Notes: July 2001

Nirmit

AMB

SMT Venkat

Mitchelle

email $\checkmark$ done 11/7/2001. Find out file

F:/workshop/costing & pricing & type.

July 7, 2001

Jan 30, 2004

Costing & Pricing Policy

I attach my notes on this subject, prepared nearly Seven years back.

Basic principles mentioned therein, have not changed and remain applicable even now.

Only thing is, I could not envisage internet in 1994 but talked of "remote access" of our resume database by the corporates.

Since you are about to finalise our "Professional Fees" and host it on our website, I thought these notes might help you.

T/phnis = 287 1798

3822

M 98211-63620

File originally prepared: 1st April, 1994

Typed: 14th March, 2001

COSTING & PRICING

In our business, both fixed-costs and variable costs are quite low. This is especially true of the variable-costs. This is because we have NO MATERIAL-COST!

Strictly speaking, there IS a material-cost (although small). This is the "Cost of Acquisition" OR "Cost of building-up a Databank"

This varies with the volume-or the size of the databank.

Broadly speaking, it consists of costs of

VARIABLES-COSTS

Mailers (incl. postage)
Registration Forms
Manpower (that part which can be identified as "exclusively" used for building up the databank).

Although, largely manpower must be treated as a FIXED-COST, since you cannot hire and fire so easily without damaging morale/business reputation.

Stationary
Consumables
Courier charges
Telephone / fax charges
Entertain / gifts
Travel cost / conveyance
Petrol/Maint.
Advt. costs

What are our FIXED-COSTS ?

These are:

Office rental
A/c rental
Interest & Depreciation on Hardware (or Lease charges, if we decide to Lease out entire equipment. This is because, having entered into a 2 year contract, we cannot increase/decrease rental at short-notice).
Electricity

Mostly consumed for lighting/A/c.

Power used for operating hardware cannot be much.

In our Lok Bharati premises, we should install separate meters for

Lighting
A/c
Hardware Power
Most of Manpower-cost/Manpower-related costs.
Insurance
Interest on Capital blocked-up in Lok Bharati (when we move there)
Int/Dep. on furnitures (if capitalized)
Int/Dep. on Car
Maint. Contract cost for hardware
Interest on Telephone-deposits
Interest on other deposits

Having prepared a comprehensive-lists of both, the fixed and the variable costs, we should compile actual figures (of costs incurred) for the last $2/3$ years.

For the same period, we should compile following data:

No. of bio-data / RF received
No. of bio-data sent-out
No. of interviews arranged
No. of executives appointed
No. of Mailings sent out
No. of "Introduction-Letters" sent out

These NUMBERS are indicators of VOLUME

directly proportional to BUSINESS. Most are "activities" connected with the business.

Only ONE is an "EVENT"

viz.

No. of Executives appointed / joined.

(Proof of pudding is in eating!)

But then, the EVENTS (i.e. no. of persons appointed/jointed) are themselves, directly proportional to

the level/no. of activities listed above.

For the last 3 years, we have not (or very little reliable) data on any of these activities, other than "No. of persons appointed / joined".

But when the new System Software is installed, we must ensure that DATA on above-mentioned activities is generated automatically as a

Bye-Product of the System.

For the time-being, as far as the last 3 years is concerned, we have to remain satisfied with

a	Variable Cost	1991-92	1992-93	1993-94	Projection 1994-95
b	No. of Persons appointed
	a/b

Again, since even so-called FIXED-COST also tends to vary over longer-periods, we should also compile

a	Fixed Cost	1991-92	1992-93	1993-94	Projection 1994-95
b	No. of Persons appointed
	a/b

Having done this, we should get computer to plot graphs such as follows:

Fixed Cost (Rs.)

Yr.

Variable Cost (Rs.)

Yr.

Average variable Cost (per) Person appointed

Next step is to combine both graphs.

Next change "Y" axis from "Year" to "No. of persons appointed" & draw a graph as follows:

Cumulative total Cost/person

Average Cost per person (variable cost)

Plot on a log.log sheet to get a straight line curve

As a result of this analysis, we finally find that "ave. variable cost per person appointed" stabilises around a figure (may be Rs 2000/- per person ?) and does not fall further (at least significant) even as more and more persons get appointed.

This "steady-state" condition will prevail until,

there is some BREAKTHROUGH in the manner we conduct our business - some breakthrough which lifts our employee-productivity to a higher level.

In Rutherford's model of an ATOM

the electrons are orbiting around the nucleus at different levels/potentials.

If an atom is made to "drop" to a lower Orbit, it releases an enormous amount of energy. Conversely, we need to inject/impart a vast amount of energy to "lift" an atom to a higher orbit.

Same is true of "Employee Productivity". There is a limit (upper) to how much physical effort a person can put in. But it can be, periodically, boosted (to a higher orbit) by injecting "Energy"/ giving him bigger leverage.

The greater the leverage, the bigger the load that can be lifted. So bigger "leverage" means more productivity - although an individual's personal/physical effort remains the same.

In our business (which is essentially dealing with "information"), this leverage has to come from

going right upto IT (Information Technology), Artificial Intelligence.

Getting back to COSTING & PRICING, the question that may come to mind is,

If cost/price/volume (CPV) triangle is more relevant to our case, can a much bigger VOLUME, enable us to drastically drop COST (per person), which, in turn, help us drop our PRICE (per person) also drastically?

Alternatively,

if technology (i.e. hardware/software/skills) - and people's attitudes - make it possible for us to handle with ease, TEN TIMES (or even a HUNDRED TIMES) bigger volumes, must we not take advantage of that situation and drop our PRICES (per person appt. charges) drastically so that we can generate those desired/expected volumes of business?

This would be especially true, if most of our costs are FIXED and we incur these whether we

appoint 2 persons/month or 20/month
send 100 bio/month or 1000 bio/month
arrange 25 interview/month or 250/month

This situation would be especially true if we go in for LEASING of entire hardware for say

Rs. 50000/month

This is a fixed cost/sunk-cost and independent of the business volumes.

So, if our business has price/demand elasticity, then why not flog the built-in capacity to the hilt, to generate larger volume?

Most business would be happy, if they have a price:demand elasticity of 1:1, i.e.

Volume (or demand) goes up by 1 UNIT when they drop price by 1 UNIT.

I suspect in our case, if might be 1:2, i.e.

When we drop Price by 1 UNIT, the volume (demand) should go up by 2 UNIT.

If this assumption is true, keeping idle, built-in capacity would be CRIMINAL.

We should test my hypothesis, by dropping our price to 2 WEEKS (or $5\%$ of annual gross) under Mode A.

This could be done as a special case for a period of 3 months by sending-out special CAMPAIGN - LETTERS of INTRODUCTORY - OFFER.

This offer could be made only for

new clients
a limited period,

just to find-out how much more business does it bring in. Of course such clients should be chosen/selected carefully and not indiscriminately. We should select only such clients (for this introductory offer) who have potential for repeat-business.

BUT,

none of the above should be done till our entire new SOFTWARE is installed/ tested/perfected and operators fully-trained in its use.

BECAUSE,

New Software means New Technology
New Technology means New/Bigger Capacity at the same hardware-cost.

We must move with the technology. All our future Capacity expansions should be derived from newer/better technologies.

We must NEVER fall into the trap of simply replicating our existing hardware/software to increase our capacity. That should be SUICIDAL ! We will land-up with an ARMY of operations working on an ARMY of PC/AF. THIS MUST NEVER HAPPEN.

When I am talking of dropping our PRICE to utilize our capacity to the hilt, what I have in mind is the capacity created thru NEW IT TECHNOLOGY / NEW SOFTWARE.

There is no fun to create a demand - to fill which, we have to go and buy same EXISTING KIND of hardware. But if we succeed in handling TEN times larger volume with our existing hardware (but NEW Software), we would be ONE-UP on our competitors.

We must remain LEAN & MEAN - every employee and every piece of equipment working at 110% capacity utilization.

And when we reach this point

and business is threatening to outgrow our capacities to handle it
we must ask ourselves,
what shall we do to improve our "LEVERAGE/PRODUCTIVITY", before ordering more hardware/more people?

should we decide to drop our price to 2 weeks, we should consider incorporating a clause,

"There will be only one set of interviews (of the short-listed candidates) which shall be conducted JOINTLY with the client's managers".

Implicit in this price-dropping strategy, are the following assumptions:

Demand with pick-up and fill our capacity (hardware/software)
We would be able to "Sub-Contract" rating/interviewing to our associates e.g. GR/AYD/Ssa/KPB and many other retired executives.
Competitors will find it extremely difficult to match our prices because of

their high overheads (in case of established, major players like ABC/Ferguson/Datamatics, etc.)
their "low-capacity" to handle large volumes - unless they duplicate their resources in traditional way (i.e. without recourse to IT).

Our Databank will get built-up very rapidly. This will improve the probability of finding a person under MODE D, whenever such orders arrive.
We will become better known both amongst Corporate-World and amongst job-change-seekers, thru our frequent advt. under Mode A. This itself will lead to more business/bigger databank.

Remember, Cost/Price/Volume triangle can rotate both ways, e.g.

higher (per person) cost i.e. Professional Fee, will discourage clients to come to us.
which will reduce business-volume (i.e. purchase orders - ESR*)
distributing all our overheads (O/H) on a lower volume will mean either we have to raise our "prices" or incur losses.

$\square$ This is a VISCIOUS Cycle.

On the other hand, if we drop our "price" and thereby generate large volume, and distribute same overheads on larger volume, then our "per person cost" will drop significantly. So we can earn higher profits or drop the price further to pick-up even greater market-share.

But remember,

In our business, price/demand elasticity has a limit. Beyond a point, dropping price will not produce additional business.

It is simple,

even if you offer to "place" an executive free, no one will hire him if, to being with, he does not NEED such a person. An employee is not an "asset" which a Company can "trade-in" for another asset or "encash" it by disposing off !!

An employee is not like a "material" which you stock-up when prices are low but expected to go-up later.

An employee is not like a piece of "Real Estate (e.g. a flat)" which you don't need for USE but still go ahead and buy as an investment - because, even if left vacant/unutilized, it is going to APPRECIATE in value.

So the strategy of dropping prices will work only with those Companies.

$\square$ Who have large, regular recruitment (either because they are expanding their existing operations or diversifying)

$\square$ Whose own "recruitment department" is unable to handle the processing of large volumes, because the dept. is

Unorganized (no computers)
Inefficient
Understaffed etc. etc.

$\square$ Who do not even have any Recruitment Dept., nor does it want to set-up one, either because

It is a One-Time recruitment job and they do not want to create a permanent set up to handle a one-time job OR
The Company wants to remain lean and therefore believes in SUB-CONTRACTING as many office activities as possible-which it can increase/decrease/terminate anytime they want.

= Less Permanent Liability
= Greater Permanent Flexibility

In fact the next decade will see more and more Companies trying to Subcontract more and more "office-work" (just like subcontracting component manufacture and only concentrating on

R&D / ASSEMBLY / MKTG / SERVICE

but no "manufacture"

This (subcontracting) mentality will be especially VERY STRONG amongst the foreign Companies who are descending to India in hordes after liberalization. In their own home-countries, the executives of these Companies are used to work without

peons/clerks/typists/stenos/assts./receptionists etc...

And that is the way they will be expected to work in India. Their recruitment of these categories will be very little.

Even on recruitment of executives, they will be tight.

In any case, none of them would want to set up a Recruitment Dept. or even a PERSONNEL Dept. This is a luxury they can illafford. At most, they may have one executive to look after the entire gamut of HRD/Personnel/recruitment activity for the entire company, without granting him any subordinate staff.

Such Companies (multi-nationals) would be/should be our IDEAL TARGETS, for offering our services. In their own country, they would be used to pick-up a phone, talk to a Placement Service and line-up 10 gays for interview the next day !

If anyone can offer them this (same) service in India, they would rather deal with him.

This is perhaps, the reason why we are getting repeat-requests from Gujarat Guardian (An American J.V.)

And anyone who can offer such prompt/specialized service, can demand a higher price-which the multinationals would be only too happy to pay. They want "people-on-tap" and they are willing to pay the price. They don't have patience for "Advt. Campaign" under MODE A, and dropping price would not attract them - no matter how low a price. For them, the only thing that will entice them is

SPEED OF RESPONSE

So if we offer REMOTE ACCESS (thru Modem) to our DATABASE, these companies are the most likely "ACCEPTORS" of our offer.

To them, such a facility would sound familiar environment - perhaps even an improvement over what they are used to in their own countries!

This will be, to them, something, pleasantly UNEXPECTED - and very close to their own NORMS of service-level-expectations.

So when we go "ON-LINE", our first target should be one of the famous U.S.A. Company - may be G.E. because they have

GE - Godrej

GE - Apar

GE - Wipro

GE - IPCL

GE - HDFC (Consumer Credit) etc.

Once, we have been able to satisfy GE with our Service, we could use their certificate/recommendation to "hook" other multinationals.

Once we have "hooked" a few of them - and satisfied all of them - it would be a relatively easy job to rope-in large, Indian groups - who, in any case, like to "imitate" the multinationals.

We could organize a demonstration - cum - dinner meeting in a 5-Star Hotel, where, some of our "satisfied" clients could be present and "narrate" their experience in using our remote service.

1/4/94 (1)

COSTING & PRICING.

In our business both fixed-costs and variable costs are quite low. This is especially true of the variable-costs. This is because we have NO MATERIAL-COST!

Strictly speaking, there IS a material-cost (although small). This is the "Cost of Acquisition"

"Cost of building-up a Databank"

This varies with the volume-or the size of the databank.

Broadly speaking, it consists of Costs of

VARIABLE-COSTS

Mailers (incl. Postage)
Registration Forms
Manpower (That part which can be identified as "exclusively" used for building up the databank).

Although, largely manpower must be treated as a FIXED-COST, since you cannot hire & fire so easily without damaging morale/business reputation.

Stationary
Consumables
Courier charges
Telephone/Fax charges
Entertain/gifts
Travel Cost/Conveyance
Petrol/Maint.
Advt. Costs

What are our FIXED-COSTS?

These are.

Office rental
A/c
Interest & Depreciation on Hardware (or Lease charges, if we decide to lease-out entire eqpt.

This is because, having entered into a 2 year contract, we cannot increase/decrease rental at short-notice).

Electricity

Mostly consumed for lighting/A/c.

Power used for operating hardware cannot be much.

In our Lok Bharati premises, we should install separate meters for

Lighting
A/c
Hardware Power.

Most of Manpower-cost/Manpower-related costs.
Insurance
Interest on Capital blocked-up in Lok Bharati (when we move there)
Int/Depreciation on furnitures (if capitalised)
" " " on Car
Maint. Contract Cost for hardware
Interest on Telephone-deposits
" " " other deposits.

Having prepared a comprehensive-lists of both, the fixed and the variable costs, we should compile actual figures (of costs incurred) for the last $2/3$ years.

For the same period, we should compile following data:

No. of bio-datas/RF received
No. of bio-datas sent-out
No. of interviews arranged
No. of Executives appointed
No. of Mailers sent out
No. of "Introduction-Letters" sent out

These NUMBERS are indicators of VOLUME

directly proportional to BUSINESS. Most are "activities" connected with the business.

Only one is an "EVENT",

Viz.

No. of Executives appointed/joined.

(Proof of pudding is in eating!).

But then, the EVENTS (i.e. no. of persons appointed/joined) are themselves, directly proportional to

the level/no. of other activities listed above.

For the last 3 years, we have no (or very little reliable) data on any of these activities, other than

"No. of Persons appointed/joined".

But when the new System Software is installed, we must ensure that DATA on above-mentioned activities is generated automatically as a

Bye-Product of the System.

For the time-being, as far as the last 3 years is concerned, we have to remain Satisfied,

		91-92	92-93	93-94	Projection 94-95
a	Variable Cost
b	No. of Persons appointed
	a/b

Again, since even so-called FIXED-COST also tends to vary over longer-periods, we should also compile

		91-92	92-93	93-94	Projection 94-95
a	Fixed cost
b	No. of Persons appointed
	a/b.

Having done this, we should get computer to plot graphs such as follows.

Fixed COST (Rs.)

Yr.

[Hand-drawn stepped bar graph showing Fixed Cost on the Y-axis and Year (91/92, 92/93, 93/94, 94/95) on the X-axis.]

Variable Cost

Yr.

[Hand-drawn stepped bar graph showing Var. cost on the Y-axis and Year on the X-axis.]

Average Variable Cost (per)

Person appointed

[Hand-drawn line graph showing an increasing curve for Average Variable Cost (per) Person appointed on the Y-axis.]

Ave fixed cost per person appointed

[Hand-drawn line graph showing a horizontal line for Ave fixed cost per person appointed on the Y-axis and Year (91/92, 92/93, 93/94) on the X-axis.]

Next step is to Combine both graphs

Rs.

[Hand-drawn graph combining three lines against years 91/92, 92/93, 93/94:

Ave. Fixed Cost/person (horizontal line)
Ave. Variable Cost/person (upward sloping dashed line)
Ave. Total (fix+variable) Cost/person (upward sloping dashed line, above variable cost)]

Next change "Y" axis from "Year" to "No. of persons Appointed" & draw a graph as follows:

Cumulative Total Cost/person

[Hand-drawn line graph showing a straight line sloping upwards, with the X-axis labelled Cumulative No. of Persons appointed.]

Plot on a log.log sheet to get a straight line curve

ave. Cost per person (Variable cost)

[Hand-drawn line graph showing a curve that slopes downwards and then becomes horizontal, labeled taper down/stabilised, with the X-axis labeled No. of persons appointed.]

This "Steady-state" condition will prevail until,

there is some BREAKTHROUGH in the manner we conduct our business - some breakthrough which lifts our employee-productivity to a higher level.

In Rutherford's model of an ATOM

[Hand-drawn simple diagram of an atom with a nucleus (+) and a few orbiting electrons (-).]

the electrons are orbiting around the nucleus at different levels/potentials.

If an atom is made to "drop" to a lower Orbit, it releases an enormous amount of energy. Conversely, we need to inject/impart a vast amount of energy to "lift" an atom to a higher orbit.

Same is true of "Employee Productivity". There is a limit (upper) to how much physical effort a person can put in. But it can be, periodically, boosted (to a higher orbit) by injecting "Energy"/ giving him bigger leverage.

[Hand-drawn diagram of a lever system with a person applying force (K), a fulcrum (triangle), and a load to be lifted.]

The greater the leverage, the bigger the load that can be lifted. So bigger "leverage" means more productivity - although an individual's personal/physical effort remains the same.

In our business (which is essentially

dealing with "information"), this leverage has to come from

IT (Information Technology),

going right upto Artificial Intelligence.

Getting back to COSTING & PRICING, the question that may come to mind is,

If cost/Price/Volume (CPV) triangle is more relevant to our case, can a much bigger VOLUME, enable us to drastically drop COST (per person), which, in turn, help us drop our PRICE (per person) also drastically?

Alternatively,

[Hand-drawn triangle labeled VOLUME at the top, COST at the bottom left, and PRICE at the bottom right, with arrows indicating the relationship.]

if technology (i.e. hardware/software/skills) - and people's attitudes - make it possible for us to handle with ease, TEN TIMES (or even a HUNDRED TIMES) bigger volumes, must we not take advantage of that situation and drop our PRICES (per person appt. charges) drastically so that we can generate those desired/expected volumes of business?

This would be especially true, if most of our costs are FIXED and we incur these whether we

appoint 2 persons/month or 20/month.
send 100 bio/month or 1000 bio/month.
arrange 25 interviews/month or 250/month.

This situation would be especially true if we go in for LEASING of entire hardware for say

Rs. 50000/month.

This is a fixed cost/sunk-cost and independent of the business volumes.

So, if our business has price/demand elasticity, then

why not flog the built-in Capacity to the hilt, to generate larger volume?

[Hand-drawn graph of a demand curve (Price vs. Volume), showing Price on the Y-axis and Volume (demand) on the X-axis.]

Most businesses would be happy, if they have a price:demand elasticity of 1:1, i.e.

Volume (or demand) goes up by 1 UNIT

When they drop price by 1 UNIT.

I suspect in our case, it might be 1:2, i.e.

When we drop Price by 1 unit, the volume (demand) should go up by 2 UNIT.

If this assumption is true, keeping idle, built-in capacity would be CRIMINAL.

Today we are charging ONE month under Mode A.

We should test my hypothesis, by dropping our price to 2 WEEKS (or $5\%$ of annual gross) under Mode A.

This could be done as a special case for a period of 3 months by sending-out special CAMPAIGN - LETTERS of INTRODUCTORY - OFFER.

This offer could be made only for

new clients
for a limited period,

just to find out how much more business does it bring in. Of course such clients should be chosen/selected carefully and not indiscriminately. We should select only such clients (for this introductory offer) who have potential for repeat-business.

BUT,

none of the above should be done till our entire new SOFTWARE is installed / tested / perfected and operators fully-trained in its use.

Because,

New Software means New Technology
New Technology means New/Bigger Capacity at the same hardware-cost.

We must move with the technology. All our future Capacity expansions should be derived from newer/better technologies.

We must NEVER fall into the trap of simply replicating our existing hardware/Software to increase our capacity. That would be SUICIDAL! We will land-up with an ARMY of Operators working on an ARMY of PC/ATs. THIS MUST NEVER HAPPEN.

When I am talking of dropping our PRICE to utilise our capacity to the hilt, what I have in mind is the capacity created thru

NEW IT TECHNOLOGY / NEW SOFTWARE.

There is no fun to create a demand - to fill which, we have to go and buy SAME EXISTING KIND of hardware.

But if we succeed in handling TEN times larger volume with our existing hardware (but NEW Software), we would be ONE-UP on our competitors.

We must remain LEAN & MEAN - every employee and every piece of equipment working at 110% capacity utilization.

And when we reach this point

and business is threatening to outgrow our capacities to handle it
we must ask ourselves,
Can What shall we do to improve our "LEVERAGE / PRODUCTIVITY", before ordering more hardware/more people?

Should we decide to drop our price to 2 WEEKS, we should consider incorporating a clause,

"There will be only one set of interviews (of the short-listed candidates) which shall be conducted JOINTLY with the client's managers".

Implicit in this price-dropping strategy, are the following assumptions:

assumptions:

Demand will pick-up and fill our capacity (hardware/software)
We would be able to "sub-contract" rating/interviewing to our associates e.g. GR/AYD/Ssa/KPB and many other retired executives.
Competitors will find it extremely difficult to match our prices because of

their high overheads (in case of established, major players like ABC/Ferguson/Datamatics etc.)
their "low-capacity" to handle large volumes - unless they duplicate their resources in traditional way (i.e. without recourse to IT).

Our Databank will get built-up very rapidly. This will improve the probability of finding a person under MODE D, whenever such orders arrive.
We will become better known

both amongst Corporate-World and amongst job-change-seekers, thru our frequent advts. under Mode A. This itself will lead to more business/bigger databank.

Remember Cost/Price/Volume triangle can rotate both ways. e.g.

higher (per person) cost i.e. Professional fee, will discourage clients to come to us.
which will reduce business-volume (i.e. purchase orders - $\text{ESR}^{*}$)
distributing all our overheads ($\text{O/H}$) on a lower volume will mean either we have to raise our "prices" or incur losses.
If we raise our prices further, it will further depress the volume.

This is a VISCIOUS Cycle.

On the other hand, if we drop our "price" and thereby generate large volume, and distribute same overheads on larger volume, then our "per person cost" will drop

significantly. So we can earn higher profits or drop the price further to pick up even greater market-share.

But Remember,

In our business, price/demand elasticity has a limit. Beyond a point, dropping price will not produce additional business.

It is Simple,

even if you offer to "place" an executive free, no one will hire him if, to begin with, he does not NEED such a person. An employee is not an "asset" which a Company can "trade-in" for another asset or "encash" it by disposing off!!

An employee is not like a "material" which you stock-up when prices are low but expected to go-up later.

An employee is not like a piece of "Real Estate (e.g. a flat)" which you don't need for USE but still go ahead and buy as an investment - because, even if left vacant/unutilised, it is going to APPRECIATE in value.

So the strategy of dropping prices will work only with those Companies

Who have large, regular recruitment (either because they are expanding their existing operations or diversifying)
Whose own "recruitment department" is unable to handle the processing of large volumes, because the dept. is

Unorganised (no Computers)
Inefficient
Understaffed
etc. etc.

Who do not even have any Recruitment Dept, nor does it want to set-up one, either because

It is a One-Time recruitment job and they do not want to create a permanent setup to handle a one-time job OR
The Company wants to remain lean and therefore believes in SUB-CONTRACTING as many office activities as possible - which it can increase/decrease/terminate anytime they want.

= Less permanent liability
= Greater permanent Flexibility.

In fact the next decade will see more & more Companies trying to Subcontract more & more "office-work" (just like subcontracting component manufacture & only concentrating on

R&D / ASSEMBLY / MKTG / SERVICE

but no "manufacture".

This (subcontracting) mentality will be especially VERY STRONG amongst the foreign Companies who are descending to India in hordes after liberalisation. In their own home-countries, the executives of these Companies are used to work without

Peons/clerks/typists/stenos/Assts./Receptionists etc.

And that is the way they will be expected to work in India. Their recruitment of these categories will be very little.

Even on recruitment of executives, they will be tight.

In any case, none of them would want to set-up a Recruitment Dept or even a PERSONNEL dept. This is a luxury they can illafford. At most, they may have one executive to

look after the entire gamut of $\text{HRD/Personnel}$ recruitment activity for the entire company, without granting him any subordinate staff.

Such Companies (Multi-nationals) would be/should be our IDEAL TARGETS, for offering our services. In their own country, they would be used to pick up a phone, talk to a Placement Service and line-up 10 guys for interview the next day!

If anyone can offer them this (Same) service in India, they would rather deal with him.

This is perhaps, the reason why we are getting repeat-requests from Gujarat Guardian (An American J.V.).

And anyone who can offer such prompt/specialised service, can demand a higher price - which the multinationals would be only too happy to pay. They want "people-on-tap" and they are willing to pay the price. They don't have patience for "Advt. Campaign" under MODE A, and dropping price would not attract them - no matter how low a price. For them, the only

only thing that will entice them is

SPEED OF RESPONSE.

So if we offer REMOTE ACCESS (thru Modem) to our DATABASE, these companies are the most likely "ACCEPTORS" of our offer.

To them, such a facility would sound familiar environment - perhaps even an Improvement over what they are used to in their own countries!

This will be, to them, something, pleasantly UNEXPECTED - and very close to their own NORMS of service-level-expectations.

So when we go "ON-LINE", our first target should be one of the famous U.S.A. Company - maybe G.E. because they have

GE - Godrej

GE - Apar

GE - Wipro

GE - IPCL

GE - HDFC (Consumer credit) etc.

Once, we have been able to satisfy

GE with our Service, we could use their certificate/recommendation to "hook" other multinationals.

Once we have "hooked" a few of them - and satisfied all of them - it would be a relatively easy job to rope-in large, Indian groups - who, in any case, like to "imitate" the multinationals.

We could organise a demonstration - cum - dinner meeting in a 5-star Hotel, where, some of our "satisfied" clients could be present and "narrate" their experience in using our remote service.

Saturday, 7 July 2001

COSTING & PRICING POLICY