XAT DECISION MAKING :2011 :PART 1
29. Indian
government may hold top executives responsible if state-run power companies
fail to meet
performance
targets and punish them with fines and transfers. The strict performance
parameters
are
aimed at ensuring that at least the reduced target for 62,000 MW of generation
capacity addition
is
achieved before the end of the II th Plan, said a power ministry official.
Performance of chairmen
and
managing directors of the power Public Sector Units (PSUs) in project
implementation will be
assessed
as per the terms and conditions stipulated in the company’s memorandum of
understanding
(MoU)
with the power ministry, he said, requesting anonymity. Performance parameters
of executives
had
come under strict scrutiny due to a lack of progress in capacity addition
program. While the
target
for the II th five year plan has already been scaled down by the government
from 78,500 MW,
in
the first three years of the plan yielded only 22,302 MW of fresh capacity. If
you were the chairman of one of these power PSU’s, which of the following
statements (all of which are assumed to be true) could best be used in order to strengthen your case against the government
holding top executives responsible?
i.
The labour unions, owing allegiance to ruling party at the Centre, are not
allowing work to progress with their demands for wage hikes that are untenable
ii.
The actions of the mid-level management are not In line with the objectives
laid down by the top management
iii.
The delays have been due to difficulties in obtaining funds at reasonable
interest rates on
account
of the recessionary conditions
iv.
We are not to blame. The government is not doing enough to ensure availability
of sufficient
fuel
to power the existing plants, let alone the new plants.
v.
The government had ignored the infrastructure availability like roads etc., and
environmental
clearances
required for such projects and therefore set an unrealistic target to begin
with,
and
the revised target is also unrealistic as well.
A. i
and ii
B. i
and iii
C.
i, iii and iv
D.
ii, iv and v
Answer
Questions 30 and 31 on the basis of the
paragraph
below
The
CEO of ABC Telecom Ltd. (ABC) is in a quandary since he received the telephone
call in the
morning
from his counterpart at LMN Telecom Ltd. (LMN). Both companies were engaged in
a bitter experience a couple of years ago when they had attempted to merge with
the intention of creating a behemoth telecom company, possibly the largest in
the world. The merger had fallen through due to opportunistic behaviour on the
part of Mr. Das, then CEO of LMN. During the time the merger talks
were
taking place, Mr. Das had also approached a few other suitors for LMN in an
attempt to force ABC to pay a higher price. Further, there were reports of
attempts by management of LM to scuttle the deal. Back then, ABC had also faced
stiff opposition to the deal from one of its large shareholders. Since then, a
lot has changed for both companies. The bleak economic conditions due to
recession had led to a drastic fall in the market value of both companies, with
ABC comparatively losing much more in terms of market value. Raising money has
become more difficult for both companies, especially for LMN. On the brighter side
for ABC, the opposing shareholder had recently sold
off
his stake to another investor who earlier had supported the original merger
deal with LMN a couple of years ago.
30.
Which of the following would be the most appropriate line(s) of thought for the
CEO of ABC
to
adopt in response to the offer by LMN?
i.
Once bitten twice shy. There is simply no way I can think of resuming talks
with LMN after
their
unethical behaviour the previous time around. I would rather spend my time on
merger
discussions
with other companies.
ii.
The deal may make less business sense this time around. However, if it goes
through, I will
become
the CEO of the world’s largest telecom company. So let us try our luck once
more.
iii.
I will resume talks only if they provide guarantees as to the reimbursement of
our expenses incurred, in the event of the deal not materializing.
iv.
Let me not be biased against dealing with LMN. If we can secure the deal at a
reasonably low
price,
benefiting our shareholders, let us go ahead with it.
v. I
am not sure if we can raise the money now. In
any
event, they are the ones facing greater
financial
problems. So let’s not hurry now. We
might
have an opportunity to buy them out at a
cheaper
price later.
A. i
and iii B. ii and iv
C.
ii and iii D. i and iv
E.
iv and v (3 Marks)
(2011)
31.
The merger of ABC and LMN has been confirmed after detailed negotiation with
LMN holding the
majority
share of the resultant entity. LMN has financed the merger by taking debt at
higher-thanmarket interest rates from its bankers, in the hope that it would be
able to streamline operations and reduce costs in the resultant entity which
will allow it to repay the loan. If you were an investor looking to invest in
telecom companies, which of the following
could be the strongest reasons for staying away from investing in resultant
entity?
A.
The new entrants in the telecom market were coming with better offers for the
customers.
B.
The market would be as competitive as ever for the resultant entity, thus
providing no guarantee
for
success.
C.
The combined management did present have any grand strategies to the investors.
D.
ABC’s management was giving in to Mr. Das who was a known opportunist.
E.
LMN was using high cost debt to purchase another company in the same industry
facing
similar
problems, with no visible advantage for
the
combined entity over competitors .. ,
Read
the following case and choose the best
alternative
(Questions 32 to 35):
Chetan
Textile Mills (CTM) had initiated various employee welfare schemes for its
employees since the day the mill began its operations. Due to its various
welfare initiatives and socially responsible business practices, the organization
had developed an impeccable reputation. Majority of the regular workers in
Chetan Mills had membership of Chetan Mills Mazdoor Sangh (CMMS), a non
political trade union. CMMS had the welfare of its members as its guiding
principle. Both CTM and CMMS
addressed
various worker related issues on a proactive basis. As a result no industrial
dispute had been reported from the organization in the recent past.These days
majority of the employers deploy large number of contract labourers in their
production processes.In an open economy survival of an organization depends on
its competitiveness. In order to become competitive,an organization must be
able to reduce cost and have flexibility in employment of resources. Engaging
workers through contractors (contract labourer) reduces the overall labour cost
by almost 50%. Indian labour legislations make reduction of regular workers
almost impossible, but organizations can overcome this limitation by employing contract
labourers. Contract labourers neither get the same benefits as regular
employees nor do they have any job security. According to various recent
surveys, government owned public sector units and other departments are the biggest
employers of contract labourers in the country. Contractors, as middle-men,
often exploit the contract labourers, and these government organizations have
failed to stop the exploitation.Over time CTM started engaging a large number
of contract labourers. At present, more than 35% of CTM’s workers (total 5,000
in number) are contract labourers. CMMS leadership was wary about the slow
erosion of its support base as regular workers slowly got replaced by contract
workers and feared the day when regular workers
would
become a minority in the mill. So far, CMMS has refused to take contract labourers
as members.Recently, based on rumours, CTM management started to investigate
the alleged exploitation of contract labourers by certain contractors. Some
contractors felt that such investigations may expose them and reduce their
profit margin. They instigated contract labourers to demand for better wages.
Some of the contract labourers sought the support of various political parties
in order to increase
their negotiation power. Contract labourers engaged in material handling and
cleaning work started provoking CTM management by adopting violent tactics.Today’s
news-paper reports that police and CTM security guards fired two or three
rounds in air to quell the mob. The trouble started while a security guard
allegedly slapped one of the contract labourers following a heated argument.
Angry labourers set fire to several vehicles parked inside the premises, and to
two police jeeps.
32. In the wake of recent happenings, what
decision is expected from CTM management? From the combinations given below,
choose the best sequence of action.
I.
Stop the current investigations against the contractors to ensure industrial
peace; after all allegations were based on rumours.
II.
Continue investigations to expose exploitation and take strong actions against
trouble makers.
III.
Get in direct touch with all contract labourers through all possible means,
communicate the need for current investigation to stop their exploitation, and
convince them regarding CTM’s situation due to competition. Also expose those
contractors who are creating problems.
IV.
Promise strong action against the security guards who are guilty.
V.
Increase the wages of contract labourers.
A.
I, V B. I, II
C.
II, V D. III, IV
(2011)
33. In the current context, which among the
following represent the most suitable reaction from CMMS leadership?
A.
Distance CMMS from the episode and explain that CMMS is not involved in the
fiasco through
a
press conference.
B.
Offer membership to contract labourers, which would put the contract workers at
par with the
regular
workers in CMMS.
C.
Do not offer membership to contract labourers, but represent their interests
during negotiation in order to prevent the formation of another union in CTM.
D.
Start another union exclusively for contract labourers of CTM.
E.
Adopt a neutral stand in public, and pass on information related to problem creators
to the CTM management. (5 Marks)
34.
Out of the options given below, which one would be the best policy decision by
government at the
national
level? (2 Marks)
A.
Asking CTM management to pay same wages to both regular and contract workers.
B.
Income tax raids in offices of contractors under investigation.
C.
Setting up a new labour welfare office within CTM premises.
D.
Setting up a new committee to make recommendations for changes in labour legislations
with an objective to reduce exploitation of contract labourers.
E.
Use entire government machinery to support CTM, which has an impeccable track
record.
35.
The criminals in the surrounding area often took their cue from the situation
in the mill, creating law and
order problems outside the mill which would make it difficult for workers to
come to the mill
safely.
Given the circumstances, identify the stakeholder that should be the immediate
priority of CTM management. (1 Mark)
A.
Contract labourers who were allegedly beaten by the security guards of the
company.
B.
District administration that is concerned about the spread of violence.
C.
CMMS that prefers an immediate settlement of the issue.
D.
Customers who are concerned about prices and regular supplies.
E. Contract
labourers who are demanding job security and same wages as regular employees.
see:Answer key
see:Answer key
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