|EDUCATION TRIBUNE||Tuesday, January 21, 2003, Chandigarh, India|
Cost-led pricing or price-led costing?
Cost-led pricing or price-led costing?
IN 1990’s management guru Peter F. Drucker wrote of five deadly business sins—avoidable mistakes that have damaged many businesses in the past. Drucker’s third deadly sin is ‘cost-led pricing’. He argued: "The only thing that works is price driven costingonly sound way to price is to start out with what the market is willing to pay — and design to that price specification". Avoiding this mistake makes a great economic sense to any business situated in any part of the globe.
Contrary to this, a good number of Indian companies still arrive at prices by adding up costs and then putting a profit margin on top. Due to competition in the market place they start cutting the prices, have to redesign the product at enormous expense, have to take losses and quite possible have to drop the product line because it is priced incorrectly. And if you ask them why it has happened like that. Very often the reply will be, "we have to recover our costs and make a profit."
Gone are the days when it was not difficult for a business to get paid not only for product’s cost but also for its inefficiencies. Manufacturers and suppliers dictated the rules of the game to customers: "you can have it ‘fast’ or you can have it ‘cheap’ or you can have it ‘right’ — but you can not have all the three". But in the changed scenario, the customer is gaining power.
Value for money (VFM) has become a primary consideration with the customer and he does not mind value from any part of the world, an appeal like — be Indian buy Indian, will not work. He has choices because of global competition.
Product life cycles are dwindling, global players themselves at times, cut short the life span of a product. Business organisations are thus passing through a very revolutionary transformation. But all this has not surfaced all of a sudden. There have been economies which were able to foresee the impending tough competition.
In 1970s a team of Japanese businessmen was taken around an automated warehouse by an enthusiastic American automobile manufacturer. Instead of getting admiration, as expected by the American, the team made a comment. "Why do you store what you can’t sell".
During the same time in Japan, a supplier’s truck was stopped at the gates of Toyota for no other reason than early arrival which was against the spirit of ‘Just in time’. In addition, the Japanese emphasis on cost management has focussed on the pre-production stage in a product’s life cycle when the key decision about product design, resourcing and production technology are made, and when up to 90% of a product’s total costs are committed.
The idea once again is to "get costs right" before production commences. Source of profit, in fact, is not the physical efforts involved in production and selling but in the intellectual efforts in planning and designing the production and sales processes. Those involved in intellectual work should not be diverted from it by other responsibilities. Line managers and workers are there to realise the plan created by the intellectual efforts of others.
However, in the west more emphasis has been placed on the assessment of actual costs incurred after the production is under way.
It must always be remembered that profit is an outcome of two forces—costs and revenues. In a market-oriented economy, revenue (which itself is made up of selling price and volume of product/service sold) is influenced by the market forces. Therefore, it is only cost that presents itself as a factor to be managed so as to maximise profits.
Permanent cost control
Cost is not simply incurred, it should reflect only purposeful spending. Further, if cost incurrence is to be fully understood, it should be viewed not simply as an event occurring at one point in time but as a process involving several stages. Japanese cost managers say: "Cost management is like wringingout a wet towel. The biggest reaction is obtained first, but we must keep wringing. Even when the towel appears dry to touch, we must wring it to extract more." Achieving this level of effort and success in cost management requires commitment of resources, formulation of appropriate policies and procedures and establishment of a flow of relevant cost-based information.
Thus, cost cutting has to be a continuous endeavour always, ensuring that it should not result into cutting corners or cutting quality or cutting workforce.
In order to enhance global competitiveness, a lot of effort is being put in by various businesses across the globe. Even a war-shattered country like Israel is making its corporates competitive. It has been reported that Israeli companies (e.g. Israel Aircraft Industries, Teva Pharmaceutical Industries., Scitex Corporation are providing best illustrations on ways to avoid Drucker’s five deadly sins.
The main reason pointed out is the hostile environment that Israel faces which in turn has developed a national character demanding that things be done right the first time. This character dominates national consciousness and has surfaced in the philosophies and mission statements of many Israel companies.
In order to enhance global competitiveness, Indian companies have to re-orient themselves to the changing environment. Public sector undertakings in particular have to do much more in this context. In situations where one undertaking happens to be, if not a sole but a major supplier of a product/service.
State Electricity Boards cost-plus pricing mechanism is advocated. Reason being that there are not many market players. Hence, marker-driven pricing is out of question. Here the customer of such services becomes vulnerable unless a mechanism exists so as to ensure that the supplier charges only for the true cost and not for inefficiencies or lack of corporate professionalism.
These issues were addressed by a team of experts headed by Prof Roger Noll at a seminar recently organised by Punjab in partnership with the Centre for Research on Economic Development and Policy, Stanford University, USA.
Feb 10 School of Advanced Engineering & Information Technology, (A BHEL Trichi & IIT Madras MoU Project), Kailaspuram Township, BHEL Campus, Tiruchirapalli 620014 (TN)
Cert Prog in Computational Engg
(Areas: CAD, FEM, CFD, etc.)
Elig: BE (Mech/Civil).
Selectn: WrittenTest (Feb 23 at 6 centres, including Del), Interview.
Appln F: Send Rs 750/- by DD favouring "SAEIT" payable at Tiruchirapalli or download from website.
Feb 10 Wildlife Instt. of India, P.O. Box 18, Chandrabai, Dehradun-248001 (UA)
MSc in Wildlife Sc (2-yr)
(Affltd to Saurashtra Univ, Rajkot)
Elig: BSc (55%). Age: Working cands: 35 yrs, others: 30 yrs (on 1 Jul ‘03).
Selectn: Written Test (at D ‘dun, Kol ‘ta, B’lore & M ‘bai).
Appln F: Send Rs 200/- by IPO in favour of "Director, Wildlife Institute of India," Payable at D ‘dun with typed Appln stating: (1) Name (2) Mailing Add (3) DoB (4) SC/ST (5) Edu Qual (6) Ex (7) Choice of Exam Center (8) Optnl Subj for Written Test (Life Sc/Forestry/Vet. Sc/Agri. Sc) (9) Contact (Tel, Fax, E-Mail), with rel certs of age, min. qual, SC/ST status & recent PP photo to: Course Director, MSc (Wildlife Sc) at above add. Superscribe env "Appln for MSc Wildlife Sc".
Details: Employment News (11-17 Jan)/Website
Manipal Academy of Higher Education (Deemed Univ), Madhav Nagar, Manipal 576119 (Kar)
1. MS Medical Software
2. MS (VLSI CAD/Embedded Syst)
3. Panchakarma & Ksharasootra
(Kasturba Medical Coll)
4. Oral Implantology
(Coll of Dental Surgery)
Elig: For 1: BE/BTech (Comp Sc/Biomed/Med Electron/Med Instru/Info Sc/Electl & Electron/Electron & Comm/Instru) (50%)
For 2: BE/BTech (Comp Sc/Info Sc/Electl & Electron/Electron & Comm/Instru) (50%).
For 3: Ayurvedic Grads/Practitioners.
Selectn: For 1 & 2: Entrance Test & Interview (15/16 Feb)
Appln F: Send Rs 250/- by crossed DD favouring "MAHE" payable at Manipal or Udupi (Kar) to admission Office at above add.
Feb 15 International Institute of Information Technology, P-14, Pune Infotech Park, Hinjawadi, Pune 411027
1) MS Prog in Adv IT (18-mth)
2) Master of Bus Admin Prog in Adv IT (20-mths)
Elig: For 1 & 2: Bachelor’s Deg (Maths at Cl 12).
Appln F: Send Rs 750/- by DD favouring "International Institute of Information Technology" payable at Pune to the Admissions Cell at above add or download from website.
Mar 10 Indian Institute of Technology, Kharagpur 721302
PG Dip in IT (2 sem, FT)
(At Kharagpur, Kol ‘ta & Bhubaneswar)
Elig: BTech/BE (60%)/MSc (Phy/Chem/Maths/Stats/Comp Appl, with maths in BSc (60%).
Selectn: Written Test (13 Apr; at 9 centres).
Appln F: Send Rs 800/- by crossed DD favouring "IIT, Kharagpur" payable at Kharagpur with 2 self-add slips to Chairman, GATE at above add by 28 Feb. Designated branches of Canara Bank (H54, Bombay Life Bldg, CP, New Delhi; SCO 117-119, Sec 17-C, Ch ‘grh): Rs 800/- (cash) by 3 Mar.
Details: Employment News (4-10 Jan).
Feb 1 Symbiosis Institute of Computer Studies & Research (SICSR), II Floor, Atur Centre, Gokhale Cross Rd, Model Colony, Pune 411016 (Mah)
1) MSc (Comp Appln)
2) MBA (IT)
Elig: Bachelor’s deg (50%).
Selectn: Written Test (9 Feb; at 5 centres incldg Del), GD & Interview (18 & 19 Feb at Pune).
Appln F: Send Rs 1100/- (Rs 1500/- if applying for both courses) by DD favouring "Director SICSR" payable at Pune to above add.
Mar 22 Dhirubhai Ambani Institute of Information & Communication Technology, Gandhinagar 382009 (Guj)
1) UG Prog in Info & Comm Tech (4-yr)
Elig: Cl 12 (PCM), born after: Oct 1 ‘78.
Selectn: Entrance Test: (May 18) (incldg: Amritsar, Ch ‘garh, Del, Jammu & Shimla).
Appln F: At Select branches of IOB (Delhi: Def Col, CP, Model Town, Karol Bagh & Yusuf Sarai, Punjab: Minerva Bldg,Cantt; Green Av, Amritsar; Sec 7-C, Ch ‘garh; Civil Lines, Ludhiana) or send Rs 800/- by DD favouring "Educational Consultants India Limited" payable at New Delhi, (write ur name, add on reverse of DD) to: The Project Manger (DA-IICT), Educational Consultants India Ltd., 18-A, Sec 16-A, NOIDA 201301 (UP). .
National Power Training Institute, Sec-33, Faridabad 121003
MBA (Power Mgt)
(AICTE Appv & Affltd to MD Univ, Rohtak)
Elig: BE/BTech/BSc (Engg) (Gen 60%).
Selectn: Written Test, GD & Interview.
Appln F: Send Rs 300/- by crossed IP/DD favouring "NPTI" payable at Faridabad by 28 Feb.
Jan 31 AICAR Business School, (Asian Institute of Communication & Research), A-101, Vintage Pearl, 29th Rd, TPS III, Bandra (W), Mumbai 400050
Elig: Bachelor’s deg.
Appln F: Send Rs 1000/- by DD favouring "Asian Institute of Communication & Research" payable at M ‘bai or download from website.
Apeejay School of Marketing, Sec-8, Dwarka Institutional Area, New Delhi 110045
PG Dip in Bus Mgt
Elig: Bachelor’s degree.
Selectn: MAT Scores, GD & Interview.
Appln F: Send Rs 750/- by DD favouring "Apeejay School of Marketing" payable at New Delhi to above add.
Jan 30 Society for Self Employment, (G/o NCT), E-26-29, Flatted Factories Complex, Jhandewalan, New Delhi 110 055
1) Repair of Radio & TV (6-mth).
2) Refrig & A/c Course (4-mth)
3) Repair & Maintenance of Household Elect Appliances (6-mth)
4) Plumbing (4-mth)
Elig: Residents of Delhi, For 1-3: Cl 10, For 4: Cl 8. Age: 16-25 yrs.
Appln F: Rs 20/- in cash at counter till Jan 29.
Details: Employment News (4-10 Jan).
Mar 10 School of Medical Science & Technology, Indian Institute of Technology, Kharagpur 721302
Masters in Medical Sc & Tech (3-yr)
Elig: MBBS (60%), (Maths in Cl 12).
Assistantship: Rs 10,000/- pm.
Selectn: Written Test (13 Apr; at 9 Centres).
Appln F: Send Rs 1000/- by DD favouring "IIT, Kharagpur" payable at Kharagpur to Chairman, GATE, at above add by 28 Feb. At designated Canara Bank Branches (H54, Bombay Life Bldg, CP, New Delhi; SCO 117-119, Sec 17-C, Ch ‘grh): Rs 1000/- (cash).
Red Alert !!
Jan 27 Indian Navy, Direct Entry (Diploma Holders), Po Box 488. Gole Dak Khana, GPO, New Delhi 110001
Direct Entry Diploma Holders (3-yr)
Jan 20 Pearl Academy of Fashion, A-21/13, Naraina Industrial Area, Phase II, New Delhi 110028
MA in Fashion Design (11/2-Yrs)
(Nottingham Trent University, UK)
Jan 25 Indian Institute of Information Technology (IIIT), 1st Fl, "INNOVATOR", International Tech Park, Whitefield Road, Bangalore 560066
PG Program in IT (4 sem)
Jan 20 Nirma Institute of Management, Sarkhej-Gandhinagar Highway, PO: Chandlodia, Ahmedabad-382481
Fellow Prog in Mgt
Jan 25 Symbiosis Institute of Telecom Management, 5th Floor, Atur Centre, Gokhale Cross Rd, 1068, Model Colony, Pune 411016 (Mah)
PG Dip in Telecom Mgt (2-yr, FT)
Jan 25 Prin L. N. Welingkar Institute of Management Development & Research, L. Napoo Road, Matunga, C. Rly., Mumbai 40019
PGDBA; PGPeB (2-yr, FT)
Jan 27 Panjab University, Sector-32, Chandigarh
(Anaesth; Chest & TB; Comm. Med; Forensic Med; Ophthal; Paedi; Pathol)
(Anatomy & Orthopaedics)
Jan 23 Maritime Education Training & Research Institute* (Div of South East Ship Mgt Pvt. Ltd.), Falta Industrial Growth Centre, Sector IV, Falta, 24, PGNS (S) (WB)
Pre Sea Training for Ratings:
1) GP Seamen, (41/2 mths, resid).
2) Deck Seamen (31/2 mths, resid).
3) Cook/Stewart/Saloon Seamen (41/2 mths, resid).
Jan 22 Madurai Kamaraj University, Palkalainagar, Madurai 625021 (TN)
2) Master of Studies (IT & Mgt)
5) Comp Sc - S/W
6) Biochem Tech
8) Microbial Gene Tech
Director, CARING (www.careerguidanceindia.com), New Delhi