Managerial Economics - Case Studies

Topics: Pricing, Economics, Stock market Pages: 16 (3459 words) Published: July 29, 2013
CASE – 1 Dabur India Limited: Growing Big and Global


1. What is the objective of Dabur? Is it profit maximisation or growth maximisation? Discuss.

Answer : The objective is to “significantly accelerate profitable growth by providing comfort to others”. It is growth maximization because for achieving this objective Dabur aims to: • Focus on growing core brands across categories, reaching out to new geographies, within and outside India, and improve operational efficiencies by leveraging technology. • Be the preferred company to meet the health and personal grooming needs of target consumers with safe, efficacious, natural solutions by synthesising deep knowledge of ayurveda and herbs with modern science. • Be a professionally managed employer of choice, attracting, developing and retaining quality personnel. • Be responsible citizens with a commitment to environmental protection. • Provide superior returns, relative to our peer group, to our shareholders.

2. Do you think the growth of Dabur from a small pharmacy to a large multinational company is an indicator of the advantages of joint stock company against proprietorship form? Elaborate.

Answer: While opting company form of business, the entrepreneur should clearly gone through the distinction between company with partnership form of business. The next step arises a regard to why to go for company form of business. [ The following points depicts the advantageous points of this form of business. Advantages of Joint Stock Company: (1) Huge resources: A company can raise large amount of resources from the genera public by issuing shares. Since, there is no maximum limit of the number of shareholders ii case of public company, fresh shares can be issued to meet the financial requirement. Capita can also be obtained by issuing debentures and accepting public deposits. (2) Limited liability: The liability of the shareholders is limited to the extent of the face value of the shares held by them or guarantee given by them. The shareholders are not liable personally for the payment of debt of the company. Thus, limited liability encourages the investors to put their money in the shares of the company. (3) Transferability of shares: The shares of the public company are transferable without any restriction. A shareholder can sell his shares at any time to anybody in the stock exchange Therefore, the conservative and cautious investors are also attracted to invest in the shares of public company. This brings liquidity to the investors. (4) Stability of existence: A joint stock company enjoys perpetual succession. It continues for a long period of time because it is unaffected by the death, insolvency of the shareholders directors. Change of ownership and management also does not affect the continuity of the business. (5) Efficient management: A company can hire the services of professional manager for its functional areas because of its financial strength. The directors who look after the management of the company are generally experienced and persons of business acumen Therefore, the management of a company is sure to be efficient. (6) Scope for expansion: A company can generate huge financial resources by issuing shares and debentures to finance new projects. Companies also transfer a portion of their profit to reserve which can be utilised for future expansion. ]

CASE – 2 IT Industry: Checkered Growth

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