacts various levels of business excellence. In this study, a

conceptual TQM model is developed according to a literature review. This conceptual TQM

model demonstrates the relationship between critical factors of TQM and business excellence

through examining the direct and indirect effects of twelve critical factors TQM on four

different levels of business excellence. The proposed conceptual TQM model and hypotheses

were tested by using data collected from information-related small and medium sized

manufacturing enterprise (SMMEs) in the north Karnataka.

9.5.1 Satisfaction of Employee (SOE)

Satisfaction of employee is the terminology used to describe whether employees are happy

and contented and fulfilling their desires and needs at work. Employee satisfaction is also a

measure for how happy the workers are with their job and working environment. Keeping the

morale high among workers can be of tremendous benefit to any company, as happy workers

will be more likely to produce more, take fewer days off, and stay loyal to the company.

There are many factors in improving or maintaining high employee satisfaction, which the

wise employers would do well to implement. Job security, Equity, fairness, and equal

opportunities, recognition and reward schemes, leadership style and ability, relationships with

coworkers, promotion opportunities, and other factors may improve employee satisfaction.

9.5.2 Quality of Product (QOP)

According to Garvin (1987), product quality consists of eight dimensions: performance,

features, reliability, conformance, durability, serviceability, aesthetics, and perceived quality.

Performance refers to operating characteristic of a product. Feature refers to additional

characteristics that supplement a product‟s basic function. Reliability reflects the probability

of a product being available for use or failing within a specified period of time. Next,

conformance refers to the degree to which product design and operating characteristic meet

the predetermined standard. Durability can be defined as the amount of use one gets from a

product before it deteriorates. While serviceability reflects speed, courtesy, competence and

ease of repair. Aesthetics refer to personal judgment of appearance of products, their sound,

taste or smell. Lastly, perceived quality is about the reputation of the provider.

9.5.3 Satisfaction of Customer (SOC)

It is important to focus on the customer, both internal and external i.e., the employees and the

users of the end product. A successful organization recognizes the need to put the customer

first in every decision made. Customer satisfaction can be measured by comparing product

quality and service quality with those in the other firms in the same industrial sector. Use of

customer satisfaction information can provide a focus and direction for continuous

improvement throughout the entire firm. Such information can be used to improve TQM


implementation efforts, seek opportunities to improve product and service quality, and study

the time dimension of TQM implementation. The ultimate measure of company performance

is customer satisfaction. Thus, it is very important to find customer satisfaction and customer

perception of quality. The insights gained can clearly help the organization improve quality.

9.5.4 Strategic Business Performance (SBP)

Total Quality Management (TQM) tries to meet customer expectations. TQM is a strategic

way for revamping the operations of organization for the above goal. It means that TQM is

not an addition to anything else. In short, TQM is an organizational strategy formulated at the

top management level and then implemented throughout the organization. The overall

success of TQM depends upon different major steps such as achieving total quality in Human

Resource Management, total Quality in Business Strategy, TQ Business Process Management

etc. Annual sales growth, Profits, market share is typical measures of strategic business

performance.

10.0 ESTABLISHMENT OF RELATIONSHIP BETWEEN INDEPENDENT

VARIABLES WITH DEPENDENT VARIABLES FOR BUSINESS EXCELLENCE.

Literatures on total quality management practices and organizational business excellence are

abundant. Organizations are motivated to embrace quality management practices with the

principle objective to achieve improved organizational business excellence. Generally, these

studies are mainly focused on large organizations and the majority of the studies are on

organizations in developed economy. There is less number of studies of quality management

practices on small and medium enterprises. The objective of this theoretical TQM

implementation model is to show the critical success factors that influence organizational

business excellence for small and medium enterprises when they are adopting standard based

TQM as a system of their quality management practice. The primary thrust in this proposed

study is to enable the findings of this research to be utilized as guidance to organizations and

consultants to establish and prioritize the critical success, factors that should be addressed in

order to achieve improved organizational business excellence. Identifying and prioritizing to

address the critical success factors as the determinant of organizational performance would

enable small and medium enterprises to improve in quality management practices.

The proposed TQM implementation model for the research is illustrated in the model

shown in Figure 7.2. Organizational business excellence will be the Dependent Variable

(DV) and the critical success factors for standard based management are the Independent

Variable (IV).

10.1 Independent variable (Critical Success Factors)

The conceptual TQM model for this study addressed the critical success factors on

organizational business excellence for small and medium enterprises that adopt quality

management practices using standard based management systems. The critical success

factors for quality management developed by a number of authors had been be utilized for

this study.

10.2 Dependent Variables (organizational business excellence)

Organizational business excellence (Neely, Gregory & Platts, 1995) can be defined as the

process of quantifying the efficiency and effectiveness of action, and „performance measure‟

as a metric used to quantify that action. In Total Quality Management and quality

importance of performance indicators has been highlighted as important criterion in


achieving quality excellence. Quality measures are seen to represent the most positive step

in broadening the basis of business excellence measurement (Bogan & English, 1994).

11.0 THE IMPORTANCE OF THE STUDY

Small and Medium Enterprises often are constrained by their resources such as financial,

manpower and time to embark on quality management practices. Adoption of TQM system

is perceived as an economical option to embrace quality management practices in the

organization. Knowledge and understandings of the critical success factors of TQM system

on organizational business excellence for small and medium manufacturing enterprises will

facilitate to influence or establish the determinants for the success of small and medium

enterprises in their organizational quality practices in their pursuit for organizational

competitiveness, and consequently, organizational business excellence. These determinants

will be utilized as prescriptive measures for the small and medium enterprises in their

strategic decision makings in order to achieve positive organizational excellence. It is

anticipated that, small and medium enterprises that focused on these critical success factors

would be able to economically concentrate to enhance these factors in order to economically

achieve their quality management exercise.

The relationship between twelve independent variables with dependent variables

(business excellence) comprising of four components. The final findings indicate that there

exits positive higher significant relationship between independent variables with business

excellence for both small and medium companies and ISO and non ISO certified companies.

11.1 Perceived relationship between independent and dependent variables (Small and

Medium)

The findings indicate that there exits positive higher significant relationship between

independent variables with business excellence for both small and medium manufacturing

enterprises.

Table 4: Relationship between independent and dependent variables (Small and

Medium sized manufacturing enterprises)

Sl. No Aspect Relationship with Business Excellence (r)

Small (n=247) Medium (n=48)

1 LTMC 0.790 0.822

2 VPS 0.741 0.860

3 SQM 0.852 0.807

4 SPQI 0.795 0.786

5 TEI 0.757 0.853

6 ET 0.869 0.888

7 PAR 0.807 0.837

8 CFS 0.727 0.732

9 En 0.895 0.930

10 WEC 0.789 0.650

11 CI 0.778 0.759

12 Co 0.532 0.594

Source: Research Survey Data r = Correlations co-efficient


It is evident from the chart (establishing) under which establishes the relationship between all

twelve independent variables with dependent variables (business excellence) comprising of

four components. The final findings indicate that there exits positive higher significant

relationship between independent variables with business excellence for both small and

medium companies (Table 4).

11.2 Practice relationship between independent and dependent variables (Small and

Medium)

Table 5: Relationship between independent and dependent variables (Small and

Medium sized manufacturing enterprises)

Sl. No Aspect Relationship with Business Excellence

(r) Remarks

Small (n=247) Medium

(n=48) Com

(n=295)

1 LTMC 0.879 0.923 0.796

2 VPS 0.891 0.953 0.764

3 SQM 0.921 0.893 0.843

4 SPQI 0.867 0.845 0.790

5 TEI 0.894 0.939 0.775

6 ET 0.954 0.949 0.872

7 PAR 0.937 0.965 0.810

8 CFS 0.912 0.935 0.727

9 En 0.955 0.948 0.901

10 WEC 0.934 0.935 0.761

11 CI 0.929 0.940 0.773

12 Co 0.886 0.901 0.541

Source: Research Survey Data r = Correlations co-efficient

It is evident from the chart (establishing) under which establish the relationship between all



relationship between independent variables with business excellence for both small and

medium companies (Table 5).

11.3 Relationship between critical success factors (independent) and dependent

variables (ISO and Non ISO)-Perceived




relationship between independent variables with business excellence for both ISO and non

ISO companies (Table 6).

Table 6: Relationship between critical success factors (independent) and dependent

variables (ISO and Non ISO)

Sl. No Aspect Relationship with Business Excellence( r)

ISO

(n=69)

Non ISO (n=226)

1 LTMC 0.817 0.838

2 VPS 0.505 0.852


3 SQM 0.793 0.852

4 SPQI 0.761 0.818

5 TEI 0.772 0.768

6 ET 0.957 0.820

7 PAR 0.908 0.768

8 CFS 0.409 0.837

9 En 0.878 0.916

10 WEC 0.796 0.794

11 CI 0.981 0.651

12 Co 0.910 0.321

11.4 Relationship between critical success factors (independent) and dependent

variables (ISO and Non ISO)-Practice

Table 7: Relationship between critical success factors (independent) and dependent

variables (ISO and Non ISO)

Sl. No Aspect Relationship with Business Excellence( r)

ISO

(n=69)

Non ISO (n=226)

1 LTMC 0.817 0.838

2 VPS 0.505 0.852

3 SQM 0.793 0.852

4 SPQI 0.761 0.818

5 TEI 0.772 0.768

6 ET 0.957 0.820

7 PAR 0.908 0.768

8 CFS 0.409 0.837

9 En 0.878 0.916

10 WEC 0.796 0.794

11 CI 0.981 0.651

12 Co 0.910 0.321




relationship between independent variables with business excellence for both ISO and non

ISO companies (Table 7).

12.0 VALIDATION OF PROPOSED TQM IMPLEMENTATION MODEL

THROUGH REGRESSION USING ESTIMATION PROCEDURES

This is the final section of the research study that designed to validate and evaluate the

proposed conceptual TQM implementation model based CSFs of TQM. The manager of the

company gave the perceptions, comments, criticisms, and suggestions to the conceptual TQM

model. The comment made by the company about the conceptual TQM implementation

model was regarding the overall acceptability of the conceptual TQM model. The company

agreed that the role of top management commitment is an important role to play in

implementing the TQM program. Top management commitment alone, without vision and

plan statements, employee involvement in process, continuous improvement, customer focus


and satisfaction, education and training, work environment and culture, supplier quality

management and other CSFs will not bring the program into success of business excellence.

In statistical theory it is always ascertained with 10% of the main sample accounted for

the validation of the research tool. Hence small and medium companies sample subjected has

been considered. Thirty (n=30) companies were selected and subjected for validation. Further

the model was formulated considering all the factors. The assessment of factors collected

from the selected thirty companies and received back with responses. The model so

constructed with the appropriate validation can be made use in the entire relevant field which

found to be more appropriate and suitable. The model is also further helpful in the predictions

aspects. The validation of the proposed TQM implementation model was undertaken through

a case study involving thirty SMMEs with the objective of establishing relationship between

independent variables and dependent variables.

The predicted business excellence (BE) value comprising twelve critical factors

worked using simple regression co-efficient. This estimated value is has been compared with

business excellence for sample size n=295+30=325. To ascertain the goodness of fit or on par

results between absorbed business excellence and predicted business excellence values the χ2

test is employed.

The computed χ2value found to be 3.74 is with lesser compared to χ2 table value

(3.86). Hence it can be concluded that the absorbed business excellence in relation to

predicted business excellence found to be non significant. However it can be concluded that

the validity component found to be stronger in establishing the difference between absorbed

BE and predicted BE as non significant. The overall predicted BE worked to be 3.43(X)

subjected for 95% confidence interval to estimate the population parameters (µ) ranges

between 3.10 to 3.86. The range of value of the confidence interval depicts the narrow

difference with responses to predicted business excellence value. With the procedure

followed above with actual and predicted value of BE resulting with strong validation with

respect to the component BE excellence under study. Hence, this conceptual TQM model can

be utilized to the North Karnataka region as the sample selected is appropriate and

Representing the same region.

13.0 VALIDATION METHODOLOGY

T-tests are statistical tests that are used to determine whether there are significant differences

between two groups with respect to a given endpoint. Most calculators and spreadsheets have

functions that will calculate the t-value for once enter the data. However, t-values are

relatively easy to calculate, especially if the sample numbers are small. Once calculate a t-

value it can determine whether there are statistically significant differences.

Calculate the mean for each of the samples. To do this, add all the values in each sample and

divide by the number of values present

Explicit expressions that can be used to carry out various t-tests are given below. In each

case, the formula for a test statistic that either exactly follows or closely approximates a t-

distribution under the null hypothesis is given. Also, the appropriate degrees of freedom are

given in each case. Each of these statistics can be used to carry out either a one-tailed test or a

two-tailed test. Once a t value is determined, a p-value can be found using a table of values

from t-distribution. If the calculated p-value is below the threshold chosen for statistical

significance (usually the 0.10, the 0.05, or 0.01 level), then the null hypothesis is rejected in

favor of the alternative hypothesis.

(Avg. of business excellence) - (presumed avg. predicted business excellence.)

t = -----------------------------------------------------------------

(S D of sample) / (sq. root of sample size)

http://en.wikipedia.org/wiki/Student%27s_t-distribution


http://en.wikipedia.org/wiki/Degrees_of_freedom_%28statistics%29

http://en.wikipedia.org/wiki/One-tailed_test

http://en.wikipedia.org/wiki/Two-tailed_test

http://en.wikipedia.org/wiki/P-value


http://en.wikipedia.org/wiki/Statistical_significance

http://en.wikipedia.org/wiki/Statistical_significance


For above equation, the differences between all pairs must be calculated. The pairs are either

one person's pre-test and post-test scores or between pairs of persons matched into

meaningful groups (for instance drawn from the same family or age group: see table). The

average (XD) and standard deviation (SD) of those differences are used in the equation. The

constant μ0 is non-zero if you want to test whether the average of the difference is

significantly different from μ0. The degree of freedom used is n − 1.

13.1 Calculating the T-test for Comparing Two Means

The t-test is often used to calculate the significance of observed differences between the

means of two samples. The t-test is generally used with scalar variables, such as length and

width, and so on. The null hypothesis is that there are no significant differences between the

means.

1) First, calculate the variance in each of your samples:

Calculate the sample variance, which is an indicator of how much variability there is in

responses, for each of the samples. To calculate the variance, subtract the mean from the first

value, then square it and divide by the number of samples in the set minus one. Continue to

do this for the second value, and then the third, continuing until you have a value for each

sample, then add them all together. In math terms, the variance

(s2) = the sum of (x(1) -- x(mean)) / (n-1).

(χ2 cal. value) = the sum of BE – x (mean of predicted BE)) / (n-1).

2) Second, calculate the t-value

Calculate the t-value by taking the absolute value of the mean of sample one minus the mean

of sample two. Divide this value by the following: the square root of the variance of sample

one divided by the variance of sample one added to the variance of sample two divided by the

variance of sample two. This will give you a single t-value with which you can determine

significance by looking on a t-table.

Formula for the t-test

3) Third, calculate the degrees of freedom

Calculate the degrees of freedom by adding the samples of both means (n) which leads to the

overall sample size (N), and subtract 1.

N = n1 +n2 and df = N –1

4) Compare your t-value with the critical t-value


Compare the t-value and calculated with the t-value associated with the appropriate degrees

of freedom. If the t-value is greater than the t-value reported in the table, this indicates that

the two samples are significantly different from one another.

For a given df, if your t-value is larger than the value in the table, the null hypothesis of no

difference between the means should be rejected. Again, biologists use a p-value of 0.05 or

less as an indicator of significance.

5) Report the results of the t-test

The calculated t-value is less than t-tabulated value (1.96), the finding reveals the both the

estimated methods under the package found to be similar and identical.

Predicted business excellence (mean) less than compared with 95% Confidence Interval (C

I) found to be (3.10) less than that (3.42) less than that (3.86).

Calculated χ2 value is less than tabulated χ2 value is Non Significant.

Hence Validated

14.0 RESULTS AND DISCUSSION From the analysis in the previous sections it is evident that the following inferences can be

drawn.

A conceptual implementation model for TQM implementation in the north Karnataka context

has been derived based on the discussion of the findings of the investigations of the practices

of north Karnataka organizations and knowledge of the literature. The conceptual

implementation model illustrates the relative criticality of the critical quality factors and their

interrelationships, and the conceptual implementation model is constructed using inputs from

the north Karnataka organizations, in order to offer north Karnataka management relevant

guidelines for decision making for TQM implementation.

This research study makes several contributions. The study proved the positive

relationship between TQM practice and all the various measures of manufacturing objective

attainment, as well as organizational business excellence improvement, revealing the strong

linkage of TQM and manufacturing objective as well as organizational business excellence.

Most of the critical quality factors identified and used in the construction of this

conceptual implementation model are used in other current conceptual model of

implementation provided by researchers, experts and consultants, and national quality

awards.

The proposed TQM model is comprehensive model comprising twelve critical factors and

aspects of TQM, and four elements of business excellence.

This chapter empirically examines the extent to which TQM and business excellence

are correlated and how TQM impacts various levels of business excellence. The relationship

between twelve independent variables with dependent variables (business excellence)

comprising four components indicate that there exits positive higher significant relationship

for both small and medium companies and ISO and non ISO certified companies.

To ascertain the goodness of fit or on par results between absorbed business excellence

and predicted business excellence values the χ2 test is employed. The computed χ2value

found to be 3.74, which is lesser compared to χ2 table value (3.86). Hence it can be

concluded that the absorbed business excellence in relation to predicted business excellence

found to be non significant.

The actual and predicted value of BE resulting with strong validation with respect to the

component BE under study. Hence, this conceptual TQM model can be utilized to the North

Karnataka region as the sample selected is appropriate.

http://biology.nebrwesleyan.edu/courses/Labs/Biology_of_Animals/Statistics_T&GtestTable.html


15.0 CONCLUSIONS

This research paper presented a model for implementing TQM in small and medium sized

manufacturing enterprise to achieve business excellence. The model is an integration of the

twelve critical factors and four elements of business excellence, which cover all the groups

for total quality management implementation. The analysis has established a high positive

relationship between independent variables and dependent variables of business excellence

for both small and medium enterprises and ISO and non ISO certified companies.

The validation of the model using regression analysis and ANOVA technique has clearly

established the difference between absorbed business excellences (BE) and predicted BE as

non-significant thereby confirming the valid for application in this region. However, the

holistic approach adopted in this model makes it suitable application in any part of the

country.

The final part of the TQM implementation model is the outcomes. It is hoped that at the

end of the implementation of the TQM implementation model, organization can satisfy its

customer and achieve continuous improvement in order to achieve business excellence to be

competitive in the world competition. TQM implementation model system also focuses in

helping a company grow and on focusing efforts on continually increasing profits.

To conclude, the proposed TQM implementation model can assist its users in evaluating

the strengths and weaknesses of their TQM implementation, targeting their improvement

areas, setting up an action plan for improvements, and tailoring a special part to the needs of

their firms.

ACKNOWLEDGEMENT

The authors are greatly indebted to all the small and medium sized enterprises of North

Karnataka who responded enthusiastically to our survey. Without their active involvement,

this research study would not have been successful. We are also grateful to the Research

Center at B.V.Bhoomaraddi College of Engineering & Technology, Hubli, for facilitating the

conduct of this study.

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Journal of Quality and Reliability Management, Vol. 25(8), pp. 89-823, 2008.

[30] Sureshchandar, G. S., Rajendran, C. and Anantharaman, R. N., “A holistic model for

total quality service”, International Journal of Service Industry Management, Vol. 12, pp.

378-412, 2001.

[31] Tamimi, N, and Sebastianelli,R., “ The barriers to total quality management”, Quality

Progresss, Vol.31 No 6, June, pp. 57-60, 1998.

[32] Tari, J. J.; Components of successful total quality management, The TQM Magazine, 17

(2), pp. 182-194, 2005.

***


INDIAN BPO- A STEADY GROWTH IN RECESSION PERIOD -

WITH RESPECT TO REVENUE GENERATED

Mr. S. D. More

Research Scholar

Vivekanand College Kolhapur

Co-ordinator YCMOU Nashik

Dr. U.M. Deshmukh

Research Guide

Chh. Shahu Inst. Of Business Edu. & Research,

Kolhapur.

Abstract

The Indian BPO companies are the important sectors in which the 37 percent growth is

observed in last three years and various companies are now looking for the varied jobs

through the outsourcing assignments with in and out side the country. This paper highlights

on the BPO industry in India its growth and sector wise share of the companies. The

dynamisms of the industry and various risks and suggestions for making the BPO a largest

revenue attracter for this decade.

The time when much part of the world is facing recession , the Indian BPO has also shown

courage to maintain and grow steadily in this hard times. The advantage lies in hard working

capacity of Indian employees with skills in language and ICT facilities in this year.

The authors have done the decent effort to highlight the Indian BPO with respect to its

growth, prospectus and problems so that the


Introduction :-

Business Process Outsourcing (BPO) can be defined as the act of utilizing services of third

party by a company in short even a small function like birthday celebration may also be

outsourced for few activities in the main task and in the mean time your time and efforts may

be reduced of course with some cost. Nowadays many companies can not perform all the

tasks in the company itself due to cost and expertise, the outsourcing in short is a old

tradition followed even in ancient India and various tasks were performed through the skilled

people.

Most popular services are Data Capture, call center , document management , and recent

emerging areas like KPO , LPO, and e-learning. Many other countries like China, the

Philippines and few other countries including America are giving stiff competition to Indian

BPO sector. This paper highlights on the status of Indian BPO Sector merger and acquisition

adopted as growth strategy by India BPO Companies and risks with its solutions are also

given to benefit the BPO companies .

Growth of BPO an Overview

The economic crises all over the world also has some effect on Indian BPO sector but still

following figures shows the gradual growth I revenue coming out of BPO companies in

India. The IT Industry grew globally by 5.6 percent in 2008 and reached $ 1.6 trillion .

Software and services grew by 6.3 percent and is $ 1 trillion in 2008. Globally BPO grew by

12 percent in 2009 and reached $71.6 billion. Total software and services had shown a

growth of 10.5 percent in 2009 as compared to 32 percent in 2008. BPO has shown the

growth of 18 percent and it is highest among all the segments in IT industry in India.

Segment wise IT Revenue ($Billion)

Company Amount Year

IT services 13.5 2005

17.8 2006

23.3 2007

31 2008

35.2 2009

BPO 5.2 2005

7.2 2006

9.5 2007

12.5 2008

14.8 2009

Engineering Services 3.8 2005

5.3 2006

6.5 2007

8.6 2008

9.5 2009


Source :Nasscom Directory

According to NASSCOM worldwide IT revenue is expected to be $12 trillion by 2012

whereas the BPO worldwide revenue is expected to touch $ 181 billion by 2012. In India

total IT revenue is expected to touch $ 132 billion and BPO share would be around $30

billion by 2012. The domestic IT BPO revenue is expected to reach Rs. 2,00,000 crores ($50

billion) by 2012.

Indian export is also growing at steady space. Total IT BPO export has reached $ 47.3 billion

in 2009 i.e. it has shown growth of 16 percent.

Region wise Export Revenue Received to India

Region Percentage of Revenue Year

America 68.30% 2005

67.18% 2006

61.00% 2007

60% 2008

Europe 23.10 % 2005

25.14 % 2006

30.10 % 2007

31 % 2008

Rest Of World 8.60 % 2005

7.69 % 2006

8.50 % 2007

9.00 % 2008

Source : NASSCOM Directory

IT-BPO Revenue ($ Billion)

IT Revenue Year BPO Revenue

37.4 2006 7.2

47.8 2007 9.5

64 2008 12.5

71.7 2009 14.8

132 2012 30

Source : NASSCOM Directory

Indian BPO has shown the steady growth over a period of last five years and it is motivating

to know the future growth in the Indian BPO during future.

Hardware 5.6 2005

7.1 2006

8.5 2007

12 2008

12.1 2009


The Present Problems in Indian BPO :-

Stress Related Problems

The BPO industry has been facing the problem of good health due to working hours and long

term seating with exposure to computers and other devices for interacting with the clients.

From sleep disorders to digestive problems, from back aches to depression, everything has

been associated with many nights stay in offices .

The long working hours, erratic timings, travel time, work pressure and insufficient breaks

have always been the factors causing stress amongst the BPO goers. And when you add lesser

amount of money over and above these factors, the stress increases manifold. The employees

in the BPO sector really work hard during office hours.

The sleep is the main cause of stress related problems in BPO ans stress after all does affect

your sleep, as our survey reflects. While only 32% people complained of sleeping disorders

in the 2008 survey, the figure has taken a massive jump this year with 44.5% of the people

surveyed complaining of sleep related problems. The number of people with digestive

disorders has also gone up from 21 % to 28% this year.

However, it's not that companies are not aware of the health issues. Most companies ate

offering benefits like free health checkups, regular tests, etc. Also, a lot of them have

switched on to the concept of non-smoking premises to keep their employees off cigarettes.

And yes, even the health minister is at it. Who knows, there might be a separate health policy

for the night walkers soon. The Insurance policies are also given which deal with health

related coverage to the employees of the BPO Sector.

Conclusion

The Indian BPO industry has really shown the steady and encouraging growth in this period

of time when the whole world is facing recession due to various reasons. The effect of this

has given the boost to Indian BPO companies to show their skill and make the world wide

impact of the hard working and intelligent youth of the country.

The problems of the health of the BPO employees have also shown the concern about their

future diseases which will be of course taken care by employers by giving the best share in

terms of salary, off time and good working conditions for the employees. The Global

environment in the coming decade will also make positive effect on Indian BPO due many

favorable conditions as compared to other countries.

The authors feel that the research in this sector will revel very interesting points which can be

used for making positive developments in this sector.


References :

1) Donald R. Cooper , Pamela S. Schindler – Business Research Methods – 9th

edition

Tata McGraw-Hill Publishing Company Limited – 2006 ISBN 978-0-07-062019-3.

2) ICFAI March , 2007 - Banking Operations ISBN :81-7881-609-1

3) Tas, J. & Sunder, S. 2004, Financial Services Business Process Outscourcing,

Communications of the ACM, Vol 47, No. 5

4) Harmon, P. 2003, An Overview of Business Process Outsourcing, Business Process

Trends Newsletter, Vol. 1, No. 9

5) Cover Story NASSCOM Announces Top-15 ITES-BPO Exporters Rankings for FY

06-07

6) The Untapped Market for Offshore Services, 2006

7) Willcocks, L., Hindle, J., Feeny, D. & Lacity, M. 2004, IT and Business Process

Outsourcing: The Knowledge Potential, Information Systems Management, Vol. 21,

pp 7–15

8) Gilley, K.M., Rasheed, A. 2000. Making More by Doing Less: An Analysis of

Outsourcing and its Effects on Firm Performance. Journal of Management, 26 (4):

763-790.

9) Website references :- www.nasscom.in , www.sbi.org, www.wikipedia.com

***

http://www.nasscom.in/Nasscom/templates/NormalPage.aspx?id=53402



http://www.nasscom.in/

http://www.sbi.org/

http://www.wikipedia.com/


INTERNATIONAL STOCK MARKET INTEGRATION: A STUDY OF

THE US AND THE BRIC MARKETS

Sudhakara Reddy S Faculty member, IFHE University,

Hyderabad, India.

Visiting Research Scholar,

Syracuse University, NY.

Kavita Wadhwa Faculty member, IFHE University,

Hyderabad, India.

Visiting Research Scholar,

Syracuse University, NY

Abstract

A complete understanding of various stock markets of the world is important in the present

global era of financial uncertainty. International investors should track their markets of

interest to understand the forces behind the integration of stock markets in order to realize the

possible risks and returns of global diversification. In this paper an attempt is made to

understand the integration of BRIC emerging markets, which are gaining prominence in the

investment community with the United States. The data for the study is considered from

01/04/2000 to 31/01/2010. The results indicate that there is a varying degree of cointegration

among the BRIC and US nations which is mainly due to the trade relations between these

countries.


Introduction

Over the last decade, there has been a rapid growth in all the stock markets of the world.

Between 1995 and 2005, the total size of global capital markets rose to 115% to $US140tr.

McKinsey Global institute forecasts markets will grow to around $US214tr by 2010. Capital

has been flowing across the borders in the form of equity (direct and portfolio), debt and

financing from banks also increased very strongly. Japan, China and oil rich countries make

up a large portion of the global savings pool. The United States continue to account for

almost two-thirds of global capital imports (in fact it was no.4 in 2006).

A complete understanding of the integration of various stock markets which are

located all over the world is important in the current environment where liberalization has

taken place all over the world. International investors should track their markets of interest all

over the world to understand the forces behind the integration of stock markets in order to

realize the possible risks and returns of global diversification (Mukherjee, 2004). So, it is

important to understand the US stock markets’ integration with the other emerging world

super powers such as BRIC nations, ASEAN nations or the developed markets such as UK. If

the stock markets of various countries are integrated, then the investors investing in these

stock markets should know that their investment portfolios are not properly diversified and

investing in them will not lead to long term long term gains. Policy makers need to

understand the forces responsible in driving the stock market integration and such

understanding will help in providing a better grasp of the global stock markets and the impact

of those on their economies. Here an attempt is made to understand the interdependence of

the US stock markets with those of the BRIC nations.

There is a lot of importance being associated with BRIC nations in the recent past

saying that they are going to be the next super powers in the world markets by 2050

(Goldman Sachs report). These four countries have quite different backgrounds and each of

them are growing with the almost the same pace with differing strategies. They are some

complex issues which influence the growth of these nations. If BRIC nations can work out

their somewhat complex issues, then it is almost certain that they are going to be the

triumphant economic powers and the entire world will be looking towards them. This will

help the BRIC nations and other nations of the world in terms of business and trade.

In this paper analysis has been made from the US investor’s point of view to best

identify the markets which will give higher returns and his portfolio will be well diversified.

Literature Review

There are broadly three categories of literature on stock market Integration. The first category

of studies also called as ‘contagion effect’ simply examines on the basis of economic

fundamentals. It explains the stock market interrelationships to determine how a specific

group or individual stock markets are interdependent. The second category of research also

termed as ‘Economic Integration’ is interested in finding out the interrelationships and the

possible changes in such relationships based on the facts that more the economies of two

countries are related, more the influence on stock market returns, interest rates and inflation.

The third and last category of studies based on the ‘stock market characteristics’ such as

industrial similarity, volatility and market size tries to explain why stock markets are


interdependent by either decomposing or modeling stock market correlations (Mukherjee,

2004).

Contagion Effect

The first category that is, the studies of contagion effect are studied by various authors for a

long time. Sharma and Kennedy (1977) made an attempt to test the random-walk hypothesis

by applying the technique of runs analysis and spectral densities by examining the price

behavior of Indian market with US and London stock markets. By observing monthly indices

over a period of 11 years starting from 1963 to 1973, they found that the behavior of Bombay

Variable Dividend Industrial Share Index (BVDIS) was statistically indistinguishable from

that of London Financial Time-Actuaries 500 Stock Index and S & P’s 425 Common Stock

Index. Their spectral densities estimated for the first difference series of each index

confirmed the randomness of the series. The conclusions from the tests are that stocks listed

on the Bombay Stock Exchange follow a random walk behavior and are equivalent with the

stock price behavior of other stock markets of advanced industrialized countries, like US and

UK.

Jorion et al., (1986) have examined issue of segmentation versus integration of the Canadian

equity market relative to global North American market. Monthly data for rates of return on

the Canadian stocks were taken from January 1963 to December 1982. As far as the main

findings of the study are concerned, the authors rejected the joint hypothesis of integration of

the North American markets.

Taylor and Tonks (1989) used the bivariate co-integration technique by Engle and Garner

(1987), and found that there was a co-integration between the stock price index of the UK

with the stock price index of the US, Germany, Netherlands, and that of Japan for the period

between 1976 and 1986. They could not find any co-integration of the stock price indices of

these countries in the period between 1973 and 1979.

By taking the monthly stock price indices from 1971 to 1988 of US, Japan and Indian stock

markets Rao and Naik (1990) studied the inter-relatedness of these markets. They tried to

cover the episode of the October, 1987 world market crash and the Indian stock market boom

of 1985-87 and subsequent fall in 1987-88 in their study period. By applying the cross-

spectral analysis they concluded that the interrelationship among the three markets were, in

average, very low.

Choudhury (1994) tried to examine the relationship among Asian Newly Industrialized

Economies (NIEs), Japan, and the US by using the daily data for the period between 1986

and 1990. The author used variance decomposition and impulse response functions and found

that the US led the NIEs and that there were significant linkages between the markets.

Amanulla and Kamaiah (1995) attempted to examine the stock market efficiency by

measuring the integration among different exchanges in Indian Stock Market. The data used

was the RBI monthly aggregate share indices relating to the all India, and five selected

regional stock exchanges, viz., Bombay, Calcutta, Madras, Delhi and Ahmedabad during the

period 1980-1993. By using two market integration approaches, such as, Ravallion approach

and Cointegration and error correction approach they concluded that Bombay, Madras and

Calcutta stock exchanges were integrated and thus not efficient. But Ahmedabad and Delhi


stock exchanges confirmed the existence of market efficiency at the sense that these stock

markets were not integrated during the study period.

Angela Ng. (2000) had tried to examine the magnitude of changing nature of volatility

spillovers from Japan and the US to six Pacific-Basin equity markets. Weekly data relating to

equity indices, in terms of US dollars, were used. The indices used are the Hang Sang Index

(Hong-Kong), the Korean Composite Stock Price Index, the Kuala Lumpur Stock Exchange

Composite Index, the Stock Exchange of Singapore All Share Index, the Taiwan Stock

Exchange Weighted Price Index, Stock Exchange of Thailand Index, the Tokyo Stock Price

Index and the S & P’s 500 Index. Their study consists of various tests based on the ARCH

family of model developed by Engle (1982) and generalized by Ballerrslev (1986). Bivariate

GARCH (1, 1) model was used for the Japanese and the US returns, while univariate

Volatility Spillover model for the Pacific-Basin markets. The authors concluded that both

regional and world factors, influenced by important liberalization events, were important for

market volatility in the Pacific-Basin regions. Again, their findings showed that Japanese and

the US shocks together account for less than 10 per cent of the weekly variation in returns.

Roca and Selvanathan (2001) analyzed the linkages between the equity market of Australia

and those of Hong Kong, Singapore and Taiwan. They used the Granger-causality, Variance

decomposition and impulse responses analysis based on the MSCI database between the

period 1975 and 1995. The results showed that the Australian stock market is not

significantly linked with any of these markets.

Chang (2002), by using daily closing price indices from 1995 to 1999 tried to explore

whether there exist any long-run benefits from equity diversification for investors who invest

in two Chinese share markets, namely those of Shanghai and Shenzhen Stock Exchanges. In

order to test the integration between the markets they used three tests, namely the

Multivariate Trace statistics, Harris-Inder approach, and the Johansen method. All the tests

used by them suggested that these two Chinese share markets are not pair wise co integrated

with each other. In other words, there were no long-term linkages between these two Chinese

share markets and thus there exist potential for investors from diversifying in these two

Chinese share markets.

Bose and Mukherjee (2006) tried to examine the integration of Indian stock market using

tests like pair wise and group wise co-integration and Granger-Causality with the developed

markets of the world such as US, Japan and other Asian markets. They used the daily closing

price indices data from January 1999 to June 2004. Their results suggest that the degree of

integration that is found to be not very high implies that the nature of integration with

emerging Asian markets does not yet warranty any immediate concern for India regarding

possible contagion and also shows that there is still much scope for reaping benefits of

portfolio diversification, by investing in Indian markets.

Financial Crisis and Integration

The above studies focused only on the existence of inter-linkages between various

markets. But another set of studies focused not only on the inter-linkages between the stock

markets but also on various international and national events such as the 1987 October stock

markets crash which affected the stock markets worldwide. They also studied the evolution of

stock market relationships.


Neal (1987) tried to examine the working of international capital markets between

Amsterdam and London in the early eighteenth century. The author used the bi-weekly stock

price data from August 9, 1973 to December 19, 1974. The Auto Regressive Moving

Average Model (ARMA) which is a standard estimation technique was used for the price

changes. The conclusion was that London and Amsterdam stock markets were efficient and

well integrated from second quarter of eighteenth century onwards.

Campbell and Hamao (1992) tried to study the integration of long term capital markets in US

and Japan by using the predictability of monthly excess stock returns on US and Japanese

equity portfolios over the US Treasury bill rate. Stock prices and dividends are taken from the

Centre for Research on Security Prices (CSRP) in case of US and for Japan from the

available stock price indexes of Nekkei 225. Auto correlation methodology was used and

they could find out that there is common movement of expected excess returns which suggest

that there is at least a partial integration of US and Japanese stock markets.

Faff and Mitto (2001) examined whether capital market integration varies across industries.

They have considered Australia, Canada and US capital markets and used matched sample

design where companies are matched by size and industry. The tests were conducted in the

Capital Asset pricing model and multi-factor pricing frameworks between 1983 and 1992.

The results suggest that the global industry stocks such as oil and mining stocks are priced in

a relatively integrated while regional industry stocks such as consumer and capital goods

stocks are priced in segmented markets and also the Australian stocks were priced in different

markets than the Canadian and US stocks prices. These findings also suggest the notion that

economic and trade linkages are a dominant factor in international asset pricing.

Hardouvelis et al., (2006) tried to study the evidence linking the process of increased

integration of European stock markets in the 1990s to the prospects of the formation of EMU

and the adoption of the euro as the single currency. They used weekly, deutschmark

denominated, dividend-adjusted, and continuously compounded stock returns based on

Friday closing prices in the 11 EU countries. The weekly risk-free rate is the German

Eurocurrency rate. Belgium and Luxembourg are aggregated into one market. The period of

study was between February 7, 1992 and 26 June 1998. They concluded that UK market

showed no signs of increased integration with the EU stock market and the integration in

Europe was a Euro-specific phenomenon which is independent of possible simultaneous

world-market integration.

Lagoarade et al., (2007) studied the stock market integration of MENA (Middle Eastern and

North African) countries and its implications for international portfolio investment allocation

by using four different co-integration methodologies. The study significantly rejected the

hypothesis of a stable long-run bivariate relation between each of these markets and the

EMU, the United States, and a regional benchmark which indicated that there are significant

diversification opportunities for the three categories of investors. They also concluded that

these markets displayed heterogeneous reactions by extending the methodology to capture the

effects of economic, financial, and political events.

Mukherjee and Mishra (2007) tried to investigate the price co-movement and hence the inter-

market relations among India and 22 other foreign countries form all over the world and also

to find out the possible forces that affected the evolutions of such international stock market


integration among India and other countries. Their study was done by using Geweke (1982)

measures of feedback on the daily closing price index data over a period of 16 years from

1990 to 2005. The annual feedback measures revealed the evolution of inter-market

relationship on the same day and/or the lead-lag relationship across days for all the pairs of

Indian and other foreign markets. The contemporaneous Geweke measures indicate a

significant same-day relationship among the stock markets in India with that of almost all

other foreign markets considered in the study.

Stock Market Integration and Degree of Interdependence

There are other studies which apart from concentrating on the examination and degree of

interdependence of stock markets, concentrated on finding out why stock markets are

interdependent. Most of the studies addressed this issue and they laid emphasis on

decomposition of stock returns into country and industry effects, only a few of them have

tried to examine the other economic variables that may drive stock market co-movement.

Meric and Meric (1989) found empirical evidence that diversification across countries results

in greater risk reduction than diversification across industries. Their inter-temporal stability

tests indicated that the longer the time period considered the better proxies ex-post patterns of

co-movement can be for the ex-ante co-movements of international stock markets. Their

seasonality tests also signified that international stock market co-movements were stable in

the September- May period and relatively unstable during the period from May to September.

Chen and Zhang (1997) attempted to explain the extent of stock market correlation with

extent of bilateral trade. They calculated the correlations between the emerging stock markets

of Korea, Malaysia, Thailand, Taiwan, the Philippines, and Mexico, and the developed

markets of the US, Hong-Kong, Japan, Canada, Singapore, Australia, New Zealand, Austria,

Belgium, Denmark, France, Germany, Italy, the Netherlands, Norway, Spain, Sweden,

Switzerland and the UK. After dividing the world into four regions: the US, Europe, Japan

and the Asian Newly Industrialized Economies (NIEs), they calculated each country’s

correlation with each region, and then tried to determine whether those correlations can be

explained by the extent of bilateral trade between country and the region. Overall, they found

that stock market interdependence was positively correlated with the extent of trade.

Gutierrez et al., (2007) examined the linkages between two parallel stock exchanges trading

the same shares in Colombia namely the Bogota Stock Exchange and the Medellin Stock

Exchange. The empirical analysis was conducted by using monthly data of the stock prices of

13 companies during the period from January 1963 to June 2001. The authors concluded that

the two stock exchanges can be best described as fully integrated over a period of almost four

decades, so that arbitrage opportunities could have been exploited in the short-run but not in

the long run. Furthermore, the analysis of the short-run dynamics of the models offers support

to the view that the location of a company’s headquarters appear to matter in stock price

formation.

Khoon (2008) tried to study the capital mobility in Malaysia with three main trading

countries, namely the US, Japan and Singapore by evaluating the consumption patterns in

Malaysia. Malaysia’s annual data 1960-2000 on real private final consumption was used as a

measure of the consumption variable and annual real GDP was used as a measure of the

income variable. The GMM model was used to test the different equations. The results


indicate that Malaysia exhibited a substantial amount of financial openness despite periodic

exchange controls.

In particular, there are a significant number of stock market integration studies with respect to

US. But most of these studies focus on developed markets (Roca et al., 2001). A small

number of studies have included in their investigation the markets of Australia, Hong Kong,

Taiwan, Singapore (Chowdhary, 1994, Kwan et al., 1995; Kwork 1995; Maish and Maish,

1997).

But no study focused specifically on US equity market interaction with the BRIC (Brazil,

Russia, India and China) nations.

In the above context it is very interesting to see how US is related with the BRIC nations.

The present study tries to fill the gap of finding out the interdependence and co-movement of

US stock markets with BRICs’ stock markets.

Methodology

The present study is based on the secondary data related to daily closing figures of the

Australian and BRIC nations’ stock market indices over the period from 01/04/2000 to

31/01/2010. Table 1 shows the general stock indices of the countries used for the present

study. The data is taken from Yahoo Finance (for Brazil, China, US) and the websites of

National Stock Exchange (NSE, for India), Russian Stock Exchange (RTS, for Russia). There

were a few practical problems regarding the inconsistency of the overall data which was

because of different calendar holidays followed by different countries. Some of the countries

had more number of working days than US and some of them had less number of working

days than US. So, a SAS program is used to match the daily returns/prices of different

countries according to the calendar dates. It is assumed that the timing of the trading sessions

of the stock exchanges may not completely be related and it will not add any value by taking

into account the real trading time of different stock markets under study, therefore, the same

has not been taken into account.

Table 1: Stock Exchanges and Stock Indices under study

S. No Country/Region Index Symbol

1. US S&P 500 GSPC

2. Brazil IBovespa BI

3. China Shanghai Composite SC

4. India S&P CNX Nifty NSE

5. Russia RTS Index RTS

3. 1 Descriptive Statistics

Table 2 provides summary statistics of the index prices, namely sample means, minimums,

maximums, medians, standard deviations, skewness and kurtosis. It can be observed from the

table that standard deviation of BI is highest, thus showing highest volatility during the

period of study. No other index is closer to BI in volatility and RTS shows the least volatility.

It can be further inferred that all the indices showing positive skewness. The values of

skewness and kurtosis shown in the table suggest that the stock prices are not normally

distributed and hence


Table 2: Characteristics of Distributions of the Stock Indices under study

Symbol Mean Median Max Min Std dev Skewness Kurtosis Obs.

NSE 2358.222 1851.725 6272 854.2 1364.348 0.86644 -0.39155 1998

GSPC 4094.824 3502.8 6853.6 2673.3 1106.533 0.82288 -0.64327 1998

SC 2053.686 1677.215 6092.06 1011.5 1043.591 1.942593 3.148433 1998

RTS 878.8099 618.31 2478.87 131.02 678.7364 0.797093 -0.82187 1998

BI 28509.23 23073 73517 8371 16733.7 0.844846 -0.42154 1998

the data may not be stationary, that is there might be a unit root in the time series data under

study.

4. Results and Discussions

Return of the indexes is used to find out the correlation of the BRIC markets with US stock

market. Daily returns have been calculated by taking the natural logarithm of the daily

closing price relatives, i.e. r = ln (Pt / Pt-1). Where, Pt is the closing price of the tth

day.

Pearson Correlation is used to find correlation between the stock market returns. Testing of

stationarity (unit root test) is done by using Augmented Dickey-Fuller test.

Granger causality test will be used to identify the direction of influence from one series to

another.

4.1 Correlation Table 3 shows the return correlations among the various indices under study. It can be

clearly seen form the table that all the BRIC stock markets are weakly correlated with the US

stock market. This gives a first indication that the US stock market and BRIC stock markets

are not highly interdependent. Also, it can be observed there does not exist any strong

interdependence among any of the markets. The highest of correlations of US is with India of

about 36% and least is with China with about 16%.

Table 3: Correlations of Returns of the Stock Indices under Study

This gives an understanding that neither US market nor the BRIC markets is playing a

dominant role in influencing the other markets. The correlations need to be further verified

for the direction of influence by the Granger causality test and for long-term movements

among the returns of stock markets. These tests provide a better understanding is the data is

stationary over time and therefore, there is a need of stationarity test for the time series data

under study.

Symbol AOI BI SC NSE RTS

GSPC 1 0.1616 0.1576 0.3633 0.2872

BI 0.1616 1 0.0339 0.1926 0.2219

SC 0.1576 0.0339 1 0.0749 -0.0654

NSE 0.3633 0.1926 0.0749 1 0.1933

RTS 0.2872 0.2219 -0.0654 0.1933 1


4.2 Unit Root Test

Table 4: Augmented Dickey Fuller Test (ADF test)

Exogenous: Constant

Lag Length: Automatic based on SIC, MAXLAG = 25

*MacKinnon (1996) one-sided p-values.

Deterministic terms: Intercept

In very simple terms, a unit root test is used to test a time series for stationarity. The most

appropriate and widely used tests are the Augmented Dickey-Fuller (ADF) test and Phillips-

Perron (PP) test. Here, ADF test is used to test for the null hypothesis that unit root exists for

all the time series data.

From table 4, it can be inferred that the null hypothesis about the existence of a unit root can

be rejected for all variables using the intercept terms in the test equation at the level form. So,

it can be concluded that no variable contains a unit root, which is non-stationary.

4.3 Granger Causality Tests

Having done the unit root test for stationarity of the time series and the Pearson correlation

among the stock price returns under study, there is a need to capture the degree and the

direction of correlation among the stock returns. The Granger Causality tests are conducted

for this purpose. These tests involve testing of whether the lagged values of one time series

have any significant explanatory power for another study. The null hypothesis is that there is

no Granger causality between the series. The Granger test considers the following models for

finding out whether US stock market prices causes BRIC nations’ stock market prices

separately or BRIC nations’ stock market prices cause US stock market prices.

To test whether Australian stock market causes Brazil stock markets

(Australia→ Brazil) the following equation is considered.

= t-1 +

t-1 + u1t

In the same way the equation to test whether Brazil stock market causes Australian stock

market can be written as

= t-1 +

t-1 + u2t

Where it is assumed that the disturbances u1t and u2t are uncorrelated.

Symbol

Level

Lag

Length ADF Statistic P-value*

AOI 0 -21.3330 0.0000

BI 0 -20.7436 0.0000

SC 0 -20.5766 0.0000

NSE 1 -15.6812 0.0000

RTS 0 -21.5808 0.0000

The critical values form MacKinnon (1996) for rejection of

H0: Intercept

1% level -3.4332

5% level -2.8627

10% level -2.5674


The similar type of equations can be formed for the other stock markets of India, China, and

Russia and tested for the Granger causality. Table 5 gives the results of the Granger test for

the stock markets under study.

Table 5: Summary of Pair-wise Granger Tests

From the table it can be viewed that US stock market is not playing a dominant role in

influencing the other stock markets, since the direction of Granger Causality is not always

following from US to the stock markets of BRIC countries. It can be seen that US is causing

the stock markets of China and Russia only. This implies that in the long run the China and

Russian stock markets can be influenced by the US stock markets but not Indian and

Brazilian stock markets. China is also Granger causing US, so these two stock markets are

interdependent but Russia is not Granger causing US. US is not Granger causing Brazil but

Brazil is Granger causing US. This implies that Australian stock market depends on Brazil

stock market but Brazil does not depend on US stock market. Coming to the case of India,

there is no two way interdependency between the US and the Indian stock markets. That is

US stock market does not Granger cause Indian stock market and Indian stock market does

not Granger cause US stock market.

Conclusion

This study is a continuation of research on the very interesting topic of growing

interdependency among the stock markets of the world. There is lot of evidence that the

major stock markets of the world are trending together. So, in this situation the investors look

for diversification of their assets so that their risk will be reduced. So, this paper focuses on

the study of interdependency of US stock market on the famous emerging BRIC markets

which are going to influence the world markets in the coming years. So, knowing whether the

BRIC nations are influenced by the US stock markets will help the investors to take a

decision to invest in these markets or not for the purpose of diversification. The correlation

among the market returns is not substantial as can be viewed from the correlation table. It is

also evident that the degree of correlation varies between the US and BRIC markets. By using

Granger Causality test which is a well used tool for studying the interdependency among the

global stock markets. In the case of US and BRIC markets there is no complete

interdependency. The interdependency between US and India is insignificant implying that

the investors of US can safely put their funds in the Indian stock markets. But there is atleast

a unidirectional relationship between the US and other stock markets of the BRIC nations.

Also Brazilian stock market is not influenced by the US stock market. But the Chinese and

Russian stock markets are interdependent on US stock markets. All these results are due to

the reasons of their trade relations. Based on this, these results will be useful for the

Direction of Causality F-Value P-value Decision Direction of

Causality

US → Brazil 0.5693 0.5659 Do not reject No Causality

Brazil → US 4.2988 0.0137 Reject Unidirectional

US → China 24.1086 0.0000 Reject Bidirectional

China → US 4.8835 0.0076 Reject Bidirectional

US → India 0.5642 0.5689 Do not reject No Causality

India → US 0.5842 0.5576 Do not reject No Causality

US → Russia 5.9648 0.0021 Reject Unidirectional

Russia → US 1.4195 0.2420 Do not reject No Causality


individual and institutional investors of US for managing their asset portfolios in terms of risk

and the policy makers to take decisions regarding trade with these countries.

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***


SEARCH ENGINE OPTIMIZATION –

A TOOL FOR ADVERTISING IN INDIA

K. Venu Gopal

Faculty Member

Department of Management Studies

Aditya Institute of Technology and Management

Tekkali, Andhra Pradesh, India – 532201

N. Santosh Ranganath

Faculty Member

Dept. of Commerce and Management Studies

Dr. B.R. Ambedkar University

Srikakulam, Andhra Pradesh, India – 532410

Abstract

Search engine optimization is the process of improving the visibility of a website or a web

page in search engines via the "natural" or un-paid search results. As an Internet marketing

strategy, SEO considers how search engines work, what people search for, the actual search

terms typed into search engines and which search engines are preferred by their targeted

audience. The companies who are using the SEO for the purpose of advertisement are getting

more new customer than the companies using the other methods. In the 1990s India has

witnessed a massive expansion of advertising, and the advertising sector has quickly been

taken over by foreign advertisers and agencies that are affiliated with foreign advertising

agencies. The whole advertising sector demonstrates a remarkable degree of concentration.

The profile of most advertised products is dominated by advertising for personal products.

The strategies used in India have undergone significant change in recent years, and there has

been increased customization to the local culture alongside a major intensification of

strategies aimed at targeting rural markets, to stimulate the purchase the products of foreign

companies. This paper explores the profile of contemporary advertising in India in the wider

context of trends with search engine optimization, the recent changes in advertising

techniques in India and SEO as tool for the marketing development.

Keywords: Internet Marketing, Niche Markets, Creativity, Motivation, Search Engine

Marketing.


Advertising Management – An Introduction

Advertising management is the process of overseeing campaigns that seek to inform

and attract consumers regarding a particular good or service. This process begins with the

first stages of the market research that helps to create the advertising strategy, moves on to

the development of the general outline for the campaign, the creation of a specific plan of

action and the launching of the completed project. Without effective advertising

management, ad campaigns and public relations efforts tend to founder and produce little or

no results. Effective advertising always begins by engaging in competent advertising

research. The research helps to identify the sectors of the consumer market that are most

likely to positively respond to a given product.

In order to identify these niche markets within the larger group of consumers,

researchers will not only seek to understand what appeals to these buyers but why those

goods and services have that inherent appeal. The data collected from the research can then

be used to enhance the marketability of products, addressing everything from function to

packaging. The next phase of the advertising management process has to do with deciding

exactly how to apply the data collected during the research stage. Here the basis for deciding

on what forms of advertising are most appropriate begins to take shape. Depending on the

specifics of the products and the nature of the niche markets that the campaign will seek to

connect with, advertising services such as print media, and radio, television or the Internet

may be deemed the most appropriate options.

Once the niche markets are identified and the determination of which types of

advertising media are most appropriate for the campaign, advertising management focuses on

the creation of the specifics of the overall campaign. This may involve such elements as the

development of print ads for use in magazines and newspapers, audio campaigns for radio

advertising, or commercials appropriate for television broadcast or streaming across the

Internet. Because any given campaign may use several advertising options in one campaign,

the process of advertising management also involves making sure all strategies complement

one another and present a unified public image to consumers.

To function in advertising management, it is necessary to possess the proper training.

Advertising training is often a combination of formal education and experience derived from

working under the direction of more seasoned professionals who have learned over time how

to identify and interact with consumers in order to secure the data needed to structure a

campaign. While creativity and inspiration are always vital elements in any advertising

campaign, the ability to organize and view the greater picture are essential to managing the

process and launching a campaign that will successfully reach the right consumers and

generate the desired amount of revenue over the lifetime of the campaign.

Research in Advertising

Research in advertising is done in order to produce better advertisements that are

more efficient in motivating customers to buy a product or a service. The research can be

based on a particular advertising campaign or can be more generalized and based on how

advertisements create an effect on people’s mind. Lots of approaches are involved to go

about conducting an advertising research like economical, psychological, demographical and

sociological.

When designing an advertisement for a particular product many things should be

researched like where it should be displayed, whether the advertisement can be printed in

newspapers or magazines or broadcasted on television or radio or published on the Internet.

Many methods are undertaken to collect relevant information. The research itself is of two


kinds, syndicated and customized. Syndicated research is a single research done by the

company that is available to other companies as well. Customized research is research based

on certain criteria and is done for a particular company and its results are available to only

that company.

Pre-testing or copy testing is a type of customized research that determines the in-

market efficiency of an advertisement before it is released or before the final production. The

more the pre-testing is done the more likely that it will be a successful advertisement and

each pre-testing should be applied number of times. This can done by studying the level of

attention the customers have, motivation, brand linkage, communication and entertainment.

Flow of emotions and flow of attention are broken down and studied individually. The results

are applied on the advertisement that is still being developed to recognize the weak points

and replace them. A reliable feedback loop can guide the researchers, client and the agency to

work in harmony. Tests should be applied during the storyboard stage of ad making. This is

an early stage and the results are highly predictive. During this process images are selected

and used as integrated campaign print ads.

Post-testing or ad tracking studies are either syndicated or customized. Studies are

done over a period of time or continuously. The in-market research is done to understand a

brands linkage, performance, awareness, and preference along with product attitudes and

usage. They are done by, conducting interviews either on phone or Internet. Testing the

finished advertisement provides the confidence and gives an idea whether it is following the

strategy.

All the above studies should facilitate the client’s advertisement development make

the end product easier to achieve. The study should contain rational information having not

only surface knowledge but also provide deep in-sight that will open window to a customer’s

mind. The customer, too, should provide precise information based on facts and not based on

imaginary thinking and self-delusion. He should be able to explain the role of advertisement

in the whole marketing plan. Working in vacuum doesn’t get the desired result. The basis is

to provide in-depth understanding about the consumers for improving on the advertisement

techniques and other marketing decisions. The traditional methods of qualitative and

quantitative techniques have been improved to analyze the information with good insight.

The rapidly changing likes and needs of the customers are difficult to track, but should be

studied in order to increase the quality of advertisement. The changes are because of the huge

number of options offered to them by the market.

Advertising in India Indian Advertising starts with the hawkers calling out their wares right from the days

when cities and markets first began. Concrete advertising history begins with classified

advertising. Ads appear for the first time in print in Hickey’s Bengal Gazette, India’s first

newspaper. To ‘advertise’ meant merely to ‘inform’ until the end of the eighteenth century,

and the early newspapers and periodicals announced births, deaths, arrivals of ships from

England, sale of household furniture, etc. some journals like the Bengal Journal even offered

to print government advertisements free.

The front page of most such journals carried only advertisements. But before long

persuasive copy began to replace mere information. This is evident from the appearance of

punch lines such as ‘superior to anything of the kind hitherto imported’ and ‘warranted to the

first quality’. Discounts and special services also began to be offered by the beginning of the

nineteenth century. Later, new products and services established themselves on the market

through the advertisement columns of the newspapers and periodicals. The power of

advertising increased rapidly with the growth in trade and commerce. The Advertising


planning cycle helps in isolating the roles of each department in an agency such as Client

Servicing, Creative, Media and Research. It guides the agency through various stages of

formulating, creating, releasing and evaluating an advertising campaign.

Figure 1: Advertising Planning Cycle

With the increasing impact of the industrial revolution on our country, the number of

advertisements from British business houses rose sharply. ‘Agents’ flourished at the time as

space contractors, obtaining advertisements for newspapers and periodicals on a commission

basis. Leading newspapers like ‘The Statement’ and ‘The Times of India’, which had their

own advertising departments, offered their own facilities to ‘agents’. This was of great

advantage to both the advertiser and the publisher, for the advertiser, it saved the bother of

preparing a suitable layout for the advertisements, for the publisher, it assured a certain

uniformity of standard in the advertisements appearing in its column. This practice was

responsible for turning advertising into a distinct profession. These ‘agents’ were forerunners

of the ‘advertising agencies’.

Advertising is a big business in this era in India. Indian Advertising industry has

witnessed a prominent globalization. With the inception of various divisions, the advertising

industry has undergone a sea change. Indian consumer's deepening pocket and blooming

markets for ad-spends have touched new heights in India. The Indian Advertising Companies

are creating stories and brand experiences in a way that engages and involves. The Best

Indian sites offer the names of the top Advertising Organizations in India. Here is a list of the

top Indian websites and a quick glance at them will help you to get the required knowledge

about the websites.

Table 1: Top Advertising Companies of India

Crayons Advertising

and Marketing Pvt Ltd

This company is in existence from 25 years and the clients of this

company include Air India, Fortis, MTNL, Bank of Maharashtra

and many more.

Euro RSCG Advertising

Pvt Ltd

The company is the global agency network and the largest brand

of Havas, the 5th largest global communications group.

Madison Advertising

Pvt Ltd

The company is 23 years old and is famous in this advertising

sector. It deals in Advertising, Media, PR, and sports, business

analytics.

Sasi Advertising Pvt

Ltd

This agency is 30 years old and is one of the largest South Indian

Advertising Agency. The company deals with Branding, Public

Relations, Event Management, Direct marketing and many more.

Ogilvy and Mather This is one of the leading advertising companies in India. This

company has offices across the globe.

Xebecindia.com The company offers variety of services like Brand Building, Print

Production, Advertising, Public Relations and Market Research.


J Walter Thompson

India

One of the most popular companies in the advertising industry is J

Walter Thompson India. This company is the first one to introduce

pioneer careers in ad for women.

Mudra Communication

Pvt. Ltd

This is one of the renowned advertising companies of India. This

advertising organization was founded in the year 1980 at Mumbai.

FCB-Ulka Advertising

Ltd

One of the best companies in India in the advertising arena is

FCB-Ulka Advertising Ltd. In US, this advertising company ranks

third and tenth in the world having about 188 offices in 102

countries.

Rediffusion-DY&R This Advertising company of India has made a benchmark in the

field of creativity. India's 5th largest advertising company is

Rediffusion.

McCann-Erickson India

Ltd

The prominent name among the best advertising companies of

India is McCann-Erickson India Ltd.

RK Swamy/BBDO

Advertising Ltd

It maintained the record of remaining consistently among the top

ten advertising agencies in India. Established in 1973, this

advertising reached great heights.

Leo Burnett India Pvt.

Ltd

It has a significant presence in about 96 offices in 10 countries.

This advertising agency was awarded the 'Worldwide Agency of

the Year' in 2004.

Technology in Advertising Options

After the advent of online selling sites, shopping has been made so easy that it can be

done within the comfort of the home. Online selling gave rise to online advertising also

known as advertising, which is proving to be the best way to reach a larger audience within a

short time using less money. There are many options available on the Internet to get started.

Creating a website and then placing its link on different websites is one of the ways. Pages

can be submitted to the search engines after applying search engine optimization techniques.

Websites offer various payment methods. Some take money for simply placing an ad

or link on their website, some take money only if a visitors clicks on the link or website and

some take money only if the visitors visits a link and have bought something or availed some

service. There are options available for the type of ad being placed. There are pop-up ads,

banner ads, wallpaper ads, polite ads, video ads, etc. Businesses with really low budget can

send mails to targeted customers. Radio stations offer a good price to advertise during the

non-peak time. Get in touch with the local station and try to ask for a discount. The same

applies to television; even they have a minimal amount for advertising slots during the non-

prime hours, especially after midnight. Contact different television station to compare

pricing.

The age-old tradition of advertising in yellow pages directories is always a success.

All businesses from small to big register themselves in the yellow pages and have sworn to be

benefited from it. People can look up for contact numbers, addresses and services offered

directly from the pages. Newspaper is the next best thing. First analyze the audience to be

targeted by age group, sex, and location. Choose the local newspaper and section where the

ad should be placed depending on the audiences to be targeted. The classifieds department of

the local newspapers have special offers, find out in detail about the pricing structure for the

size of the advertisements, number of words, font size, etc.


Design the business cards with accuracy. Try to include all the vital information about

the business like the name of the company, where it is located, services provided, working

hours, and contact information like landline number, cell number and person to be contacted.

Personalized business cards are good way of reaching the genuine customers. The word of

mouth is also a good method of advertising. Try growing the links in your network and join

organizations which deals with advertising like trade associations and chamber of commerce.

Active participation in events of these organizations eventually helps reaching more number

of people.

Other way to advertise is to give presentations on your products. Brochures can be

inserted in the business presentation package. Other than things like history of the company

and annual turn-up, once again business cards can be included in the package. Distribute

newsletters with information about the latest offers and discounts. Informational letters of a

page length and e-mails can be sent too on a regular basis. All this can become lot easier by

getting in touch with companies who can provide the mailing list of a particular locality and it

comes for a very small price. Again the yellow pages can be referred to get information about

such companies. After getting the information get in touch with company to get a copy of the

latest mailing list. Different companies charge different prices.

Search Engine Optimization process:

Optimizing a website may involve editing its content and HTML and associated

coding to both increase its relevance to specific keywords and to remove barriers to the

indexing activities of search engines. Promoting a site to increase the number of back links,

or inbound links, is another SEO tactic. The initialism "SEO" can refer to "search engine

optimizers," a term adopted by an industry of consultants who carry out optimization projects

on behalf of clients, and by employees who perform SEO services in-house. Search engine

optimizers may offer SEO as a stand-alone service or as a part of a broader marketing

campaign. This research will evaluate the impact of SEO on the advertisement of firm.

1. Consultation & Keywords Research Analyze

Once we set the wheels in motion, the first thing we do is search the current status of

your company’s website to find the best ways to implement SEO changes. Every site is

different for optimization and every Daily Server program is tailored specifically to your site

and no one else’s. Part of this first step is also to research your industry to figure out the most

useful and targeted key words, which you will then review and approve based on your

specific goals.

2. Unique Content Creation

Second, our content writers create unique, useful, and creative content for your

website, utilizing the list of highly targeted keywords with good density that has been decided

upon. Again, you will take part in this step of the process by letting us know which content

you like best and want to include in your site.


Figure 2: SEO Process

Source: www.indian-seo-company.com

3. Web Development or Redevelopment

Next, our programmers will take all of the gathered data and content and integrate

both into the actual website. Daily Server will change your entire website (on the backside

only and without affecting any other processes) so that it will optimally communicate your

keywords to any search engine. This includes changing Meta tags, alt tags, graphic text,

internal link structure, and sub-pages to ensure that your site is search engine spider friendly

and syncs up with the best search engine algorithms.

4. Internal & External Link Building

The most important part of achieving a high ranking among search engines is to create

well-developed incoming links. This crucial step establishes many direct connections

between your site and other sites. These links increase your traffic by sending relevant links

to your industry and website. Daily Server offers one-way links from major directories,

reciprocal link exchange, and fee-based directory submissions. We always get the most

effective and quality links to ensure a high search ranking.

5. Directory & Search Engine Submissions

After completing website optimization which are content creation, website

redevelopment, and link development, we will submit your website to all the major search

engines and directories including Google, Yahoo, AltaVista, HotBot, AllTheWeb, AOL,

iWon, Netscape, MSN, Lycos, Teoma, Ask, and DMOZ (Open Directory). Furthermore, we

will submit your company’s website to some of the fee based directories, such as Yahoo

Directory, and several other quality directories, which will add to your link popularity.

Lastly, if your Website has indexing issues for search engines, we will create and submit site

maps to both Google and Yahoo via their respective programs.

6. Monitoring & Reporting

As the final step, to ensure that our optimization service is correct and accurate, we at

Daily Server will run a ranking report comparison between pre-SEO treatment and post-SEO

treatment. This report will be sent to your company so that you may check its accuracy. A

similar report will be run every 30 days and sent to you by mail so that you can see the

continued improvement of your rankings. In addition to the monthly ranking reports, our

technical staffs will check the website on daily, weekly, and monthly routines to ensure

website integrity and verify that the website has not been dropped by any major search

engines.


Search Engine Optimization and Advertising

In today’s net-savvy world it has become common for any business to have a website

which they use mostly for advertising their products and services. With the advent of search

engines it has become even easier for the customers to search for the stuff online. For a

website to be successful its link should land in the first three pages which the search engine

brings and the rank of the page should be high which means many visitors come to the site.

This can be achieved by applying search engine optimization or popularly known as SEO.

This is a marketing strategy which increases the quality and quantity of traffic flow to a

particular website via search engines.

SEO not only affects the search engine results, but also image search, video search

and industry specific vertical search engines. It determines how a search algorithm functions

and searches what is popular with people. When a website link is submitted to a search

engine, a spider crawls through a page to gather links which lead to other pages and stores

those pages on the server of the search engine. The information collected from these pages is

sent to the indexer, whose job is to extract information from those pages such as the

keywords and their weights, the location of the page and other links that are stored for the

spider to crawl in future.

In the beginning, the search engine optimizer algorithms were dependant on the

keywords, Meta tags, and index files provided by the Webmaster. Meta tags provided

information about a particular page, but using them for indexing the pages didn’t prove to be

successful as some Webmasters added irrelevant Meta tags to increase the number of hits and

earn huge ad revenue. They even changed the HTML of the web pages to achieve a good

rank for the page. But this was a case of abuse as it fetched irrelevant pages.

Search engines then began utilizing complex ranking algorithm, which were difficult

for the webmasters to manipulate so as to provide web surfers with genuine results. The rank

of the web page was calculated mathematically by functions using strength and quantity of

the inbound links. The higher the rank of the page the more chances it had to be viewed by a

person. Later algorithms were developed which considered various other on-page factors

such as rank and off-page factors such as hyperlink. Since the webmasters couldn’t

manipulate the page rank, they began exchanging, selling and buying links, which lead to link

spamming and even creation of numerous sites dedicated for this purpose.

SEO as a tool for Advertising in India SEO and Search Engine Marketing (SEM) have fast gained importance as a part of

owned media. The online advertising market in India, according to IMRB for 2009-10 was

estimated at 785 crore and is expected to grow to almost 1,000 crore in 2010-11. Of this,

search advertising was estimated at 368 crore in 2009-10 and is expected to touch 460 crore

in 2010-11. Despite the impressive numbers, user defined search optimization however is still

nascent in India. Madan Sanglekar, principal partner - invention, Mindshare calls SEO the

"behind-the-scene, boring cousin" of the digital world. "This is a small but growing market.

Since it is more process oriented and tool driven, it isn't given as much importance as, say,

websites or micro sites or apps are." He adds that brand managers tend to give 90% of their

attention to the site itself and only about 10% to SEO. "Website decisions are taken by brand

managers and not the IT staff in an organization. But when it comes to SEO, it is relegated to

the IT staff."

Agencies may rue the lack of attention, but brands like HDFC Life and Volkswagen

use SEO to maximize their brands' presence online. For HDFC Life, SEO is a core activity in

its marketing pie and though it takes only 0.1% of the entire marketing budget, it has given

the brand through targeted efforts an increase in organic traffic to its website at around 20%.


Sanjay Tripathy , EVP & head, marketing & direct channels, HDFC Life says, "More than

50% of our traffic comes in through the search engines on a month-on-month basis where as

on an average we have around 4.5 lakh visitors on our website monthly."

Volkswagen has a dedicated team monitoring the search results, volumes and

analytics and their customer management system (CMS) system that ensures high ranking of

its corporate site on major keywords. "It would be wrong to say that the SEO is only meant

for online companies. We have experienced in the past that offline activities are also driving

the online searches even for companies that are primarily using mainline media e.g. the Vento

'Talking newspaper' was the second most searched word on that particular day" , says Lutz

Kothe, head-marketing & PR, Volkswagen Passenger Cars, Volkswagen Group India.

For matrimony portal Shaadi.com, SEO is a long-term strategy. "Over the last several

years, we have put in time and effort to make sure that we rank high on keywords related to

our area of business including our brand name itself. This not only helps drive traffic to

Shaadi.com but also helps increase our brand exposure and awareness. Every month, we get

thousands of new members to our site through organic search (SEO) results" , says Ram

Bhamidi, VP - online marketing, Shaadi.com.

The time for SEO to come on its own is still away and for most Indian companies

their websites are just an extension of the current TVC. "SEO is one of the oldest forms of

marketing on the web", says Gautam Mehra, business head - Mumbai, Connecturf. "But there

are two kinds of companies which are using it — brands that do it because everyone else is

there, and those for whom SEO is a primary focus, like finance and travel brands." Coffee

retail chain Café Coffee Day (CCD), which isn't big on traditional media has used SEO and

the digital medium to its advantage.

Conclusions

The advertising and marketing and advertising strategy uses the fact that when

persons want to buy anything or look for certain alternatives they test first on the internet.

Search engine optimization is the process of improving the visibility of a website or a web

page in search engines via the "natural" or un-paid search results. In general, the earlier, and

more frequently a site appears in the search results list, the more visitors it will receive from

the search engine's users. SEO may target different kinds of search, including image search,

local search, video search, academic search news search and industry-specific vertical search

engines. SEO is not an appropriate strategy for every website, and other Internet marketing

strategies can be more effective, depending on the site operator's goals. A successful Internet

marketing campaign may also depend upon building high quality web pages to engage and

persuade, setting up analytics programs to enable site owners to measure results, and

improving a site's conversion rate. In today’s net-savvy world it has become common for any

business to have a website which they use mostly for advertising their products and services.

With the advent of search engines it has become even easier for the customers to search for

the stuff online.

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***

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