The invisible hand of business marketing:

From the travel diary of a marketing professor.

On October 11, 2009, Dr. Gautam Kapur (G.K.) boarded Geetanjali express, a super
fast train from Jamshedpur for Kolkata. Jamshedpur (Tatanagar) is the second last station of
Geetanjali Express, which runs between Mumbai and Kolkata. It takes 4 hours to reach Kolkata.
He travelled in a rented car, which was Tata Motor’s Indica, from his home to the railway
station. Unable to find a bench under a fan at the platform, Gautam was lucky to find a place
under a roof of corrugated steel sheets. A steel structure of beams and tubes was supporting the
roof. Looking up at the dirty ceiling, he could locate fans, tubelights wires, steel tubes and so on.
He could also spot the poorly maintained water taps from which only very poor passengers were
willing to drink. The well to do had started drinking the branded bottled water. Even though
beyond the reach of many, but Gautam visualized huge potential for bottled water at affordable
prices for the masses.

After having boarded his second air-conditioned coach, he observed, it had a new type of
synthetic leather upholsteries on the berths. He recalled that nearly 25 years back, the first class
air conditioned coaches of Indian Railways used to have pure leather upholsteries for the berths
which now have been replaced by synthetic leather. Other components in the compartment were
lights, fans, aluminium ducts for cold air, wash basins, taps, mirrors, glass windows, curtains,
paint, backing of wood below the seats and so forth. Steel was used for the body of the coach,
heavy springs, brake lines, bearings and several other products had been used for various
purposes. Some of these may have been bought outs and some made by railways in its factories.

He noticed that Indian Railways have replaced lot of bathroom fittings of steel with
plastics and aluminium. He wondered the time involved in this change. The picture of a huge
office of Railways Design and Standards Organisation (RDSO) in Lucknow flashed in his mind.
This huge monolith of Indian Railways is the watchdog to approve and develop standards for
(each and every product that goes in to running of the entire Railways.

The RDSO covers A to Z of whatever is used by the Indian Railways like locomotives, the rail
tracks, signaling equipments, wagons coaches, catering services and many more areas. For each
category of product and services, Railways would need thousands of parts, components, material
and a multitude of services. Railway being a public entity is accountable to the Parliament and
all types of civic bodies. The issue of safety being very important, Railways have to be very
careful in approving its suppliers for various parts. This makes the entire process of adoption of
new parts and substitutes very slowl. Gautam felt that Indian Railways, in-spite of the slow and
long processes, seem to have several products of sub-standard quality .Playing in his mind were
the plastic fittings used in the bathrooms already broken within a few days. Gautam was aware
that for any new supplier, it takes several years to get a breakthrough for the Railways business.
But in spite of such efforts, the final outcome appears to be nowhere near the global standards. Is
it due to lower standards of Indian Railways or is it lowest price obsession of government

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organization like Railways! Gautam recalled several personal friends who had to manage RDSO
well for continuation of their business.

Gautam’s fellow passenger Kartikey, turned out to be an ex-employee of Larsen & Toubro. L &
T is one of the largest private sector organization in Engineering and Construction business.
Kartikey used to work with Larsen & Toubro’s Eutectic division which was the leader in low
temperature welding electrodes. It had more than 400 application engineers. These engineers
were helping the customers to repair the worn out parts of steel and metal. Kartikey shared that
he was currently working for an Australian firm dealing in coal and iron ore business. He
mentioned about his idea of setting up a solid waste recovery plant in Jamshedpur. This was to
handle 250 tonnes per day of solid waste .The purpose is to convert waste into manure for
organic farming

Gautam’s first meeting in Kolkata was to be with an old friend Naresh. Naresh is
manufacturing specialized rubber parts and components. These are used in the plants and
equipments for the material handling of products like copper and iron ores. Naresh has
employed more than 120 engineers and he has factories in Kolkata, Delhi, Johanesburg (South
Africa), Australia and Canada. In spite of being in business since last 35 years, his group’s total
turnover by end 2007 was only Rs. 1000 million ($25 million). His customers are Tata Steel,
Hindustan Copper, several copper and iron ore mines owners, Indian Railways, and alike. His
perpetual problem has been of hiring and retaining engineers. His business demands a sound
background of engineering and a good commercial acumen. But hiring and retaining of such
talent has been a constant challenge for Naresh. He shared the experience of sales persons is
very critical to be successful in his business. Naresh observed that young engineers now a days
prefer the IT firms over manufacturing companies because of salary and work environment.

The second meeting of Gautam was with Swapan who has been exporting leather
goods to countries like Germany, Japan and USA. A question regarding corruption in Business
marketing led Swapan to share a lot. He began by saying that the corruption in Business
marketing is global. If India has ranked as number one in bribe giving nation, then who is
receiving this money! He pointed out that the people, who are receiving these bribes, are mostly
based outside India. Swapan shared that even in professionally managed companies, the
corruption is very rampant. He cited examples of how a truck would enter the gates twice in a
factory buying Zinc in a MNC. Whereas the material received would be for one truck, but the
payment made would be for two trucks. He mentioned that such examples would run into
millions, globally.

On October 12, 2009, Gautam flew from Kolkata to Chennai and drove straight to a
place 60 Kilometers from Chennai. This was to attend the inauguration of an auto component
factory of Marx: a leading auto component manufacturer from Chennai. The factory was a
dedicated facility for MRW, USA. The Chennai factory had a technological collaboration to
manufacture ball joints for MRW. This outer ball joint is a part of the steering system of cars and
trucks. The capacity of Chennai plant was 10 million pieces of ball joints for MRW per year. Mr.
Kannan, the Chairman of Marx, shared that the key parameters of MRW were quality, delivery,
and price. The biggest challenge was quality consistency. The standards of MRW were tight.
Maximum rejection rate permitted was 22 parts out of a supply of million parts. The plant had

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several special purpose machines to make and assemble the ball joints. The entire facility was
commissioned within 8 months. Kannan shared that this was possible because of group’s
decision to opt for all steel construction instead of the old concrete construction [RCC]. Had the
group opted for RCC, the commissioning time would have been 12 months. Kannan pointed at
the roof of the new factory. The roof was designed to make an effective use of sun light having
a special insulation sheeting of glass wool. Kannan shared that his group would be amongst the
pioneers to adapt to this kind of sheets. These would keep the shop floors cooler by 3 to 4
degrees. This would make working more comfortable for the factory personnel. Even though the
facility was dedicated, the company had to maintain inventory levels of 45 days. So even when
he would supply on the basis of just in time (JIT) to MRW in the USA, MRW was insisting upon
them to maintain 45 days inventories to avoid any stock-out situations. These were needed to
take care of eventualities like sinking of a ship!! Or production shut downs. For this; Marx had
to maintain a go-down in the USA near to the manufacturing locations of MRW.

During discussions, Gautam learnt about the high growth performance of auto industry
in India. Linked to the performance of auto industry was the fate of Marx. Marx’s actual
performance for sales and profits was likely to be 15% higher than its annual plans for 2006-07.
But inspite of the improved performance of auto customers, Kannan shared the reluctance of the
auto companies to pay in less time than 60 days. Kannan mentioned that the increase in demand
for the components would lead to higher consumptions of steel. When asked about the steel
prices, Kannan expected steel prices to remain flat. This too came as a surprise to Gautam as
only six months back; the constant complaint of Marx and other auto companies were the ever
increasing price of steel. Gautam recalled sitting thru presentation of a company which was
supplying refractories to the steel customers. The situation for the refractories was just the
reverse. The refractories manufacturers were neither getting more sales or more money from the
steel customers in spite of the buoyant market situation for steel. On the contrary, in spite of
getting higher prices, the steel customers were neither paying higher prices nor making the
payment earlier than 60 days. They were flushed with funds but their suppliers like refractory
manufacturers were starved of funds. Gautam was wondering whether there is a way to explain
this situation.

Question:

What concepts of Business Marketing can you see in this article?