THE STUDY ON PROJECT EXPORT AND SERVICE EXPORT MANUAL WITH RESPECT TO INTERNATIONAL PROJECTS SUMMER INTERNSHIP PROJECT REPORT PDF Free Download
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THE STUDY ON PROJECT EXPORT AND SERVICE
EXPORT MANUAL WITH RESPECT TO INTERNATIONAL
PROJECTS
SUMMER INTERNSHIP PROJECT REPORT
MASTER OF MANAGEMENT STUDIES (MMS)
Finance
Deepti Rammohan Nayak
2022-2024 Roll Number: 103
Under the Guidance of
Manoj Bagesar
SIES COLLEGE OF MANAGEMENT STUDIES
NERUL, NAVI MUMBAI 400706
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THE STUDY ON PROJECT EXPORT AND SERVICE EXPORT
MANUAL WITH RESPECT TO INTERNATIONAL PROJECTS
SUMMER INTERNSHIP PROJECT REPORT SUBMITTED
AS A PARTIAL FULFILMENT OF THE CURRICULUM
FOR THE DEGREE
Of
MASTER OF MANAGEMENT STUDIES
For
SIES COLLEGE OF MANAGEMENT STUDIES
NERUL, NAVI MUMBAI
UNDER THE GUIDANCE OF
MANOJ BAGESAR
BY
DEEPTI NAYAK
ROLL NO. 103
FINANCE
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Date: 15/07/2023
Declaration
I, Ms. Deepti Nayak, studying in the second year of Master of Management Studies at
SIES College of Management Studies, Nerul, Navi Mumbai, hereby declare that I have
completed the Summer Internship Project titled “The Study on Project Export and
Service Export Manual with Respect to International Projects” as a part of the
curriculum requirement for program name.
I also declare that the work undertaken by me is original and has not been copied from
any source. I further declare that the information presented in this project report is true
and has not been submitted to SIESCOMS or any other institute for any other
examination.
Signature of the Student
Name of the Student: Deepti Nayak
Roll No. 103
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Certificate by Faculty Guide
This is to certify that Ms. Deepti Nayak, studying in the second year of Master of
Management Studies at SIES College of Management Studies, Nerul, Navi Mumbai, has
completed the Summer Internship Project titled “The Study on Project Export and
Service Export Manual with Respect to International Projects” as a part of the
curriculum requirement for Master of Management Studies.
Signature by Faculty Guide:
Name: Mr. Manoj Bagesar
Date:
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1. Acknowledgment
I had the opportunity to intern at L&T Energy Hydrocarbon, and it was a worthwhile learning
experience. I consider it a privilege to be working with F&A offshore, where each member has been
warm and supportive as I've grown both professionally and personally. I am appreciative of the
opportunity to work with such lovely people.
I want to convey my sincere gratitude and particular appreciation to my mentor Ms. Vaidehi Dixit
along with her team Mr. Srinivas Kumar, Mr. Ankit Vira and Ms. Meeta Thakkar who, despite
being incredibly busy with their regular tasks, made the time to train me, direct me in the right direction,
and assist me in completing this project in their department during the duration of my internship.
I also want to express my gratitude to my faculty mentor Mr. Manoj Bagesar for helping me out and
guiding me on a regular basis with his valuable feedback.
Signature:
Name: Deepti Nayak
Date: 15/07/2023
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2.
3. Executive Summary
The Hydrocarbon business provides integrated D&B turnkey solutions for the hydrocarbon industry,
globally. The business executes projects for oil and gas extraction and processing, petroleum refining,
chemicals & petrochemicals, fertilizers, cross-country pipelines & terminals, and has recently launched
asset management as well as services for offshore wind.
D&B (Design & Building) turnkey contract means the fixed price, date certain, turnkey contracts to be
entered into with the D&B contractor for the construction of the project, based on terms and conditions
acceptable to the PA/LA and the rating agencies.
The business has integrated capabilities across the value chain, supported by inhouse front end design
and detailed engineering, R&D, Project Management, Procurement, Modular Fabrication facilities,
onshore construction, offshore installation, and commissioning. Major fabrication facilities are in India
and the Middle East. In India, the engineering, procurement & project management centres are at
Mumbai, Vadodara & Chennai. Modular fabrication facilities are at Hazira (near Surat) and Kattupalli
(near Chennai). Overseas presence is dominantly in the middle east i.e., in the UAE, KSA & Kuwait and
in Algeria. The project management office with the training facility id in Al Khobar, KSA. The business
has a state-of-the-art modular fabrication facility at Sohar in Oman, Piping shop Jubail in KSA and an
upcoming heavy wall pressure vessel manufacturing shop at Jubail industrial zone in KSA.
Pursuant to the scheme of amalgamation, approved by National Company Law Tribunal (NCLT) on
January 28, 2022, L&T Hydrocarbon Engineering Limited (LTHE) has become a division of L&T w.e.f.
April 1, 2021. This amalgamation will enable the hydrocarbon business to leverage the superior pre-
qualification and financial capability of L&T for securing large bids.
Regulations relating to ‘Project Export’ and ‘Service Export’ were issued in a booklet form in March
1994. Subsequently, an update version was published in May 1997. With the introduction of Foreign
Exchange Management Act, 1999 (42 of 1999), suitable charges were made in the instructions on
Project Exports and Service exports. The directions contained in the memorandum of instructions on
Project and Service export (PEM) have been issued under Section 10 (4) and Section 11 (1) of the
Foreign Exchange Management Act, 1999 (42 of 1999).
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Table of Contents
Acknowledgment ______________________________________________________ 6
Executive Summary ____________________________________________________ 7
Chapter 1 ____________________________________________________________ 9
1.1. Introduction to the Industry _____________________________________________ 9
1.2. Introduction to the Company ___________________________________________ 15
1.3. Introduction to the Project _____________________________________________ 18
Chapter 2 ___________________________________________________________ 23
2.1 Objectives ___________________________________________________________ 23
2.2 Literature Review ____________________________________________________ 23
2.3 Scope and Limitations _________________________________________________ 23
Chapter 3 ___________________________________________________________ 25
3.1 Research Methodology ________________________________________________ 25
3.2 Sample and Sample size _______________________________________________ 25
Chapter 4 ___________________________________________________________ 27
4.1 Data Analysis & Findings ______________________________________________ 27
Conclusion __________________________________________________________ 32
Annexures ___________________________________________________________ 33
References___________________________________________________________ 45
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1. CHAPTER 1
1.1. Introduction to the Industry
• Introduction
The oil and gas sector is among the eight core industries in India and plays a major role in influencing
the decision-making for all the other important sections of the economy.
India’s economic growth is closely related to its energy demand, therefore, the need for oil and gas is
projected to increase, thereby making the sector quite conducive for investment. India retained its spot
as the third-largest consumer of oil in the world as of 2022.
The Government has adopted several policies to fulfil the increasing demand. It has allowed 100%
foreign direct investment (FDI) in many segments of the sector, including natural gas, petroleum
products and refineries, among others. The FDI limit for public sector refining projects has been raised
to 49% without any disinvestment or dilution of domestic equity in existing PSUs. Today, it attracts
both domestic and foreign investment, as attested by the presence of companies such as Reliance
Industries Ltd (RIL) and Cairn India. The industry is expected to attract US$ 25 billion investment in
exploration and production by 2022. India is already a refining hub with 23 refineries, and expansion is
planned for tapping foreign investment in export-oriented infrastructure, including product pipelines and
export terminals. India’s crude oil production in FY22 stood at 29.7 MMT.
• Market Size
According to the IEA (India Energy Outlook 2021), primary energy demand is expected to nearly double to
1,123 million tonnes of oil equivalent, as India's gross domestic product (GDP) is expected to increase to
US$ 8.6 trillion by 2040.
As of September 2021, India’s oil refining capacity stood at 248.9 MMTPA, making it the second-largest
refiner in Asia. Private companies owned about 35% of the total refining capacity.
India is expected to be one of the largest contributors to non-OECD petroleum consumption growth globally.
India’s consumption of petrol products stood at 183.32 MMT in April-January 2023. High Speed Diesel was
the most consumed oil product in India and accounted for 38.84% of petroleum product consumption in
FY22.
India’s oil consumption stood at almost 4.9 million barrels per day (BPD) in 2021, up from 4.65 million
BPD in 2020. India’s LNG import predicted at 2,266 million metric standard cubic meters (MMSCM) in
January 2023. Gross production of LNG was 2,883 MMSCM in the same month. According to the
International Energy Agency (IEA), consumption of natural gas in India is expected to grow by 25 BCM,
registering an average annual growth of 9% until 2024.
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Fig 1.1
• Investment/ Recent Development
According to the data released by Department for Promotion of Industry and Internal Trade (DPIIT),
FDI inflows in India’s petroleum and natural gas sector stood at US$ 7.98 billion between April 2000-
March 2022.
Following are some of the major investments and developments in the oil and gas sector:
o India’s crude oil production in April-October 2022 stood at 17.2 MMT.
o The total number of OMC retail outlets increased to 84,895, as of November 1, 2022, from 59,595
in FY17.
o As of August 1, 2022, India had 10,420 kms of crude pipeline network, with a capacity of 147.9
MMTPA.
o As of June 30, 2022, Gas Authority of India Ltd. (GAIL) had the largest share (57.74% or 19,524
kms) of the country’s natural gas pipeline network (33,815 kms).
o In May 2022, ONGC announced plans to invest US$ 4 billion from FY22-25 to increase its
exploration efforts in India.
o In April 2022, Indian Oil Corporation Limited, Larsen & Toubro and Goldman Sachs-backed
renewable energy producer Renew Power formed a joint venture by signing a term sheet. This JV
will develop green hydrogen projects, helping India cut down its carbon emissions.
o Exports of petroleum products from India reached 62.7 MMT in FY22. The value of these crude
oil and petroleum products stood at US$ 44.41 billion. In FY22, crude oil imports stood at 4.24
MBPD, which was worth US$ 120.4 billion.
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o In March 2022, the Board of IOCL approved plans to invest Rs. 7,282 crore (US$ 932.6 million)
for the development of City Gas Distribution (CGD) network in 9 geographical areas (GAs).
o In March 2022, the Board of Oil India approved an investment of Rs. 6,555 crore (US$ 839.49
million) for Num Aligarh petrochemical project.
o As of March 2022, the oil sector’s total installed provisional refinery capacity stood at 249.21
MMT, and IOC emerged as the largest domestic refiner with a capacity of 70.05 MMT.
o In January 2022, Indian Oil Corp. Ltd. (IOCL) announced plans to expand its city gas distribution
(CGD) business, looking to invest Rs. 7,000 crore (US$ 918.6 million).
o In January 2022, Adani Total Gas Ltd (ATGL), a joint venture between the Adani Group and Total
Energies, won licences to expand its City Gas Distribution (CGD) network to 14 new geographical
areas, with an investment of Rs. 20,000 crore (US$ 2.62 billion).
o In November 2021, Oil and Natural Gas Corp. Ltd (ONGC) announced that it invested up to Rs.
6,000 crore (US$ 800 million) in its petrochemicals arm (ONGC Petro Additions Ltd.) to meet its
equity requirements.
o In November 2021, Indian Oil, Bharat Petroleum Corporation Limited and Hindustan Petroleum
Corporation Limited announced the launch of the Model Retail Outlet Scheme and a Digital
Customer Feedback Programme called Darpan@petrolpump.
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• Road Ahead
Rapid economic growth is leading to greater outputs, which in turn is increasing the demand of oil for
production and transportation. Crude oil consumption is expected to grow at a CAGR of 5.14% to 500
million tonnes by FY40 from 202.7 million tonnes in FY22. In terms of barrels, India’s oil consumption
is forecast to rise from 4.05 MBPD in FY22 to 7.2 MBPD in 2030 and 9.2 MBPD in 2050. Diesel
demand in India is expected to double to 163 MT by 2029-30, with diesel and petrol covering 58% of
India’s oil demand by 2045. Demand is not likely to simmer down anytime soon, given strong economic
growth and rising urbanisation.
Natural Gas consumption is forecast to increase at a CAGR of 12.2% to 550 MCMPD by 2030 from
174 MCMPD in 2021.
India is planning to double its oil refining capacity to 450-500 million tonnes by 2030.
Energy demand of India is anticipated to grow faster than energy demand of all major economies
globally on the back of continuous robust economic growth. Moreover, the country’s share in global
primary energy consumption is projected to increase to two-fold by 2035.
Fig 1.2
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Engineering
Construction
Procurement
• Overview EPC industry:
An EPC contract in the construction industry is a contractual agreement between a project owner and
the contractor. The contractual framework in an EPC contract enables the owner to transfer the complete
risk of design, procurement, and construction to the contractor. The contractor is solely responsible for
completing the project and handing it over to the owner in a turnkey condition.
Fig 1.3
An EPC contract is one of the most widely used construction contracts, especially large and complex
construction projects in industries such as oil & gas, energy, and infrastructure. They have emerged as
the construction contract of choice in project financing that involves major international development
projects.
This is a project contract that is a risk mitigation and management tool. They are designed deliberately
to shift the construction risk to the contractor. They hold the contractor accountable for all project
operations from the design phase to the construction phase.
As part of the EPC contracting agreement, the EPC contractor or EPC company undertakes three
important components of a project.
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Engineering
Procurement
Construction
• Initiation
• Planning
• Estimating
• Design
• Purchasing
• Expediting
• Receiving
• Invoicing
• Construction Schedule
• On-site material Handling
• Building Activities
• On-site Client
Communication
• Closing
Fig 1.4
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1.2. Introduction to the Company
Offshore
Lumpsum Turnkey EPCIC solutions are offered to the global offshore oil & gas industry. The products
encompass wellhead platforms, process platforms, process modules, subsea pipelines and systems,
brownfield developments, offshore drilling rigs (upgrade and new builds), FPSO modules, deep-water
subsea manifold & structures, living – quarters platforms, transportation & installation services, and
decommissioning projects.
Leveraging its offshore expertise, the business is carving out a part of the team to focus on the emerging
business opportunities in Offshore Wind Farms, which will address renewable energy requirements and
balance portfolio.
The offshore vertical has comprehensive in-house engineering capabilities offering customised ‘Fit for
purpose’ engineering solutions, covering the complete project life cycle, from concept to
commissioning, for offshore projects. As a vertically integrated EPCIC player, it also has in-house
fabrication and offshore installation capability. Marine assets comprise a self-propelled heavy-lift-cum-
pipe-lay vessel – LTS 3000 – held in a joint venture, and wholly pipe-lay barge – LTB 300.
Onshore
This business vertical provides EPCC solutions for a wide range of onshore hydrocarbon projects
covering oil & gas processing, petroleum refining, petrochemicals, fertilizers (ammonia & urea
complexes), thermal systems such as cracking furnaces, cryogenic storage tanks and LNG regasification
terminals, cross-country pipelines and terminals as well as coal/pet-coke gasification, coal-to-chemicals,
and crude-too chemicals projects. The business has a track record of concurrent execution of multiple
mega projects successfully both in domestic and international markets, with diverse technology process
licensor. Design engineering centres for the Onshore vertical offer the complete spectrum of FEED
process, and detailed engineering.
Modular Fabrication
This vertical specialises in modular fabrication and supply of offshore & onshore structures and process
modules, including free-standing static equipment for oil & gas fields, refineries, petrochemical plants,
and fertilizers plants. Leveraging its modular capacity, much of the on-site work for mega projects –
such as Onshore Process Modules (PAU) & Pre-assembled Pipe racks (PAR) for a Residue upgradation
Facility (RUF) in India, a Gasification plant in Singapore, a Hydrogen Plant in Netherlands, and a
Refinery in Thailand are being executed at its fabrication yards.
World-class modular fabrication facilities are strategically located at Hazira (India’s West coast),
Kattupalli (India’s East coast), Sohar (Oman) and Jubail (KSA). The combined annual capacity for
fabrication is estimated at about 60 million manhours or about 200,000 MT (depending on the product
mix).
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The Piping shop and the proposal Pressure Vessel manufacturing shop in KSA will mainly cater to the
local market and for developing local skills to support the IKTIVA programme.
The business is equipped to supply products like windfarm foundations and other modules for offshore
windfarm projects and e-houses. All-weather waterfront facilities provide easy access to clients across
the globe and have loadout jetties suitable for dispatch of large and heavy modules via ocean-going
vessels and barges.
Advanced Value Engineering & Technology Services (AdVENT)
Leveraging the expertise in high-end engineering and execution of large-scale, technologically complex
EPC project over several decades and collaborating with well-organised R&D centres and renowned
institutions, the AdVENT vertical delivers comprehensive customer-centric solutions for the entire
value chain of the Hydrocarbon industry.
AdVENT’s technical capabilities and agility enable it to offer associated tailored value engineering
solutions such as product modular solutions, supporting customers in re-purposing study of existing
assets and adoption to energy transition. AdVENT’s offerings to clients encompass full spectrum
engineering, technology co-development & commercialisation, strategic products delivery through EPC
& other contracting models, integrated modular solutions as well as emerging technology-driven
solutions.
Asset Management
The Asset Management business is newly formed vertical with a view to diversify revenue streams and
deliver highly integrated, digitally enabled value-added services to the oil & gas industry. These
comprehensive asset management solutions extend the organisations design, engineering, construction,
and commissioning capabilities to cover operations, maintenance, critical asset. Asset Management
complements EPC project offerings for mutually beneficial engagement with clients over the entire
lifecycle of assets.
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Financial Performance of the Segment
Consequent to L&T Hydrocarbon Engineering Limited being merged with the parent entity, the
previous year’s figures have been regrouped, wherever necessary.
Fig 1.5
The Hydrocarbon segment achieved order inflows of ₹30,912 crore, registering robust growth of 74.4%
over the previous year with receipt of two large value orders during the year from Saudi Arabia, which
led to the shares of the international orders increasing to 79% from 17% in FY 2020-21.
Fig 1.6
The segment revenue at ₹19,265 crore for the year grew by 13.6% y-o-y, due to pick up in execution
momentum, mainly in the Onshore vertical of the business. The share of international revenue in FY
2021-22 was lower at 36% of the total revenue of the segment as compared to 47% in the previous year,
with a lower opening international Order Book. The segment’s operating margin decreased to 8.7%
from 9.2% mainly due to input cost inflation and change in job mix.
Funds employed by the segment as on March 31, 2022, at ₹2167 crore increased substantially over
March 2021, mainly due to increase in contract assets in some large value onshore projects.
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1.3. Introduction to the Project
Need of the study:
Export of engineering goods on deferred payment terms and execution of turnkey projects and civil
constructions contracts abroad are collectively referred to as ‘Project Exports’. Project exports contract
are generally of high value and exporters undertaking them are required to offer competitive credit terms
to be able to secure orders from the foreign buyers in the face of stiff international competition. Indian
exporters offering deferred payment terms to overseas buyers in respect of export of goods and those
who have been awarded turnkey, civil construction contracts by overseas parties have to secure prior
approval at post award stage from Authorised Dealer/ EXIM Bank for credit terms to be offered, third
country imports etc. Regulations relating to Project Exports and Service Exports are laid down in the
memorandum which is divided into the following parts:
Part A: General
Part B: Project Exports
Part C: Exports of Services
Part D: Other matters connected with Project Exports & Services Exports
Definition and Concepts
• PART A: GENERAL
Exporters who have secured orders for undertaking supply contracts on deferred payment terms, those
who have secured turnkey/civil construction contracts abroad or for export of services in the area of
management, technical consultancy, etc. where the execution of the contracts involves grant of fund
based and/or non-fund based facilities from the Indian banking system or where deferred payment terms
are to be offered require approval from Authorised Dealer/ EXIM Bank.
Broad Criteria for consideration of Proposals:
(i) Authorised Dealer/ EXIM Bank will mainly examine, among others, the following aspects while
considering grant of package approval for proposal for export of engineering goods on deferred payment
terms or for undertaking turnkey/construction contracts abroad:
(a) Period of deferred credit offered vis-a-vis foreign competition, moratorium, rate of interest,
adequacy of advance and down payment provided for as well as requirement of foreign exchange
for execution of contracts (viz. imports from third countries, agency commission, freight, etc.)
and overall economics of the proposal.
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(b) Nature of security obtainable from the foreign buyers against payments due and nature and extent
of various bonds/guarantees required to be offered by the exporter (including those for procuring
third country supplies).
(c) Nature of escalation, force majeure and arbitration clauses provided in the contract and
penalty/damages payment provisions.
(d) Extent of fund based, and non-fund-based facilities required in India including pre-shipment and
post shipment credit and/or bridge finance requirement.
(e) In case of turnkey contracts, economic and technical viability thereof as well as special features
relating to erection, supervision, and commissioning of the contract.
(ii) As regards civil construction contracts, turnkey engineering contracts, process and engineering
consultancy services and project construction items (excluding steel and cement), the Authorised
Dealer/ EXIM Bank will consider proposals only from contractors who are on the approved list of
Ministry of Commerce and Industry, Government of India in order to ensure that only contractors
having the necessary competence and capability undertake overseas construction contracts. While
considering proposal, Authorised Dealer/ EXIM Bank will endeavour to promote, wherever possible,
the idea of high value construction contracts being undertaken on a consortium basis. Apart from
examination of special features relevant to the proposal under consideration and the factors enumerated
in sub-paragraph (i) above, Authorised Dealer/ EXIM Bank will also take into account the following
aspects while considering grant of package approval for construction contracts abroad:
(a) Availability of infrastructural facilities in the importer country like transport. Water, construction
material, skilled/unskilled labour, etc. and nature of laws governing civil matters, labour usages,
etc.
(b) Estimated monthly/quarterly cash flows for the entire duration of the contract and arrangements
between prime contractor and associate/sub-contractors for timely execution of the contract in
case of consortium arrangement.
(c) Whether the contract would need any bridge finance facility abroad to meet temporary cash flow
deficits in working capital, if so, the manner of raising the bridge finance and its full repayment
with interest.
(iii) In regard to service contracts, Authorised Dealer/ EXIM Bank will, inter alia take into account
relevant factors like size of the contract, nature of services to be rendered, overall economic condition of
the improper country, extent of international competition and potential and prospects for further export
of services, goods or turnkey projects from India.
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(iv) Authorised Dealer/ Exim Bank may suitably relax the above criteria as its discretion were warranted
by merits of the proposal. While considering proposals, Authorised Dealer/ Exim Bank may also make
such suggestions or tender such advice as may be necessary to avoid inter se competition and to
promote, as far as possible, exports in such a way that the foreign exchange benefit for the country is
maximised.
Procedure for Clearance of Proposals
(i) Applications in the prescribed form as required to be submitted by the exporters sufficiently in
advance to the Authorised Dealer/ Exim Bank to enable to it to consider the proposal and grant a
package clearance to it.
(ii) Exporters desiring to submit bids for execution of projects abroad including service contracts will
not be required to obtain clearance for submission of bids from Authorised Dealer/ Exim Bank.
• PART B: PROJECT EXPORTS
Extension of deferred payment Terms
Contracts for export of goods against payment to be received partly or fully beyond the period
statutorily prescribed for realisation of export proceeds ae treated as deferred payment exports.
Ordinarily, contracts providing for deferred payment terms will be allowed only for export of
engineering goods (capital goods and consumer durables). Turnkey projects involve rendering of
services like designing, civil construction and erection and commissioning of plant/ factory along with
supply of machinery, equipment and materials. Execution of civil construction contracts abroad involves
mainly erection and civil construction work and supply of construction materials and equipment going
into the civil works. Payment in respect of goods supplied under both turnkey and civil construction
contracts may be received on ‘cash’ basis but sometimes exporters are required to offer deferred
payment terms in respect of such supplies depending on the nature and size of the project. The terms
and conditions governing extension of deferred credit terms are set out in the following paragraphs.
Nature of Credit
Contracts for export of goods on deferred payment terns may be financed either under supplier’s credit
or buyer’s credit. Under supplier’s credit the exporter extends credit directly to the overseas buyer.
Buyer’s credits are credits extended to the foreign buyers by authorised dealers or financial institutions
in India (including a consortium of authorised dealers or financial institutions in India) and the exporters
realise the export value in Indian rupees from the institution/s concerned straightaway. As repayments
under deferred payment arrangements are spread over a long period of time, exporters extending
supplier’s credit as well as those desiring to undertake exports to be financed under buyers credit may
seek the advice of Exim Bank or ECGC inregard to various risks inherent in extension of such long-
term credits and ways and means of protecting themselves against these risks.
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Eligible Goods
An illustrative list (in two parts, A and B) of engineering goods in respect of which commercial export
credit may be offered by exporters to prospective buyers abroad is given in Annexure I. The list is
subject to revision from time to time. Inclusion of goods in the lists does not imply that their exports.
may be made only on deferred payment terms. Exporters should always endeavour to secure the best
possible terms from their buyers so that foreign exchange accrues to the country as early as possible.
Period of Deferred Credit
The periods for which credit may be offered for the export of goods, consumer durables, turnkey
contracts, and civil construction will depend on merits of individual case and may be determined by the
exporter and his banker in mutual consultation based on commercial judgement. However, consumer
durables and miscellaneous engineering goods (Part B of list) should ordinarily be exported on cash
terms. Four major factors viz. anticipated life of the goods to be exported, extent of foreign competition,
nature of the foreign market and the contract value constitute the criteria for determining the overall
terms of credit.
Conditions necessary for clearance of proposals by Authorised Dealers/ EXIM Bank
While it is not necessary for exporters to obtain prior approval for submission of bids/offers for
execution of contracts, authorised dealer/ Exim Bank should, while granting post-award clearance,
ensure that the export proposals satisfy, inter-alia, the following conditions:
(a) Moratorium or grace period applicable to repayment of principal (and not to payment interest)
should noy exceed one year in respect of export of capital or producer goods. In the case of turnkey
contracts, the moratorium should not exceed two years. No moratorium should be permitted in
respect of export of consumer durables. Interest should be payable even during the period of
moratorium.
(b) In case of supply contracts, deferred receivables should be received in equal half-yearly instalments
over the agreed period with relation to mean date of shipment (i.e., the date by which 50% supplies
in terms of value will be completed) or the date of respective shipment. In case of the turnkey
projects, instalments should be related to either date of contract or the mean date of shipment or
commissioning as agreed upon between the parties.
(c) The rate of interest on deferred receivables should be such that considering the cost of deferred
credit in India the overall profitability is ensured.
(d) Ordinarily, down payment together with advance payment or mobilisation advance should not be
less than 15% of the contract value. Un exceptional cases, this may be reduced to 5% of the contract
value. In case of civil construction contracts, it should not ordinarily be less than 5%.
(e) Down payments and deferred instalments receivables should be secured by a letter of credit/
acceptable bank guarantee. In case the overseas importer/ project authority is a government
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department or a public sector undertaking, a guarantee from the foreign Government/ public sector
undertaking will suffice.
(f) As far as possible, turnkey projects and civil construction contracts should be self-financing.
However, bridge finance required for meeting temporary shortfall in working capital should not
normally exceed 25% of the contract value. However, authorised dealer/ Exim Bank may clear
proposals involving bridge finance more than 25% of the contract value also wherever they are
satisfied that such finance is necessary.
(g) Ordinarily, deferred payment terms in respect of the services segment of a turnkey contract may be
offers only if the competitors of the exporter from other countries are known to have offered similar
terms. In such cases, other terms for the deferred receivables towards services like period of credit,
rate of interest and security should be the same as offered for the supply portion of the contract.
Appointment of Sub-contractors
In the case of large value contracts, applicant firms/companies normally take the assistance of other
contractors. In such cases the applicant firm/companies will be treated as the prime contractor while
other contractors will be treated as sub-contractors. The prime contractor will be accountable to the
various authorities in India for compliance with the requirements laid down by them and will at the
same time be equally responsible to the overseas buyer for proper and timely completion of the
contract. Overseas financial requirement of the sub-contractor will have to be met by the prime
contractor. Appointment of all subcontractors and/or any subsequent change in subcontractors will
require prior clearance of the concerned approving authority.
Follow-up of Turnkey/ Construction Contracts
Exporters and all their Indian subcontractors executing turnkey contracts or civil construction
contracts abroad should furnish progress report in form DPX 2 on a half yearly basis (June &
December) to concerned approving authority viz. authorised dealer / Exim bank, and to ECGC/
Exim bank in all cases where their risk/guarantee cover participation in the funded/ non-funded
facilities has been obtained. The final report in Form DPX 2 should clearly indicate the fact of
completion of the project and full compliances with the requirements relating to completed projects.
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1.
2. CHAPTER 2
2.1 Objectives
Objective of the study:
The primary objective of this study is to build-up a statistical database on project exports in the oil &
gas industry to meet RBI guidelines.
Sub - objective of the study:
• To execute Projects overseas/domestic by employing the best technologies and Project
construction items.
• To co-ordinate the promotions of economic co - operations between Indian Project exporters and
foreign companies.
2.2 Literature Review
The Empowered Committee (E.C.) will also monitor the implementation of the sanctioned projects. To
guide the department/ implementing agencies for optimal utilization of available resources, monitoring
and evaluation (M&E) of sanctioned projects would be undertaken. The EC shall, from time-to-time,
issue instructions/ guidelines for administration and monitoring of the scheme. The M&E would be
designed and implemented in collaboration with reputed institutions such as IIFT, NCAER, ICRIER,
IIMs, IITs, etc.
To ensure timely achievements of the objectives of the scheme, the Empower Committee shall
periodically review the implementation under the scheme and may lay down guidelines for
administering at the scheme from time-to-time. The committee may authorise an outside agency to
undertake physical verification of projects as may be decided on annual basis to ensure that the
principal of canons of financial discipline are maintained.
The eligible agencies shall submit such reports and information as prescribed from time-to-time.
2.3 Scope and Limitations
Assistance under the Scheme will be provided to the eligible agencies registered within the country to
undertake initiatives and activities aimed at developing and strengthening export market for Indian
goods and services. It will include all those activities that will provide impetus to meet the objective of
the scheme and ensure strong growth in India exports such as any direct/indirect activities for
exploration of new markets as well as consolidating the existing market, development of export-
oriented entrepreneurship, training in exports, market research, capacity building, branding, meeting
statutory regulations in importing markets.
24
The EPCs will propose Trade delegations to markets where significant events are not identified or are
not suitable for participation in large numbers. These Trade delegations will facilitate Buyer-Seller
interaction. The Commodity Division will organize these Trade delegations specifically for markets
with regulatory restrictions, allowing exporters to interact and comprehend the regulatory requirements
of those markets. A yearly list of such markets will be prepared in advance and shared with the
E&MDA Division.
The Screening Committee's scope encompasses all companies that intend to engage in overseas
construction engineering projects, which involve activities such as design, construction, erection,
and/or commissioning. However, Indian companies looking to export project construction items or
provide consultancy services are not within the jurisdiction of the Screening Committee.
• Changes in Operational guidelines:
Changes, if any, in the operational guidelines within the scope of the Scheme, would be with the prior
approval of the Empowered Committee. Such changes may include modifications in individual
exporter-wise cap and overall ceiling keeping in view the inflationary trend and budget ceilings for
MAI Scheme and to meet Budget Announcement, Foreign Trade Policy, and other important
announcements of the Government from time to time.
25
CHAPTER 3
3.1 Research Methodology
Key words: Project Export Manual, RBI guidelines, Service Export Manual, Market Access Initiatives
i. Type of Research: There are several types of research methodology to conclude the restricted
topics. However, in this project title the research is mainly focused on Secondary data available
on different platforms. In case of secondary research, the to be more precise, the focus is on
Descriptive research. Which says that the aims are to describe document characteristics,
behaviours, or phenomena. It does not involve manipulating variables or establishing cause-
and-effect relationships and focuses on providing an accurate representation or summary of the
subject being studied.
ii. Research Design: Research design refers to the overall plan or blueprint that guides the
collection and analysis of the data in research study. It outlines the structure and strategy for
conducting the research, ensuring that the study is well – organised, rigorous, and capable of
answering the research objectives.
A research design typically includes the following concepts:
a) Research objectives: Clearly defined and specific research questions or objectives that the study
aims to address.
b) Variables and measurables: Identifications and operationalization of variables, along with the
selection of appropriate measures or instruments to collect data on these variables.
c) Data Analysis: determination of the statistical or analytical techniques that will be used to analyze
the collected data and draw meaningful conclusions.
d) Ethical Consideration: Consideration of ethical issues and guidelines for conducting the research,
including informed consent, confidentiality, and protection of participants’ rights.
e) Timeframe and resources: Planning the timeline for the data collections, analysis, and reporting,
as well as estimating the necessary resources, such as funding, equipment and personnel.
f) Validity and Reliability: Strategies to ensure the validity (e.g.: random sampling, purposive
sampling) to ensure that the sample represents the target population adequately. The research
design is crucial as it determines the overall structure and approach of the study, providing a
framework for gathering and analysing data to answer the research objectives effectively.
3.2 Sample and Sample size
Samples refer to the sources or materials that are analysed and used to gather information. Some of them
are as follow:
26
In this secondary research, the chosen samples are articles, guidelines copy from RBI, Company’s
internal documents, published reports, etc.
a) Government publications: Reports with respect to Project and Service export manual are being
released by Indian government on RBI portal which gives valuable data and insights for secondary
research.
b) Online Database: Database from the online platforms like ProQuest, Google scholarly and others
provide multiple databases with respect to PEM portal.
c) Company’s internal documents: Being company provided with 2-3 documents of company’s
history and their project details. However, the project details are confidential and the overview of
them are explained in the necessary contents.
27
1. CHAPTER 4
4.1 Data Analysis & Findings
1. Exporter details:
I. Exporter
Name & Address
Larsen & Toubro Ltd, L & T House,
Ballard Estate, PO Box 278, Mumbai 400
001
(Other details as per Annexure
I)
Interpretation: LTEH offers lump-sum turnkey solutions to the upstream Hydrocarbon sector,
encompassing the entire value-chain from oil & gas production to processing. It has in-house
capabilities in engineering, project management, procurement, fabrication, and installation.
The product range includes oil well-head platforms, SUBSEA pipelines, brownfield developments,
floating systems and offshore drilling rigs and deep-water subsea systems.
It has its fabrication facilities located at Hazira in Gujarat, Kattupalli in Tamil Nadu and Sohar in Oman.
Hence it is mandatory to mention the complete registered address of the company.
2. Overseas Buyer
II. Overseas Buyer
a) Name & Address
Aramco Overseas Company B.V.
b) Constitution (indicating
whether a private or
Government undertaking
Government Undertaking
c) Details of any Indian
participation in the capital
structure of the buyer or
association with buyer in any
other manner.
d) Main lines of activity
Oil & Gas Exploration and Production
e) Whether the project is being
financed by World Bank/ADB,
etc.
f) Brief particulars of the
overall projects to which the
present application relates
g) Exporter’s experience with
the Buyer, if any
28
Interpretation: LTEH has delivered EPCI (Engineering, Procurement, Construction & Installation)
services over the last two decades, in India, the Middle East, Africa and South-East Asia to reputed
international companies like ONGC, GSPC, British Gas, Songas, Qatar Petroleum, Shell, Maersk Oil
and Aramco.
3. Prime Contractor
III. Prime Contractor
Consortium of “___________”
(If other than overseas Buyer)
Name & Address
Interpretation: The prime contractor is not necessary to be filled with multiple other partners.
Consortium member is a group of companies that work closely together for the same purpose of the
company. However, if there is a partner then the project is executed by both and has distributed scope.
4. Export Contract
IV. Export Contract
a) Date of Signing
b) Effective date
c)Completion / Maintenance
period (if any)
d) Total value
Interpretation: Export contract contains the date of signature, or when the bid order is received. The
project is thereafter turned over by the bid team to the project team, who determines the start date for
each project which determines the effective date. With regard to the 12- to 24-month deferred liability
period (DLP), the completion date is simply the end of the project period. The overall value, on the
other hand, represents the total budget that has been allotted to LTEH and its supporting party for each
distinct scope.
I. In foreign currency
I.
II. Equivalent Indian rupees
II.
III. Exchange rate
III.
e) Break-up of contract value
Supplies
Services
Total
Indian
Third
country
Local
Total
value
* (Goods directly imported into Buyer's country)
29
Interpretation: The deal and all other exchanges are made in US dollars in foreign currencies. When
calculating the equivalent rupees, the exchange rate is considered as of the date of signing.
Regarding the Break-Up Contract Value, it has the initial division of the specified scope value into
supplies and services for Indian, foreign, and local, adding it to total.
f) Goods to be exported from India
i) Description
ii) value (specify whether the value is
F.O.B., C&F or C.I.F. or on other terms
giving the actual or estimated F.O.B value
where the price is in non-F.O.B. terms. If the
price is fixed in aforeign currency, state the
price in terms of foreign currency, and its
rupee equivalent.)
iii) Payment terms
(iii) % Amount
(1) Advance payment
1)
(2) Down payment
2)
(3) Deferred payment
3)
(4) Retention money
4)
Interpretation: If the price is expressed in non-F.O.B. terms, indicate whether the value is expressed as F.O.B.,
C&F, C.I.F., or on other terms by providing the actual or expected F.O.B value. Indicate the price in terms of
foreign currency and its rupee equivalent if the price is set in a foreign currency.)
In case any goods have been exported from India, a complete description would be given along with its payment
terms in %. It will also contain related details such as when and how payment to be made; information regarding
installation, period, and rate; and Export Credit and Guarantee Corporation (if any) implied.
(a) Currency/ies of payment
(b) Is there an exchange variation clause? If not, will the
exchange risk be covered under E scheme?
(Cost of forward cover, if any, should be built into the
tender/offer)
(viii) Please indicate whether payments will be received
under bilateral or other special arrangements
(ix) Time schedule for shipments
(1) Last date of shipment, as per contract
(2) Probable dates of commencement and completion
shipments
(3) Penalty provisions if any
30
Interpretation: The USD, which is the primary form of payment accepted by international buyers. A
brief description of the shipment and the date of shipping must be kept on file. This currency payment is
for both goods and services implied for LTEH.
Interpretation: After all the information about the exported items has been recorded, it is also
necessary to include all the services that the exporter gave to the foreign customer. In case any services
have been provided, a complete description would be given along with its payment terms in percentage.
It will also contain related details such as when and how payment to be made; information regarding
installation, period, and rate; and Export Credit and Guarantee Corporation (if any) implied.
(g) Services
1. Description (Nature of services being rendered,
whether turnkey or supervision of erection/
commissioning)
2. Value
3. Payment terms
a) Advance Payment
b) Progress Payments
c) Deferred Payments
d) Retention Money
V. Status of exporter
State whether Prime
Exporter/ Consortium
Member
(a) If a Prime Exporter
(1) Name/s & Address/es of major sub-supplier/s
(2) Nature of goods/services relating to each sub-
supplier and value thereof
(3) Payment and other back-to-back arrangements
with sub-supplier/s
(4) Past experience of major sub-supplier/s
(5) Details of banking arrangements made by sub-
suppliers for the offer
(Note: If prime exporter is a sub-supplier to a foreign principal other than the overseas
buyer, Annexure II may be completed).
(b) If a member of a
consortium/joint bid
(1) Name/s & Address/es of the LEADER/ OTHER
MEMBERS
(2) Nature of goods/services relating to leader/each
consortium member, and value thereof
(3) Payment and other back-to-back arrangements
with leader/other consortium members
(4) Past experience of leader/consortium members
(5) Details of banking arrangements made by
leader/consortium members for the offer
31
Interpretation: It is mandatory to fill all above details with respect to the status of the exporter. In both
the scenario, the name of the supplier/member; nature of services provided; mode of payment; any
experience in similar area and details of banking arrangement needs to be filed.
(Note: If the offer is jointly with a foreign party, information as in Annexure II may be given).
VIII. Cost & Profitability
Estimated profit - amount and %
(Annexure III to be completed)
Interpretation: A cost sheet is prepared based on all the expenses incurred for the project. The cost
sheet includes labour charges, wage charges, overhead charges, insurance, freight charges, any
outsourcing or subcontracting charges and any other charges incurred as expense.
Based on the total cost and the sales value the profit amount and the profit percentage is calculated. The
annexure for the same is attached in further pages.
IX. ECGC cover
X. Arrangement for Bank Finance
Interpretation: State whether ECGC quotations have been obtained. If so, furnish rates quoted and
certified copies of the relevant correspondence with the Corporation.
It is mandatory for the project exporter to record the bank details and the credit facilities taken for
completing the project. Also, a description of the credit facilities needs to be recorded i.e., whether
needed for remittance of expenses, nature of facilities, amount against the expense, any securities kept
against the credit, etc.
XII. Documents to be attached with the
Application (Attach certified true copies)
Interpretation: Documents such as Balance Sheet and Income Statement of the exporter for last 3
financial year, Letter of credit, Agreement with sub-suppliers, Statement of cost and profitability of
export transaction, cash flow statement and any other relevant information as per the guidelines need to
be attached along with the application.
32
4.
5. CONCLUSION
After entering into contract, the exporter should submit to his bankers an application in form DPX-1 (in
respect of turnkey and deferred payment supply contracts), in six copies along with six copies of the
contract. Authorised dealers should deal expeditiously with all applications made by exporters in
connection with project export. In cases where the proposal is within the powers delegated to him,
authorised dealer may grant post award approvals for the terms and conditions of the contract, provided
the contract basically satisfies the conditions.
Copies of the approval letters along with the copies of application and the contract may be forwarded by
the authorised dealer to ECGC and EXIM Bank where their participatory interest by way of funded/
non-funded facilities, insurance/ risk covered etc is involved.
Authorised dealers/ EXIM Bank may grant post-award clearance to the project proposal without any
monetary limit. If the authorised dealer desires participation of EXIM Bank should be obtained before
granting post-award clearance. In case, the authorised dear is unable for any reason to grant post-award
clearance, he should forward four copies of the application to EXIM Bank for consideration within 2
days indicating, inter-alia, the extent up to which his bank would be prepared to take a share in the fund
based and non-fund-based facilities required by the exporter for execution of the overseas contract.
EXIM Bank may also receive direct applications for project exports proposals of the value without any
limits, without being routed through an authorised dealer provided. All facilities require to execution of
the project are being extended by EXIM bank. It makes necessary arrangement with unauthorised dealer
to handle exchange control matters like GR formalities, etc. In connection with execution of the project
and EXIM Bank monitor such projects cleared by them till their completion and ensures compliances
with their requirements of completed projects.
In all the cases mentioned above, the authorised dealers or EXIM Bank have to consult ECGC in
advance for counter-guarantees or insurance cover. The authorised dealer/EXIM Bank while granting
clearance should advice the exporters that they will become effective only after the guarantee
commission/ deposit premium as prescribed by the corporation is paid to it.
The procedure outlined in the preceding paragraphs will not apply to exports of goods (pure supply
contracts) where at least 90% of the export value will be realised within the prescribed period i.e., six
months from the date of export and the balance amount within a maximum period of 2 years from the
date of export, provided the exporter does not require or avail of any funded or non-funded facilities for
such exports, from authorised dealers.
33
6.
7. Annexures
DPX 1
{Paragraph B.7(i) of PEM}
Application to be submitted by exporters after award of
contract for export on deferred payment/turnkey basis
A. Instructions:
1. The application should be completed in six copies and submitted to an authorised dealer along
with six copies of the contract, within fifteen days of entering into contract with the overseas
buyer.
2. Banker’s comments on the exporter may also be submitted as in Form DPX 2 ____________.
B. Documentation:
Certified copies of the documents, listed in item XII of the application form.
I. EXPORTER
Name & Address
(Other details as per Annexure I).
Larsen &Toubro Limited,
L&T House, Ballard Estate, NM Marg,
Mumbai 400 001, India
II. Overseas Buyer
(a) Name and Address
(b) Constitution (Indicating whether a
private or Government undertaking
(c) Details of any Indian participation
in the capital structure of the buyer
or association with buyer in any
other manner.
(d) Main lines of activity
Oil & Gas Exploration and Production
(e) Whether the project is being
financed by World Bank/ADB, etc.
(f) Brief particulars of the overall
project to which the present
application relates
(g) Exporter’s past experience with the
Buyer, if any.
34
III. Prime Contractor
(If other than overseas Buyer)
Name & address:
IV. Export Contract
(a) Date of signing
(b) Effective date
(c) Completion / maintenance period (if
any)
(d) Total value
I. In foreign currency
II. Equivalent Indian rupees
III. Exchange rate
1 USD: xx INR
e) Break-up of contract value
In Rupees (in Crores.) (Larsen & Toubro
Limited Scope)
Supplies
Services
Total
Indian
Third
country
Local
Total
value
f) Goods to be exported from India
i. Description
ii. Value (specify whether the value is
F.O.B, C&F or C.I.F. or on other
terms giving the actual or estimated
F.O.B value where the price is on
non-F.O.B. terms. If the price is
fixed in a foreign currency, state the
price in terms of foreign currency,
and its rupee equivalent.)
iii. Payment terms
(1) Advance payment
(2) Progress payment
(3) Deferred payment
(4) Retention money
iv. When is advance payment
receivable?
v. Progress payments – how and when
receivable?
vi. Deferred receivables
35
1) Moratorium/grace period, if any,
on principal amount (please also
indicate the date from which the
period will start).
2) Period of deferred payments
inclusive of moratorium
3) Number and amount of
instalments (principal and
interest separately)
4) Whether the instalments will be
linked to the date of contract /
individual shipment / date of
mean shipment / date of
commissioning / any other date.
5) Security for deferred receivables
6) Rate of interest on deferred
receivables.
7) Moratorium, if any, on interest
payments.
8) Will bills / pro-notes be drawn/
made in respect of deferred
receivables and interest thereon?
When will they be available to
the exporter?
vii.
(a) Currency/ies of payment
(b) Is there an exchange variation
clause? If not, will the exchange risk
be covered under ECGC Scheme?
(Cost of forward cover, if any,
should be built into the tender/offer)
vii. Please indicate whether
payments will be received under
bilateral or other special
arrangements.
viii. Time schedule for shipments
1) Last date of shipment, as per
contract
2) Probable dates of commencement
and completion shipments
3) Penalty provisions if any
(g) Services
1) Description (Nature of services
being rendered, whether turnkey or
supervision of erection/
commissioning)
2) Value
36
3) Payment terms
(a) Advance Payment
5% of Contract Value (recoverable from each
invoice)
(b) Progress Payments
95% of Contract Value
Milestone payment as per Contract payment
schedule + Percentage progress payment
(c) Deferred Payments
-NA-
(d) Retention Money
5% of Contract Value
To be released on submission of Bank
Guarantee
1) Number and amount of instalments
relating to deferred receivables
2) Security
3)
(a) Currency/ies of payment
US Dollars
(b) Is there an exchange variation
clause? If not, will the exchange
risk be covered under ECGC
Scheme in respect of deferred
receivables, where allowed?
(Cost of forward cover, if any,
should be built into the tender/offer)
4) Rate of interest on deferred
receivables
Not Applicable
(a) Third country imports
(a) Reasons for third country imports
Not Applicable
(b) Nature of imports, estimated cost,
names of suppliers and country of
supply
Not Applicable
(c) Have firm quotations been
obtained? If so, how long are they
valid?
Not Applicable
(d) Terms of payment, Are L/Cs
required to be opened in favour of
suppliers?
Not Applicable
(e) Will any warranty/Bank guarantee
be forthcoming from supplier/s. If
so, particulars such as percentage,
amount, validity, etc. should be
furnished.
Not Applicable
(f) Standing and reputation of
supplier/s and how ascertained.
Not Applicable
.
(g) Remittance of foreign exchange on
repatriation basis
(a) From India
(b) From other projects
Not Applicable
37
(h) Terms of payment for third country
imports vi-a-vis the overseas buyer.
Would any L/Cs be opened by the
overseas buyer?
Not Applicable
(i) Details of financing arrangements, if
any, required abroad by the
exporter.
Not Applicable
V. STATUS OF EXPORTER
State whether Prime Exporter/
Consortium Member
(a) If a Prime Exporter
1) Name/s & Address/es of major sub-
supplier/s
2) Nature of goods/services relating to
each sub-supplier and value thereof
3) Payment and other back-to-back
arrangements with sub-supplier/s
4) Past experience of major sub-
supplier/s
5) Details of banking arrangements
made by sub-suppliers for the offer
(Note: If prime exporter is a sub-supplier
to a foreign principal other than the
overseas buyer, Annexure II may be
completed).
(b) If a member of a consortium/joint
bid
1) Name/s & Address/es of the
LEADER/ OTHER MEMBERS
2) Nature of goods/services relating to
leader/each consortium member,
and value thereof
3) Payment and other back-to-back
arrangements with leader/other
consortium members
4) Past experience of
leader/consortium members
5) Details of banking arrangements
made by leader/consortium
members for the offer
(Note: If the offer is jointly with a
foreign party, information as in Annexure
II may be given).
VI. FOREIGN EXCHANGE OUTGO
Please refer Attached Cash Flow for the total
foreign exchange outgo
38
(a)
(i) CIF cost of raw materials and
components proposed to be imported into
India for the execution of the order or value
of import replenishment entitlements
whichever is higher
Note: If the item of export is not
manufactured by the exporter, then this
information should be collected and
furnished here by the exporter.
(ii) Freight payable
(iii) Third country imports
(iv) Agency commission/fees
TOTAL
(b) Nature of raw materials and components
to be imported into India
Refer Annexure IV
(c) Name & Address of Overseas Agent
–
NA
(d) Interest on overseas borrowings/
other charges
Please Refer Annexure III
(e) Remittances of Royalty payment, if
any, and Exchange Control approval
therefore
Not Applicable
VII. Whether machinery equipment’s
etc. are required for execution of the
contract, if so, whether these are to be
procured on hire / lease basis or are to
be purchased abroad or are to be
exported from India on reimport basis
or are to be transferred from other
project abroad. Please furnish
particulars thereof with value.
VIII. Cost & Profitability
Estimated profit - amount and %
(Annexure III to be complete)
Please Refer Annexure III
IX. ECGC cover
Nature of the ECGC insurance proposed
to be obtained. (State whether ECGC
quotations have been obtained. If so,
furnish rates quoted and certified copies
of the relevant correspondence with the
Corporation).
X. Arrangement for Bank Finance
Name/s of the exporter/s banker/s
Any banks
39
Arrangements made or proposed to be
made for obtaining finance during the pre
and post shipment stages and guarantee
facilities for executing the export order.
Refer Annexure VI-Banking Facilities
Credit and other facilities
(a) Amount Period
(a) Guarantees and letters of credit
Foreign for Currency which and Rupees require
equivalent
I. Advance Payment Guarantee
Refer Annexure VI
Refer Annexure VI-
Banking Facilities
II. Performance Guarantee
Refer Annexure VI
Refer Annexure VI-
Banking Facilities
III. Retention Money Guarantee
Refer Annexure VI
Refer Annexure VI
IV. Material Bank Guarantee
Refer Annexure VI
Refer Annexure VI
V. Guarantee for borrowings
abroad/or
NIL
VI. Remittances on repatriation
basis
NIL
VII. Any other guarantee
Refer Annexure VI
VIII. Letters of Credit to be opened
Refer Annexure VI
A.
From India
Refer Annexure VI
B.
Outside India
Refer Annexure VI
(b) Credit facilities
I. Pre-shipment credit
Not Applicable
II. Credit against deferred receivables
Not Applicable
III. Credit against export incentives
Not Applicable
IV. Other credit facilities
Not Applicable
(c) Other facilities
I. Whether site office/s / liaison office
are required, and location thereof
II. Whether foreign currency bank
accounts are required? If more than
one account is required, places
where these are required and
reasons therefor.
YES - Refer Annexure VI
III. Whether foreign exchange for
meeting initial / mobilisation
expenses are to be remitted from
India. If so, please indicate the
amount and reasons therefor.
The following details should be furnished:
I. Name/s of the banker/s from whom
financial facilities for export are
sought
NA
II. Nature of facility
Refer Annexure VI
III. Amount
Refer Annexure VI
40
IV. Security (Details should be
furnished for each type of facility)
Refer Annexure VI
XI. Provisions in respect of the
following:
i. Penalty / Liquidated damages
NA
ii. Price escalation
NA
iii. Pre-shipment inspection
iv. Force majeure
Refer Annexure VIII-Force Majeure
v. Arbitration
Refer Annexure IX-Choice of Law
vi. Law governing the contract
Laws of Saudi Arabia
XII. Documents to be attached with the
Application (Attach certified true
copies)
(a) Balance sheets and profit and loss
accounts of the exporter for the last
3 years
Refer L&T website: -
www.larsentoubro.com
(b) Export contract with amendments, if
any (6 copies)
Email Copy enclosed
(c) Letter of credit or Letter of
guarantee received by the exporter
Not Applicable
(d) Agreements with sub-
suppliers/other members of
consortium
Note: If the exporter is a sub-supplier or a
member of a consortium/joint bidder copies
of recent Annual Reports and write up on
activities of the leader and other members
of the consortium/joint bidders and
information as per Annexure II should also
be furnished.
(e) Letter, if any, from the exporter’s
banker communicating the terms of
sanction, of guarantee and/or credit
facilities for the contract.
(f) The following further statements are
to be attached.
i. Statement of cost and profitability
of the export transaction on the lines
indicated in Annexure III.
Refer Annexure III
ii. Statement of probable period of
utilisation of the post-shipment
credit as per Enclosure.
NA
iii. Cash flow statements in the case of
turnkey projects
Refer Annexure X enclosed
iv. Any other relevant information
41
We apply for grant of approval for exports on deferred payment terms/turnkey basis as per details
furnished above.
We hereby certify that the particulars given above are true to the best of our knowledge and belief.
STAMP
……………………………………
(Signature of Authorised Official)
Place: Name:
Date: Designation:
Note: Where applicable, amounts are to be stated in foreign currencies and also their Indian rupee
equivalent.
42
Cost and Profitability Template
Annexure III
DESCRIPTION
DOMESTIC
COSTS
THIRD
COUN
TRY
LOCAL
CURREN
CY
Total (INR
Crs.)
1
Raw materials
& components
(excluding
duties)
Indigenous
Imported
a) into
India
b) direct
into the
importing
country
2
Direct labour
3
Depreciation
4
Factory overheads
5
Sub-Contracting Charges
6
Packing Charges
7
Other administrative & selling
expenses
8
Taxes and
duties
(i) Excise
duties
(ii) Import
duties
(iii) Taxes
(to be
specified)
9
Royalty on the export sales
10
Overseas agent’s
commission/fee
11
Other commission and service
charges
12
Interest at the pre-shipment
stage
13
Interest at the post-shipment
stage (net)*
14
ECGC
premium
relating to
(a) Policies
(b)
Counter-
guarantees
15
Miscellaneous (including cost
of forward cover)
16
Contingencies
a)
Provision
for cost
escalation
43
b)
Negotiatin
g margin
c) Any
other
17
Others 1
18
Others 2
19
Others 3
20
Sub-total
21
i) Freight(outward)
22
ii) Insurance
23
Total Cost
24
Sales Value
25
Net Profit/loss (Sales Value -
Total Cost)
26
Export
Incentives
a) Duty
draw-back
b) Others
(to be
specified)
27
Total profit (Net profit/loss +
Export Incentives)
28
Profit as a percentage of
contract Value %
44
Quarterly Cash Flow Statement Template
Project name
ANNEXURE 3 A
Project Code
FC Million
Q1
Q2
Q3
Q4
In FC USD
Million
1
2
3
4
Total
OPENING BALANCE
ADD: INFLOW
Advance
Progress payments
Retention
TOTAL (A)
Cost of goods
Direct labour
Sub-contracts
Local contracts / agency
commission
Finance charges
Insurance
Risk & Contingency
Indirect cost
Others 1 (field to type)
Others 2 (field to type)
Others 3 (field to type)
Others 4 (field to type)
Others 5 (field to type)
TOTAL (B)
CLOSING BALANCE
Negative cashflows met by:
Borrowings from Banks
Interproject borrowings
Working capital funding from
India
45
9.
10. REFERENCES
• RBI Documents, Google scholarly, ProQuest, Academia and Resource gate.
• https://commerce.gov.in/wp-content/uploads/2021/07/Market-Access-Initiative-MAI-Scheme-
2021-dated-19-July-2021.pdf
• https://www.enggpro.com/blogs/engineering-procurement-and-construction-epc/
• www.larsentoubro.com
• https://www.lnthydrocarbon.com/our-businesses/
SPECIALIZATION PROJECT REPORT
Exploring the Impact of AI-Driven Dynamic Pricing
Strategies
PRANJALEE PARAB
ROLL NO. 117
MASTER OF MANAGEMENT STUDIES
(MARKETING) 2021-2023
SIES COLLEGE OF MANAGEMENT STUDIES
NERUL, NAVI MUMBAI – 400706
i
Specialization Project on
Exploring the Impact of AI-Driven Dynamic Pricing
Strategies
Submitted in partial fulfillment for the award of the degree of
MASTER OF MANAGEMENT STUDIES (MMS)
(Under University of Mumbai)
Submitted By
PRANJALEE PARAB
ROLL NO: 117
Under The Guidance of
Dr. SEEMA LADDHA
2021 -2023
SIES COLLEGE OF MANAGEMENT STUDIES
NERUL, NAVI MUMBAI
ii
CERTIFICATE
This is to certify that the project titled “Exploring the Impact of AI-Driven Dynamic Pricing
Strategies” is successfully completed by Ms. Pranjalee Parab during the IV Semester, in
partial fulfillment of the Master’s Degree in Management Studies recognized by the
University of Mumbai for the academic year 2021-2023 through SIES College of
Management Studies.
This project work is original and not submitted earlier for the award of any degree/diploma or
associate of any other University / Institution.
Name: Dr. Seema Laddha
Date: 28/04/2023 Signature of Guide
iii
DECLARATION
I hereby declare that this Project Report submitted by me to the SIES College of Management
Studies is a bonafide work undertaken by me and it is not submitted to any other University
or Institution for the award of any degree diploma/certificate or published any time before.
Name: Pranjalee Parab
Roll No: 117 Signature of Student
iv
ACKNOWLEDGEMENTS
At the outset, I would like to express my sincere gratitude to some people without whose help this
project would not have been possible or completed successfully.
To begin with, I would like to extend my heartfelt gratitude to SIES College of Management
Studies for providing a platform for me to learn many aspects of Marketing.
My special thanks to Dr. Seema Laddha, my mentor, and guide without whom this project could
not have been possible. I am very thankful to her for being extremely helpful & supportive
throughout my academics. He has also devoted his precious & valuable time whenever required,
making my college period a fruitful learning experience.
Last but not least, I take pride and pleasure in thanking my parents for their much-valued support
and strength. I hope that my learning experience at SIESCOMS will help me in my future
endeavors.
Signature:
Pranjalee Parab
Date: 28/04/2023
v
Index
Sr.
No.
Name of the topic
Page No.
1
Introduction of the Dynamic Pricing
1
Need, Importance, and Overview of Dynamic
pricing
9
2
Literature Review
13
3
Methodology -Research
16
4
Data Analysis & Interpretation
29
5
Findings & Recommendations
41
Scope & Suggestions
43
6
Conclusion
48
7
Bibliography & References
50
8
Annexure
51
vi
Exploring the Impact of AI-Driven Dynamic Pricing Strategies
Executive summary
Dynamic pricing is a pricing strategy that involves adjusting the price of a product or service in real
time based on various factors, such as demand, competition, and time of day. With the increasing
use of Artificial Intelligence (AI) models in dynamic pricing, businesses are now able to leverage
data to optimize their pricing strategies and improve profitability. This executive summary
explores the impact of dynamic pricing using AI models on consumer purchase behavior.
Research has shown that dynamic pricing using AI models can significantly impact consumer
purchase behavior. The ability to optimize pricing in real-time allows businesses to attract
customers with lower prices during off-peak hours while maximizing profits during peak hours.
In addition, AI models can also help businesses personalize pricing based on consumer data, such
as purchase history and preferences, leading to increased customer loyalty and repeat purchases.
However, there are also potential drawbacks to dynamic pricing using AI models. Consumers may
perceive the strategy as unfair or discriminatory if they feel that they are being charged different
prices based on factors beyond their control. Additionally, the use of AI models in dynamic
pricing raises concerns about privacy and data security.
Despite these potential drawbacks, dynamic pricing using AI models is becoming increasingly
popular in various industries, including e-commerce, transportation, and hospitality. As businesses
continue to optimize their pricing strategies with AI models, it will be important to balance the
benefits with ethical considerations and consumer perceptions.
1
Chapter 1 - Introduction
Dynamic pricing is a pricing strategy that involves adjusting the price of a product or service in real
time based on various factors such as demand, competition, and time of day. With the growing use
of Artificial Intelligence (AI) models in dynamic pricing, businesses are now able to leverage
data to optimize their pricing strategies and improve profitability. The impact of dynamic pricing
using AI models marketing has become a topic of great interest in recent years, with businesses
seeking to understand how this approach can be used to enhance customer engagement and drive
revenue growth.
The aim of this capstone research project is to explore the impact of dynamic pricing using AI
models in marketing. Specifically, the project will investigate the effectiveness of dynamic
pricing using AI models in attracting new customers, retaining existing customers, and increasing
revenue. The project will also examine the potential drawbacks of this pricing strategy, including
consumer perceptions of fairness and the ethical implications of using AI models to personalize
pricing.
To achieve these goals, the project will conduct a thorough review of the existing literature on
dynamic pricing and AI models, as well as collect and analyze primary data through surveys and
interviews with businesses and consumers. The project will also utilize statistical analysis
techniques to identify correlations between dynamic pricing using AI models and marketing
outcomes.
The findings of this capstone research project will provide insights into the impact of dynamic
pricing using AI models on marketing and will be useful for businesses seeking to optimize their
pricing strategies and enhance customer engagement.
Dynamic pricing is a pricing strategy that adjusts the price of a product or service in real time based
on various factors such as demand, competition, and time of day. With the increasing use of
Artificial Intelligence (AI) models in dynamic pricing, businesses are now able to leverage data
to optimize their pricing strategies and improve profitability. The impact of dynamic pricing
using AI models on marketing is a topic of growing interest among researchers and practitioners
alike.
2
This capstone research project aims to investigate the impact of dynamic pricing using models on
marketing. Specifically, this project will examine the effects of dynamic pricing on consumer
behavior, such as purchase intentions, loyalty, and satisfaction. Additionally, the project will
analyze the ethical considerations surrounding dynamic pricing using AI models, such as concerns
over price discrimination and consumer privacy.
Through a comprehensive literature review and empirical research, this capstone project will
provide insights into the impact of dynamic pricing using AI models on marketing. The results of
this research will be useful for businesses looking to optimize their pricing strategies, as well as
policymakers and consumer advocates interested in the ethical implications of dynamic pricing.
Overall, this research project aims to contribute to understanding the impact of dynamic pricing
using AI models on marketing and inform the development of best practices in this area.
3
4
Need to study the impact of dynamic pricing on marketing.
The advent of Artificial Intelligence (AI) has revolutionized how businesses operate, especially
in marketing. One area that has gained significant attention is the use of dynamic pricing using AI
models, a pricing strategy that adjusts the price of a product or service in real time based on
various factors. The impact of dynamic pricing using models on marketing is a topic of growing
interest, and there is a need to conduct research this area for several reasons.
Firstly, dynamic pricing using AI models has the potential to significantly impact consumer
behavior. By optimizing prices in real-time, businesses can attract customers with lower prices
during off-peak hours, while maximizing profits during peak hours. This pricing strategy has the
potential to improve customer satisfaction and loyalty, leading to increased profitability in the
long run. Therefore, research into the impact of dynamic pricing using AI models on marketing
is necessary to understand how businesses can leverage this strategy to optimize pricing and
improve customer outcomes.
Secondly, there are ethical concerns surrounding dynamic pricing using AI models. For instance,
the use of data such as consumer purchase history and preferences to personalize pricing may raise
concerns about price discrimination. There are also concerns about consumer privacy and data
security, as businesses collect and analyze large amounts of data to inform their pricing strategies.
Therefore, research into the ethical implications of dynamic pricing using AI models is necessary
to inform policymakers and consumer advocates about potential issues and help businesses
develop best practices in this area.
Thirdly, the increasing use of dynamic pricing using AI models across industries makes it
important to understand the impact of this pricing strategy on marketing. For instance, e-commerce,
transportation, and hospitality are among the industries that have adopted dynamic pricing using
AI models. Given the potential impact of this pricing strategy on consumer behavior, it is crucial
to conduct research to understand the effects of dynamic pricing across different industries and
inform the development of best practices.
5
Importance of dynamic pricing as a marketing strategy
Dynamic pricing is an essential pricing strategy that enables businesses to adapt to changes in the
market and enhance their profitability. For example, ride-hailing services like Uber and Lyft use
dynamic pricing algorithms to adjust fares in real time based on factors like supply and demand,
traffic conditions, and weather. During peak hours, when demand for rides is high, prices increase
to encourage more drivers to hit the road and meet the demand. On the other hand, during off-
peak hours, prices are lower to incentivize riders to use the service.
This helps the companies balance their supply and demand, increase revenue, and improve
customer satisfaction.
Similarly, airlines use dynamic pricing strategies to optimize seat occupancy rates and maximize
revenue. They use sophisticated pricing algorithms that consider factors like booking trends, time
of day, and seasonality to set fares for their flights. For example, airlines may offer discounted
fares during low-demand periods or change prices on popular routes based on the availability of
seats. This enables airlines to attract more customers and generate more revenue while offering
customers flexible pricing options.
Overall, dynamic pricing helps businesses stay competitive by enabling them to respond quickly
to market demand and optimize their revenue. With the use of data analytics and AI algorithms,
companies can gain valuable insights into customer behavior and preferences, ultimately leading
to better customer engagement and satisfaction.
6
Dynamic pricing is an important pricing strategy used by businesses to respond to market demand
and improve profitability. Here are some key reasons why dynamic pricing is important:
1. Increased revenue: Dynamic pricing allows businesses to adjust prices in real-time based on
demand, which can increase revenue and profits.
2. Better inventory management: By using dynamic pricing, businesses can manage inventory
more efficiently by pricing products based on their demand and availability.
3. Improved customer satisfaction: Dynamic pricing can create a sense of urgency among
consumers to make purchases, leading to better customer engagement and satisfaction.
4. Competitive advantage: Dynamic pricing helps businesses stay competitive by responding to
changes in the market and providing better pricing than their competitors.
5. Data-driven insights: Dynamic pricing relies on data analytics and AI algorithms to determine
the most effective pricing strategies, providing businesses with valuable insights into customer
behavior and preferences.
Overall, dynamic pricing is an effective pricing strategy that allows businesses to respond to
market demand, optimize revenue and profitability, and provide better value to their customers.
In conclusion, the potential impact of this pricing strategy on consumer behavior and the ethical
concerns surrounding its use makes it necessary to conduct research in this area. By understanding
the impact of dynamic pricing using AI models on marketing, businesses can optimize their pricing
strategies and improve customer outcomes while addressing ethical concerns. Therefore, research
in this area is crucial to inform policymaking, guide industry practices, and improve consumer
outcomes.
7
8
An overview of dynamic pricing as a pricing strategy, its applications, and its
impact
Dynamic pricing is a pricing strategy that involves changing the price of a product or service in
response to market demand. With advancements in AI technologies, businesses are increasingly
using dynamic pricing algorithms to optimize their pricing strategies and improve profitability.
Studies have shown that dynamic pricing using AI models can have a significant impact on
consumer behavior and purchase decisions. For example, a study by Lee and Kwon (2018) found
that dynamic pricing led to an increase in sales for online retailers. The study found that
consumers were more likely to make purchases when they perceived the pricing to be fair and
consistent, which dynamic pricing enabled.
Another study by Zhang and Xiong (2020) found that dynamic pricing using AI models could lead
to increased profits for businesses. The study found that businesses could use AI algorithms to
optimize their pricing strategies based on factors like consumer behavior, market demand, and
competitor prices. This allowed businesses to increase revenue and improve profitability while
providing customers with more personalized pricing options.
However, there are also concerns about the potential negative impacts of dynamic pricing. For
example, some studies have found that dynamic pricing can lead to price discrimination, where
certain groups of customers are charged higher prices than others. This can create inequities and
harm consumer trust in the brand.
Overall, the literature suggests that dynamic pricing using AI models can have both positive and
negative impacts on consumer behavior and marketing outcomes. To optimize the benefits of
dynamic pricing, businesses need to carefully consider the ethical implications of their pricing
strategies and ensure that they are transparent and fair to all customers.
9
Chapter 2 -Literature Review
1. Lee, Y. J., & Kwon, O. (2018). The impact of dynamic pricing on sales performance in e-
commerce. Journal of Business Research. The study found that dynamic pricing led to an increase
in sales for online retailers by providing customers with fair and consistent pricing. The study
found that dynamic pricing led to an increase in sales for online retailers by providing customers
with fair and consistent pricing. The authors suggest that dynamic pricing can help businesses
remain competitive in the online retail space by optimizing prices based on market demand and
other external factors. The study also found that certain customer segments responded differently
to dynamic pricing, suggesting that businesses should tailor their pricing strategies based on
customer behavior. The authors recommend that businesses consider factors such as customer
loyalty, price sensitivity, and purchase history when implementing dynamic pricing strategies. E-
commerce platforms like Amazon and Walmart, use dynamic pricing algorithms to adjust prices
in real-time based on demand, inventory, and competitor pricing.
2. Zhang, H., & Xiong, J. (2020). Dynamic pricing with machine learning: A survey. IEEE
Transactions on Knowledge and Data Engineering. The study found that dynamic pricing using
AI models could lead to increased profits for businesses by optimizing pricing strategies based
on market demand and customer behavior. The study analyzed data from a ride-sharing platform and
found that using a deep reinforcement learning algorithm increased profits by 21%. The algorithm also
reduced the waiting time for riders and increased the number of completed trips. It has real-time
applications in ride-sharing platforms like Uber and Lyft, which use dynamic pricing algorithms to adjust
prices based on demand and supply in real-time.
3. Luan, J., & Chiu, Y. C. (2019). Dynamic pricing with limited inventory using reinforcement
learning. European Journal of Operational Research. The study found that dynamic pricing using
reinforcement learning algorithms could help businesses optimize their pricing strategies and
improve profitability. Reinforcement learning algorithms can help travel companies optimize
prices in real-time based on customer demand, competitor pricing, and inventory levels. The study
analyzed data from an airline and found that implementing a reinforcement learning algorithm
increased profits by 12%. The algorithm also increased the number of bookings and reduced the
number of empty seats. Its real-time application can be seen in the travel industry where airlines
10
and hotel chains use dynamic pricing algorithms to adjust prices based on demand and competitor
pricing.
4. Huang, Y., Wang, G., & Yan, Z. (2021). A multi-agent deep reinforcement learning approach to
dynamic pricing. Journal of Business Research. The study found that dynamic pricing using
multi-agent deep reinforcement learning algorithms could improve pricing decisions and increase
revenue for businesses. The study analyzed data from an e-commerce platform and found that
implementing a multi-agent deep reinforcement learning algorithm increased profits by 15%. The
algorithm also reduced the number of unsold items and increased the number of satisfied
customers. Multi-agent deep reinforcement learning algorithms in dynamic pricing have real-time
applications in e-commerce platforms such as Alibaba and JD.com, which use dynamic pricing
algorithms to adjust prices based on demand and inventory in real-time.
5. Kostami, V., Haghighat, F., & Abdi, A. (2021). Dynamic pricing in e-commerce using machine
learning: A systematic review. Journal of Retailing and Consumer Services. The study found that
dynamic pricing using machine learning algorithms could lead to increased sales and revenue for
e-commerce businesses. A systematic review of the literature on dynamic pricing using machine
learning algorithms found that machine learning algorithms can help companies.
to optimize prices in real-time based on customer demand, competitor pricing, and inventory levels in
a variety of industries. The review analyzed data from multiple studies and found that implementing
machine learning algorithms can lead to increased profits, sales, and customer satisfaction. Its usage can be
seen in industries such as online retail, travel, and transportation, where companies use dynamic pricing
algorithms to adjust prices based on market demand, competitor pricing, and inventory in real-time.
6. Bapna, R., Goes, P., Gupta, A., & Karuga, G. G. (2019). The impact of dynamic pricing on the
sharing economy: Evidence from Airbnb. Information Systems Research. The study found that
dynamic pricing on Airbnb could lead to increased revenue and profitability for hosts. The study
analyzed data from Airbnb and found that using a dynamic pricing algorithm increased revenue
by 5%. The algorithm also increased the number of bookings and reduced the number of
unoccupied listings. platforms like Airbnb and Uber use dynamic pricing algorithms to adjust
prices based on demand and supply in real-time.
7. Song, S., Zhang, J., & Chou, D. C. (2019). Dynamic pricing and replenishment policies for
perishable products under consumer reference price effects. The study found that dynamic pricing
11
and replenishment policies could help businesses optimize pricing decisions for perishable
products and improve revenue. dynamic pricing algorithms can help companies in the food and
beverage industry to optimize prices in real-time based on inventory levels and customer demand.
The study analyzed data from a grocery store and found that implementing a dynamic pricing
algorithm increased profit by 8%. The algorithm also reduced the number of expired products and
increased the number of satisfied customers.
8. Hu, M., Jiang, Y., & Cao, Z. (2018). Dynamic pricing in a dual-channel supply chain with a fair
profit allocation contract. European Journal of Operational Research. The study found that
dynamic pricing in a dual-channel supply chain could lead to increased revenue and improved
profit allocation between suppliers and retailers. Dynamic pricing in a dual-channel supply chain
found that dynamic pricing algorithms can help companies in the manufacturing and distribution
industry optimize prices in real-time based on demand and inventory levels. The study analyzed data from
a supply chain and found that implementing a dynamic pricing algorithm increased profit by 10%. The
algorithm also reduced the number of unsold items and increased the number of satisfied customers.
Dynamic pricing and replenishment policies for perishable products have real-time applications in
industries such as food and beverage, where companies such as Walmart, reliance fresh, Zepto, etc. use
dynamic pricing algorithms to adjust prices based on inventory and demand in real-time. Dual-channel
supply chain has real-time applications in industries such as manufacturing and distribution, where
companies use dynamic pricing algorithms to adjust prices based on demand and inventory in real-time.
9. Qu, Y., & Wei, J. (2019). A dynamic pricing model with reference price effects and service
heterogeneity. Journal of Business Research. The study found that dynamic pricing with reference
price effects could improve pricing decisions for services and increase customer satisfaction. The
healthcare sector uses dynamic pricing algorithms to adjust prices based on patient demand and
availability in real-time. Hospitals and clinics can use dynamic pricing to optimize patient flow
and allocate resources based on real- time patient demand, which can lead to better patient
outcomes and increased revenue for healthcare providers. It has recently been used by large
hospital corporate chains such as Max Hospitals, and Medanta in India.
10. Dehkordi, Aghdam, and Ghaffari's (2018) study on the impact of dynamic pricing on customer
behavior has real-time applications in various industries. Retailers such as Target and Walmart use
dynamic pricing algorithms to offer personalized discounts and promotions to customers based on
12
their shopping behavior and purchase history. This allows them to incentivize customers to make
purchases and increase customer loyalty. Furthermore, airlines use dynamic pricing to adjust
ticket prices based on demand in real- time, ensuring they maximize revenue on each flight.
Overall, dynamic pricing is a powerful tool that can be used across industries to optimize revenue
and customer satisfaction in real-time. study on the impact of dynamic pricing on customer behavior has
real-time applications in a variety of industries, where companies use dynamic pricing algorithms to adjust
prices based on customer behavior and preferences in real-time. For example, retailers like Target and
Walmart use dynamic pricing algorithms to offer personalized discounts and promotions to customers
based on their shopping behavior and purchase history.
13
Chapter 3-Research Methodology
I.
Introduction: The purpose of this research project is to study the impact of dynamic pricing
using AI model on consumer purchase behavior in marketing. The study will include both primary
and secondary research methods to gather relevant data and insights on the topic.
II.
Research Objectives: The following are the research objectives for this study:
1. To identify the different types of dynamic pricing strategies used in marketing.
2. To understand the impact of dynamic pricing on consumer purchase behavior.
3. To explore the benefits and drawbacks of using AI models for dynamic pricing.
4. To analyze the regulatory and ethical considerations related to dynamic pricing.
III.
Research Design: The research design for this study will include both primary and
secondary research methods. The primary research will involve conducting a survey of consumers
to gather data on their purchase behavior and attitudes toward dynamic pricing using an AI model.
The survey will be conducted online using a sample of consumers aged 18-65 years old. The
survey will be designed to collect quantitative data using closed-ended questions.
The secondary research will involve a comprehensive literature review of academic and industry
sources on the topic of dynamic pricing and AI in marketing. The sources will be gathered through
databases such as Google Scholar, Emerald Insight, and JSTOR. The secondary research will be
used to provide context and background information on the topic, as well as to support the analysis
of the primary data.
IV.
Sampling and Data Collection: The sample for the primary research will be recruited
through online survey platforms and social media. The sample size will be respondents and the data
will be collected over a period of two weeks. The survey will include questions on demographic
information, purchase behavior, and attitudes toward dynamic pricing using an AI model.
V.
Data Analysis: The primary data will be analyzed using statistical software such as Excel.
The data will be analyzed using descriptive statistics, such as means, frequencies, and percentages.
The data will also be analyzed using inferential statistics, such as correlation and regression
analysis, to identify relationships between variables.
14
The secondary data will be analyzed using thematic analysis, where the themes and patterns in
the data will be identified and organized into categories.
VI.
Ethical Considerations: The research project will follow ethical guidelines for research, such
as obtaining informed consent from participants, protecting participant confidentiality, and
ensuring that the research is conducted in an unbiased and objective manner.
VII.
Limitations: The limitations of the research project include potential sampling bias, as the
sample will be recruited through online platforms and may not be representative of the general
population. Another limitation is the potential for self-report bias, as respondents may not provide
accurate or truthful responses to survey questions.
VIII.
Conclusion: This research project aims to provide insights into the impact of dynamic
pricing using an AI model on consumer purchase behavior in marketing. The study will use a
combination of primary and secondary research methods to gather relevant data and insights on
the topic.
15
16
Secondary Research
There are various types of dynamic pricing strategies that can be implemented using AI
models. Some of the most used types include:
1. Time-based pricing: This involves adjusting prices based on the time of day or week as well as
seasonal trends. For example, an airline might charge higher prices for flights during peak travel
times, such as holidays or weekends, and lower prices for flights during off-peak times.
2. Location-based pricing: This involves adjusting prices based on the geographic location of the
customer. For example, ride-sharing companies might charge higher prices for rides in busy urban
areas compared to rural areas with less demand.
3. Inventory-based pricing: This involves adjusting prices based on the availability of inventory. For
example, a hotel might increase prices for rooms that are in high demand and decrease prices for
rooms that are not selling as quickly.
4. Demand-based pricing: This involves adjusting prices based on the level of demand for a product
or service. For example, a concert venue might increase prices for a popular artist's concert when
tickets are in high demand.
5. Personalized pricing: This involves adjusting prices based on the specific customer's behavior and
preferences, as well as their purchase history. For example, an online retailer might offer
personalized discounts and promotions to customers based on their browsing and purchasing
history on the website.
There are several AI models that can be used for dynamic pricing, including:
1. Machine learning algorithms: These are mathematical models that use data to learn patterns and
make predictions. Machine learning algorithms can be used to analyze large amounts of data, such
as customer behavior and market trends, and predict how prices should be adjusted to maximize
revenue.
2. Neural networks: These are machine learning algorithms that are modeled after the structure and
function of the human brain. Neural networks can be used for complex tasks such as image and
speech recognition and can also be applied to dynamic pricing by analyzing large amounts of data and
predicting optimal prices.
17
3. Reinforcement learning: This is a type of machine learning that involves an AI model learning
from trial and error through interactions with its environment. Reinforcement learning can be used
for dynamic pricing by allowing an AI model to learn from its experiences in adjusting prices and
adapting its pricing strategy over time.
4. Deep learning: This is a type of machine learning that uses neural networks with multiple layers to
analyze complex data. Deep learning can be applied to dynamic pricing by allowing AI models to
analyze vast amounts of data and make predictions based on patterns and trends.
Overall, these AI models offer powerful tools for businesses to implement dynamic pricing
strategies that can optimize revenue and respond to changing market conditions in real-time.
18
The impact of dynamic pricing on various stakeholders, such as customers, businesses, and
competitors.
Dynamic pricing is a strategy that involves adjusting prices in real-time based on changes in
demand, supply, and other market conditions. This pricing strategy has a significant impact on
various stakeholders in the market, including customers, businesses, and competitors. In this
essay, we will examine the impact of dynamic pricing on each of these stakeholders.
First, let us consider the impact of dynamic pricing on customers. On the one hand, dynamic
pricing can benefit customers by offering them lower prices when demand is low and prices are
adjusted accordingly. This can be seen in the travel industry, where airlines and hotels adjust their
prices based on demand, offering lower prices during off-peak times. However, on the other hand,
dynamic pricing can also harm customers by increasing prices when demand is high, such as during
peak holiday seasons. This can lead to customers feeling exploited and may result in a loss of
customer loyalty.
Secondly, let us examine the impact of dynamic pricing on businesses. Dynamic pricing can
benefit businesses by allowing them to maximize revenue and profits by adjusting prices in real-
time based on market conditions. This can be seen in the retail industry, where businesses use
dynamic pricing to adjust prices based on customer demand and supply chain fluctuations.
However, businesses need to be careful to avoid overpricing their products, as this can lead to a
loss of customer trust and may result in negative publicity.
19
The impact of dynamic pricing on competitors.
Dynamic pricing can benefit competitors by creating a more competitive market and allowing
businesses to respond quickly to changing market conditions. This can be seen in the online retail
industry, where businesses use dynamic pricing to adjust their prices in response to competitor
pricing strategies. However, dynamic pricing can also harm competitors by making it difficult for
small businesses to compete with larger businesses with more resources to invest in AI and
machine learning algorithms.
By leveraging data and AI algorithms, businesses can optimize pricing decisions to increase
profits, customer satisfaction, and market competitiveness.
20
Case studies of businesses that have successfully implemented dynamic pricing
strategies using AI models.
1. Uber
Uber is a ride-hailing service that uses dynamic pricing to adjust its fares based on supply and
demand in real time. The company uses an AI model that factors in variables such as time of day,
location, and traffic conditions to determine the optimal fare for each ride. During peak demand
periods, such as rush hour or during major events, Uber increases prices to incentivize more
drivers to offer rides. During off-peak times, Uber lowers prices to incentivize more customers to
request rides. As a result, Uber is able to balance supply and demand and increase profits.
2. Amazon
Amazon is an e-commerce company that uses dynamic pricing to adjust the prices of its products
based on changes in market conditions, competitor prices, and customer behavior. The company
uses an AI model that factors in variables such as historical sales data, product availability, and
customer preferences to determine the optimal price for each product. As a result, Amazon is able
to offer competitive prices while maximizing profits.
3. Marriott International
Marriott International is a hotel chain that uses dynamic pricing to adjust room rates based on
supply and demand in real-time. The company uses an AI model that factors in variables such as
occupancy rates, booking trends, and competitor prices to determine the optimal room rate for
each night. During peak travel periods, such as holidays or major events, Marriott increases room
rates to maximize revenue. During off-peak times, Marriott lowers room rates to incentivize more
bookings. As a result, Marriott is able to maximize occupancy rates and revenue while offering
competitive prices.
4. Priceline
Priceline is an online travel agency that uses dynamic pricing to offer customers discounted hotel
rooms based on real-time inventory and market conditions. The company uses an AI model that
factors in variables such as hotel occupancy rates, room availability, and customer demand to
21
determine the optimal price for each room. As a result, Priceline is able to offer customers
discounted prices while maximizing profits for hotels
5. Alaska Airlines
Alaska Airlines is an airline that uses dynamic pricing to adjust its airfares based on supply and
demand in real-time. The company uses an AI model that factors in variables such as time of day,
travel season, and customer demand to determine the optimal fare for each flight. During peak
travel periods, Alaska Airlines increases fares to maximize revenue. During off-peak times,
Alaska Airlines lowers fares to incentivize more bookings. As a result, Alaska Airlines is able to
offer competitive prices while maximizing revenue.
These case studies demonstrate the successful implementation of dynamic pricing strategies using AI
models by various companies in different industries. By leveraging data and AI algorithms, these
companies are able to optimize pricing decisions in real- time, leading to increased profits, customer
satisfaction, and market competitiveness. Businesses that are considering implementing dynamic pricing
strategies should consider the success of these companies and the potential benefits that AI models can
bring to their pricing strategies.
22
23
Industry reports on the use of dynamic pricing in marketing
1. "Dynamic Pricing: Strategies, Challenges and Opportunities" by MarketsandMarkets: This report
provides an overview of the dynamic pricing market, including its drivers, challenges, and
opportunities. It also includes a detailed analysis of the key players in the market and their
strategies.
2. "Dynamic Pricing in Retail: Market Outlook and Opportunities" by Technavio: This report
provides a detailed analysis of the global dynamic pricing market in the retail industry, including
its growth prospects, key drivers, and challenges. It also includes a competitive analysis of the key
players in the market.
3. "Dynamic Pricing in E-Commerce: Market Outlook and Opportunities" by Technavio: This report
provides a detailed analysis of the global dynamic pricing market in the e-commerce industry,
including its growth prospects, key drivers, and challenges. It also includes a competitive analysis
of the key players in the market.
4. "Dynamic Pricing Strategies in Travel and Tourism" by Phocuswright: This report focuses on the
use of dynamic pricing in the travel and tourism industry, including its impact on hotel revenue
management and the challenges of implementing dynamic pricing in the airline industry. It also
includes case studies of companies that have successfully implemented dynamic pricing.
5. "Dynamic Pricing in the Automotive Industry" by Frost & Sullivan: This report provides an
overview of the use of dynamic pricing in the automotive industry, including its impact on sales
and revenue management. It also includes a competitive analysis of the key players in the market
and their strategies for implementing dynamic pricing.
These reports can provide valuable insights into the current state and prospects of the dynamic
pricing market in various industries.
24
Government reports on the impact of dynamic pricing using the AI model on
consumer behavior and the economy.
1. "The Impact of Dynamic Pricing on Consumers: Evidence from the Airline Industry "by the U.S.
Department of Transportation: This report examines the impact of dynamic pricing on airline
passengers, including changes in pricing transparency, fare levels, and travel patterns. It also
includes recommendations for improving consumer protection in the airline industry.
2. "Competition and Consumer Protection in the 21st Century" by the Federal Trade Commission:
This report examines the current state of competition and consumer protection in the United States,
including the role of technology, data, and privacy. It also includes recommendations for policy
and enforcement actions.
3. "Online Platforms and Digital Advertising" by the Competition and Markets Authority (CMA) in
the UK: This report examines the impact of online platforms and digital advertising on competition
and consumer welfare, including the use of dynamic pricing and personalized pricing algorithms.
It also includes recommendations for regulatory reform.
4. "Market Study into Online Pricing Practices" by the European Commission: This report examines
the use of online pricing practices, including personalized pricing, in the e-commerce sector. It
also analyzes the impact of these practices on competition and consumer welfare and includes
recommendations for policy actions.
5. "Pricing Practices in Australia's Dairy Industry" by the Australian Competition and Consumer
Commission: This report examines pricing practices in the Australian dairy industry, including
the impact of pricing decisions on farmers, processors, and consumers. It also includes
recommendations for improving transparency and competition in the industry.
These government reports can provide valuable insights into the impact of pricing and
competition on consumer welfare, as well as recommendations for policy and regulatory actions
to address any concerns.
25
26
Industry trends and growth of usage of dynamic pricing in all sectors of the
market
One of the main advantages of dynamic pricing is that it can increase profits for businesses.
According to a study by McKinsey & Company, dynamic pricing can increase profits by 2-
5% for most companies. The study found that dynamic pricing can lead to increased revenue and
market share by adjusting prices based on changes in demand and competitor prices. Furthermore,
dynamic pricing can help businesses to reduce inventory costs by selling out products faster and
avoiding overstocking. Another benefit of dynamic pricing is that it can improve customer
satisfaction.
According to a survey by Accenture, 60% of consumers are willing to share their personal
data in exchange for personalized experiences and offers. Dynamic pricing can provide
customers with personalized pricing based on their preferences, purchase history, and more. As a
result, customers are more likely to feel valued and engaged with the brand, leading to increased
loyalty and repeat business. Statistics also show that dynamic pricing can help businesses to
compete more effectively in the market.
According to a study by Forbes, 95% of companies report that they face increased
competition, and 71% of companies report that they have lost business due to competitive
pricing. Dynamic pricing can help businesses to adjust their prices to match or beat their
competitors, while still maintaining profitability. This can help businesses to gain market share
and compete more effectively in the long term. However, there are also potential drawbacks to
dynamic pricing.
For example, customers may perceive dynamic pricing as unfair or discriminatory if they
perceive that they are being charged differently from others. Additionally, dynamic pricing
may lead to lower trust and loyalty if customers feel that they are not being treated fairly. dynamic
pricing is powerful pricing.
A strategy that can help businesses to increase profits, improve customer satisfaction, and
compete more effectively in the market. Statistics show that dynamic pricing can lead to
significant improvements in profitability, revenue, and customer loyalty. However, businesses
27
should also be aware of the potential drawbacks and work to mitigate them to ensure that dynamic
pricing is implemented in a fair and transparent manner.
28
Statistical data about the use of dynamic pricing by AI models in marketing:
1. According to a report by MarketsandMarkets, the global market for dynamic pricing is expected
to grow from $1.2 billion in 2018 to $3.0 billion by 2023, at a CAGR of 20.3%.
2. A survey by PwC found that 72% of retailers are interested in adopting dynamic pricing, and 68%
of those retailers plan to use AI and machine learning to implement their pricing strategies.
3. A study by Zilliant found that companies that implemented AI-based dynamic pricing saw an
average profit increase of 15%.
4. A case study by the airline Lufthansa found that implementing dynamic pricing resulted in an
increase in revenue of €160 million ($181 million) over a three-year period.
5. According to a report by Reprice Express, retailers who use dynamic pricing strategies see an
average increase in sales of 31%.
6. A study by McKinsey & Company found that dynamic pricing can increase revenue by 2-5 % for
most companies, and up to 10% for some companies.
7. A survey by Econsultancy found that 56% of businesses that use dynamic pricing report an increase
in revenue, while 42% report an increase in profits.
These statistics demonstrate the potential benefits of implementing dynamic pricing strategies
using AI models in marketing, including increased revenue and profits, improved competitiveness,
and greater customer satisfaction.
29
Chapter 4-Data Analysis
Following are the data collected through primary research with the help of the
survey method. A Google form was circulated and accordingly, data was collected.
The total number of responses received are 82.
1. Age
Chart 1: Pie Chart defining Age.
Interpretation:
• 45% belong to the age group between 25 to 30 years.
• Whereas 24% belonged to the age group between 35 to 44 years.
• 21% of the respondents belonged to 45 to 54 years.
• The remaining 10 % of respondents belong to the age group of 55 to 65 years.
Age (in years)
10%
21%
45%
24%
25-34
35-44
45-54
55-65
30
2. Gender
Chart 2: Pie Chart defining Gender.
Interpretation:
• 53% of respondents are female.
• 43% are male.
• 4% did not prefer to answer.
Gender
4%
43%
53%
Male
Female
Prefer not to
mention
31
3. Have you ever purchased a product or service that used dynamic pricing
(i.e., the price changed based on real-time changes in demand and supply)?
Chart 3: Pie Chart defines depicting if the respondent has purchased a product or service that
used dynamic pricing.
Interpretation:
•
A maximum of 66.85% of respondents have purchased a product or service that used dynamic pricing.
•
Around 34.15 % have never purchased a product or service using dynamic pricing.
6
0
5
0
4
0
3
0
2
0
1
0
0
Ye
s
N
o
Purchase using
dynamic
32
3A: If yes, used dynamic pricing to purchase a product how satisfied were you
with the dynamic pricing?
Pie Chart 3A: Pie Chart 3A Depicts the satisfaction level of the respondents
after using dynamic pricing for buying a product or service.
Interpretation:
•
30% of consumers are satisfied with purchases made by dynamic pricing.
•
Only 6% of users have been recorded to be very dissatisfied.
•
This data is recorded only for 54 respondents who have used dynamic pricing. Out of
which 10 are satisfied, 11 are neutral and 14 are dissatisfied.
Response
18
26
30
Dissatisfied
20
Very
satisfied
Satisfied
Neutral
33
3B: If not, would you be willing to purchase a product or service that used
dynamic pricing?
Pie Chart 3B: Pie Chart 3B Depicts the willingness of the
respondents to buy a
product or service by using dynamic pricing.
Interpretation:
•
68% of the respondents are willing to make a purchase using a dynamic pricing model.
•
32% of the respondents are not willing to make a purchase using a dynamic pricing model.
Willingness to purchase by
dynamic pricing.
32%
Yes
68%
No
34
4. What factors would make you more likely to purchase a product or service
that used dynamic pricing? (Check all that apply)
Chart 4: Chart 4 Depicts the factors which influence the buyers to purchase a
product or service by using dynamic pricing.
Interpretation:
•
75% of the people are willing to buy due to lower prices and personalized pricing based on
preference.
•
50% are influenced by discounts available due to purchase history.
•
25% opt to buy due to options available to compare.
35
5. What factors would make you less likely to purchase a product or service
that uses dynamic pricing? (Check all that apply)
Chart 5: Chart 5 Depicts the factors which influence the buyers topurchase a
product or service by using dynamic pricing.
Interpretation:
•
25% of the people are less likely to buy due to higher prices.
•
50% are less likely to buy due to a lack of transparency in pricing.
•
75% of the people are less likely to buy because of perceived unfairness or discrimination.
36
6. Do you think dynamic pricing is a fair pricing strategy?
Chart 6: Chart 6 Depicts Respondents Perception of dynamic Pricing.
Interpretation:
•
The majority, i.e., 69% of the respondents, are of the opinion that Dynamic Pricing is Fair.
•
31% of the respondents are of the opinion that dynamic pricing is not fair.
Dynamic pricing is fair?
31%
69%
Yes
No
37
7. Do you think dynamic pricing is a transparent pricing strategy?
Chart 7: Chart 6 Depicts Respondents Perception of dynamic Pricing.
Interpretation:
•
75% of the respondents feel dynamic pricing is a transparent pricing strategy.
•
25% of the respondents feel dynamic pricing is not a transparent pricing strategy.
38
8. Would you be willing to share your personal data (e.g., purchase history,
browsing behavior) in exchange for personalized pricing offers?
Chart 8: Chart 8 Depicts the willingness of the respondents to share your
personal data in exchange for personalized pricing offers.
Interpretation:
•
55.55% of the respondents are willing to share their personal data in exchange for
offers.
•
44.44% of the respondents are not willing to share their personal information for
any personalized offers.
Chart Title
30
24
WILLING TO SHARE YOUR PERSONAL
DATA (E.G., PURCHASE HISTORY,
BROWSING BEHAVIOR) IN EXCHANGE
FOR PERSONALIZED PRICING OFFERS
0
0
0 5 10 15 20 25 30 35
Series 2 Series 1
39
9. Overall, do you think dynamic pricing is a beneficial pricing strategy
for businesses?
Chart 9: The chart Depicts if dynamic pricing is beneficial pricing for
businesses.
Interpretation:
•
75% of the respondents feel dynamic pricing is a beneficial pricing strategy for
businesses.
•
25% of the respondents feel dynamic pricing is not beneficial pricing for businesses.
Yes
41
No
13
Overall, do you think dynamic pricing is a beneficial pricing strategy
for businesses?
40
10. Would you be more likely to purchase a product or service from a company
that uses dynamic pricing?
Chart 10: The chart depicts the willingness of the customer to buy a product
or service from a company that uses dynamic pricing.
Interpretation:
▪ 69% of the respondents are willing to buy a product from a company that uses
dynamic pricing.
▪ 31% of the respondents are less likely to buy a product if a company uses dynamic
pricing
Willing to purchase from the company that uses dynamic.
pricing
31%
69%
Yes
No
41
Chapter 5-Findings & Recommendations
It can be concluded from the above data that dynamic pricing has a positive influence on
consumer experience. However, it does not come without potential risks. Let’s look at the
implications and findings in more detail.
Dynamic Pricing and Consumer Preference: Implications for Marketing Dynamic pricing is
a marketing strategy that involves adjusting the prices of goods and services in response to
changes in supply and demand. This pricing model is gaining popularity in various industries,
including e-commerce, hospitality, and transportation, due to its potential to increase revenue and
customer satisfaction. This essay examines the reasons why consumers prefer purchasing using
dynamic pricing and its impact on marketing.
Advantages of Dynamic Pricing for Consumers Lower Prices
One of the main advantages of dynamic pricing observed in the data from consumers is lower
prices. By adjusting prices in real time based on supply and demand, retailers can offer discounts
and promotions that attract price-sensitive consumers.
Personalized Pricing
It can be stated based on the above data that dynamic pricing allows retailers to personalize prices
based on individual consumer data, such as purchase history, browsing behavior, and location.
This creates a more customized shopping experience that meets the unique needs and preferences
of consumers.
Improved Shopping Experience
Dynamic pricing has also improved the shopping experience for consumers by making prices
more transparent and fairer. They prefer the display of real-time pricing information and offerings
based on personalized discounts, retailers can increase consumer trust and loyalty.
Transparency and Fairness
Dynamic pricing has ensured the consumers that prices are transparent and fair, as they are based
on real-time data rather than arbitrary pricing decisions. This can increase consumer confidence
and reduce the risk of price discrimination.
42
Potential Risks and Limitations of Dynamic Pricing for Consumers and
Marketers
Price Discrimination
Dynamic pricing can lead to price discrimination, as prices are based on individual consumer
data. This can create pricing disparities that disadvantage certain groups of consumers.
Privacy and Security Concerns
Dynamic pricing requires the collection and storage of sensitive consumer data, which raises
concerns about privacy and security. Retailers must take appropriate measures to protect consumer
data and ensure compliance with data protection laws.
43
Future Scope & Suggestions
Dynamic Pricing using AI: Recommendations for Successful Implementation
Improved Pricing Accuracy Dynamic pricing using AI can improve pricing accuracy by
analyzing large amounts of data and predicting future demand. This can reduce the risk of
overpricing or underpricing products, leading to increased sales and revenue.
Faster Response to Market Changes Dynamic pricing using AI allows companies to respond
quickly to market changes, such as changes in consumer behavior, competitor pricing, or
economic conditions. This can help companies stay ahead of competitors and maximize profits.
Personalized Pricing Dynamic pricing using AI can provide personalized pricing based on
individual consumer data, such as purchase history, browsing behavior, and location. This creates
a more customized shopping experience that meets the unique needs and preferences of
consumers.
Enhanced Data Analytics Dynamic pricing using AI allows companies to collect and analyze
consumer data, which provides insights into consumer behavior and preferences. This data can be
used to optimize marketing strategies, enhance product development, and improve customer
service.
44
Challenges and Risks of Implementing Dynamic Pricing Using AI.
Data Security and Privacy Concerns Dynamic pricing using AI requires the collection and
storage of sensitive consumer data, which raises concerns about data privacy and security.
Companies must take appropriate measures to protect consumer data and ensure compliance with
data protection laws. Ethical Considerations Dynamic pricing using AI can lead to price
discrimination and disadvantage certain groups of consumers. Companies must establish ethical
guidelines to ensure fairness and transparency in pricing.
Risk of Negative Customer Perception Dynamic pricing using AI can lead to negative customer
perception if consumers feel that they are being exploited or discriminated against. Companies
must communicate clearly with customers about pricing strategies and ensure that pricing
decisions are fair and transparent.
Technical Challenges Dynamic pricing using AI requires robust technology and infrastructure to
analyze large amounts of data in real time. Companies must invest in the right AI tools and
technologies and ensure that they have the technical expertise to implement dynamic pricing
successfully.
45
Key Considerations for Implementing Dynamic Pricing Based on AI Model
Data Management
Implementing dynamic pricing based on the AI model requires a robust data management system
that can handle large amounts of real-time data. Companies must ensure that their data
infrastructure is secure, reliable, and compliant with data protection laws. They should also
establish a data governance framework that includes data quality control, data ownership, and
data privacy policies.
AI Model Selection and Training
Selecting the right AI model is crucial to the success of dynamic pricing. Companies should
choose a model that is appropriate for their industry, data volume, and pricing objectives. They
should also invest in AI training to ensure that their models can learn and adapt to changing market
conditions.
Pricing Rules and Strategies
Companies must develop customized pricing rules and strategies that align with their business
goals and customer needs. They should consider factors such as customer segmentation,
competitor pricing, and seasonality when setting prices. They should also establish pricing rules
that prevent price discrimination and ensure fairness and transparency.
Testing and Evaluation
Testing and evaluation are essential for fine-tuning dynamic pricing based on the AI model.
Companies should conduct frequent tests to measure the effectiveness of their pricing strategies
and identify areas for improvement. They should also establish performance metrics and
benchmarks to evaluate the success of their dynamic pricing implementation.
Communication and Transparency
Companies should communicate their dynamic pricing strategies clearly and transparently to
customers. They should provide pricing information in real-time and explain the factors that
influence pricing decisions. They should also address customer concerns and feedback promptly
and openly.
46
Best Practices for Implementing Dynamic Pricing Based on AI Model
A.
Establish Clear Goals and Metrics
The first step in implementing dynamic pricing based on an AI model is to establish clear goals and
metrics. Companies should define their objectives for dynamic pricing, such as increasing
revenue, improving customer satisfaction, or optimizing inventory management. They should
also identify key performance indicators (KPIs) that can measure the success of their dynamic
pricing implementation. To establish clear goals and metrics, companies should conduct a
thorough analysis of their business processes, competitive landscape, and customer behavior.
They should also involve key stakeholders, such as marketing, sales, and IT teams, in the goal-
setting process. By setting clear goals and metrics, companies can track progress, evaluate the
effectiveness of their dynamic pricing implementation, and make data-driven decisions.
B.
Build Robust Data Infrastructure and Governance
Implementing dynamic pricing based on the AI model requires a robust data infrastructure that
can handle large amounts of real-time data. Companies should invest in data management tools
and technologies that enable efficient data collection, processing, storage, and analysis. They
should also ensure that their data infrastructure is secure, reliable, and compliant with data
protection laws.
To build a robust data infrastructure and governance framework, companies should establish data
quality control measures, data ownership policies, and data privacy protocols. They should also
train employees on data management best practices and ensure that their AI models are trained
on high-quality data. By building a robust data infrastructure and governance framework,
companies can minimize data-related risks and ensure the accuracy and integrity of their dynamic
pricing implementation.
C.
Invest in Skilled Talent and Technology
Implementing dynamic pricing based on an AI model requires skilled talent and technology.
Companies should hire experienced data scientists, AI experts, and pricing strategists who can
develop and implement effective dynamic pricing models. They should also invest in cutting-
edge technology tools and platforms that enable efficient data processing, model training, and
real-time pricing updates.
47
To attract and retain skilled talent, companies should offer competitiveness. compensation
packages, career development opportunities, and a supportive work environment. They should also
provide employees with development opportunities, and a supportive work environment. They
should also provide employees with access to training and educational resources that enable them
to stay up to date with the latest AI and pricing trends. By investing in skilled talent and technology,
companies can develop and implement dynamic pricing models that drive revenue and improve
customer satisfaction.
D.
Develop Customized Pricing Rules and Strategies
Dynamic pricing based on the AI model requires customized pricing rules and strategies that align
with business goals and customer needs. Companies should consider factors such as customer
segmentation, competitor pricing, and seasonality when setting prices. They should also establish
pricing rules that prevent price discrimination and ensure fairness and transparency.
To develop customized pricing rules and strategies, companies should conduct a thorough analysis
of customer behavior and preferences. They should also monitor competitor pricing and industry
trends to stay ahead of the competition. By developing customized pricing rules and strategies,
companies can increase revenue, improve customer loyalty, and optimize inventory management.
E.
Monitor Performance and Adjust Pricing as Needed
Implementing dynamic pricing based on AI model requires continuous monitoring and
evaluation. Companies should establish performance metrics and benchmarks that enable them to
measure the effectiveness of their dynamic pricing implementation. They should also conduct
frequent tests to identify areas for improvement and fine-tune their pricing strategies accordingly.
To monitor performance and adjust pricing as needed, companies should leverage data analytics
tools and platforms that enable real-time pricing updates and performance tracking. They should
also establish a feedback loop that allows customers to provide feedback on pricing decisions and
address any concerns promptly. By monitoring performance and adjusting pricing as needed,
companies can optimize their dynamic pricing implementation and stay ahead of the competition.
48
Chapter 6-Conclusion
Dynamic pricing based on the AI model has revolutionized the way businesses operate in the
modern marketplace. This cutting-edge technology has enabled companies to adjust their prices
in real-time, based on various factors such as customer behavior, inventory levels, and competitor
pricing. The impact of dynamic pricing on marketing has been significant, with companies
experiencing increased revenue, improved customer satisfaction, and enhanced competitiveness.
One of the key benefits of dynamic pricing based on an AI model is its ability to optimize revenue.
By adjusting prices in real-time based on demand, companies can increase revenue without
sacrificing profit margins. Additionally, dynamic pricing can help businesses manage inventory
more efficiently, preventing overstocking or understocking, and ultimately reducing costs.
Another benefit of dynamic pricing is its impact on customer satisfaction. By tailoring prices to
customer behavior and preferences, businesses can provide a more personalized shopping
experience. Customers are more likely to feel valued and appreciated when they are offered fair
and transparent pricing. This can lead to increased customer loyalty and repeat business.
Furthermore, dynamic pricing based on the AI model has improved competitiveness in the
market. By leveraging real-time data and analytics, businesses can adjust their pricing strategies
to stay ahead of the competition. This allows companies to offer competitive pricing while
maintaining profit margins. However, it is important for businesses to implement dynamic pricing
strategies carefully and thoughtfully. Companies must be transparent with customers about their
pricing strategies and avoid practices that could be seen as discriminatory or unfair. Additionally,
companies must ensure that their data infrastructure and governance framework are robust and
secure to protect customer data and maintain trust.
In conclusion, dynamic pricing based on an AI model has had a significant impact on marketing. By
providing real-time pricing updates based on customer behavior and demand, businesses can
optimize revenue, improve customer satisfaction, and enhance competitiveness. However, it is
important for companies to implement dynamic pricing strategies carefully and transparently to
49
ensure long- term success. Technology continues to advance, dynamic pricing is likely to become
even more prevalent in the modern marketplace, making it essential for businesses to adapt and
leverage this cutting-edge technology to stay ahead of the curve.
50
Chapter 7-Bibliography & References
•
"Global Dynamic Pricing Market Size, Share & Trends Analysis Report by Type (Product,
Service), By Deployment Mode, By Application (Retail, E-Commerce, Travel & Hospitality), By
Region, And Segment Forecasts, 2021 - 2028" by GrandView Research, Inc.
•
"Artificial Intelligence in Retail Market - Growth, Trends, COVID-19 Impact, and Forecasts
(2021 - 2026)" by Mordor Intelligence LLP
•
"Global E-commerce Artificial Intelligence Market 2021-2025" by Technavio
•
"Dynamic Pricing: Changing the Face of Retail" by Gartner
•
"The Future of Retail: AI and Dynamic Pricing" by Retail Dive
•
"Dynamic Pricing in Retail: Market Outlook and Opportunities" by Technavio
•
"Dynamic Pricing Strategies in Travel and Tourism" by Phocuswright
•
"Dynamic Pricing in the Automotive Industry" by Frost & Sullivan
•
HubSpot Blog: https://blog.hubspot.com/sales/dynamic-pricing
•
Medium: https://medium.com/syncedreview/ai-powered-dynamic-pricing-is- everywhere-
4271a9939d11
•
Forbes: https://www.forbes.com/sites/forbestechcouncil/2018/07/09/ai-enabled- personalization-
the-new-frontier-in-dynamic-pricing/?sh=642e1f7f6c1b
•
Harvard Business Review: https://hbr.org/2021/09/the-pitfalls-of-pricing- algorithms
51
CHAPTER 8-ANNEXURE
Q1) What is your age range?
a. 18-24
b. 25-34
c. 35-44
d. 45-54
e. 55-65
Q2) Gender:
a. Male
b. Female
c. Do not wish to disclose.
Q3) Have you ever purchased a product or service that used dynamic pricing (i.e., the price changed
based on real-time changes in demand and supply)?
a. Yes
b. No
Q3a) If yes, how satisfied were you with the dynamic pricing?
a. Very satisfied
b. Satisfied
c. Neutral
d. Dissatisfied
e. Very dissatisfied
52
Q3b) If not, would you be willing to purchase a product or service that used dynamic pricing?
a. Yes
b. No
Q4) What factors would make you more likely to purchase a product or service that used dynamic
pricing? (Check all that apply)
a. Lower prices
b. Personalized pricing is based on my preferences.
c. Discounts based on my purchase history.
d. Other (please specify):
Q5) What factors would make you less likely to purchase a product or service that used dynamic
pricing? (Check all that apply)
a. Higher prices
b. Perceived unfairness or discrimination
c. Lack of transparency in pricing
d. Other (please specify):
Q6) Do you think dynamic pricing is a fair pricing strategy?
a. Yes
b. No
c. Not sure
Q7) Do you think dynamic pricing is a transparent pricing strategy?
a. Yes
b. No
c. Not sure
Q8) Would you be willing to share your personal data (e.g., purchase history, browsing
behavior) in exchange for personalized pricing offers?
a. Yes
b. No
53
Q9) Overall, do you think dynamic pricing is a beneficial pricing strategy for businesses?
a. Yes
b. No
c. Not sure
Q10) Would you be more likely to purchase a product or service from a company that uses dynamic
pricing?
a. Yes
b. No
c. Not sure
Thank you for taking the time to complete this questionnaire. Your feedback is greatly appreciated.
54
1
2
General Management.
CAPSTONE PROJECT REPORT
Masters of Management Studies
Finance. Shantanu H. Naik
2021-2023 Roll. No: 50
SIES COLLEGE OF MANAGEMENT STUDIES
NERUL, NAVI MUMBAI 400706
3
General Management PROJECT
PROJECT REPORT ON
Fall Of Silicon Valley Bank & It’s Impact On India.
SUBMITTED IN PARTIAL FULFILLMENT FOR THE AWARD
OF THE DEGREE OF MASTER OF MANAGEMENT STUDIES
(MMS)
(UNDER UNIVERSITY OF MUMBAI)
SUBMITTED BY
Shantanu H. Naik
ROLL. NO – 50
Finance 2021 – 2023
UNDER THE GUIDANCE OF:
Prof. Sujata Rao.
2021-2023
SIES COLLEGE OF MANAGEMENT STUDIES NERUL,
NAVI MUMBAI 400706
4
Declaration
I, Mr Shantanu H. Naik, studying in the second year of Masters of Management Studies
program at SIES College of Management Studies, Nerul, Navi Mumbai, hereby declare that I
have completed the Capstone Project “Fall Of Silicon Valley Bank & It’s Impact On India‖
as a part of the curriculum requirement for Masters of Management Studies.
I also declare that the work undertaken by me is original and has not been copied from any
source. I further declare that the information presented in this project report is true and has
not been submitted to SIESCOMS or any other Institute for any other examination.
Signature of the Student Date: 0-0-2023
Shantanu H. Naik
Roll. No: 50
5
Certificate by Faculty Guide
This is to certify that Mr. Shantanu H.Naik , studying in the second year of Masters of Management
Studies program at SIES College of Management Studies, Nerul, Navi Mumbai, has completed the
Capstone/Special Project titled
“
Fall Of Silicon Valley Bank & It’s Impact On India
”
as a part
of the curriculum requirement for Masters of Management Studies.
Signature of the Faculty
Guide Name: Prof. Sujata Rao
Date:
6
Acknowledgements
I would like to express my special thanks and gratitude to my mentor, ―Prof.Sujata Rao‖
whose valuable guidance and instructions have served as the major contribution towards the
completion of the project.
I express my gratitude to our Director Dr. Suhas Tambe, Prof. Vatsala Bose Dean of
Marketing & Chairperson of MMS for their support.
I also take this opportunity to thank all of my fellow friends for their company during the
preparation of project and for useful discussion I had with them.
I would be failing in my duties if I do not mention my family members including my
parents for providing moral support, without which this project would not have been
completed.
Signature
Shantanu H. Naik
Date:
7
INDEX:
SR.NO
PARTICULARS
PAGE. NO
1
Introduction
9
2
Background of U.S. Economy During Covid
11
3
Background Of S.V.B.
13
4
Performance Of S.V.B.
15
5
Regression Analysis
20
6
S.W.O.T Of S.V.B.
21
7
S.V.B. Asset & Liabilities Management
26
8
Factor Engendering S.V.B. Fall
29
9
Chronology Of Fall
33
10
Impact On Indian Startup
36
11
Why India Need Not to Worry About SVB Fall
41
12
13
14
15
What Next
Limitation Of Study
Reference
Conclusion
44
46
47
49
8
1.Introduction.
The sudden collapse of Silicon Valley Bank (SVB) has come as a surprise to
many investors and industry experts, given the bank's recent accolades and
long-standing reputation as one of the best national and regional banks in the
US for several years.
1 Just a few weeks before the bank's failure, it was named by Forbes as one of
the best American banks based on its impressive growth, credit quality, and
profitability, highlighting its success and stability in the industry.
2 Moreover, there have been no reported bank failures during the Covid-19
pandemic from 2020 to 2022. As the second largest bank failure in U.S.
history, the collapse of SVB has raised many questions about what went wrong
and how such a successful institution could fail so unexpectedly. Why do
banks fail? Banks can fail due to a variety of reasons such as weak regulation
(Acharya and Richardson, 2009; and Laeven and Valencia, 2013),
macroeconomic uncertainty (Aubuchon and Wheelock 2010), poor corporate
governance (Berger et al., 2016), and inadequate risk management (Beltratti
and Stulz, 2012). Reviewing the database on global systemic banking crises
from 1970 to 2011, Laeven and Valencia (2013) show that weak regulation
and supervision are among the primary causes of banking crises. Additionally,
Aubuchon and Wheelock (2010) found that bank failure is positively
associated with economic downturns. While Acharya and Richardson (2009)
point out that risk taking behavior is a major reason for bank failure, Berger
and Bouwman (2013) note that insufficient capitalization can also lead to a
bank's demise. Following the 2008 financial crisis, there were significant
increases in bank failures in the United States. In 2010, there were 157 bank
failures, the highest number since the savings and loan crisis of the 1980s and
early 1990s. However, since then, the number of bank failures has steadily
declined. 3 One possible reason for this decline is the regulatory reforms that
were implemented after the financial crisis, which aimed to strengthen the
banking sector and prevent future failures. The Dodd-Frank Wall Street
Reform and Consumer Protection Act, for example, introduced new
regulations to increase capital and liquidity requirements for banks, as well as
to enhance risk management practices (Le, Narayanan and Vo, 2016). These
9
measures have helped to improve the stability and resilience of the banking
sector, reducing the likelihood of bank failures.4 Additionally, the overall
improvement of the economy and the banking industry's recovery from the
financial crisis have contributed to the decline in bank collapses. In this paper,
we investigate the collapse of Silicon Valley Bank. We analyze the bank‘s
financial performance in the period 2019-2022 and point out that its failure can
be attributed to several factors, including its heavy investment in debt
securities in a period of low interest rates, its low reliance on equity capital
compared to its peers, and its lack of depositor diversification. The bank's
significant increase in debt securities investments and the high proportion of
held-tomaturity securities to total assets left it vulnerable to interest rate
fluctuations. Moreover, the bank's deposit base was heavily concentrated in a
small group of depositors, increasing the risk of a bank run. These factors
ultimately led to a decline in investor confidence, leading to underperforming
share prices and the bank's failure. A multivariate analysis of bank
performance during the period of 2014-2022 further reveals a significant and
positive correlation between the interest rate and the bank's unrealized losses.
Consequently, the substantial increase in interest rates since 2022 has led to
large unrealized losses. eover, our analysis documents a negative correlation
between these losses and insured deposits, but a positive relationship with the
withdrawal of uninsured deposits. These findings suggest that the bank incurs
more losses when uninsured depositors withdraw their funds. Our paper makes
significant contributions to the literature on bank failure. First, we identify the
three primary reasons that lead to the collapse of Silicon Valley Bank, which
was previously regarded as one of the top banks in the U.S. Second, we
demonstrate that the recent surge in interest rates poses a potential risk to U.S.
banks. Finally, our findings highlight the importance of proper management of
assets and liabilities to avoid the failure of banks. The remainder of this paper
is structured as follows. We briefly review the background of the U.S.
economy during the Covid-19 pandemic in Section 2. In Section 3, we
summarize the background of SVB and discuss sample selection and
methodology. Section 4 analyzes the bank‘s financial performance. Section 5
concludes the paper.
10
2. Background of the U.S. Economy during the Covid-19 pandemic.
The U.S. macro economy has experienced significant changes since the
outbreak of the COVID-19 pandemic in 2020. The initial response to the
pandemic resulted in a sharp decline in economic activity due to lockdowns
and other measures. The real GDP growth rate in the U.S. dropped by 4.60%
in the first quarter and a staggering 29.90% in the second quarter of 2020.
Moreover, the pandemic caused a significant increase in the unemployment
rate, which spiked to 14.8% in April 2020 from 3.50% in January of the same
year.
This figure summarizes three main macroeconomic indicators: the consumer
price index (CPI), Fed funds effective rate, and the change in real GDP.
In response to the COVID-19 pandemic, the U.S. government implemented
several economic relief measures. The CARES Act, signed into law in March
2020, provided $2.2 trillion in economic relief, including direct payments to
individuals, expanded unemployment benefits, and loans and grants to
businesses.5 An additional relief package, the American Rescue Plan Act, was
signed into law in March 2021, providing an additional $1.9 trillion in relief. 6
In addition to fiscal stimulus, the Federal Reserve took aggressive monetary
policy actions to support the economy. In March 2020, the Fed cut interest
rates to near zero and implemented a variety of programs to provide liquidity
to financial markets and support lending to businesses and households. The
11
Fed also purchased large quantities of Treasury securities and mortgage-
backed securities to keep long-term interest rates low. As of March 2022, the
federal funds rate remained at 0.25%, the same level since March 2020. These
measures helped to support economic activity and stabilize financial markets
during the pandemic. These relief measures had a significant impact on the
U.S. economy. The economy rebounded quickly and grew at a rate of 35.30%
in the third quarter of 2020. The recovery continued in 2021, with GDP growth
of 6.7% in the second quarter. The unemployment rate fell sharply to 8.4% in
August 2020 and 4.2% in September 2021 before rising to 4.9% in January
2022.7 Despite their intended benefits, the relief programs have also brought
about some negative consequences. First, they have contributed to the growth
of the public debt, which surged from $23.22 trillion in January 2020 to
$28.53 trillion (around 135% of GDP) by April of the same year and continued
to rise to $31.42 trillion in the third quarter of 2022. This rapid increase in
public debt raises concerns over the long-term financial stability of the
country. Second, these relief.
12
3. Background of SVB.
SVB was founded in 1983 in Santa Clara, California with the goal of
supporting innovation and entrepreneurship in the technology and life sciences
sectors. While its primary focus remains on these industries, SVB has
expanded its services to include asset management, private wealth
management, investment banking, funds management, M&A advisory
services, and other investment services. The bank has also evolved into a bank
holding company and financial holding company with offices located in
various regions worldwide, including Europe, Asia, and the United States.
SVB has undergone significant development over the past four decades.
In 1992, its total assets amounted to approximately $956 million. This figure
experienced a remarkable increase,
reaching $70 billion by 2019. Throughout the Covid-19 pandemic, SVB's
expansion accelerated substantially, and its total assets reached their peak in
the first quarter of 2022, with a value of $218 billion, making it the 16th
largest bank in the U.S. For many years, SVB had placed significant emphasis
on cultivating strong relationships with firms in the global private equity and
venture capital community, demonstrating its unwavering commitment to
supporting and nurturing entrepreneurial endeavors. Additionally, the bank has
earned a reputation as a valuable partner to its clients, providing strategic
advice and facilitating introductions to potential investors, customers, and
partners. SVB has been recognized for its outstanding contribution to
innovation and entrepreneurship, receiving numerous awards and accolades
over the years. For instance, in 2016, Global Finance Magazine named the
bank as the "best investment bank" on the West Coast of the U.S., a title it held
for several years.8 Furthermore, Bank Director's 2022 report recognized SVB
as the best regional bank based on "a combination of profitability, growth,
shareholder return, and leadership" (Milligan, 2022).
Startup Bank .
While SVB offer modern banking products designed for tech, life science and
healthcarefounders, that‘s just the start.
Our team of 75+ startup banking experts can help you maneuver the
fundraising maze, connect with investors, and provide candid advice on how to
13
increase the probability of your success.
And now backed by First Citizens Bank, we bring new strength and security to
founders.
Founder-focused. Digitally forward. Human-to-human. We‘re the bank of you.
14
4. SVB Performance.
4.1. Univariate Analysis
Table 1 presents a summary of the key financial metrics of the bank from
2019 to 2022. The results indicate a significant increase in the bank's total
assets, liabilities, equity, and total revenue during the Covid-19 pandemic
period. Notably, the bank's total assets grew three-fold from $70 billion in
2019 to $209 billion in 2022. Among asset items, cash and balances due from
depository institutions increased from $6 billion in 2019 to $12.5 billion in
2022. The bank's net loans and leases also doubled from $33 billion in 2019 to
$74 billion in 2022. In contrast, securities soared more than four-fold from $28
billion to $117 billion. This significant surge in securities suggests that the
bank made notable investments in securities, especially debt ones, during this
period.
The results in Table 1 reveal that the bank's total revenue increased from $3
billion in 2019 to $7 billion in 2022, with all main income statement items
growing at a similar rate except for total interest expense, which was highly
volatile during this period. It decreased three-fold in 2020 and 2021, but then
increased significantly by over 15 times from 2021 to 2022. This fluctuation
can be attributed to the changes in interest rates after the Covid-19 pandemic.
Since the bank had made significant investments in debt securities, an increase
in interest rates could have resulted in significant losses. We will explore this
further in the next section.
15
Table 2 shows the bank's performance ratios from 2019 to 2022, revealing a
decline in its average performance over the period. The yield on earning assets
decreased from 3.83% to 2.77%, which was lower than the average for banks
in California or the nation. On the other hand, the cost of funding earning
assets increased from 0.30% to 0.53%, which was higher than the figure for
Californian banks. The bank's net interest margin also dropped from 3.53% to
2.23%, which was lower than the industry average. This drop in net interest
margin could be attributed to the high investments in securities and a low
proportion of loans and leases.
Furthermore, Table 2 also reports a decline in the bank's return on assets and
return on equity. The return on assets decreased from 1.65% to 0.96%, while
the return on equity decreased from 21.47% to 13.43% in the same period. It is
interesting to note that in 2022, the bank's return on assets was significantly
lower than the industry average, whereas its return on equity was higher. This
suggests that the bank used less equity capital than the industry average
Table 3 reveals a decrease in the proportion of loans and leases from 2019 to
2022. The ratio of net loans and leases to total assets declined from 46.96% to
35.22%, while its ratio to deposits dropped from 52.18% to 41.97%. These
figures are significantly lower than the industry average, suggesting that this
bank provided fewer loans than its peers. Consequently, both the loss
allowance to loans and leases and net charge-offs to loans and leases were
significantly lower than the industry average.
The bank's ratio of deposits to assets decreased from 89.99% in 2019 to
83.90% in 2022. This is higher than the industry average ratio of 81.42%,
indicating that SVB relied more on deposits to fund its assets than its peers.
16
Conversely, the bank's ratio of equity capital to total assets remained stable,
while its leverage ratios improved from 7.30% to 7.96% during the same
period. However, these ratios were considerably lower than the industry
averages of 8.98%, suggesting that this bank utilized less equity capital.
Despite having a low equity capital ratio, this bank's total risk-based capital
was significantly higher than the industry average. This can be attributed to the
fact that (1) the bank held a higher proportion of U.S. government securities,
which typically carry lower credit risk, and a lower proportion of loans and
leases, and (2) the bank have had its assets with low credit risks. This resulted
in the bank being classified as "well capitalized" for multiple years by the U.S.
banking regulators.
17
Fig:- Working Capital of SVB
4.2 Altman Z-Scores.
Usually, the lower the Z-score, the higher the odds that a company is heading
for bankruptcy. A Z-score that is lower than 1.8 means that the company is in
financial distress and with a high probability of going bankrupt. On the other
hand, a score of 3 and above means that the company is in a safe zone and is
unlikely to file for bankruptcy. A score of between 1.8 and 3 means that the
company is in a grey area and with a moderate chance of filing for bankruptcy.
Investors use Altman‘s Z-score to make a decision on whether to buy or sell a
company‘s stock, depending on the assessed financial strength. If a company
shows a Z-score closer to 3, investors may consider purchasing the company‘s
stock since there is minimal risk of the business going bankrupt in the next two
years.
18
However, if a company shows a Z-score closer to 1.8, the investors may
consider selling the company‘s stock to avoid losing their investments since
the score implies a high probability of going bankrupt.
Fig:- Altman‘s Model
4.2.1 SVB Altman Z Score & Inference
Year
Altman Z-Score
Inference
2018
1.72143
Since Z-Score lies between 1.10 and 2.60,
thereby indicating moderate risk of
bankruptcy.
2019
2.39022
Since Z-Score lies in the range of 1.10
and 2.60, it is a metaphor of moderate risk
of bankruptcy
2020
3.102266
As Z-Score > 2.60, it is an indication low
likelihood of bankruptcy.
2021
1.5849
As Z-Score lies between 1.10 and 2.60,
moderate risk of bankruptcy looms over
the bank.
2022
1.10903
Z-Score is almost equal to 1.10, thereby
giving a vivid indication of bankruptcy.
19
5.Regression Analysis.
5.1 Regression Analysis- Interest Income and Net Profits.
Multiple R
R- Square
F- Value
0.766440615
0.587431216
4.271514761
The correlation coefficient
value indicates fairly robust
relationship between
Interest Income and Net
Profits.
R-Square which is also known
as Coefficient of Determination
indicates that 58% of the
dependent variable (Net
Profits) is explained by the
Independent Variable (Interest
Income). Thus, it may be
inferred that Interest Income
has not exerted a high impact
on the Net Profits.
For v1= 1 and v2 = 3,
F0.05 = 10.13. The
calculated value of F is
less than the table value.
Thus, it indicates that
Interest Income has not
influenced / exerted a
positive impact on the
Net Profits of the Silicon
Valley Bank to a great
extent.
5.2 Regression Analysis- Non-Interest Income and Net Profits.
Multiple R
R- Square
F- Value
0.914052252
0.835491519
15.2361418
The correlation
coefficient between
Non-Interest Income
and Net Profits is
extremely high, thereby
indicating a strong
relationship between
the two variables.
R-Square which is also known
as Coefficient of Determination
indicates that 83% of the
dependent variable (Net
Profits) is explained by the
Independent Variable
(NonInterest Income). Thus, it
may be inferred that Non-
Interest Income has exerted a
high impact on the Net Profits.
For v1= 1 and v2 = 3,
F0.05 = 10.13. The
calculated value of F is
more than the table
value. Thus, it indicates
that Non-Interest
Income has influenced /
exerted a positive
impact on the Net
Profits of the Silicon
Valley Bank to a great
extent.
20
6 S.W.O.T Analysis of S.V.B.
6.1 Strengths.
The geographic presence in different regions can act as one of the major
strength of the organisation. It determines the business‘s reach to the target
market and ensures the easy accessibility.
The wide product portfolio can allow the organisation to expand the customer
base and offset the losses from one product category with benefits obtained
from the other.
Strong online presence on different social networking sites and efficient social
media management can enhance the effect of positive e-WOM and develop
strong relationships with customers.
Strong financial position and health can allow the firm to make further
investments.
Access to the suppliers that offer raw material at a lower cost can improve the
overall business efficiency.
The locational advantage can improve the competitive positioning of the firm in
various ways, such as- lower cost, improved accessibility or enhanced brand
image.
The well-developed and efficiently integrated IT infrastructure can improve the
operational efficiency and increase knowledge of the latest market trends.
Competent and committed human capital can act as a powerful source of
competitive advantage, particularly when business is service oriented in
nature.
High product quality increases brand loyalty and improves Silicon Valley
Bank's performance in a competitive market.
Workplace diversity can also act as a major business strength, particularly when
the organisation intends to operate in the international market.
The horizontal and/or vertical integration can increase the control over whole
value chain, result in improved access to raw material and quick product
delivery to the final customer.
21
An organisation may own different intellectual property rights that can
make the product offerings unique and exclusive, making it difficult for
competitors to imitate.
6.2 Weakness
The organisation can draw the criticism from the environmentalists for its
poor waste management practices and inability to integrate sustainability in
business operations.
The company may lose efficiency due to poor inventory management
practices. The shortage or excessive inventory can either result into
The cash shortage or insufficient current assets negatively affect the
liquidity position and harms the overall business performance.
Insufficient budget for the marketing and promotion activities weakens the
firms‘ ability to expand the customer base and encourage repeat purchase.
Less expenditure on the research and development activities can weaken
the company performance due to poor local/international market
knowledge.
The inability to understand customers‘ needs and expectations lead to an
ineffective strategic decision-making process. With this weakness, the
organisation may not be able to identify the potential improvement seeking
areas in product/service mix.
The prices charged by the business may not be perceived as justified when
compared to the product/service characteristics. It indicates the need to
revise the pricing strategy.
The poor customer service (such as inefficient customer complaint
handling) can trigger the negative word of mouth about the business and
affect business growth.
The decision making in the Silicon Valley Bank takes too much time,
causing expensive delays in introducing new products in the market.
Poor project management practices can internally weaken the ability of the
organisation to successfully open new branches or expand the product line.
Lack of organisational commitment and high employee turnover can
increase recruitment costs and reduce organisational productivity.
22
High job stress and consequent low workers‘ morale makes the workforce
less productive.
The misalignment between the organisation's leadership style and its core
strategic objectives can make the business organisation directionless.
Organisational culture also becomes a big internal weakness when it does
not align with the strategic/business objectives. For example, the main
strategic objective of the chosen business organisation is to launch
innovative and new products in the market. But there exists a risk averse
attitude prevailing in organisational culture, which discourages employees
from thinking creatively.
6.3 Opportunity.
The exponential growth in the population, and particularly in the existing
or potential customer segments is a great growth opportunity for the
business organisation.
The changing customer needs, tastes and preferences can act as an
opportunity if the business organisation has good market knowledge.
The development of new technologies to assist the product/service
production and delivery process can be exploited to embed the innovation
in business operations. The advanced technological integration can
decrease costs, improve efficiency and result in the quick introduction of
innovative products.
Rise in the customers‘ disposable income and increase in the affluent
customer base can be taken as an opportunity to introduce more high-end
products.
Reduction in the interest rates makes the fund raising and financing at
lower cost easier for the business organisation.
Customers may start preferring new and creative products/services as a
result of changing tastes.
The emergence of e-commerce and social media marketing as a trend can
be a great opportunity for Silicon Valley Bank if it can ensure strong
online presence on different social networking sites.
23
The emergence of new market segments and new niches provide business
and product line expansion opportunities.
The diminishing boundaries and rising global interconnectedness allow the
organisation to get into the international market; target geographically
dispersed customer base and increased profitability.
The subsidies provided by the government and other policies to make the
business environment more friendly is a positive external environmental
factor for Silicon Valley Bank.
Improvement in the customers- lifestyle and standards mean more
consumption on consumer goods and services, and more opportunities to
encourage the purchase.
6.4 Threat.
The changing regulatory framework and introduction of new stricter
regulations impose a major threat to the Silicon Valley Bank. It makes
compliance with legal standards more complex and challenging for the
business organisation. Inability to comply with changed regulations raises
the risk of expensive law suits.
Shortage of skilled labour in the market can make it difficult for the
organisation to attract talent with the right skills set.
The increasing number of direct and/or indirect competitors affects the
organisation's ability to sustain and expand the customer base.
The deteriorating economic conditions affect business performance when
they directly influence the customers' spending patterns and purchasing
power.
The rise in inflation increases the cost of production and affects the
business profitability.
The growing environmental sustainability trends act as a major threat when
offered products/services are not environment friendly. It draws the
negative publicity and criticism from the environmentalists and affects the
brand image in a competitive market.
24
The globalisation pushes the organisation to cross national boundaries and
deal with cultural diversity, which may have a detrimental impact if the
organisation lacks the cultural intelligence.
25
7. SVB Asset & liabilities management.
Why did Silicon Valley Bank fail? The above analyses shed light on the main
reasons behind the collapse of Silicon Valley Bank. These include the bank's
heavy investment in debt securities in 2020 and 2021, which formed the
majority of its assets, and its lower reliance on equity capital compared to its
peers while depending more on deposits. This section will delve into these
factors in greater detail to provide an explanation for the bank's failure. The
bank has classified its debt securities into two groups: available-for-sale (AFS)
and held-to-maturity (HTM) securities. According to SVB's Annual Report
2021, AFS securities "are carried at fair value with changes in fair value
recorded as unrealized gains or losses in a separate component of stockholders'
equity", while HTM securities "are accounted for at cost with no adjustments
for changes in fair value".
Table 4 demonstrates a notable increase in debt securities investments, rising
by more than 451% from 2019 to 2021. This growth rate was substantially
higher than the expansion of the bank's total assets (Table 1). The ratio of debt
securities to total assets also increased from 36.68% to 60.07% during the
same period. On a cost basis, AFS securities doubled while HTM securities
grew by seven-fold. The proportion of HTM securities to total assets surged
26
from 19.79% in 2019 to 47.08% in 2021. This ratio was significantly higher
than the 31.57% of the net loans and leases to total assets ratio in 2021
presented in Table 3, suggesting that the bank regarded debt securities as its
primary operating strategy.
According to SVB's Annual Report of 2021, the value of AFS securities at the
end of the year was $27 billion with a weighted average yield of 1.17%, while
the value of HTM securities was $98 billion with a weighted average yield of
1.64%. Compared to the yield of a 1-year Treasury bill of around 0.10%, these
yields generated substantial net income for the bank in 2021. However, with
the significant increase in interest rates in 2022, the bank's large holding of
debt securities could potentially lead to significant losses At the end of 2021,
the weighted average duration of the AFS securities portfolio was 3.5 years,
and this figure for the HTM securities portfolio was 4.1 years. This led to a
weighted average duration of the bank's debt securities of 3.97 years at the end
of the year. According to the SVB's Annual Report of 2022, at the end of
2022, the weighted average duration of the HTM securities significantly
increased to 6.2 years, which resulted in an estimated weighted average
duration of the bank's fixed income securities of 5.7 years. When the fed funds
rates increased to around 4% in September 2022, the bank's unrealized loss
was at least 14.80% of the value of debt securities of $125 billion, resulting in
a negative market value of the bank's equity capital. Fortunately, the bank did
not sell its securities, so this loss was not realized. However, investors
recognized the bank's problem and started to sell its shares. As a result, the
bank's share prices underperformed the S&P 500 index since the third quarter
of 2022. Another major disadvantage of this bank is its lack of depositor
diversification. Table 4 reveals that at the end of 2021, the bank had only
95,238 deposit accounts valued at less than or equal to $250,000 and 34,727
deposit accounts valued greater than $250,000. Although the total number of
deposit accounts valued at less than or equal to $250,000 represented 2.31% of
the total deposit, the total number of deposit accounts valued greater than
$250,000 contributed 89.27% to the total deposit. By the end of 2022, the
number of deposit accounts valued greater than $250,000 had increased to
37,466, and these accounts contributed 89.38% to the total deposit. These
27
figures indicate that the bank's deposit base is heavily concentrated in a small
group of depositors, many of whom work in the venture capital industry. As a
result, they are likely to know each other,9 increasing the risk of a bank run.
28
8. Factors Engendering Silicon Valley Bank Failure.
8.1: Abedrock of bad deposits
―Don‘t put all your eggs in one basket‖ – so goes the cliché saying. But this
adage has some truth in it.
Silicon Valley Bank indeed put all its eggs in one basket. As the name
suggests, the financial institution focused on startups, venture capital funds,
and the broader Silicon Valley ecosystem. The deposit base was highly
concentrated. This is a bad foundation for a bank.
The problem is that those clients have similar economic exposures. If one
client must withdraw their funds, it is very likely that myriad other clients
must do so. This is analogous to the mortgage-backed security crisis in 2008:
when one borrower defaults, it is likely that many more will also do so.
Silicon Valley Bank had a steady increase in withdrawals. It has been a tough
last year for startups and the tech industry. Since the pandemic, VC funds have
tightened their belts. Enterprise sales are taking longer. So-called ‗down
rounds‘ are more frequent. And so, tech startups – and VC funds –
increasingly needed their cash, triggering more withdrawals and fewer bank
deposits.
This caused Silicon Valley Bank‘s cost of capital to increase. With money
leaving deposit accounts, Silicon Valley Bank must now pay depositors higher
rates to retain them, or rely on higher-cost external sources of funding.
29
8.2: A problem with assets
Suppose you buy a house in the US. You lock in a 30-year mortgage and you
secured an ultra-low rate covid era loan. But now, overtime has been cut, you
need cash whereas property prices have fallen. What do you do? Your assets
have plummeted, your cash needs have increased. If only you could hold on
until you‘ve paid off the house. Silicon Valley Bank faced a similar
conundrum.
Silicon Valley Bank had a similar problem: It needed cash now, its assets had
fallen in value, and its cash flow was declining relative to its cash needs.
Let‘s dig into the weeds of this a bit.
Silicon Valley Bank‘s main assets – with which to meet depositors - had
several major components:
(1) assets for sale,
(2) assets held to maturity,
(3) other non-marketable securities,
(4) cash, and
(5) loans. Of these, only Assets for Sale and Cash are designed to be liquid.
Here we can see an immediate liquidity issue: if there is a bank run, Silicon
Valley Bank simply would not be able to satisfy all its withdrawals as it
simply does not store the deposits as cash per se.Silicon Valley Bank‘s assets
have also fallen in value. Most of Silicon Valley Bank‘s assets are loans and
bonds. A bond is a loan. When you buy a bond (or a loan), you buy the right to
the future cash flow stream underlying that loan. Banks – such as Silicon
Valley Bank – don‘t need to record the current market value of those bonds if
they intend to hold the bond until the loan is fully repaid.
30
As interest rates go up, so too does the required return on any recently issued
bond. Think of how mortgage rates have changed for household loans. It is
much the same for corporate debt.
But the old bonds that had locked in a low interest rate are now worth
significantly less because they pay less than what investors could obtain on
new loans.
This is a problem. Silicon Valley Bank held many US government bonds and
mortgage-backed securities. These have yields below 2 per cent. Meanwhile
the Fed Funds rate increased to well over 4 per cent. Thus, SVB sold its
‗available for sale‘ bonds, incurring a $1.8 billion loss in so doing. SVB‘s
‗held to maturity‘ assets have also fallen in value.
The asset base can also create a cash flow problem. Silicon Valley Bank‘s
funding costs increased. As indicated, this owes to higher interest rates.
However, many of Silicon Valley Bank‘s assets have locked in low interest
rates. This created an ongoing cash flow concern.
8.3: A capital raise that spooked the market
Because of this situation, Silicon Valley Bank decided to embark on a capital
raise in order to support its balance sheet and ensure adequate liquidity. In this
raise, it revealed that it had sold bonds. It requested around $2.25 Billion. The
market responded badly. This was likely on the news that Silicon Valley Bank
has sold all its ‗available for sale‘ securities and was in a dire liquidity and
solvency position.
A classic bank run ensued. Within a day, $42 billion was withdrawn. This
largely followed VC funds extracting their deposits and instructing their
portfolio companies to do so. This created an immediate liquidity (and
potentially solvency) problem for Silicon Valley Bank.
Banking regulators stepped in and took control of Silicon Valley Bank. Silicon
Valley Bank collapsed.
31
8.4 Loss in G-sec holding
Banks had been holding close to 19.5 per cent of their Net Demand and Time
Liabilities in government securities, even before the pandemic to meet the
SLR (statutory liquidity ratio) mandate. Banks‘ holding of government
securities amounted to ₹37,47,349 crore towards the end of March 2020.
As the G-Sec issuances surged during the pandemic to bridge the widening
fiscal deficit, banks were encouraged to buy more G-Secs by allowing them to
hold more government bonds in the HTM category. Banks‘ G-Sec holding
increased by ₹7.15 lakh crore in FY21, ₹2.27 lakh crore in FY22 and has
further increased ₹5.87 lakh crore so far in FY23.
8.5 Stock Sale.
Chief Executive Officer Greg Becker sold $3.6 million of company stock
under a trading plan less than two weeks before the firm disclosed extensive
lossesthatledtoitsfailure. The sale of 12,451 shares on February 27 was the first
time in more than a year that Becker had sold shares in parent company SVB
Financial Group, according to regulatory filings. He filed the plan that allowed
himtosellthesharesonJan.26. Greg Becker is no longer a director of the Federal
Reserve Bank of San Francisco, according to a Fed spokesman.
The change was effective Friday, the same day SVB-owned Silicon Valley
Bank failed and was taken over by state and federal regulators. He became a
Class A director of the San Francisco Fed‘s head office board in 2019 and his
departure leaves a vacant seat on the nine-member board.
alley Bank failed after a week of tumult fueled by a letter the firm sent to
shareholders that it would try to raise more than $2 billion in capital after
taking losses. The announcement sent shares in the company plunging, even as
Becker urged clients to stay calm.
Neither Becker nor SVB immediately responded to questions about his share
sale, and whether the CEO was aware of the bank‘s plans for the capital raise
attempt when he filed the trading plan. The sales were made through a
revocable trust controlled by Becker, filings show.
32
9. Chronology of fall.
March 8 2023:- Silicon Valley Bank announced its $1.8 billion loss on its
bond portfolio, along with plans to sell both common and preferred stock
to raise $2.25 billion. In the aftermath of this announcement, Moody's
downgraded Silicon Valley Bank‘s long-term local currency bank deposit
and issuer ratings.
Investor Reax SVB stock plummeted around 38% at today's open, wiping
out over $6 billion in market cap (calculated using a flat share count that
doesn't include the new issues).
March 9 2023:- The stock for Silicon Valley Bank‘s holding company,
SVB Financial Group, crashed at the market opening. Other major banks
also saw their stock prices take a hit. Additionally, more SVB customers
began withdrawing their money, for a total attempted withdrawals of $42
billion.
Silicon Valley Bank long one of the most popular financial institutions
among tech and life sciences startups, saw its shares fall more than 60% on
Thursday, wiping out a whopping $9.4 billion in market value.
Several top venture capital firms, including Coatue and Founders Fund
have suggested to some portfolio companies that they strongly consider
pulling money out of SVB as concerns grow over the bank's stability.
SVB announced plans to launch a $1.25 billion common stock sale, plus
raise another $1 billion via other share sales, after rising interest rates
sparked large losses on its Treasury and mortgage-backed securities
portfolios.
March 10 2023:- Trading was halted for SVB Financial Group stock.
Before the bank could open for the day, federal regulators announced they
would take it over.
After regulators were unable to find a buyer for the bank, deposits were
moved to a bridge bank created and operated by the FDIC, with a promise
that insured deposits would be available by Monday, March 13
33
Federal Deposit Insurance Corp. (FDIC) created new bank into which all
of SVB Deposit were transferred, and said that "all insured depositors will
have full access to their insured deposits
One big caveat is that deposits only are insured to up to $250,000, so FDIC
added that it "will pay uninsured depositors an advance dividend
FDIC added that all of SVB's physical bank branches will reopen.
March 12 2023:- Federal regulators announce emergency measures in
response to the Silicon Valley Bank failure, allowing customers to recover
all funds, including those that were uninsured.
Regulator shut down signature bank in New York citing system risk.
Federal banking regulators took aggressive new actions aimed at
preventing depositors in failed SVB rom losing moneyand at trying to
prevent its downfall from unleashing a nationwide run across the banking
system.
March13 2023:- Silicon Valley‘s UK arm Sold to HSBC
Despite its name, the bank best known for serving startups as its customers
is a global business, with outposts outside of the U.S. in Europe, Canada,
Israel and a Chinese joint venture.
At the point of Failure SVBUK had total Balance sheet size of
approximately £8.8bnand a deposit base of approximately £6.7bn,"
according to the Bank of England.
It also had around £5.5 billion ($6.3 billion) in loans, andits tangible equity
is expected to be around £1.4 billion ($1.7 billion), per HSBC.
The Federal Reserve will conduct a review of the collapse of Silicon
Valley Bank.
March 15 2023:- Credit Suisse, who‘s had its own woes for quite some
time announced it will borrow 50 billion swiss francs from the Swiss
National Bank to strengthen its liquidity.
protections provided by the Swiss central bank "are fully collateralized by
high quality assets," per a statement from Credit Suisse.
March 16 2023:- Silicon Valley Bank's former parent company filed for
chapter 11 Bankruptcy. protection on Friday, a week after the US
34
Government took over its commercial bank that collapsed from a run on
deposits.
Sate of Play Silicon Valley Bank (SVB) was the nation's 16th largest bank
by assets until it collapsed in a depositor run last week, amid fears about its
interest rate risk and balance sheet strength.
35
10. Impact on Indian start-ups.
Indian startups have more than $250,000 stuck in accounts with Silicon Valley
Bank and nearly two dozen have more than $1 million tied with the lender,
according to a survey by and among the startups seen by TechCrunch,
illustrating how the worst bank failure since the 2008 financial crisis is also
impacting firms 8,000 miles away.
Dozens of young Indian startups backed by the likes of YC, Accel, Sequoia
India, Lightspeed, SoftBank and Bessemer Venture Partners banked with
Silicon Valley Bank, sometimes as their only banking partner, and couldn‘t take
out the money on time on Thursday, multiple people familiar with the situation
said.
VCs are cautious about divulging the names of the impacted startups out of fear
that it might impede the young firms‘ prospects of raising capital in the future.
Regulators stepped in Friday to shut down Silicon Valley Bank, the 16th largest
in the U.S. and lifeblood for startups, citing ―inadequate liquidity and
insolvency.‖ The Federal Deposit Insurance Corporation will work to recover
―the maximum amount possible from the disposition of assets,‖ it says on its
website.
Some Indian firms couldn‘t timely yank their deposits from Silicon Valley Bank
because they didn‘t have another US banking account readily available to hold
that capital, many venture capitalists recounted. Indian gaming firm Nazara said
two of its subsidiary had about $7.75 million stuck in SVB.
Many Indian startups are incorporated in Delaware to make it easier for them to
raise capital from U.S. venture firms such as Y Combinator. Some SaaS firms
are registered in the U.S. because even as they operate from India, they want to
serve the international markets and want to be seen as a US-firm.
Moreover, many firms that ―flipped‖ their home base to the U.S. from India,
Silicon Valley Bank was the preferred choice, another person familiar with the
36
matter said, pointing to the fact that many events in India were sponsored by
SVB as the lender‘s executives pushed to increase ties with Indian firms.
Nearly all Indian SaaS startups with large presence in the U.S. banked with
Silicon Valley Bank, a partner at one of the top venture funds said. Over a dozen
Indian SaaS unicorns and many more ―soonicorns‖ are headquartered in the
U.S.
Many of these young firms did not diversify their funds into multiple banks
because in the early days of a firm, operators tend to avoid increasing admin
costs. A U.S.-based investor, who requested anonymity speaking candidly, said
he knew for a fact that many Indian firms had about $4-10 million parked in
their SVB accounts.
Indian SaaS startups and otherwise those backed by YC who set up their
companies in the U.S. and raised their maiden round there often had SVB as
their default bank, Ashish Dave, India head of Mirae Asset, tweeted.
―Uncertainty is killing them. Growth ones are relatively safer as they
diversified.‖
Garry Tan, the president of Y Combinator, said more than a 1,000 YC-backed
startups are impacted by the collapse of Silicon Valley Bank. ―30% of YC
companies exposed through SVB can‘t make payroll in the next 30 days,‖ he
tweeted.
SVB has been a real supporter of the Indian start-up scene and provided
banking services.
• Most of the start-ups of India that conduct business activities in the US,
preferred Silicon Valley Bank because it was one of the few financial
institutions that exhibited willingness to work with the Indian banks.
• Dozens of young Indian start-ups backed by the likes of YC, Accel, Sequoia
India, Lightspeed, SoftBank and Bessemer Venture Partners banked with
Silicon Valley Bank, sometimes as their only banking partner.
37
• Start-ups exposure to SVB are mainly of three forms- a) Money deposited
with SVB Bank, b) Equity funding received from SVB and c) Debt funding
received from SVB.
• Start-up firms backed by Silicon Valley accelerator Y Combinator (YC)
(Venture Firm) are facing trouble. Industry experts say the bank‘s failure is
likely to impact Indian start-ups as it has injected much uncertainty in the
industry.
• Some Indian firms couldn‘t timely withdrew their deposits from Silicon
Valley Bank because they didn‘t have another US banking account readily
available to hold that capital
10.2 Indian Companies Funding with SVB:-
Sr.no
Company
Total Funding (USD)
1
TutorVista
102,250,000
2
Shaadi.com
8,000,000
3
CarWale
9,873,512
4
Asklaila
12,000,000
5
Sarva
12,281,001
6
Games2win Media
13,085,782
7
Loylty Rewardz
28,270,232
8
PubMatic
31,000,000
9
Drip Capital
85,120,000
10
Numerify
88,000,000
11
BlueStone
111,502,585
12
Paytm Mall
808,241,000
13
Paytm
4,637,862,461
14
Icertis
520,000,000
38
10.3The Silver Lining for Indian Start-ups and Key Takeaways
As a big financial relief to the Indian Start-ups, the US Government assisted
the depositors of the failed Silicon Valley Bank in getting access to their funds
from March 13, 2023.
• US Government also announced to make additional loans available to
eligible depository institutions.
• This issue is expected to be trivial for those start-ups who have deposits only
with SVB, as they can withdraw the amount. However, for startups who have
received funding, the situation is different.
• Indian government is working on ways to shield the start-ups from any
economic uncertainty that may arise due to SVB collapse.
• In this regard, the Union Minister of State for Electronics and Information
Technology has proposed a slew of measures like enabling US fund transfer to
Indian banks and development of innovative credit products like deposit
backed credit lines
• According to Aviral Bhatnagar, VC at Venture Highway opined that the
impact of SVB turmoil will not affect India much than the US since start-ups
domiciled in India do not have SVB exposure.
• India potentially has 15-20% exposure (out of funded companies) to the US
through being incorporated in the US. This is primarily SaaS companies and
YCombinator companies. The ones that are sub-Series B are likely to have
significant SVB exposure.
• Since start-ups who hold only deposit accounts with SVB may not be
affected to a great extent, as they can withdraw the amount to meet
expenditures on day to day business operations.
39
• The start-ups that have received funding through equity route from SVB
should not experience immediate tremors, since those shares may be
transferred to the acquiring entity.
• For the start-ups that have received funding in the form of debt capital from
SVB, their case may be little complicated, especially with reference to
undrawn capital lines
• The SVB Bank fiasco should serve as a wake up call for Indian startups. No
one should take it for granted that the regulator will always step in, but rather
have their own precautions and risk management in place.
• Indian start-ups needs to diversify heir exposure by having accounts with
different banks, as deposits are insured only up to a certain amount.
• In view of the robust banking system in India, start-ups of India henceforth
may keep less money with US banks and substantial amount with Indian
banks.
• Since the situation is much better in India, due to RBI‘s monetary policies
and its stringent banking norms.
• In future, there may be drastic change in start-ups scenario in India, as more
of start-ups may open accounts in GIFT City. Going ahead, start-ups may
undertake evaluating the option of having banking operations in GIFT City.
• Indian start-ups needs to develop business models that is sustainable and
address the real problems of business.
40
11 Why India need not worry about SVB.
Important lesson emerging from the SVB crisis is the need to enact pending
banking reforms & for a prompt resolution framework so depositors don't face
a moratorium on their deposits. On March 10, Silicon Valley Bank (SVB), a
start-up focussed lender, became the largest bank to fail in the US since the
2008 global financial crisis. The bank‘s collapse was triggered by a downturn
in the technology sector and the Federal Reserve‘s aggressive monetary policy
tightening to tame record high inflation. The bank had seen a huge influx of
deposits from start-ups and venture capital firms during the pandemic. It
invested the deposit money in long-term US government securities. These
investments are typically safe but the value of these investments fell due to the
current high interest environment — the US Federal Reserve has increased the
interest rate by a massive 450 basis points. The depositor base of SVB was
largely the start-ups and other-technology focussed companies. Due to the
drying up of venture capital funding through public offerings, these companies
were scrambling for funds, leading them to tap into their deposits. The
resulting large-scale withdrawal of deposits required SVB to sell their bond
holdings. So, when the bank started selling bonds, it suffered mark-to-market
losses as the prices of existing bonds dropped with the increase in yields.
The bank‘s chief executive officer sent a letter to shareholders that it has
suffered a loss of $1.8 billion on the sale of US treasury bonds worth $21
billion and outlined a plan to raise additional capital through share sale. The
41
letter sparked a run as the venture capital firms started to pull their money.
Since these were corporate deposits, they exceeded the deposit insurance limit
of $250,000. The run amounting to $42 billion — a quarter of the bank‘s total
deposits in a day — made it incapable of honouring its obligations. It ran out
of cash.
11.2 Prompt regulatory interventions:- The SVB‘s insolvency was followed
by prompt regulatory interventions involving coordination between the
Treasury Secretary, the banking regulator and the resolution authority. The
bank was closed by the California banking regulator and placed under the
receivership of Federal Deposit Insurance Corporation (FDIC). The FDIC
seized the assets of the bank, created a bridge bank called the Deposit
Insurance National Bank of Santa Clara and transferred all insured deposits of
SVB to the bridge bank — an entity to temporarily take over the liabilities and
operations of a failed bank till a buyer is found. The bridge bank, in this case,
will ensure continuity of all banking activities. All insured depositors have
access to their insured deposits. The uninsured depositors will receive their
payouts as the FDIC sells the assets of the SVB. To prevent the run on banks
and meet the demands of depositors, the US Fed has set up an additional
funding facility for banks called the Bank Term Funding Program. Under this
facility, loans of up to one year will be provided to banks and other depository
institutions through pledge of government securities at par, eliminating the
need to quickly sell securities in times of stress.
11.3 Need for counter-cyclical tools:-
The collapse of the Silicon Valley Bank underscores the need to have adequate
countercyclical macroprudential tools in place to provide a buffer against
losses on account of rising interest rates. One such tool in the context of Indian
banking regulation is the Investment Fluctuation Reserve (IFR). This reserve is
created by transferring the gains realised on sale of investments during an
easing interest rate cycle. These gains act as shock absorbers during an interest
rate tightening phase. To address the impact of sharp increase in the yields on
government securities, the rules governing the IFR were refined in 2018.
According to the revised rules, banks are required to transfer profits on sale of
42
investments to the IFR until the amount of IFR is at least 2 per cent of the
portfolio of government bonds available for trading and sale. According to the
Financial Stability Report, December 2022, the banking system‘s IFR reached
2.2 per cent of the portfolio of securities available for trading and sale in
March 2022. This helped banks tide over losses in the first quarter of 2022-23
11.3 Indian banks are better placed to address SVB-like crisis:-
According to an analysis by global financial major Jefferies, Indian banks are
not particularly at a risk of facing an SVB-like crisis. Unlike the concentration
of deposits of SVB, 60 per cent of deposits of banks are held by households.
These are sticky in nature as households do not move quickly to other
investment options such as government securities. On the asset side, 60 per
cent are held in the form of loans and investments constitute 25 per cent of the
assets. Recently, the Reserve Bank of India (RBI) enhanced the limit for
securities that are held to maturity (HTM) to 23 per cent of deposits. Under
HTM, the bonds are exempt from being marked to market and hence banks
can avoid treasury losses. The other two bond portfolios — the available for
sale (AFS) and heldfor-trading (HFT) — are subject to losses in the event of
rise in the bond yields.
43
12. What Next
The US Treasury, Federal Reserve Board, and the Financial Deposit Insurance
Corporation announced that depositors of the failed Silicon Valley Bank will
have access to all of their money.
In a joint statement released by Secretary of the Treasury Janet Yellen, Federal
Reserve Board Chair Jerome H Powell, and FDIC Chairman Martin J
Gruenberg announced they would ―fully protect‖ all depositors who had funds
in Silicon Valley Bank, just days after regulators took control of the
institution.
―Depositors will have access to all of their money starting Monday, March 13.
No losses associated with the resolution of Silicon Valley Bank will be borne
by the taxpayer,‖ read the statement. After receiving a recommendation from
the boards of the FDIC and the Federal Reserve, and consulting with the
President, Secretary Yellen approved actions enabling the FDIC to complete
its resolution of Silicon Valley Bank, Santa Clara, California, in a manner that
fully protects all depositors.
In addition, Signature Bank, a New York bank, was also closed by regulators
over the weekend. Signature depositors will also be made whole.
―We are also announcing a similar systemic risk exception for Signature Bank,
New York, New York, which was closed today by its state chartering
authority. All depositors of this institution will be made whole. As with the
resolution of Silicon Valley Bank, no losses will be borne by the taxpayer,‖
added the statement.
Shareholders and certain unsecured debtholders will not be protected. Senior
management has also been removed. Any losses to the Deposit Insurance Fund
to support uninsured depositors will be recovered by a special assessment on
banks, as required by law.
44
Finally, the Federal Reserve Board on Sunday announced it will make
available additional funding to eligible depository institutions to help assure
banks have the ability to meet the needs of all their depositors.
―The US banking system remains resilient and on a solid foundation, in large
part due to reforms that were made after the financial crisis that ensured better
safeguards for the banking industry. Those reforms combined with today‘s
actions demonstrate our commitment to take the necessary steps to ensure that
depositors‘ savings remain safe,‖ added the statement.
Meanwhile, US president Joe Biden lauded Yellen and National Economic
Council Director for working ―diligently with the banking regulators to
address problems at Silicon Valley Bank and Signature Bank.‖
―I am pleased that they reached a prompt solution that protects American
workers and small businesses, and keeps our financial system safe. The
solution also ensures that taxpayer dollars are not put at risk,‖ said Biden on
actions to strengthen confidence in the banking system.
―The American people and American businesses can have confidence that
their bank deposits will be there when they need them. I am firmly committed
to holding those responsible for this mess fully accountable and to continuing
our efforts to strengthen oversight and regulation of larger banks so that we are
not in this position again,‖ added Biden.
13. Limitation Of study.
• The research study is based on the secondary data.
45
• Due to technical constraints other crucial financial facets of Silicon Valley
Bank, like Earnings Per Share, Non-Performing Assets, Return on Assets,
Ratios covered under CAMELS etc. and Overall US Bond Market
performance etc. could not be studied.
13.1 Scope for further study:-
• How banking policies will shape up in the future in developed countries,
particularly those where bank debacles happened with reference to prevention
of further banking failures may be explored.
• Business sustainability of selected mammoth banks of developed countries
having large exposures to various countries across the globe, especially India
using CAMELS approach, Regression Analysis, Parabolic Trends and other
Time Series Analysis tools, Altman Z-Score Model etc. may be studied to
determine the financial stability scenario of global banking sector and its
probable impact on the Indian banking sector.
• Corporate Governance of selected big global banks may be examined to
decipher the fault lines and determine resuscitating measures. In this regard,
Piotroski Score may be applied which would assist in ascertaining the strength
of banks financial position, a key component of banks corporate governance.
• A comparative study of Global and Indian banking systems may be
undertaken by analysing the factors of ESTEMPLE
14.References
46
Aastveit, K. A., Natvik, G. J., and Sola S., 2017, Economic Uncertainty
and the Influence of Monetary Policy, Journal of International Money and
Finance, 76, 50–67. Acharya, V. V., and Richardson, M., 2009, Causes of
the financial crisis, Critical Review, 21(2- 3), 195-210.
Aubuchon, C.P., and Wheelock, D.C., 2010, The geographic distribution
and characteristics of US bank failures, 2007-2010: Do bank failures still
reflect local economic conditions? Federal Reserve Bank of St. Louis
Review, 92(05), 395-415.
Beltratti, A., and Stulz, R.M., 2012, The credit crisis around the globe:
Why did some banks perform better? Journal of Financial Economics, 105
(1), 1-17.
Berger, A. N., and Bouwman, C.H.S., 2012, How does capital affect bank
performance during financial crises? Journal of Financial Economics, 109
(1), 146-176.
Berger, A.N., Imbierowicz, B., and Rauch, C., 2016, The roles of corporate
governance in bank failures during the recent financial crisis, Journal of
Money, Credit and Banking, 48(4), 729-770.
Laeven, L., and Valencia, F., 2013, Systemic banking crises database: An
update. IMF Working Paper, WP/13/ 163.
Le, H.T.T., Narayanan, R.P., and Vo, L.V., 2016, Has the Effect of Asset
Securitization on Bank Risk Taking Behavior Changed? Journal of
Financial Services Research, 49, 39–64.
Le, H.T.T. and Vo, L.V., 2023, Interest Rate Hike and the Instability in the
U.S. Banking Industry, Working paper
47
15 Conclusion.
This project examines the causes behind the failure of Silicon Valley Bank,
once regarded as one of the best national and regional banks. By analyzing the
bank's financial statements over the past four years, we demonstrate that its
performance had, on average, declined. Despite this, its return on equity
remained higher than the industry average, and its capital ratios significantly
exceeded those of its peers, as well as regulatory requirements. Furthermore,
its nonperforming loan ratios were significantly lower than the industry
average. We point out three weaknesses resulting the bank‘s collapse. First,
this bank held significantly less equity capital than its peers. Second, the bank
made significant investments in debt securities during 2021 when interest rates
were low. Third, this bank had a highly concentrated depositor base, primarily
consisting of a small group of venture capitalists. This concentration of
depositors poses a significant risk of bank run, particularly in times when the
bank's performance has declined since these depositors are likely to be
interconnected. A multivariate analysis indicates that the bank's unrealized
losses are influenced by the interest rate, GDP growth rate, insured deposits,
and the withdrawal of concentrated deposits. Unlike the effects of GDP growth
rate or insured deposits on the bank's unrealized losses, interest rate and
concentrated deposit withdrawal are negatively correlated with these losses.
These results suggest that the bank faces significant losses when interest rates
rise and concentrated depositors withdraw their funds. The collapse of Silicon
Valley Bank has several implications. First, the significant increase in interest
rates can cause significant losses for banks, particularly for smaller banks with
less diversified assets, and especially those who invested heavily in debt
securities. Second, high interest rates can increase the risk for banks with
lower equity capital. Finally, the combination of high interest rates and
economic downturns poses a high risk for community banks that mainly
acquire deposits from local sources.
48
1
Social Relevance
Project on
OVERVIEW OF CSR ACTIVITIES OF RELIANCE
INDUSTRIES
Submitted in partial fulfilment for the award of the degree of
Master of Management Studies (MMS)
(Under University of Mumbai)
Submitted by
SHRADDHA ANIL KULKARNI
(Roll No. – 46)
Under the Guidance of
Dr. Kaustubh Sontakke
2021-2023
SIES COLLEGE OF MANAGEMENT STUDIES
NERUL NAVI MUMBAI 400706
2
CERTIFICATE
This is to certify that project titled “Overview of CSR Activities of
Reliance Industries” is successfully completed by Ms. Shraddha
Anil Kulkarni during the IV Semester, in partial fulfilment of the
Master’s Degree in Management Studies recognized by the
University of Mumbai for the academic year 2021 -2023 through
SIES College of Management Studies.
This project work is original and not submitted earlier for the award
of any degree/diploma or associateship of any other University/
Institution.
Name: Dr. Kaustubh Sontakke
Date: (Signature of the Guide)
3
DECLARATION
I hereby declare that this Project Report submitted by me to the SIES
College of Management Studies is a bonafide work undertaken by
me and it is not submitted to any other University or Institution for
the award of any degree /diploma or certificate or published any time
before.
Name: Shraddha Kulkarni
Roll No.: 46 Signature of the Student
4
ACKNOWLEDGEMENTS
I would like to express my gratitude to SIES college of management
studies, Nerul Navi Mumbai for giving me an opportunity to work
on this project. This project has helped me in gaining deep
knowledge about the subject.
I would also like to thank my project guide Dr. Kaustubh Sontakke,
Assistant Professor, Finance, for constantly guiding me through-out
the capstone, providing me with the useful feedbacks and
encouragement which helped me in completion of my project. I am
thankful to other faculty members of SIES College of Management
Studies for their support in completion of my project.
Signature
Shraddha Kulkarni
Date:
5
EXECUTIVE SUMMARY
The project titled ‘Overview of CSR Activities of Reliance Industries’ is an
attempt to analyse the scope of corporate social responsibility. CSR activities
undertaken by Reliance Industries is studied. To understand the social
responsibilities and explore areas for finding sustainable solutions to challenges
which are social in nature like Environment protection.
Corporate social responsibility (CSR) is a self-regulatory business model that
enables a company to be socially accountable to itself, its stakeholders, and the
public. Companies can be aware of their impact on the economic, social, and
environmental aspects of society by engaging in corporate social responsibility,
also known as corporate citizenship.
Corporate social responsibility is a business model whereby organizations make
a conscious effort to conduct their operations in a way that benefits society and
the environment rather than harm it. CSR helps in enhancing several social
issues as well as enhancing the reputation of businesses. Corporate
responsibility initiatives are a great way to boost workplace morale.
Environmental impact, ethical responsibility, philanthropic endeavours, and
financial responsibilities are the four main subcategories of CSR.
6
CONTENTS
Chapter
No.
Particulars Page No.
Acknowledgement
4
Executive Summary
5
1 Introduction
1.1 Introduction to the Study
1.2 Objectives
1.3 Purpose and Significance of the Project
1.4 Limitations of the Project
8
9
9
9
2 Literature Review
10
3 Methodology
12
4 CSR Activities of Reliance Industries
4.1 CSR Policy of Reliance Industries
4.2 Net Carbon Zero Status by the year 2035
4.3 Solving for Rural India’s Toughest
Challenges
4.4 About Reliance Foundation
4.5 Overview of CSR Initiatives taken by
Reliance Foundation
4.6 Reliance Foundation - Covid-19 Response
Initiative
13
18
19
20
21
30
5 Impact, Committee & Budget of the CSR
Activities of the Reliance Industries
5.1 Measuring and Reporting Outcomes of the
CSR Activities
5.2 Impact of CSR activities
5.3 Corporate Social Responsibility and
Governance Committee of Reliance
Industries
33
34
38
7
5.4 Budget for the CSR Activities of
Reliance Industries
39
6 Conclusion
40
Bibliography / References
41
Figures
42
Appendices
43
8
CHAPTER 1
INTRODUCTION
1.1 Introduction to the Study
Corporate Social Responsibility is the official name of this concept. It is referred
to as a business structure that enables a company to be accountable to its
stakeholders and the public to inform them of the company's impact on various
societal facets, including the social, economic, and environmental facets.
The goal of CSR is to integrate economically beneficial services and endeavours
into an organization's culture and business model. It strictly implies that
businesses must promote growth in the social, economic, and environmental
spheres, which benefits society. The government closely monitors the CSR
component of businesses because it necessitates the involvement of the private
sector to support the weaker segment of society and safeguard the environment.
CSR provides businesses with the power to manage their operations while
having a positive impact on society. It states that in addition to conducting
business, a company must also fulfil its social responsibilities, which may
include.
Monetary gifts to various non-profit organizations.
Helping people affected by natural disasters like hurricanes, earthquakes, and
drought.
Promotion of talent in the spheres of sports, business, and cultural events.
Take measures to lessen water and air pollution, etc.
Companies are expected to establish a CSR committee that approves the board's
CSR planning and policy practices.
1.1.1 About Reliance Industries and its thought on CSR
Activities
Reliance Industries Limited (RIL) is India's largest private sector enterprise,
which operates across the energy and materials value chains and has a strong
presence in the media, telecommunications, and retail industries.
RIL's wide range of initiatives and operations have a profound impact on
people's lives in a variety of ways and add value by promoting the
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comprehensive growth of communities across multiple geographies. By
assisting communities and undertaking projects that fill in gaps in fundamental
societal needs, the group aims to play a meaningful role through its various
initiatives.
The tagline for Reliance Industries for the CSR Activities is “Enabling the lives,
living and livelihood for a stronger and inclusive India”.
Several large-scale projects have been started by Reliance Industries in the
domains related to livelihood, healthcare, and education. Reliance Industries
makes an ongoing effort to adapt its policies and implementation strategy
considering its experiences.
1.2 Objectives
The objective of the project is to study the CSR activities undertaken by the
Reliance Industries.
To analyse the CSR activities undertaken by one of the largest conglomerate in
India that is Reliance Industries.
To analyse in depth analysis of CSR Activities.
1.3 Purpose and Significance of the Project
To understand the concept and scope of corporate social responsibility.
To get the insights in CSR Practices of Reliance Industries
To be aware of the social responsibilities and explore areas for finding
sustainable solutions to challenges which are social in nature like Environment
protection.
1.4 Limitations of the Project
The time constraint was the limiting factor as more in-depth analysis could not
be carried.
The findings may change with the change in the time.
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CHAPTER 2
LITERATURE REVIEW
Reliance Industries Limited Integrated Annual Report (2021-2022), the
water-based initiative taken by Reliance Foundation where the objective under
this impact assessment undertaken by RF was to ensure water security,
augmenting sustainable livelihood. Net Carbon Zero by 2035 initiative wherein
its approach is to make CO2 a recyclable resource, transition to clean energy
usage and replacing transportation fuel with electricity and hydrogen. Reliance
had undertaken multiple mission to fight against Covid-19 like Mission Vaccine
Suraksha, Mission Anna Seva etc. During the pandemic RF supported lakhs
people with covid -19 advisories and queries on government schemes and social
benefits. They also distributed crores of masks, lakhs of sanitisers and gloves
for free.
CSR Policy by Reliance Industries, the key philosophy of CSR initiatives of
Reliance is guided by Scale, Impact, Sustainability. Its six-focus area includes
Rural Transformation, Health, Education, Environment, Arts, Heritage and
Culture, Disaster Response. Reliance also collaborates with the other companies
or institutions to undertake programs for CSR activities. The budget for the CSR
activities and Corporate Social Responsibility and Governance Committee is
mentioned in this policy.
Report on Corporate Social Responsibility by Reliance Industries Limited
(RIL) (2017-2018), about Reliance Foundation and initiatives taken by them
which includes changing lives and empowering India through Digital
technology. Apart from six-focus area by RIL, other initiatives are Education
and Sports for All, Urban Renewal, Contribution to Swachh Bharat,
Empowering Women through Financial Literacy, Wildlife Conservation and
Animal Welfare, Improving Sports Infrastructure.
Covid-19 Response by Reliance Foundation, Reliance took various initiatives
to support the nation like providing testing facilities and providing PPE
manufacturing facilities. Every step of the way, the Reliance family has come
forward to help the country meet its urgent needs, from healthcare to medical
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oxygen, from livelihood support to vaccination. Reliance undertook various
mission to the urgent needs of nation, several missions were Mission Covid
Infra, Mission Oxygen, Care for Stray animals, Mission Covid Suraksha, Free
Covid Consultation, Restoring Rural Livelihoods, etc.
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CHAPTER 3
METHODOLOGY
Descriptive research has been used to understand the CSR Activities. Both
Primary and Secondary data have been used to retrieve data.
Primary data has been collected from various websites; information available
on online websites.
The following steps have been followed to collect secondary data:
1) The data has been collected from the Reliance Industries Annual Report.
2) The data has also been collected from Reliance Industries website.
3) The data has been also collected from the CSR policies of Reliance Industries.
The scope of the study is limited due to limited time and resources.
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CHAPTER 4
CSR ACTIVITIES OF RELIANCE
INDUSTRIES
4.1 CSR Policy of Reliance Industries
Figure No.1: Objectives of the CSR Policy of the Reliance Industries
4.1.1 Corporate Social Responsibility Philosophy
The group made conscious business decisions that improved people's lives by
directly and indirectly generating value for numerous stakeholders. RIL has
always been committed to generating value for society by offering reasonably
priced goods and services that have aided in the expansion of related
industries. There are inherent connections and linkages between each of its
operational areas that have an immediate and long-term impact on society.
Additionally, RIL has a positive impact on thousands of underprivileged
people's lives through their CSR initiatives.
RIL wants to keep making a positive impact on society through its unique value
proposition, which meets the needs of millions of people while also enhancing
their lives through healthcare, raising their standard of living through education,
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and enabling livelihoods by generating employment opportunities through the
following methods:
A) For the Business: value generated by business for society (including
employment creation, market expansion, opportunity creation, etc.).
B) By the business: value created by CSR initiatives at various operating
facilities with appropriate ties to the local communities where they operate.
Over the past several years, RIL has taken part in a variety of social
responsibility initiatives. These efforts have significantly raised the quality of
people's lives through health care, education, livelihoods, and community
development initiatives, by significantly enhancing their ability to live happy,
fulfilling lives. The lives of marginalized communities are impacted by these
activities, which are carried out all over India and go far beyond their corporate
locations.
Three SIS core commitments serve as the foundation for RIL's CSR programs:
S- Scale
I-Impact
S- Sustainability
An endeavour is made to ensure that all initiatives undertaken by the group have
an impact on the beneficiaries in improving their lives. The initiatives should
also be scalable, replicable, and long-term sustainable.
To empower people and deepen its engagement with the goal of improving lives,
living standards, and livelihood for millions of people on a sustainable basis,
RIL intends to continue its efforts to build on its tradition of social
responsibility.
4.1.2 Focus Area of Engagement
There are many opportunities to broaden and deepen social impact at scale and
create value for all for a company like RIL, which has diversified business lines.
In a strategic manner, RIL aims to consolidate the company's CSR initiatives to
concentrate on specific social issues that all work to improve people's lives,
living and livelihood. The value of sustainable social impact at scale is ingrained
throughout the conglomerate because of its long history of social responsibility.
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Reliance Industries has identified six focus areas:
1) Rural Transformation:
Creating sustainable livelihood solutions, addressing poverty, hunger, and
malnutrition. To improve livelihoods, address poverty, hunger, and malnutrition
to close the development gap between rural India and urban India.
Key initiatives include:
a) Supporting both farm and non-farm livelihoods.
b) Improving water conservation and rainwater harvesting.
c) Developing community-based initiatives like VFAs and producer companies
towards boosting community capacity and ensuring sustainability.
d) Making use of technology to distribute information based on user needs to raise
standard of living.
e) Improving nutrition and food security.
f) Developing Community Infrastructure
2) Health:
Affordable solutions for health care through improved access, awareness and
health seeking behaviour. To address the problems with accessibility and
affordability of high-quality health care and bringing about improving in
awareness and health-seeking behaviour across the country, enabling a better
living by taking steps like:
a) Facilities for primary, secondary, and tertiary care.
b) Conducting need-based health camps and providing consultation, advice,
medication, etc.
c) Taking steps to improve maternal and child health.
d) Behavioural change to promote the health of both mother and child.
e) Improving healthcare delivery through creative outreach initiatives.
f) Using technology for training, competency assessment, and clinical decision
support for medical professionals with the goal of raising the standard of
healthcare.
3) Education:
Access to quality education, training, and skills enhancement. To work on
several educational initiatives to deliver high-quality education, training, and
skills enhancement to raise living and working standards. Initiatives are aimed
at:
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a) Promoting Primary and secondary education.
b) Enabling higher education through merit cum means scholarships, including
for differently abled across the country.
c) Using sports as a tool for development of students in both urban and rural
environments.
d) Supporting universities in their establishment and operation while promoting
higher education.
e) Vocational training and skill development.
4) Environment:
Environment sustainability, ecological balance, conservation of natural
resources. Promote environmental sustainability to enable improved livelihood
and quality of life. through several initiatives for:
a) Ecological sustainability
b) Promoting biodiversity
c) Conservation of natural resources
d) Maintaining quality of soil, air, and water
e) Promoting renewable energy
f) Developing gardens and river fronts
5) Arts, Heritage, and Culture:
Protection and promotion of India’s art, culture, and heritage. To put forth effort
in protecting India's rich heritage, arts and culture for its future generation and
make deliberate efforts to protect it, enhance avenues for livelihoods of
traditional artisans and craftsmen. Key initiatives include:
a) working towards protecting and promoting India's art, cultural, and historical
heritage through a variety of promotional and development projects and
programs.
b) Promoting and helping artists and artisans.
c) Preservation and promotion of traditional art and handicraft.
d) Documenting India's rich heritage for the benefit of future generations.
6) Disaster Response:
Managing and responding to the disaster. To strengthen efforts in Disaster
Response towards establishing RIL as one of the leading organizations with the
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capacity to respond in a timely and impactful manner in the affected areas. Key
initiatives include:
a) Improving local communities' ability to respond to disasters.
b) Acquiring the knowledge and tools necessary to respond to a disaster.
RIL aims to continue its work in the above-mentioned areas and scale up further
for better reach, deeper engagement, and impact.
4.1.3 Implementation Strategy
RIL is dedicated to enhancing the lives of India's most marginalized and
vulnerable communities.
a) Direct Engagement:
RIL to have a direct engagement strategy- most initiatives to be conceptualized
and executed directly through a team of professionals.
b) Partnerships:
In some circumstances, in addition to direct engagement, to partner with other
companies who have the required technical expertise and experience to
undertake various programs in the identified core focus areas of operation, to
improve our outcomes. The following summarizes the core model of
engagement:
a) Working to make life better for India's most marginalized vulnerable
communities.
b) Direct engagement with the communities through a group of skilled experts.
c) Put an emphasis on local needs, community ownership and long-term
sustainability.
d) Outcome and impact orientation
e) Developing testable development models that can be replicated.
f) Using technology as a tool for development.
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Figure No. 2: Core Model for the focus area of the CSR Activities
by the Reliance Industries
4.2 Net Carbon Zero Status by the year 2035
Recognizing the danger posed by climate change, Reliance has set an ambitious
goal of becoming Net Carbon Zero by 2035 and has embarked a 15-year plan to
establish itself as one of the top new energy and new materials companies in the
world. Over the course of three years, Reliance has pledged to invest 75,000
crores in the development of new energy capabilities. Their vision and mission
is “To build one of the world’s leading New Energy and New Materials business
with the aim of bridging the green energy divide in India and globally”.
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Ideas for Technology deployment for a greener tomorrow by the Reliance
Industries:
Next-gen technology for Carbon Capture Utilization
Evaluating novel catalytic and electrochemical transformations to use CO2 as a
valuable feedstock.
Algae to Oil is a technology that makes use of waste CO2 and sunlight and sea
water, to create useful products.
Acquisitions and partnerships across the world to manufacture solar cells, green
hydrogen, technology access, and new modes of transportation.
4.3 Solving for Rural India’s Toughest Challenges
This is an impact assessment of water-based initiatives undertaken by Reliance
Foundation.
Through a holistic, self-sufficient, and sustainable model, Reliance Foundation's
Rural Transformation initiative has been working to transform the lives and
livelihoods of people in rural areas. Reliance Foundation water-focused
initiatives are built around four pillars: community organization and capacity
building; participatory water budgeting; collaboration with Gram Panchayats
and government for synergies/capacity building; and crucial support for water
harvesting and management.
Water initiatives had a trickle-down effect in addition to the intended effects on
the beneficiary’s effect that aided in the holistic development of villages.
Ensuring Water Security:
The project's increased water capacity led to better water availability for
household and agricultural needs. The risk to rainfed nature was reduced
because of the increase in water capacity for agriculture. Agricultural
production. The increased domestic water availability for domestic purposes
resulted in 89% village having access to water. 84% of farmers said they had
not experienced water scarcity in the previous years.
Increasing Sustainable Livelihoods:
89% of farmers reported an increase in area under assured irrigation. 85%
Farmers in the villages reported cultivating crops twice or more a year.
Additionally, three or more types of crops were grown by more than half of the
farmers each year.
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4.4 About Reliance Foundation
To provide impetus to various Social Responsibility activities across the group,
Reliance Foundation (RF) was set up in 2010. Led by Smt. Nita M Ambani, RF
has a comprehensive approach towards development with an overall aim to
create and support meaningful and innovative activities that address some of
India's most pressing development challenges, with the goal of enabling lives,
living, and livelihood for a stronger and inclusive India. The Reliance
Foundation oversees most CSR projects that RIL undertakes.
To achieve sustainable and profitable growth, Reliance has always made
sustainable development the cornerstone of its business strategy, building
thriving eco-systems around all its businesses in the process. The Reliance
Foundation was established in 2010 as an expression of RIL's vision for
sustainable growth in India and to give momentum to several its developmental
initiatives.
India is a country with a billion dreams, a billion aspirations, and most
importantly, a billion great opportunities. Reliance Foundation has chosen the
path of inclusive development to take care of their basic needs to make these
dreams a reality, especially for the most vulnerable groups of the society. 51
million people's lives have been positively impacted by Reliance Foundation in
more than 44,700 villages and various urban areas.
Reliance Foundation focuses on its social initiatives with a three-pronged
strategy:
(i) direct engagement with the community,
(ii) forging partnerships and collaborations, and
(iii) leveraging the power of information technology.
Through a group of qualified professionals, Reliance Foundation works directly
with the local communities. It works in partnership with the communities,
starting with identifying their needs, planning, and carrying out the programs,
and measuring the values and effects it has produced, During the process.
Reliance involves the community members in the planning and implementation,
gives them empowerment through trainings, and works to make the initiatives
scalable and sustainable.
To maximize the effectiveness of its development initiatives, Reliance
Foundation enters strategic partnerships with other organizations. State, local,
and grassroots non-governmental organizations are a part of these partnerships.
To share technical expertise, infrastructure, and human resources, Reliance
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works with other organizations. By deeply interacting with the communities and
addressing critical issues that cannot be addressed directly through direct
interventions, these partnerships help Reliance fulfil its commitment.
To offer environmentally friendly solutions, Reliance makes use of technology.
These technological interventions link communities across various digital
platforms to maximize resource use, foster capacity building, and make
decisions with knowledge. The rise of Jio Infocomm as a significant player in
digital services in recent years has greatly aided this. Reliance has made
significant strides in reaching out to the public with a variety of products and
services, including information advisories, online learning environments, virtual
sports clinics, record keeping of patients, and more.
The company encourages its employees to make voluntary contributions to
social causes in addition to the interventions made by the Reliance Foundation.
The interest of employees in supporting a specific cause is periodically taken.
The Company also makes use of specific employee skill sets and allocates
resources for efficient delivery, depending on the needs of the communities.
Apart from the CSR Activities which Reliance Foundation focuses on like
Education, Health, Rural Transformation, Disaster response, promoting arts,
heritage, and culture, It also focuses on Women Empowerment, Urban
Renewal and Sports for Development. It has started with ESA-Education,
Sports for All
4.5 Overview of CSR Initiatives taken by Reliance
Foundation
The following section presents the overview of the CSR Initiatives taken by the
Reliance Foundation.
4.5.1 Rural Transformation
Reliance's rural transformation program has been addressing issues facing rural
communities. This program's main initiatives include creating rural institutions,
providing villages with secure access to water, providing producer companies
with mentoring, and facilitating alternatives to farming both on and off the farm.
Additionally, the program makes use of technologically based solutions to
safeguard the livelihoods of farmers, fishermen, and livestock owners
nationwide.
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1) Institution Building:
The program gives rural communities the power to form Village Associations.
The establishment of village-level leadership for addressing local social
development issues has been facilitated by these institutions operating at the
community level. Many of these organizations have started acting as advocates
on various levels.
Members have come together to create a community owned fund, inject equity
into producer companies, and promote savings and thrift practices to ensure the
long-term sustainability of these institutions. They have also been crucial in
mobilizing material and monetary resources during crises. Given their active
involvement in neighbourhood development initiatives, some of these leaders
are also chosen by the public to serve as Gram Panchayat representatives. Over
86,000 rural households in 1,100 villages spread across 32 districts and 12 states
in India are currently involved with the program.
2) Water Security:
The program aims to give villages access to safe water for domestic use and
irrigation. Within the village, Reliance works to conserve every raindrop. Since
their creation, water harvesting structures such as earthen/masonry dams and
check dams, farm ponds, open wells, and others have been built or renovated,
adding up to more than 73 billion liters of water harvesting capacity. Due to this
effort, despite the rain deficit in many areas of India this year, over 32,000
hectares received guaranteed irrigation for two cropping seasons. 307 villages
now have access to secure water because of these efforts. Even at the height of
summer, several villages have reported a rise in ground water levels of over 2
meters.
3) Nutrition Security:
Reliance has been promoting its distinctive kitchen garden model across its
program locations and giving technical support to the government to improve
nutritional outcomes for the rural population. This year, Reliance Foundation
broadened the scope of its collaboration with the Rajmata Jijau Nutrition
Mission of the Maharashtra government. To establish Reliance Nutrition
Gardens, RF would offer technical assistance to anganwadis in 16 districts. By
enhancing the nutritional outcomes of 0.2 million mothers and children in these
districts, this initiative hopes to lessen the burden of malnutrition on the state.
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4) Alternative Rural Livelihoods and Entrepreneurship:
To protect against the uncertainties and disasters that threaten agricultural
livelihoods, Reliance encourages alternative livelihood options. The Company
encourages small farmers to initiate goat-rearing, poultry, nursery raising and
vermi-composting, among others. Approximately 9,500 rural families have
benefited from alternative livelihoods thus far (more than 7,000 families during
FY 2017–18).
5) Ecological Security:
Reliance advances ecological security in three ways: by increasing the supply
of cultivable land; by enhancing the green cover through extensive plantation
activity; and by enhancing the condition of the soil.
A further 7,000 hectares (64,000 since the company's founding) have been
converted to sustainable agricultural practices because of the company's
adoption of eco-consistent soil conservation techniques. Nearly 80% of this land
has been used for agricultural purposes, which has improved the soil's texture,
structure, microbial activity, and aeration.
Over 20 million saplings have been planted since the program's inception, with
over 7 million being planted to support biodiversity during FY 2017–18.
Reliance celebrated World Environment Day by encouraging its staff and rural
communities to plant trees. Over 20,000 enthusiastic attendees from over 150
villages in 12 states participated in the event.
Reliance supports safeguarding the ecosystem of the soil. It carried out more
than 11,000 tests to determine the health of the soil.
6) Increasing Access to Social Infrastructure:
By building concrete roads connecting 32 villages in Uttar Pradesh, Reliance
increased access to social infrastructure. Many of these villages have seen a
change for the better because of the construction of roads, which have made it
easier to access local markets, schools, and healthcare facilities.
7) Farmer Producer Companies:
The difficulty of creating market connections is a constant struggle for Indian
farmers. Reliance gives farmers the ability to establish Farmer Producer
Companies (FPCs) to aid them in overcoming this difficulty. These farmer-
owned and farmer-driven businesses educate rural producers about the need to
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come together as collectives, combine farm products to create economies of
scale for fetching better prices, have sustainable access to markets, etc.
Furthermore, this grouping strengthens the farmers' negotiating position.
Reliance has so far mentored 19 FPCs in 10 different states. The RF-mentored
FPCs had 21,500 farmers enrolled as of the end of March 2018. Each farmer
who used FPCs received, on average, an extra Rs 5,000 to Rs 6,000 per year.
8) Information Services:
Reliance empowers communities through its information services program by
offering trustworthy information that is suited to the requirements of farmers,
fishermen, livestock owners, etc across 12 states, in more than 13,000 villages.
This is disseminated digitally and through community-level initiatives, such as
those that provide information on crop management, livestock care, programs
and subsidies, healthcare, and public services, etc. 1.2 million people have
received the mobile-based advisories this year. These advisories have, in total,
reached 4.8 million people since the inception, and have become an effective
tool for spreading knowledge.
As part of the program, Reliance has established an ecosystem with more than
1,000 knowledge and infrastructure partners, including research institutions,
governmental agencies, non-profit organizations, etc.
4.5.2 Health
The health programme of Reliance addresses primary healthcare issues around
affordability and accessibility of quality healthcare. It strives to improve
awareness and healthy living practices, and provides a range of healthcare
services, spanning the entire life cycle. The Company also provides specialised
services through tertiary healthcare facilities such as multi-specialty hospitals,
at subsidised prices to the communities.
1)Health Outreach Programme:
Reliance’s health outreach programme provides primary health services
including screenings and consultations. It employs 10 Mobile Medical Units
(MMUs) and 3 Static Medical Units (SMUs) across Madhya Pradesh,
Maharashtra, and Uttarakhand to offer medical help to the underprivileged
communities.
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2)Alliance for Saving Mothers and New-borns (ASMAN):
Through Project ASMAN, Reliance, along with four other organisations, is
working in Rajasthan and Madhya Pradesh to strengthen the health systems by
enhancing quality of services in public health facilities for improved maternal
and new-born outcomes.
4.5.3 Education
Reliance's educational initiatives aim to advance primary and secondary
education while facilitating higher education nationwide through merit-based
scholarships. To enhance the effectiveness of teaching and, in turn, student
performance, Reliance has been utilizing the appropriate technologies and
learning resources.
Reliance supported various organizations in providing high-quality education
to children from underprivileged communities as part of its efforts to diversify
its initiatives in the education sector. The initiatives of these organizations focus
on improving enrolment rate, improving skill sets of teachers, improving
English language skills of children, mainstreaming of children with special
needs and improving educational infrastructure. Reliance is enhancing the
educational outcomes for over a lakh child nationwide through these
collaborations.
1) Scholarships for Higher Education:
The Dhirubhai Ambani Scholarship (DAS) program, which aims to develop
talented young leaders, has so far given 11,781 deserving students financial aid
so they can complete their undergraduate degrees in any stream and institution
of their choice. Nearly half are female, and one-fifth of the DAS scholars are
students with special needs. Scholarships are given to meritorious students from
the villages near the plant location under the Protsahan Scheme in East Godavari
(Andhra Pradesh). This year, 290 students were given scholarships under the
program for the purpose of pursuing higher education. Reliance has collectively
funded 13,644 students through a variety of scholarship programs.
2) Infrastructure Support to Schools:
As part of its relief and rehabilitation assistance following the devastation of the
2013 floods, Reliance built two schools for the Government of Uttarakhand. The
two now-operational schools, stand testimony to the Company's dedication to
helping Uttarakhand recover. These schools cater to nearly 1,000 students,
coming from around 30 villages in the vicinity.
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The Government schools across several locations were supported in enhancing
their infrastructure including furniture, computers, RO plants, school uniform
kits, etc. The spouses of Reliance employees held classes for English language
to Moti Khavdi Kanyashala students and assisted girls from low-income
families and school dropouts in competing through the National Institute of
Open Schooling.
3)Digital Classroom:
Reliance has worked with local governments to establish model digital
classrooms in 129 government schools across Andhra Pradesh, Gujarat, Madhya
Pradesh, Maharashtra, and Telangana benefitting about 30,000 students.
A central relay station connects teachers to all schools for teaching live virtual
classes and facilitates interaction between teachers and students. Offline classes
on specific subjects are also conducted. The virtual classroom has bolstered the
confidence of students and has resulted in higher pass percentages.
Additionally, the platform is being used for conducting classes on development
of life-skills, career guidance, etc.
4)Reliance Foundation Schools:
Over 15,000 children are educated each year at thirteen Reliance Foundation
Schools, which are spread across Jamnagar, Surat, Vadodara, Dahej, Lodhivali,
Nagothane, Nagpur, and Navi Mumbai. The schools provide education from
kindergarten through class twelve and are associated with the Gujarat and
Maharashtra State Education Boards as well as the Central Board of Secondary
Education. The Hindustan Times listed Reliance Foundation School in
Koparkhairane as one of the top 10 schools in Navi Mumbai in 2017.
Students are prepared for the ICSE, IGCSE, and IB Diploma exams at
Dhirubhai Ambani International School (DAIS). DAIS offers a top-notch
education to more than 1,000 kids each year and employs 150 teachers with
extensive backgrounds in national and international curricula. Across all three
curricula, students have consistently produced excellent results.
4.5.4 Education and Sports for All
To affect positive change among youth and children in both urban and rural
settings, Reliance uses sports as a medium to promote health, fitness, and an
active lifestyle. Children and youth are taught strategic thinking, competitive
spirit, and leadership skills through popular sports like football, basketball, and
athletics. Reliance collaborates with numerous national and state sports bodies
27
to enhance the sporting ecosystem through better facilities, training,
infrastructure, and equipment.
1) Access to Quality Education for Underprivileged:
In accordance with ESA, Reliance collaborates with NGOs and works at the
local level to support the education of underprivileged children. In 2017 an
innovation known as the Digital Learning Van was introduced as a continuation
of this initiative. In the Thane and Mumbai districts, the van has spoken with
more than 4,000 students from ten government schools. 0.2 million children
have benefited from this initiative.
2) Reliance Foundation Youth Sports (RFYS):
RFYS offers a distinctive national platform for promoting grassroots sports.
The program continued with football in 2007 and added athletics to further
recognize and promote sporting talent throughout the nation.
3) Reliance Foundation Young Champs (RFYC):
RFYC is a unique, full-time residential football and educational program
supported by scholarships. It aims to give India's aspiring football stars the
chance to hone their abilities with top-notch training and facilities.
4.5.5 Disaster Response
Reliance strives to work closely with affected communities to respond quickly
and effectively to disasters that put lives and livelihoods in danger. It makes use
of all its assets, including its human capital and technological capabilities, to
support relief and rehabilitation efforts.
1) Flood Response in Assam:
Numerous residents of the state of Assam were affected by the flooding in
August 2017 and were left stranded and without their possessions. Reliance
responded to the need by identifying the 22 villages that had not received
enough relief assistance and providing ration kits to more than 10,000 people,
enough to keep them fed for 15 days.
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2) Support during Ockhi Cyclone using Technology:
When Cyclone Ockhi hit the southern regions of India, Reliance was crucial in
helping to save many lives. Through its various communication channels, the
company informed coastal areas in Tamil Nadu and Kerala of cyclone advisories
and warnings.
Fishermen in these regions were advised not to go out to sea due to strong winds,
large waves, and a lot of rain. Over 27,000 fishermen's lives were saved by
Reliance's timely information.
Additionally, the farmers were reached through a variety of communication
channels, including the "Flag Method," "Knowledge on Wheels," a help line,
and multi-location audio conferences, which prevented the loss of over 4,600
hectares of paddy fields.
Reliance served as a technological link between government officials and
fishermen. The toll-free helpline of the Reliance Foundation received several
calls from people requesting assistance in finding missing boats and fishermen.
To speed up the rescue effort, the information was immediately shared with the
Coastguard and Indian Navy. 35 boats and more than 300 fishermen were saved
from the depths of the ocean. A survey reveals that nearly 91% of the fishermen
who were impacted by the cyclone said the advisories had been helpful to them.
4.5.6 Arts, Culture and Heritage and Urban Renewal
Reliance makes conscious efforts to improve the livelihood opportunities for
traditional artisans and craftsmen as well as to preserve India's rich heritage, art,
and culture for the future generations. This is accomplished, through the
implementation of numerous promotional initiatives and the preservation of
India's cultural heritage for future generations.
1) Beautification of Public Places:
Through its urban renewal program, Reliance works on city modernization
initiatives to enhance the infrastructure and quality of life in urban areas. The
initiatives aim to upgrade public areas to provide newer facilities and revitalize
the aging infrastructure.
29
4.5.7 Other Initiatives by Reliance Foundation
1) Contribution to Swachh Bharat:
Reliance has been motivating its programme beneficiaries on importance of
cleanliness, hygiene, and sanitation in both urban and rural areas. To raise
awareness of the benefits of cleanliness, awareness campaigns are carried out.
Reliance has been an active participant in the ambitious Swachh Bharat Mission
of Government of India.
2) Wildlife Conservation and Animal Welfare:
Numerous organizations dedicated to protecting wildlife and promoting animal
welfare are supported by Reliance. These groups provide relief and
rehabilitation support to injured wild and domestic animals, including rescue,
treatment, and surgical care, as well as shelter. They also work to protect wildlife
against poachers and reduce the likelihood that wild animals will stray into
human settlements. Additionally, these organizations educate locals on the value
of conserving wildlife and preventing conflicts between people and animals.
3) Improving Access to Sports Infrastructure:
Reliance installed a multi-sports complex in two stadiums under Thane
Municipal Corporation. With LED illuminated line markings, this facility's net
cage is specially made to fit all playing fields and facilitate the sports being
played. Soccer, ring hockey, volleyball, handball, cricket, and tennis are among
the six sports that can be played in the sports complex. These multi-sport
stadiums in the heart of densely populated cities fill a critical need as space for
athletes and fitness enthusiasts is becoming increasingly limited in urban areas.
4) Empowering Women through Financial Literacy:
Reliance undertook systematic efforts to accelerate financial inclusion by
promoting financial literacy among women because it strongly believes in
inclusive growth. Participants in this program would gain formal connections to
at least one formal financial institution while also learning the nuances of
personal finance and the value of saving money. Training in financial literacy
has been given to over 12,000 women till now.
30
4.6 Reliance Foundation - Covid-19 Response Initiative
As a Group, Reliance marshalled all its human, financial, and technical
resources, leveraging years of business expertise and community development
experience and adopted a multipronged prevention, mitigation, adaptation and
ongoing support strategy with the government and civil society to beat the
COVID-19 pandemic. The actions included addressing the socioeconomic
effects of the pandemic and addressing the pandemic's socio-economic impacts,
as well as strengthening the health infrastructure and contributing to relief funds.
Reliance took several actions to assist the country with urgent needs, such as
testing facilities, PPE manufacturing facilities, etc.
To combat COVID-19, Reliance launched numerous missions which included
Mission Oxygen, Mission COVID-19 Infra, Mission Anna Sewa, Mission
COVID-19 Suraksha, and Mission Vaccine Suraksha. Several additional
initiatives were also launched to rebuild rural livelihoods and to strengthen
community resilience and preparedness by raising awareness of various aspects
of precaution and prevention in the face of the pandemic.
Mission Oxygen: To meet the nation’s medical oxygen requirements, Reliance
Industries repurposed its Jamnagar plant in a matter of days to ramp up
production from zero to 1000 MT of liquid medical oxygen to be distributed
free across the country, serving the needs of 1 lakh patients per day.
Mission COVID Infra: Distributing over 1.4 crore masks to vulnerable
communities, strengthening hospital and healthcare infrastructure, and
providing support across numerous locations.
Mission COVID Suraksha: Mission COVID Suraksha, which focused on
spreading knowledge about prevention and safety from COVID, distributed 1.
4 crore masks throughout India to frontline workers and communities in 26
states and Union Territories. It also raised awareness on the significance of
COVID-safe behaviour. Additionally, 20 states and Union Territories received
more than 9.5 lakh sanitizers, and 2+ lakh gloves.
Free consultation for COVID: Through the Jio Health Hub, the Reliance
Foundation also introduced a program for free COVID consultations. This was
to enable People to get medical advice at their convenience and from the
comfort of their homes.
Mission Anna Sewa: To protect the most vulnerable communities from the
effects of the economic downturn, emergency meals were given to them. More
31
than 43 lakh people who are marginalized and underserved, including migrant’s
workers, wage earners, and slum residents received 8.5 crore meals through
Mission Annasewa, the largest meal distribution program ever launched by a
corporate foundation in the world. These meals included dry-ration kits, food
coupons, and cooked meals and was distributed across 19 states and 4 UTs.
Mission Vaccine Suraksha: Campaigns to raise awareness about the COVID-
19 vaccine were actively supported by Mission Vaccine Suraksha - RF
(Reliance Foundation). To raise awareness about COVID-19 vaccinations were
conducted on both physical and digital platforms, such as Dial Out Conference,
WhatsApp, and VMS, etc. The on-field RF teams supported government health
workers and departments in their efforts to mobilize the community for
immunization. 40 lakh or more doses were given out free of charge overall to
support the nation in its vaccination mission. Furthermore, RF assisted the
district administration in running vaccination campaigns for the local
populations. Ninety percent of respondents stated that the shared messages
inspired them to vaccinate themselves or family members vaccinated.
Restoring Rural Livelihoods: To help communities, sustain their livelihood,
RF mentored FPOs assisted in re-establishing market links that had been broken
by the pandemic. To close the information gap and ensure that a large portion
of the affected population has access to opportunities offered by government
programs, impromptu markets or procurement centres, the e-NAM trading
platform, and many other options, various technology platforms were used.
Support for building capacity was given to assist returning migrants in finding
new opportunities for employment in agriculture, horticulture, animal
husbandry, and fisheries. As a result, 48,706 farmers received assistance from
RF mentored FPOs and through digital linkages to transact farm and non-farm
produce worth Rs120 crores during the COVID-19 crisis. 5,900 people received
access to entitlement for receiving benefits from government programs, and
20,000 laborers were supported with opportunities for wage employment. 81%
who received livelihood advisories reported that these helped them realize
benefits during times of crisis ,62 % of the respondents could effectively manage
their livelihood activities, and they reported that these helped them realize
benefits during times of crisis.
Provide care for stray animals: The decline in human activity during the
lockdown made it difficult for stray animals to find food. Extending its care to
animals, provisions were made for the distribution of food to stray animals. To
help partner organizations that care for stray animals, animal food was given. In
rural areas, fodder kits and grain feed for birds were also available. During the
pandemic, care, and treatment for over a lakh animal was provided.
32
Collaborations & partnerships with NGOs and Government agencies, pan-India
network of Reliance, technical expertise in disaster management, digital
technology solutions, strengthened local governance and leadership in rural
areas built over the last decade facilitated and acted as a catalyst for an effective
and prompt implementation of Covid response initiatives on ground.
33
CHAPTER 5
IMPACT, COMMITTEE & BUDGET OF THE
CSR ACTIVITIES BY RELIANCE
INDUSTRIES
5.1 Measuring and Reporting Outcomes of the CSR
Activities
The Monitoring and Evaluation (M&E) framework for Reliance seeks to
concentrate on results and impact measurement in various ways by gauging how
people's lives have changed with which it interacts. The M&E team is made up
of internal staff members to continue to play a critical role in routine monitoring
and analysis of the various parameters that represent the programs using:
a) Impact evaluation studies.
b) Regular program monitoring to keep track on important operational
strategies.
c) Focus on beneficiary acceptance and course correction
d) Efficient information systems for creating solutions for accumulating,
assembling, storing, processing, and sending data.
The data gathered from various studies will be used to support the advocacy
cause of development issues to positively influence the evidence-based
decision-making process in development sector.
RIL to continuously strengthen its existing systems and processes to capture the
impact (social/economic and developmental) through its various initiatives
across multiple mediums. Periodic reports of CSR initiatives to be presented
before the Corporate Social Responsibility and Governance Committee
(CSR&G) and Board of Directors of the company.
34
5.2 Impact of CSR activities
With a comprehensive development approach, Reliance Foundation, the CSR
arm of Reliance Industries, positively touches the lives of millions every year,
making it one of the largest corporate philanthropies in India and the world.
Since the inception of Reliance Foundation, the CSR arm of Reliance Industries,
has reached the lives of 5.75 crores.
Under its Rural Transformation which is a long-term program that addresses all
the critical development indicators like rural livelihoods, water, food and
nutrition, women’s empowerment and access to knowledge resources, Reliance
Foundation has empowered 50,600 villages.
Under the Reliance Foundation Education wherein it aims to provide
opportunities for the young to develop themselves into future citizens who
contribute to the society, it has impacted 3.9 lakh children and teachers through
various education initiatives.
For the Disaster Response, Reliance Foundation provide quick to mitigate the
effect of natural disasters. This includes providing early warnings, mobilizing,
and distributing relief supplies, and supporting local governments in their efforts
to aid disaster-affected communities with post-disaster relief. From this 11.4
lakh people have benefitted.
Reliance has responded in a multi-pronged way, leveraging infrastructure and
resources to meet the challenges posed by the COVID-19 pandemic in addition
to regular health initiatives wherein 73.6 lakh health consultations have been
provided.
Under the sports for development, Reliance Foundation sports initiatives give
aspiring athletes in India a platform to hone their skills and showcase their
abilities across a range of sports wherein 2.15 youth and children have been
benefitted.
During covid-19, for communities’ free cost of vaccinations, food missions,
medical care, and support for the children.
As a part of Mission Anna Seva 8.5 crore free meals provided to marginalised
communities, daily wage earners and frontline workers.
Impact of Water based Initiatives: There was increase in income in the villages.
Annual gross income from agriculture was found to be Rs 1.08 Lakh. It also led
to decrease in outbound migration due to increase in income. It also improved
health conditions as women in villages no need to go long distance to collect
water, thus improving their health condition. As income improved the notion of
educating the children become possible for the farmers.
In the villages, the program has incorporated climate change adaptation
measures like improved agricultural practices, efficient water governance, and
35
sustainable water management practices that have increased the villagers'
capacity for adaptation. Villagers who received an water made 81 percent of
their own plans for the water requirements; only 16% of the villages experienced
water scarcity recently. According to 60% of the farmers, the water tables are
not dropping. Crop rotation is now used by 75% of farmers, and crop
diversification is used by 85% of farmers. 54 percent of farmers used effective
irrigation methods, allowing them to grow multiple crops and make better use
of the water resources.
Value Creation through Enhanced Water Security: Improvements to water
security and the creation of opportunities for small-scale and marginal farmers
to make a living are two of the program's focus areas. Reliance began an impact
analysis of its water security and livelihood in 2018 using the Social Returns on
Investment methodology.
For this assessment, five programme villages of Agar (Madhya Pradesh) were
selected. The water and livelihood benefitedi about 5,100 people in these
villages. The study looks at indicators such as improvement in water efficiency,
economic stability, education and health, livelihoods, reduction in migration,
increase in confidence, aspirations, and self-worth. Results indicate that most
of these aspects have benefited from Reliance's investments.
Transforming Lives: Water Conservation in Sendhwa: People from Bijapuri
village in Sendhwa block (Barwani, Madhya Pradesh) frequently relocate to
nearby states like Gujarat and Maharashtra each year. With predominant rain-
fed agriculture and lack of irrigation, the farmers were unable to cultivate more
than a single crop that resulted in dependency on non-farm livelihood options
during Rabi and Zaid seasons.
The village could become water secure by harvesting rainwater at key locations,
according to a water budgeting exercise that was conducted. Following a
technical evaluation, Reliance built a check dam to ensure irrigation of 80
hectares. The farmers can now cultivate in at least two crop seasons annually
with this support. The villages now have year-round access to a variety of
livelihood options because of this.
5.2.1 Impact of Rural Transformation
Livelihoods of 1.2 million+ farmers, fisherfolk and livestock owners enhanced
(over 4.8 million since inception).
36
More than 7,000 Ha of land now have sustainable agricultural practices (more
than 64,000 Ha since the program's inception) because of eco-consistent soil
conservation.
Over 32,000 hectares of land have been irrigated because of water harvesting
and conservation efforts.
Since the program's beginning, a capacity for collecting more than 73 billion
litres has been built. As a result, 307 villages now have reliable access to water.
To encourage biodiversity, more than 7 million saplings were planted this year
(over 20 million since the program's inception).
Figure No. 3: Increased Agriculture produce due to
initiative taken by the Reliance Foundation
Figure No. 4: Water conservation through earthen dam
construction, initiative taken by Reliance Foundation
37
Contribution to Village Social Transformation Mission, Maharashtra:
The Maharashtra government and Reliance partnered in 2017 to transform 1,000
villages in a comprehensive manner. Reliance is demonstrating an all-inclusive
model of rural transformation as part of this. The model gives localities the
power to create accountable and transparent governance systems, achieve food,
water, nutrition, and energy security, and support sustainable livelihoods. The
model also places a strong emphasis on education and raising awareness of
rights and privileges. It works to strengthen physical and digital infrastructure,
as well as making villages more resilient to disasters,
Early findings from Reliance's direct involvement with 51 villages point to:
2,600 hectares of irrigation have been guaranteed with increased water
harvesting capacity.
3,500 families earning an annual income of over one lakh.
5.2.2 Health
Through Reliance-managed hospitals, mobile and stationary medical facilities,
and various health camps, patients have received over 0.44 million health
consultations (4 million since inception).
5.2.3 Education
Over 13,644 scholarships have been awarded since the program's inception,
helping 713 deserving students pursue higher education through scholarships.
Delivering a top-notch education to 16,000 students through 14 Reliance
Foundation Schools.
5.2.4 Disaster Response
Supported over 10,000 people from 22 flood-affected villages spread across
Assam's 11 districts.
Helped more than 0.15 million people from 87 Gujarati villages affected by
floods spread across 2 districts. Adopted the four worst-hit villages and will help
with rehabilitation needs in addition to immediate relief.
38
Over 4,600 Ha of paddy fields and 27,000 fishermen's lives were saved by the
early warning alerts that were distributed during the Ockhi cyclone in Southern
India.
5.2.5 Arts, culture, Heritage
Supported the Indian classical music festival "8 Prahar," which featured Padma
Vibhushan Sangeet Martand Pandit Jasraj and other singers to delight Mumbai's
music lovers.
Nita Mukesh Ambani Culture Centre (NMACC) was founded by Mrs Nita M.
Ambani philanthropist and chairperson of the Reliance Foundation, to preserve
and promote Indian Arts.
5.2.6 Impact of Sports for Development
The RF Jr NBA program has expanded to 10,000+ schools across 34 cities. 9
million children and youth have been motivated to adopt a healthy, active
lifestyle so far by the program.
48 talented young football players are receiving scholarships from the RF
Young Champs program to help them hone their skills in top-notch training
environments and world-class facilities.
Football and athletics were both added to the RF Youth Sports program in its
second year.
4.7 million youth from 3,400+ educational institutions were reached by the
program.
5.3 Corporate Social Responsibility and Governance
Committee of Reliance Industries
a) CSR and Governance Committee was established by the board of directors of
RIL. The RIL CSR policy will be decided by this committee and the CSR team.
b) The Board level Committee should hold meetings at least twice a year to assess
how CSR projects and programs are being carried out and to provide appropriate
guidance.
39
5.4 Budget for the CSR Activities of Reliance Industries
a) The RIL Board should make sure that at least 2% of the company's average net
profit over the previous three years goes toward CSR projects.
b) b) All expenditure towards the programs to be diligently documented
c) c) In case at least 2% of average net profit of the last 3 years is not spent in a
financial year, reasons for the same to be specified in the CSR report
d) d) Any surplus generated from CSR activities is not to be included in RIL's
regular business profits.
40
CHAPTER 6
CONCLUSION
6.1 Conclusion
Hence Successfully studied the scope of Corporate Social Responsibility.
Studied and analysed the CSR Activities of Reliance Industries. Reliance
Foundation oversees the CSR activities undertaken by Reliance Industries. All
the major fields of social activities have been undertaken by Reliance Industries
under their corporate social responsibility.
The CSR Activity includes Rural transformation, giving affordable solutions for
healthcare through improved access, awareness, etc, CSR activities by Reliance
Industries also includes giving quality education, skill enhancements, giving
access to education of those who do not have access to proper education,
working on increasing the literacy rate. The conglomerate also works on
enhancing livelihood and quality of life therefore promoting environmental
sustainability. Reliance Industries has a track record of organizing timely relief
and rehabilitation for communities affected by natural calamities like floods,
earthquakes etc. It also promotes arts and culture and preserves rich heritage for
the future generation.
Reliance Industries aim is Net Carbon Zero by 2035. It has also taken an impact
assessment of water-based initiative wherein it provides crucial support for
water harvesting and management. Apart from these, other initiatives by
Reliance Foundation are ESA (Education and Sports for all), Women
Empowerment, Urban Renewal.
To combat COVID -19, Reliance launched several missions, including Mission
Oxygen, Mission COVID-19 Infra, Mission Anna Sewa, Mission COVID-19
Suraksha, and Mission Vaccine Suraksha, to. Several other programs were also
started to restore rural livelihoods and to increase community preparedness and
resilience by educating people about various aspects of precaution and
prevention in the face of a pandemic.
41
BIBLIOGRAPHY / REFERENCES
https://www.ril.com/getattachment/3de565d6-3a54-4243-b40b-
02f6a25679c2/AnnualReport_2021-22.aspx
https://www.ril.com/DownloadFiles/IRStatutory/CSR-Policy.pdf
https://www.ril.com/ar2017-18/report-on-csr.html
https://www.reliancefoundation.org/covid-19-response
https://byjus.com/full-form/csr-full-form/
https://www.ril.com/OurCompany/CSR.aspx
42
FIGURES
Figure No. 1: Objectives of the CSR Policy of the Reliance Industries
Figure No. 2: Core Model for the focus area of the CSR Activities by the Reliance Industries
Figure No. 3: Increased Agriculture produce due to initiative taken by the Reliance
Foundation
Figure No. 4: Water conservation through earthen dam construction, initiative taken by
Reliance Foundation
43
APPENDICES
https://www.investopedia.com/terms/c/corp-social-responsibility.asp
https://www.ril.com/OurCompany/CSR.aspx
i
Specializaon project on
Study on psychological wellbeing of employees
during remote work
Submied in paral fullment for the award of the degree of
Masters of Management Studies (MMS)
(Under University of Mumbai)
Submied By
Soundarya Mudliar
(Roll No – 20)
Under the Guidance of
Dr. Sarita Kumari
2021-23
SIES College of Management Studies
ii
Specializaon project on
Study on psychological wellbeing of employees
during remote work
Submied in paral fullment for the award of the degree of
Masters of Management Studies (MMS)
(Under University of Mumbai)
Submied By
Soundarya Mudliar
(Roll No – 20)
Under the Guidance of
Dr. Sarita Kumari
2021-23
SIES College of Management Studies
iii
CERTIFICATE
This is to cerfy that project tled “Study on psychological wellbeing of employees
during remote work” is successfully completed by Ms. Soundarya Mudliar during the IV
semester, is paral fullment of the Master’s Degree in Management Studies recognized
by the University of Mumbai for the academic year 2021-23 through
This project work is original and not submied earlier for the award of any degree or any
associateship of any other University / Instute.
Signature of the Faculty guide Name:
Dr. Sarita Kumari
Date: 28 /04/2023
4
DECLARATION
I, MS. Soundarya Mudliar, studying in the second year of Masters
of Management Studies (MMS) at SIES College of Management
Studies, Nerul, Navi Mumbai, hereby declare that I have completed
the Capstone Project tled “Study on psychological wellbeing of
employees during remote work” as a part of the curriculum
requirement for the Masters of Management Studies. I also declare
that the work undertaken by me is original and has not been copied
from any source. I further declare that the informaon presented
in this project report is true and has not been submied to
SIESCOMS or any other Instute for any other examinaon.
Name: Soundarya Mudliar Signature of Student
Roll No. 20
5
Acknowledgement
I would like to express my deep and sincere gratitude to my research
supervisor and Mentor Dr. Sarita Kumari, for giving me the
opportunity to do research and providing invaluable guidance
throughout this research. Her dynamism, vision, sincerity and
motivation have deeply inspired me. She has taught me the
methodology to carry out the research and to present the research
works as clearly as possible. It was a great privilege and honor to work
and study under her guidance. I am extremely grateful for what she
has offered me.
I am extremely grateful to my parents for their love, prayers, caring
and sacrifices for educating and preparing me for my future.
6
TABLE OF CONTENT
Particulars/Title
Page no
Introduction
07
Objectives
10
Scope
11
Literature Review
12
Methodology
17
Result
28
Discussion
29
Conclusion
30
Bibliography / References
31
7
Introducon
In recent years, the rise of remote work has significantly changed the
traditional work environment. Due to technological advancements,
many companies have adopted remote work policies, which allow
employees to work from their homes or any other location outside of
the office. While remote work offers many benefits such as increased
flexibility and reduced commute times, it also presents unique
challenges that can impact the psychological well-being of employees.
The COVID-19 pandemic has accelerated the adoption of remote work
policies, forcing many employees to work from home for extended
periods of time. This has brought the issue of psychological well-being
in remote work settings to the forefront of research. The sudden shift
to remote work has left many employees feeling isolated, stressed,
and burnt out, leading to concerns about their mental health.
The psychological well-being of employees is a critical factor that
impacts not only their personal lives but also their work performance
and productivity. Therefore, it is essential to understand the factors
that influence psychological well-being in remote work settings and
develop strategies to mitigate the negative impacts This study aims to
investigate the psychological well-being of employees during remote
work, with a focus on identifying the factors that contribute to positive
and negative outcomes. The study will explore the impact of various
factors such as job autonomy, social support, work-life balance, and
technology use on the psychological well-being of remote workers.
By identifying the factors that influence psychological well-being in
remote work settings, this study aims to provide valuable insights into
how organizations can create a supportive and healthy work
8
environment for their remote employees. The findings of this study
may inform the development of policies and interventions that
promote employee well-being and enhance the overall performance
of remote teams. Overall, this study is an important contribution to
the growing body of research on remote work and employee well-
being. The findings of this study may have implications for the future
of work and inform the development of policies that promote work-
life balance and support the mental health of employees.
When we look at what really is psychological wellbeing of an
employees, it refers to the state of a person's mental health and
overall happiness in the workplace. It includes various aspects such as
emotional stability, life satisfaction, a sense of purpose and meaning
in one's work, and positive relationships with colleagues and
supervisors. Psychological well-being is essential for employees to be
able to function effectively and to maintain a positive attitude towards
their work. In a work context, psychological well-being can be
influenced by a variety of factors, including job demands, work
resources, organizational culture, and personal factors such as
individual coping mechanisms and personality traits. When employees
experience high levels of psychological well-being, they are more likely
to be productive, engaged, and motivated in their work. On the other
hand, when employees experience low levels of psychological well-
being, they may experience burnout, stress, and disengagement,
which can negatively impact their work performance and overall job
satisfaction.
Remote work can pose unique challenges to psychological well-being,
such as social isolation, blurred boundaries between work and
personal life, and a lack of support from supervisors and colleagues.
As such, it is important to understand the factors that contribute to
9
psychological well-being in remote work settings and develop
strategies to support employees' mental health in these contexts.
Remote work has become increasingly popular in recent years due to
advancements in technology and the changing nature of work. Many
companies now offer remote work options as a way to attract and
retain top talent, improve work-life balance, and reduce costs
associated with maintaining a physical office.
Remote work can offer many benefits for both employees and
employers, including increased flexibility, reduced commute times,
and access to a wider pool of talent. However, remote work can also
present unique challenges, such as social isolation, difficulty in
collaborating with colleagues, and managing work-life boundaries. As
remote work continues to become more prevalent, it is important for
organizations to understand how to effectively manage remote teams
and support the well-being of their remote employees. This includes
providing the necessary resources and tools to enable effective
communication and collaboration, establishing clear expectations and
guidelines for remote work, and promoting work-life balance and
employee well-being.
10
Objectives
1. To study the effect of remote working on employees’
psychological well-being in the Information Technology industry
2. To study if there are gender and age differences that influence
the psychological well-being of the employees in the Information
Technology industry
3. To study the impact of remote work on employees' psychological
wellbeing, including factors such as social isolation, work-life
balance, and stress.
4. To identify the specific challenges that remote work presents to
employees' psychological wellbeing.
5. To explore the coping strategies that employees use to manage
the challenges of remote work.
6. To determine the effectiveness of current organizational policies
and practices in supporting employees' psychological wellbeing
during remote work.
By achieving these objectives, this study can contribute to the growing
body of literature on remote work and provide valuable insights for
organizations seeking to support their remote workforce and improve
employee wellbeing.
11
Scope
• Examining the impact of remote work on employee stress levels,
Work-life balance, social isolation, and overall mental health
• To explore the strategies that organizations can use to support
the psychological wellbeing of their remote workers such as
offering mental health resources and by promoting regular
communication and feedback
• The research can examine how different remote work
arrangements, such as full-time remote work versus a hybrid
model, impact employee wellbeing.
12
Literature Review
Christopher Pappas (2022) in his study “What's The Impact of Remote
Working on Employee Well-Being?” Over the last couple of years,
working remotely has become a new norm. Initially, many enjoyed the
convenience of avoiding a commute and wearing comfortable clothing
while working, but it didn't take long for negative consequences to
emerge. Burnout among remote employees is an undeniable reality of
the modern age. Employee burnout is a distinct form of work-induced
stress that usually manifests as prolonged physical and emotional
exhaustion, negatively impacting focus and productivity levels.
Consequently, employee burnout often leads to reduced job
satisfaction and engagement.
While it's not a medical diagnosis, employee burnout is genuine and
can even cause physical symptoms, such as frequent headaches, body
aches, and sleep disorders. The emotional symptoms of burnout are
also significantly harmful to employee well-being. Remote workers
may encounter feelings of inadequacy and a decline in creativity.
Additionally, they may lack the drive to begin their day, even though
they have a substantial workload to tackle. These negative emotions
can also affect workplace relationships. As burned-out employees
become increasingly disengaged from their work, they may become
critical of their tasks or impatient and irritable with their colleagues.
Moreover, these sudden changes cause employees to experience
considerable anxiety and apprehension about their future.
Fatima Mahomed(2022) in her study “Exploring employee well-being
during the COVID-19 remote work” says that the onset of the COVID-
19 pandemic has hastened the shift to remote work setups, resulting
in an almost immediate transition away from office-based jobs. This
trend towards remote work is projected to persist, with a Boston
13
Consulting Group (BCG) study revealing that 89% of individuals
anticipate working remotely at least some of the time post-pandemic.
South Africans, in particular, exhibit a greater-than-average
preference for full-time flexible working models. The pandemic-
induced forced transition and rapid change may lead to both
challenges and benefits for employee outcomes, which have yet to be
fully explored. Remote work challenges may be viewed as job
demands, whereas remote work benefits may be understood as
specific job resources. These demands and resources are expected to
impact employees' remote work experiences during the COVID-19
era, and as a result, their well-being. This study specifically aims to
concentrate on two job demands that the literature has identified as
relevant to the remote work setting: work-home conflict and social
isolation. From a resource perspective, effective communication,
social support, and job autonomy are the three essential facilitators
for successful remote working, as per the literature.
Megan Brenan (2020) in her article “COVID-19 and Remote Work: An
Update” says, In some places like U.S. due to the covid-19 pandemic
the people suffered huge loss which includes high unemployment, the
shuttering of businesses and the worked were asked to shift to off-site
and remote work. With the help of Gallup which is public opinion polls
conducted worldwide the researched found out that A majority of
workers are not concerned about being exposed to the coronavirus at
their workplace. They were not concerned about their jobs due to
which they were risking their health which is the reason for affecting
their and psychological wellbeing. According to one of the research
done by it says that in the United States, remote work has become
increasingly common, with a significant portion of workers working
remotely at least some of the time. According to recent statistics, 33%
of U.S. workers always work remotely, while 25% work remotely
sometimes. However, 41% of workers never work remotely. Despite
14
concerns about COVID-19 exposure, a majority of workers (55%) are
not concerned about exposure at work. For many remote workers, the
flexibility and autonomy offered by remote work have been beneficial,
with about two-thirds expressing a desire to continue working
remotely in the future.
Longqi Yang (2021) “The effects of remote work on collaboration
among information workers” In the wake of the COVID-19 pandemic,
there has been a significant shift in the way people work. Prior to the
outbreak, only about 5% of Americans worked from home for more
than three days per week. However, by April 2020, this number had
risen to approximately 37%, with nearly every American that was able
to work remotely doing so. This rapid transition has caused many firms
to re-evaluate their work arrangements, with some companies like
Twitter, Facebook, and Slack announcing permanent remote work
policies.This shift to remote work has prompted many questions
about its long-term impact on information work. To answer this
question, we examine Microsoft's company-wide work from home
policy during the pandemic as a natural experiment. Our goal is to
identify the causal impact of remote work on employees'
collaboration networks and communication practices.
The sudden shift to remote work has had a profound impact on
employees' communication practices. For instance, video
conferencing platforms like Zoom and Microsoft Teams have become
the primary mode of communication for many companies. This shift
has led to changes in the way that employees communicate and
collaborate with one another. For example, remote work has reduced
the frequency of in-person meetings, leading to more asynchronous
communication and a greater reliance on written communication.
Additionally, remote work has reduced the likelihood of impromptu
conversations and interactions that occur in an office setting, leading
to changes in the types of communication that occur.
15
Another impact of remote work has been on employees' collaboration
networks. Remote work has made it more difficult for employees to
build and maintain relationships with colleagues, particularly those
that they do not work with closely. As a result, remote work has led to
a reduction in the size of employees' collaboration networks. This
reduction in network size may have implications for innovation and
knowledge sharing within organizations.
However, there are also potential benefits to remote work. For
example, remote work can lead to increased flexibility, which may
improve work-life balance for employees. Remote work can also
reduce commuting time and associated costs, leading to potential cost
savings for both employees and employers. Overall, the impact of
remote work on information work is complex and multifaceted. While
remote work has led to changes in communication practices and
collaboration networks, it has also created potential benefits in terms
of flexibility and cost savings. As companies continue to evaluate their
work arrangements, it will be important to consider both the costs and
benefits of remote work in order to make well-informed decisions.
Sudhir Kumar Pant in his study, “A study of the emotional wellbeing of
private-sector employees working from home during Covid-19”
Emotions are feelings, thoughts, moods, temperaments, expressive
behavior of the individual, which leadto an action or a reaction due to
an internal or external impetus. These emotional actions are triggered
by the human nervous system, which is the core function of the
human brain. “Emotions are identified with action readiness change”.
The emotions have associated actions and a person’s ability to do a
certain thing may differ, depending upon his emotion. An individual
with positive emotions may be more productive and engaged as
compared to an individual with negative emotions. “Emotions
constitute a primary motivational system for human beings. An
employee working from home or office under a normal condition may
16
have a different motivational system, as against, when they are forced
to work from home, under constraint. Basic emotions have a facial
expression like happy, excited, sad, angry, fear, amusement,
contentment, desire, embarrassment, pain, relief & sympathy. These
emotions are discrete, measurable, and physiologically distinct.
Emotions can vary from negative to positive and in some cases, people
can experience both these emotions simultaneously.
Employee’s positive emotions (P) are associated with joyful feelings, a
sense of satisfaction, and a positive approach. Organizations are more
likely to see results by fostering positive emotions rather than simply
concentrating on negative emotions and dealing with problems.
Organizations and managers can focus on the positive emotions of
employees, motivate and leverage them to achieve organizational
goals and objectives. Employee engagement (E) and wellbeing go
hand to hand in an organization. Employee engagement includes
regular updates on the growth plans, progress, opportunities,
challenges, and updates on key strategic initiatives of the
organization. By doing this, employees have a sense of ownership,
belongingness, and engagement with an organization, as they have
first-hand information from leadership. The individual difference of
employees has a direct impact on the potential level of engagement in
the organization.
17
Methodology
While considering the Primary research it can be collected using a
variety of methods, including
• Surveys: Surveys involve asking a set of quesons to a specic
group of people. Surveys can be conducted in-person, over the
phone, via mail, or online.
• Interviews: Interviews involve a one-on-one conversaon
between a researcher and a parcipant. Interviews can be
structured, semi-structured, or unstructured.
• Focus groups: Focus groups involve a small group of people
discussing a topic or product under the guidance of a moderator.
• Observaons: Observaons involve watching and recording
behaviors or interacons of individuals or groups. Observaons
can be conducted in-person or through video recordings.
• Experiments: Experiments involve manipulang one or more
variables to see their eect on an outcome of interest.
Experiments can be conducted in a laboratory seng or in the
eld.
• Case studies: Case studies involve in-depth analysis of a specic
individual, group, or situaon.
18
The primary data collected through a quesonnaire consists of
responses provided by individuals to specic quesons asked in the
survey.
The quesons asked where as follows:
• Name
• Age
• Gender
• How frequently do you work from home?
• Which Industry do you work in?
• What is your preferred mode of communicaon with colleagues
and managers while working remotely
• How do you manage work-life balance while working from
home?
• How much support do you feel you receive from your employer
while working remotely?
• Do you feel isolated or disconnected from your team while
working remotely?
• Have you experienced any negave eects on your mental health
due to remote work?
• How oen do you take breaks during remote work, and for how
long?
• How do you handle distracons or interrupons during remote
work?
• Have you had any trouble separang work and personal life while
working remotely
• How oen do you engage in physical exercise during remote
work?
19
• How do you manage stress while working remotely?
• Do you feel that remote work has had a posive or negave
impact on job sasfacon?
• Would you prefer to connue working remotely in the future?
Why or why not?
• How do you manage stress while working remotely?
• Do you feel that remote work has had a posive or negave
impact on job sasfacon?
• Would you prefer to connue working remotely in the future?
Why or why not?
20
With this data we can clearly understand that 32.6% of the people
were under age 25-34
When asked about the gender around 56.5% of the parcipants
were female whereas 43.5% of the people were male
21
when the queson was asked about How frequently do you work
from home 54.3% of the parcipants answered that they work from
home somemes whereas 26.1% of the people worked when
required.
When asked about the industry 32.6% of the parcipants worked in
the IT industry whereas 17.4% of the people worked in
manufacturing industry.
22
When the queson was asked about What is your preferred mode
of communicaon with colleagues and managers while working
remotely 32.6% of the people prefer phone calls whereas 26.1% of
the people use instant messaging.
When the queson was asked about How do you manage work-life
balance while working from home? 37% of the people maintain a
set schedule for work and personal me whereas 23.9% of the
people use breaks throughout the day to aend to personal tasks
23
When the queson was asked about How much support do you feel
you receive from your employer while working remotely?43.5% of
the people voted for Some support
When the queson was asked about 34.8 % of the people voted for
Very isolated/disconnected
24
Here 50% of the people think that experienced negave eects on
mental health due to remote work
Here 37% of the people take breaks in every 3-4 hours for 20-30
minutes
25
47.8% of the people schedule breaks or take personal me to handle
distracons or interrupons during remote work?
52.2% of the people voted for yes, they face trouble separang
work and personal life while working remotely
26
32.6% of the people never do physical exercise during remote work
where as 26.1% voted for once or twice a week
30.4% of the people exercise or engage in physical acvity to deal with
stress while working remotely
27
37% of the people think that there is neutral impact on job sasfacon
47.8% of the people think that they Prefer a mix of remote and in-
person work
28
Results
• Increased levels of stress: Remote work can be stressful for employees as
they navigate new ways of working and balancing work and personal life.
• Impact on work-life balance: Remote work can blur the boundaries
between work and personal life, leading to increased diculty in achieving
work-life balance.
• Reduced social interacon: Remote work can lead to reduced social
interacon, which can impact employees' mental health and wellbeing.
• Increased autonomy: Remote work can give employees more control over
their work, leading to increased job sasfacon and wellbeing.
• Use of technology: The use of technology for remote work can have both
posive and negave impacts on employee wellbeing. On the one hand,
it can facilitate communicaon and collaboraon. On the other hand, it
can lead to increased screen me and tech-related stress.
• Role of managers: Managers play a crucial role in supporng employees'
psychological wellbeing during remote work. Eecve communicaon,
support, and feedback from managers can enhance employee wellbeing.
These are just a few possible ndings that could emerge from a study on the
psychological wellbeing of employees during remote work. The specic results
will depend on the research quesons, methodology, and sample populaon.
29
Discussion
• Impact of remote work on psychological wellbeing: The study's ndings
may indicate the extent to which remote work aects employees'
psychological wellbeing. This could be further discussed in the context of
previous research on the topic and the theorecal frameworks used in the
study.
• Coping strategies and resilience: The study may have idened coping
strategies that employees use to manage the challenges of remote work,
such as taking breaks or seng boundaries. The discussion secon could
explore how these strategies may contribute to employee resilience.
• Implicaons for managers and organizaons: The study may have
highlighted the importance of supporve managerial pracces and
organizaonal policies that promote employee wellbeing during remote
work. The discussion secon could examine the praccal implicaons of
these ndings for managers and organizaons, such as the need for
training programs and exible work arrangements.
• Future research direcons: The discussion secon could idenfy avenues
for future research on the topic, such as exploring the impact of remote
work on dierent demographic groups or invesgang the long-term
eects of remote work on employee wellbeing.
• Limitaons and implicaons for study design: The discussion secon could
reect on the limitaons of the study and how they may have aected the
ndings. It could also discuss the implicaons of the study's design for
future research, such as the need for larger sample sizes or dierent
research methods.
These discussion points are not exhausve, and the specics will depend on
the study's ndings and research quesons. However, they provide a
framework for discussing the implicaons and broader signicance of the
study's ndings.
30
Conclusion
• Remote work can have both posive and negave impacts on employee
psychological wellbeing. While remote work can provide increased
autonomy and exibility, it can also lead to increased stress, reduced
social interacon, and challenges in achieving work-life balance.
• Managers and organizaons play a crucial role in supporng employee
wellbeing during remote work. Eecve managerial pracces, such as
communicaon, feedback, and support, are important for promong
employee resilience and wellbeing.
• Coping strategies, such as taking breaks and seng boundaries, can help
employees manage the challenges of remote work and contribute to
employee resilience.
• Future research is needed to beer understand the impact of remote
work on dierent demographic groups and the long-term eects of
remote work on employee wellbeing.
• Organizaons should priorize the development of supporve policies
and pracces to promote employee wellbeing during remote work.
These conclusions highlight the complexity of the relaonship between remote
work and employee psychological wellbeing and underscore the importance of
organizaonal support for promong employee resilience and wellbeing.
31
Bibliography / References
• The eects of remote work on collaboraon among informaon workers
by Longqi Yang
hps://www.nature.com/arcles/s41562-021-01196-4
• 99.8% workforce in IT sector incapable of remote working: Study
hps://economicmes.indiames.com/tech/ites/99-8pc-
workforce-in-it-sector-incapable-of-remote-working-
study/arcleshow/75080948.cms
• COVID-19 and Remote Work: An Update by Megan Brenan
hps://news.gallup.com/poll/321800/covid-remote-work-
update.aspx
• Exploring employee well-being during the COVID-19 remote work:
evidence from South Africa by Fama Mahomed
hps://www.emerald.com/insight/content/doi/10.1108/EJTD-
06-2022-0061/full/html
• What's The Impact of Remote Working On Employee Well-Being? By
Christopher Pappas
hps://elearningindustry.com/whats-the-impact-of-remote-
working-on-employee-well-being
• A study of the emoonal wellbeing of private-sector employees working
from home during Covid-19 by Sudhir Kumar Pant
32
i
A STUDY ON EFFECTIVE IMPLEMENTATION OF
PROJECT MANAGEMENT TECHNIQUES IN
CONTROLLING SCHEDULED PROJECTS
CAPSTONE PROJECT REPORT
MASTER OF MANAGEMENT STUDIES
OPERATIONS
PRANIT BANDRE
ROLL NO. 39
2021-2023
SIES COLLEGE OF MANAGEMENT STUDIES
NERUL, NAVI MUMBAI - 400706
ii
A STUDY EFFECTIVE IMPLEMENTATION OF
PROJECT MANAGEMENT TECHNIQUES IN
CONTROLLING SCHEDULED PROJECT
CAPSTONE PROJECT REPORT
SUBMITTED
AS A PARTIAL FULFILMENT OF THE CURRICULUM
FOR THE DEGREE
MASTER OF MANAGEMENT STUDIES (MMS)
SIES COLLEGE OF MANAGEMENT STUDIES
NERUL, NAVI MUMBAI
BY
PRANIT BANDRE
ROLL NO: 39
SPECIALIZATION: OPERATIONS
iii
CERTIFICATE
This is to certify that project titled “A study on Effective
Implementation of project management techniques in controlling
schedule outbound project” is successfully completed by Mr. Pranit
Bandre during the IV Semester, in partial fulfillment of the Master’s
Degree in Management Studies recognized by the University of Mumbai
for the academic year 2023 through SIES College of Management
Studies. This project work is original and not submitted earlier for the
award of any degree / diploma or associateship of any other University /
Institution.
Name: Prof. Anguja Agrawal
Date: Signature of Guide
iv
DECLARATION
I hereby declare that this Project Report submitted by me to the SIES
College of Management Studies is a bonafide work undertaken by me
and it is not submitted to any other University or Institution for the award
of any degree diploma / certificate or published any time before.
Name: Pranit Bandre
Date: Signature of Student
v
ACKNOWLEDGEMENTS
At the outset, I would like to express my sincere gratitude to some people
without whose help this project would not have been possible or
completed successfully.
To begin with, I would like to extend my heartfelt gratitude to SIES
College of
Management Studies for providing a platform for me to learn many
aspects in the Operations genre.
My special thanks to Prof. Anguja Agrawal my mentor, guide without
whom this project could not have been possible. I am very thankful to her
for being extremely helpful & supportive throughout my academics. She
has also devoted his precious & valuable time whenever required making
my college period a fruitful learning experience.
Signature
Pranit Bandre
Date:
vi
EXECUTIVE SUMMARY
The effective implementation of project management techniques is crucial for
controlling the schedule of outbound projects. Project management involves the
application of tools, techniques, and methodologies to plan, execute, monitor, and
control projects. The success of any project depends on the effective implementation
of project management techniques, particularly in controlling the project schedule.
The outbound project schedule refers to the sequence of activities and tasks that must
be completed within a specified time frame to achieve the project's objectives. The
effective implementation of project management techniques is essential in controlling
the schedule of outbound projects, as it helps to identify potential delays, manage
risks, and ensure that the project is completed on time and within budget.
The first step in implementing project management techniques for controlling the
schedule of outbound projects is to define the project scope, objectives, and
deliverables. This involves identifying the stakeholders, establishing clear goals, and
developing a project plan that outlines the activities, resources, and timelines required
to achieve the project objectives.
The next step is to establish a project schedule that defines the sequence of activities
and their duration. This involves identifying the critical path, which is the sequence of
activities that must be completed on time to ensure the project is completed on
schedule. The project schedule should be regularly updated to reflect any changes in
project requirements, resources, or timelines.
In conclusion, effective implementation of project management techniques is essential
for controlling the schedule of outbound projects. It involves defining the project
scope, objectives, and deliverables, establishing a project schedule, regularly updating
the project schedule, effective communication, and collaboration, managing risks and
conflicts, and monitoring project progress.
vii
TABLE OF CONTENTS
Sr. No.
Particulars
Page No.
1
Chapter 1: Introduction
1.1 Objectives
1.2 Scope of the Work
1
10
11
2
Chapter 2: Literature Review
12
3
Chapter 3: Methodology
13
4
Chapter 4: Data Analysis
4.1 Data Analysis
4.2 Case Study
14
26
5
Chapter 5: Conclusion
34
6
References
35
1
CHAPTER 1: INTRODUCTION
The success of any project depends on effective project management, which involves
the application of various tools, techniques, and methodologies to plan, execute,
monitor, and control the project. One of the most critical aspects of project
management is controlling the project schedule, especially for outbound projects.
Effective implementation of project management techniques is essential to ensure the
project is completed on time and within budget.
Outbound projects are those that require the delivery of products or services outside
the organization. Examples of outbound projects include the construction of buildings,
the installation of telecommunications networks, and the delivery of goods to
customers. Such projects are often complex, with multiple stakeholders, and require
careful management to ensure they are completed on schedule.
The effective implementation of project management techniques in controlling the
schedule of outbound projects requires a systematic approach. This approach includes
defining the project scope, objectives, and deliverables, establishing a project
schedule, monitoring project progress, managing risks and conflicts, and effective
communication and collaboration among project team members.
Defining the project scope, objectives, and deliverables involves identifying the
stakeholders, determining the project goals, and outlining the project's expected
outcomes. Establishing a project schedule involves identifying the critical path, which
is the sequence of activities that must be completed on time to ensure the project is
completed on schedule. The project schedule should be regularly updated to reflect
any changes in project requirements, resources, or timelines.
Monitoring project progress involves tracking project status, identifying potential
delays or issues, and implementing corrective actions to ensure the project stays on
schedule. Managing risks and conflicts involves identifying potential risks,
developing contingency plans, and resolving conflicts that may arise during the
project.
Effective communication and collaboration among project team members are essential
to controlling the project schedule. Regular status meetings, progress reports, and
project reviews can help identify any potential delays or issues that need to be
addressed. The project manager must also have the skills to manage risks and resolve
any conflicts that may arise during the project.
2
DATA OVERVIEW
Nature of Project Control: Planning, measuring, monitoring, and taking
corrective action are all usually included in the control cycle. Typically, projects
utilize a control system, which monitors the difference or gap between the planning
variables and the actual results. Project control systems indicate the direction of
change in preliminary planning variables compared with actual performance.
Importance of Project Control: The successful performance of a project
depends on appropriate planning. The PMBOK® Guide defines the use of 21
processes that relate to planning, out of the 39 processes required for proper project
management. Execution of the project according to the predefined project plan can be
achieved through a control methodology. Consequently, project control is a
significant issue during the project life cycle.
The design of a project control system is an important part of the project management
effort. Furthermore, it is widely recognized that planning and monitoring plays a
major role as the cause of project failures. Despite the continuous evolution in the
project management field, it appears evident that the traditional approaches still show
a lack of appropriate methodologies for project control. Many articles have supported
the importance of control in the achievement of the project aims and objectives.
Project performance can be improved if more attention is given to the issue of control
(Avison, Baskerville, & Myers, 2001). The successful implementation of a concurrent
engineering methodology within a cross-country petroleum pipeline construction
project in India strongly recommends controlling projects through risk management,
quality monitoring, and an integrated information management system
Analyzing Project Failures: Another way of tackling the issue of the
importance of control is by examining project failures in order to identify the most
effective project control rules. For example, a survey was carried out among 1,450
companies in the public and private sectors (Whittaker, 1999). The main conclusion
was that lack of risk management was the most highly ranked factor contributing to
project failure. Other contributing factors were lack of required team skills and lack of
control.
Researchers surveyed construction projects in Jordan with the objective of identifying
the major causes of delay in the construction industry.
Findings indicated that owner interference, inadequate constructor experience,
financing and payments, labor productivity, slow decision-making, improper planning,
and subcontractors were among the top 10 most important causes for delay.
3
During the past decade, leading projects in many industries were enterprise resource
planning (ERP) implementation projects. It was found that the recommended actions
needed to bring troubled ERP projects under control are as follows (Motwani,
Mirchandani, Madan, & Gunasekaran, 2002): (a) redefining or subdividing the project;
(b) improving project management through the use of formal tools and techniques;
and (c) using a team-based approach to solve specific project problems. The key
element is to somehow link these factors to the project control system.
Another study showed that a useful control tool applied in the software industry to
reduce project failure is the identification and analysis of threats to success. This
control process, developed in the USA, Finland, and Hong Kong using the Delphi
methodology, and control techniques for the analysis and presentation of all possible
resource requirements and outcomes were discussed in another study. The successful
completion of a project within budgeted time, cost, and perceived parameters depends
to a great extent on the early identification and control of immediate risks to the
project. These cases show the necessity of a holistic approach to multidimensional
project control, but this does not mean that all risks can be controlled solely by such
an approach.
For instance, the 9/11 incident, the rejection of the EU constitution treaty in the
French national poll, growing U.S.- China trade conflicts, the currency crisis in East
Asia, and the recent upsurge of international oil prices were least expected, even by
experts. These incidents, whose frequency has seemingly increased in the post-Cold
War period, have influenced and will continue to influence project implementation,
since such risks cannot be internalized in project management. Project managers must
deal with such risks in a most flexible and economic manner so as to minimize losses
of project profitability.
Success Factors in Project Management and Control: Another project
management approach refers to factors that lead to success in meeting the entire range
of multidimensional objectives. Much research has been conducted in order to
examine project success factors. A survey was carried out among a sample of Fortune
1000. companies that examined project success. Another survey was conducted on
research and development project management in the Spanish industry, while yet
another was done to capture the real world experiences of people active in project
management. This survey took the form of a questionnaire that was sent to 995
project managers.
Another survey covered approximately 100 defense projects, and another survey was
conducted among organizations with inter/intradepartmental projects. The common
denominator resulting from all of the above-mentioned surveys was a common
checklist representing project success factors. This list included clear goals,
4
management support, ownership, a control mechanism, and communication. A great
deal of variation exists, however, among these success factors, which do not always
have the same dimensions.
A different angle was taken by an Israeli researcher who surveyed 86 Israeli
construction companies (Francis-Elran, 1998). Findings showed that the success level
of a project implementing a specific control method is related to the level of risk
measured by situational factors. A case study of a $621 million power plant in East
Asia demonstrated how a large and complex project in the area of energy production
can be successfully implemented (Ling & Lau, 2002). An important factor in the
project’s success was the use of control procedures that were applied meticulously by
the project stakeholders.
In a study that surveyed about 100 Israeli defense projects, findings indicated a
significant positive relationship between the project’s success and each of the
following factors (Dvir, Raz, & Shenhar, 2003): (a) the amount of effort invested in
defining the goals of the project; (b) the functional requirements; and (c) technical
specifications of the project. Again, the question arises as to which project control
factors best enhance these parameters.
Complex projects are performed also in the software industry. One study surveyed 86
project managers on project effectiveness in the software development industry (Jiang
& Klein, 2000). The data indicated good control over risk factors. Project
effectiveness measures reveal, however, that two common risks have a major
significant impact: (a) the team’s lack of general expertise; and (b) lack of clear role
definitions for team members. A year later, the same researcher surveyed Project
Management Institute (PMI) members and reconfirmed the critical role of project
managers in the project’s success, implying that organizations should involve their
project managers as early as possible (Jiang, Klein, & Chen, 2001).
Another study strove to define project success by developing the logical framework
method (LFM) for defining project success (Baccarini, 1999). LFM was developed to
assist in the understanding of two components of project success: management
success and product success. These two components must be defined and
differentiated in the project so that the project team has clear knowledge of its
objectives.
An article summarizing the issue indicated that success criteria should be agreed upon
with the stakeholders before the onset of the project (Turner, 2004). A collaborative
working relationship should be maintained between the project owner and the project
manager. The project manager should possess the flexibility to deal with uncertainty,
and the owner should take an interest in the project performance. A summarizing list
5
of factors affecting the success of a project is presented in the appendix of the present
review.
The integration of these success factors should lead to a better understanding of the
major issues on which project managers should concentrate. Hence, a project manager
should establish a control system that will monitor these significant issues.
Furthermore, a control system can be examined by verifying its compliance with the
project success factors.
Project Control Systems: Project control systems can be classified as: (1) one
dimensional control systems, and (2) multidimensional control systems. Both one-
dimensional and multidimensional control systems execute one or more predefined
project control objectives. In one-dimensional control systems, such objectives are not
integrated in any way, whereas multidimensional control systems integrate several
project control objectives.
The earned value (EV) methodology is probably the most commonly used
multidimensional project control method, integrating time and cost. Variations of
multidimensional control systems exist that are associated with risk management,
theory of constraint, statistical process control and so on. These will be discussed later
under their specific titles.
Another important factor in both project control systems is the ability to determine
when to perform the control activity. This point was addressed by a study that
proposed an analytical framework, based on dynamic programming, for determining
the optimal timing of project control points throughout the life cycle of the project.
A survey, conducted on the integration of project control systems in clean-room
construction projects, emphasizes the importance of the multidimensional project
control system. Project management researchers and practitioners state that existing
project control systems have several deficiencies. One study reviewed an extensive
array of research on various aspects of project scheduling. An important conclusion
was that matching project objectives with the appropriate methodology is an
important goal that remains to be explored. In the U.K., performance evaluation of
new product developments was surveyed. Without exception, all companies wished to
improve their use of performance measures. This implies that the methodologies used
by these companies were not satisfactory.
Another researcher supports this view and describes the need to use performance
measurements in project management, suggesting a list of preferred metrics. The
deficiency of current project control systems is also presented in additional work. A
thorough literature review regarding the contribution of mathematical modeling to the
6
practice of project management was conducted. It was found that the synthesis of
project management principles and operational research principles could lead to a new
managerial theory.
Adding Quality and Statistical Control: An enrichment EV system is
presented by the following studies and is offered in order to add additional
dimensions to the control system (Paquin, Couillard, & Ferrand, 2001). The model
constitutes a quality breakdown structure (QBS) that indicates the overall quality
objectives. This dimension enables the project manager to assess, at any time, the
overall quality simply by comparing its earned quality with the planned quality.
Assessing ongoing quality enables the project manager to identify activities that were
not performed successfully. The assessment of such activities initiates corrective
actions as quality deviations are detected.
Deficiencies in existing project control systems were also presented by Tukel and
Rom (1998), who surveyed project characteristics in diverse industries. Their
conclusions were\ that project quality was the most important project objective.
Furthermore, the use of quality as a measure for project success was an important
factor for the successful implementation of a project. Project quality can also be
defined as being equivalent to proper performance of the project content, i.e., its
multidimensional aims and objectives.
The total control methodology (TCM) is based on the scenario that several separate
processes usually exist within each product line (Kwok & Rao, 1998). Each of these
processes should have an individual control plan, which must include control
instructions and specifications for each operator. These researchers enhanced the
basic TCM model by using quality control tools, emphasizing the need to control the
quality dimension. Another supportive opinion was that of Tukel and Rom (2001),
who found that a project manager’s primary success measure is the quality of a
project. This is supported by empirical generalization. The quality of a project was
found to be associated with customer focus, rework reduction, and conformance to the
technical specifications.
Another enriched EV model that developed a statistical approach that aimed at
improving the project manager’s understanding of the EV results. Thus, the project
manager can know when observed schedule variances are statistically significant in
order to take corrective actions (Robinson, 1997).
A research paper introduced a new technique to provide dynamic real-time
monitoring of time-, cost- and technical performance-related project parameters
(Bauch & Chung, 2001). This methodology is called statistical project control tool
(SPCT). The control limits and the central line of the project control chart are based
7
on historical project parameter data. Project control is conducted by monitoring the
project performance on the project control chart. The SPCT model requires the use of
an appropriate chart for recording historical parameter data, which is an obvious
limitation. It is therefore important to limit this application only to those projects to
which the model may indeed be applied advantageously (Bauch & Chung).
Quality can be a significant dimension within the project objectives. It is therefore
important to measure and monitor the project quality performance. Further research is
needed to identify and to integrate quality measures with other project objectives.
Using the Total Quality Management Approach: The move toward total
quality management (TQM) is usually undertaken as a company endeavor with a
timescale of many years. Two papers examined the use of project management and
control tools as means for adapting TQM principles (Cicmil, 1997; Hides,
Polychronakis, & Sharp, 2000).
TQM principles support the entire operational process, including project management
and project control. Another researcher introduced the Canada Award for Excellence,
an internationally recognized quality award program (Laszio, 1999). The Canada
Award for Excellence defines planning and execution processes and can therefore be
used as a control tool. The author demonstrated the feasibility and practicality of
applying a quality process control approach to project management and the control
arena.
TQM principles should serve as the guidelines of any organization that manages
projects. Further research should strive to prove the advantage of implementing TQM
principles in a project environment.
Using the Theory of Constraint Approach: Another subject that researchers and
practitioners have discussed in the project management literature is the application of
the theory of constraints (TOC) in the project management arena (Goldratt, 1988;
1997). The critical chain is the TOC project management approach. The TOC offers
controlling of project scheduling by monitoring the time buffers (Steyn, 2000).
Disagreement exists as to how effective and realistic it is to implement TOC in
projects. Herroelen and Leus (2001) described the advantages and disadvantages of
implementing critical chain scheduling. The critical chain scheduling method using
time buffers (a basic TOC tool used to manage the project) provides a simple tool for
monitoring projects and setting realistic due dates. The danger, however, lies in its
oversimplification, i.e., implementing the TOC will lead to real-life problems that
TOC tools are not capable of handling. Implementation of the critical chain in
complex projects might, therefore, be problematic. However, the researchers
8
suggested a branch and bound mechanism to improve the final project makespan. The
critical chain method is starting to be implemented and it will be interesting to follow
its further development and integration within traditional methodologies.
Risk Management as a Factor in Project Control: Significant research was
performed in recent years on risk management and control. According to the
PMBOK® Guide (2004), risk monitoring and control is an ongoing process that
consists of keeping track of identified risks, monitoring residual risks and identifying
new risks, ensuring the execution of risk plans, and evaluating their effectiveness in
reducing risk to facilitate project success. A study performed on 60 large-scale
projects showed that building a strategic system for dealing with anticipated risks
supports the control of unexpected events produced by business environmental
turbulence, thus, reducing the risk (Floricel & Miller, 2001).
Tummala and Leung (1996) presented a risk management model for reducing and
controlling risk. Another study proposed that managing and controlling risk reduces
the probability of project failure (Miller & Lessard, 2001). A survey was carried out
in order to examine project risk management practice in the British utility sector
(Elkington & Smallman, 2002). Findings indicated a strong link between the extent of
risk management undertaken in a project and the level of project success.
Dey (2001) described a success story of implementing a risk management
methodology. The author developed and implemented a risk management model in a
cross-country petroleum pipeline construction project in India. This control model
was a decision-support system based on an analytic hierarchy process (AHP) and
decision tree analysis.
The Multidimensional Project Control System Approach: The conclusions from
the previously mentioned studies are that (a) the control dimensions of time and
scheduling are generally insufficient; (b) a multidimensional project control system is
needed that can measure the project’s aims and objectives; and (c) an integrative
system is needed that can indicate the project’s status during the project’s life cycle.
A new control methodology was developed, which was called the multidimensional
project control system (MPCS) (Rozenes, Vitner, & Spraggett, 2004). The MPCS is
an approach whereby deviations between the planning phase and the execution phase
are quantified with respect to the global project control specification (GPCS). The
project’s current state is translated into yield terms, which can be expressed as a gap
vector representing the multidimensional deviation from the global project control
specification.
9
The MPCS methodology allows the project manager to determine the integrated
project status; where problems exist in the project; when and where to take corrective
actions; and how to measure improvement. Implementing the MPCS methodology
does not require extra data collation. MPCS deals with the control of a single project
and defines the project performance in comparison with the plan.
The progression of several projects in parallel is a common situation in organizations;
therefore, a comparison of the various project performances is required. It was
proposed that a comparison process should be performed using the data envelope
analysis (DEA) approach (Rozenes,Vitner, & Spraggett, 2003). The reference points
for examining the performance of different projects and the directions of
improvement for the projects are not necessarily found on the efficiency frontier. An
algorithm was developed for applying multiproject system control with a relatively
large number of inputs and outputs while maintaining the validity of the DEA
methodology. The DEA output allows the diagnosis of the inputs and outputs that
found on the efficiency frontier and those that need improvement.
The MPCS methodology introduced a different approach that controls the entire set of
project objectives in a single project, or in a multiproject environment. Further
research is needed to simplify the advantage of implementing the MPCS approach.
10
1.1 OBJECTIVES
The Primary Objectives of the Report
1. To understand the need for project management techniques
2. To identify the role and importance of Effective project management
techniques in India
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1.2 SCOPE OF WORK
The scope of work is vast and includes a variety of tasks in order to effectively use
project management approaches in regulating the timetable of outbound projects. The
main goal is to guarantee that the project is completed on schedule, within budget, and
in accordance with the expectations of the stakeholders.
Defining the project's scope, goals, and deliverables is the first stage in the scope of
work. This entails identifying the stakeholders in the project, comprehending their
needs, and establishing the objectives and results of the project. Clear expectations
and goals that are in line with the project's purpose and objectives should be
established by the project manager.
The next stage is to create a project plan that details the tasks, materials, and delivery
dates necessary to meet the project's goals. A thorough work breakdown structure
(WBS) that details all project tasks, dependencies, and deadlines should be included in
the project plan. The scope, timetable, and budget of the project must all be
determined in this step.
The project manager must create a project schedule that outlines the order of tasks and
their duration after the project strategy is in place. This entails figuring out the crucial
path and controlling any potential hazards or delays. Additionally, the project manager
must make sure that the project team has enough resources and that everyone in the
team is aware of their individual responsibilities.
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CHAPTER 2: LITERATURE REVIEW
Project management techniques are essential in controlling schedule outbound
projects. According to Morris and Hough (1987), project management techniques help
in planning, scheduling, and controlling projects. It involves the use of various tools
and techniques to manage resources, control costs, and ensure timely delivery of
projects. Some of the commonly used project management techniques are Critical
Path Method (CPM), Program Evaluation and Review Technique (PERT), and Earned
Value Management (EVM).
Critical Path Method (CPM) is a project management technique that helps in
identifying the critical path of a project. The critical path is the longest path in a
project that determines the minimum time required to complete the project. According
to Kerzner (2013), CPM helps in identifying the activities that are critical to the
project and ensures that they are completed on time. It also helps in identifying the
activities that are not critical and can be delayed without affecting the project's
completion time.
Program Evaluation and Review Technique (PERT) is another project management
technique that helps in planning, scheduling, and controlling projects. According to
Fleming and Koppelman (2010), PERT is particularly useful in projects where there is
a high level of uncertainty. It involves the use of three estimates for each activity in
the project: the optimistic estimate, the most likely estimate, and the pessimistic
estimate. Based on these estimates, PERT calculates the expected time for each
activity and the overall completion time for the project.
Earned Value Management (EVM) is a project management technique that helps in
measuring the progress of a project. According to Wysocki (2013), EVM compares
the actual cost and schedule performance of a project with the planned cost and
schedule performance. It involves the use of various metrics such as Cost
Performance Index (CPI), Schedule Performance Index (SPI), and Earned Value (EV)
to measure the progress of a project.
According to Odeh and Battaineh (2002), project management techniques are
essential in controlling schedule outbound projects. They help in identifying the
critical activities, managing resources, controlling costs, and ensuring timely delivery
of projects. Project management techniques also help in identifying potential risks and
developing strategies to mitigate them.
For successful implementation of individual project life cycle phases, there are
different project management methods available. However, there are also methods
whose benefits are used within more phases or within the entire course of the project
life cycle (Patanakul et al., 2010).
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CHAPTER 3: METHODOLOGY
Secondary Research qualitative in nature
Identify data sources: Once the relevant literature has been identified, the next step
is to identify the specific data sources that will be used in the study. This could
include data from previous studies, industry reports, and case studies of outbound
projects.
Collect and analyze data: The data collected from the literature review and other
sources can be analyzed using statistical software to identify trends and patterns in
the data. The analysis will help to identify the most effective project management
techniques and best practices for controlling schedules in outbound projects.
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CHAPTER 4: DATA ANALYSIS
4.1 DATA ANALYSIS
4 Essential elements of Project Management
Apart from the budget, quality, and scope of the project, we want to give special
attention to some of the essential elements of project management regardless of the
industry or complexity of the project.
1. The Project Charter
The Project Charter in project management is a concise formal document used for
project initiation. The Project Charter lays out the project’s purpose, goals, resources,
and stakeholders. It lets your team:
Define the objective of the project
Make the measurements & assumptions for the project
Define the project restrictions
Define the project scope statement
Select the project manager authority
Form the team
The Project Charter is written and provided by the project’s sponsor and delegated to
the project manager later on. Fundamentally, every project should have a Project
Charter since it serves as the guideline that leads the project towards its goal and
success.
In the visual representation below, you can see the Project Charter’s main components
that define the project’s goal, identify the stakeholders, cost, risks, and more.
15
2. Deliverable List and Task List
The Deliverable List stands for the final products or services that are achieved upon
the completion of a project. Deliverables can be tangible such as, for instance, a
computer, or intangible — a computer program.
A task is treated as the lowest level on the list — each task represents an action or step
you need to undertake to complete a deliverable or a set of deliverables.
The difference between a Work Breakdown Structure and the Deliverable List and
Task List is that the latter strictly define who is responsible for each task. You can
even define deadlines for each task or deliverable, to establish more control over your
work.
In addition to all that, you can frame your list as a simple checklist and track your
progress by checking each task and deliverable once you’re done with it.
3. The Project Schedule
Creating a Project Schedule involves sequencing tasks to be done and allocating them
to calendar time slots for a project to be completed. You define tasks, define the
resources needed to complete the tasks, assign the tasks to specific team members,
and then have tasks allocated to specific time slots in your calendar.
If you have trouble creating an efficient Project Schedule, consider asking yourself
the following:
What needs to be done?
When?
Who is responsible for that?
Answering these questions will help you create a task list that will later form a
workable project schedule.
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Take a look at the Project Schedule visual representation below. You can see that
planning a party requires certain task completions, and for each task, there is an
allocated specific time slot in the calendar.
4. The Risk Register
Creating a Risk Register in project management means focusing on the potential
problems and challenges you may encounter while working on a project.
These potential problems are also called “negative risks” — they require that you
anticipate them, write them down, clarify how serious they are, and then define
solutions for them. You’ll also need to clarify who is responsible for implementing
these solutions.
Of course, you may also encounter “positive risks” in your work — they are
additional “project opportunities” you may want to define as separate projects and
tackle separately.
In the table below, you can see examples of certain risks and their risk matrix — the
likelihood of project’s risks, levels of their impact, risk management assignees, and
possible solutions.
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Best project management techniques for software engineering
A typical software engineering project involves gathering requirements, developing
and testing the software, and performing regular maintenance on the software product.
The best project management techniques to use with software engineering projects are:
1. Rational Unified Process (RUP)
2. Agile Project Management
3. Scrum Methodology
4. Extreme Programming (XP)
1. Rational Unified Process (RUP)
This project management technique is repetitive and agile at the same time. It’s
repetitive because activities repeat during the project, and agile since they can be
adjusted to fit the software requirements.
What is Rational Unified Process (RUP)?
The Rational Unified Process (RUP) is an agile management structure for software
development teams that makes a project unfold over time in 4 distinct phases —
Inception, Elaboration, Construction, and Transition. Each of the 4 phases has a main
objective and involves 6 development disciplines — Business Modeling,
Requirements, Analysis & Design, Implementation, Testing, and Deployment. Unless
you successfully reach the main objective of the previous stage, you won’t be able to
move on to the next stage.
Some development disciplines are more important than others, so they take up more
time than others.
How to use Rational Unified Process (RUP)?
As we previously mentioned, to use the RUP technique efficiently, the software must
go through 4 phases of development:
1. Inception — Since this is an itinerary step in the process, you must create a
business case that includes a project plan with its description, risk
management assessments, business environment, and success factors. Having
all in mind, stakeholders decide whether to continue with the project or not.
The inception stage is also the first milestone in the project. In case the project
fails to pass this stage, it can be canceled or redesigned.
2. Elaboration — In this stage, you should consider the project’s technical risks,
i.e. whether you are able to build a workable system. This is the second
milestone in the process, and it’s critical because it holds high risks, and it’s
hard to induce changes later on.
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3. Construction — This is where major components and features are developed
together with coding and testing. This stage results in user manuals and a beta
version of the system that needs to be evaluated. If the product fails the
testing, the next stage — the Transition stage — needs to be postponed.
4. Transition — The main purpose of this stage is to release a product
successfully, and this is the last milestone in this process.
A brief history of Rational Unified Process (RUP)
The Rational Unified Process was established by the Rational Software Corporation
in 2003.
What is Rational Unified Process (RUP) best for?
Software development projects with a predictable time frame for completion
and a predictable end budget.
Visual representation of Rational Unified Process (RUP)
In the visual representation below, you can see all four phases of the project
development in RUP. You can also notice that some phases (Elaboration,
Construction, and Transition) have more iterations that focus on producing technical
deliverables to achieve each phase goal.
2. Agile Project Management
This project management technique proposes flexibility and adaptability to easily
adjust to changes within a project life cycle. The word “agile” itself means being able
to change, i.e. adapt.
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What is Agile Project Management?
Agile Project Management is a methodology for software development that
emphasizes self-organization and cross-functionality in a team, as well as reaching
customer satisfaction.
How to use Agile Management?
There are several principles you need to follow to successfully use Agile Management
in your projects:
Instead of implementing specific processes and tools, this technique
emphasizes interactions between individuals in a team.
Instead of compiling comprehensive documentation for the product, this
technique emphasizes creating a fully-working software.
Instead of focusing on contract negotiations, this technique emphasizes
utilizing client collaboration to facilitate the development procedure.
Instead of following a strict project plan, this technique emphasizes the best
ways the team can respond to changes in the project.
For better understanding, follow the steps:
1. First, you divide projects into short sprints
2. You adapt your project plans as you work and aim for constant improvement
3. The project manager encourages the team to be self-organized
4. You aim to produce maximum value and functionality from the
service/product you want to offer
A brief history of Agile Project Management
Agile Project management was officially developed in 2001 as a part of the Agile
Manifesto.
What is Agile Project Management best for?
Projects who don’t have strict deadlines, but do have a general idea of the final
outcome/product
Projects that imply unexpected changes
Projects that depend on efficient team collaboration rather than efficient
project planning
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Visual representation of Agile Management
As you can see, Agile Management is an iterative process whose ultimate goal is to
respond to changes.
3. Scrum Methodology
This is another flexible project management technique that is based on iterative
processes, adjustments, and continuous learning.
What is Scrum Methodology?
Just like Kanban, Scrum is another popular subtype of the agile project management
methodology — its aim is to help software development teams deliver working
software more frequently, with the help of incremental and iterative practices.
Project progress is measured by following the sequence of short, timeboxedperiods
named sprints — the end of each sprint should mean the completion of one scheduled
amount of work.
How to use Scrum Methodology?
Here are 6 steps to running a project using the Scrum Methodology:
1. Assign your team — First of all, you need to assign people who will develop,
produce, or perform any other responsibilities to create an end product (a
Scrum master, a product owner, etc.)
2. Create a product backlog — This is the place where you make a list of the
work that needs to be done which are also known as stories.
3. Create sprints — A sprint is a short period of time where the work is broken
down into more manageable components. Add stories from the backlog here.
4. Host a meeting — This is a short daily meeting called a “daily scrum” or
“stand up” meeting. The whole team talks about the progress and tackles
issues if there are any.
5. Host a sprint review meeting — This meeting takes place at the end of a
sprint. All critical stakeholders need to be present to discuss results, gather
data, and make plans for improvements or changes.
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6. Repeat — You need to repeat the two previous steps until you complete the
final sprint and create deliverables.
A brief history of Scrum Methodology
As previously mentioned, Scrum now officially falls under the umbrella term “Agile”
— yet, it was first by that name introduced by Hirotaka Takeuchi and Ikujiro Nonaka
in 1986, in their paper The New Product Development Game.
What is Scrum Methodology best for?
Complex and ambiguous projects — traditionally, these are software
development projects, but Scrum can also be an efficient approach for
marketing projects and leadership teams.
Visual representation of Scrum Methodology
The steps to running a successful Scrum project are presented in the following image
together with other activities needed to complete the project.
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Highest Paying Companies for Project Managers in India
Other than the above-mentioned companies and their salaries, India also consists of
various other companies with the highest pay scales:
1. Cognizant: Cognizant, one of the best project management companies in India,
offers an average annual salary of over Rs. 3.9 lakhs.
2. Infosys: Known for its IT consulting services, Infosys offers an annual salary
package of over Rs. 3.4 lakhs.
3.Tech Mahindra: Tech Mahindra offers an amazing digital and innovative
customer-centric experience with an average salary of Rs. 1.8 lakhs per annum.
4. HCL Technologies: Considered the next generation global technological
company, HCL technologies is one of the best project management companies in
India which has high levels of innovative strategies and objectives. The annual
average salary package of HCL technologies is over Rs. 2.4 lakhs.
5. Accenture: Providing an annual salary package of over Rs. 3.9 lakhs, Accenture
focuses mainly on digital and cloud security.
How to Choose the Right Project Management Company in India?
To be a part of the best project management companies in India, here are a few
rules you might keep in mind:
1. Checking Profile of the Desired Consultancy Company: The first thing that
must be kept in mind is the ability to understand the specific requirements you have
from this company. Identifying and understanding the precise aims and objectives
is the probable solution in this case. Even if you find one which matches your
requirements, go through other profiles as well as it would bring about a sense of
clarity.
23
2. Enquire Related to the Services Offered: Having an effective level of support
and consistency should be certain services that must be offered by various
companies. Even if they do not have your requirements, try to learn about the
provided accounts for better comparison.
3. Reliability Towards the Company: If you are looking for the best companies
for project managers in India, reliability should be an essential factor.
Comprehension of project requirements and understanding the scope will deliver
essential solutions.
4. Learn About the Past Experiences: Thorough knowledge related to the
company’s past experiences can help you to reap better solutions. Enquiring
various firms will make you realize their working functions, objectives and
projects they have worked on previously. This will also help you identify which
skills you require to be a part of the company.
5. Communicative Skills: Choose a management firm that would communicate all
the necessary information. The company should check whether you have a
complete understanding of the assigned projects, be it individual or teamwork.
There should also be a sense of transparency when clearing your doubts with
senior managers. PRINCE2 Foundation and Practitioner course can help you to
identify these conditions, leading to better results.
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9 project scheduling techniques
Here are nine techniques you can use to help you create efficient project schedules:
1. Critical path method: The purpose of the critical path method (CPM) is to help
you determine both the longest and shortest possible time it'll take to complete a
project. The CPM contains three essential elements, which are:
The tasks required to complete the project
Which tasks depend on the completion of others
A time estimate for each activity
Determining the tasks that require completion before teams can take on other tasks
can help you determine an order for all the project’s tasks and estimate a minimum
and maximum completion time.
2. Program evaluation and review technique: The program evaluation and review
technique (PERT) is similar to CPM in that they both create a task flow and an
estimated timeline. Rather than a single possible timeline estimate like in CPM, PERT
uses a weighted average duration. With PERT, you assign each activity a time
estimate and factor in uncertainty. You can do this by:
Estimating how much time a task will take
Estimating the time in a best- and worst-case scenario
Averaging them together to determine the time estimate for the project
The PERT method also helps project managers generate a realistic estimate for their
timelines. This method requires more initial work and information to establish but can
provide you with more reliable timelines for your projects.
3. Fast-tracking: Fast-tracking is a technique that involves finding tasks you can
perform simultaneously or with some overlap. This allows you to start some tasks
earlier and reduce the time spent overall on the project. Project managers often choose
this approach for projects that have already experienced delays or that have an urgent
deadline.
4. Crashing: Crashing is a technique that involves adding more resources to help you
and your team finish a project faster. One common crashing method includes
assigning more team members to a project, which reduces the amount of work
required for each person. You can also have employees work longer hours and invest
in overtime to help you meet a deadline quickly.
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5. Gantt chart: A Gantt chart is a type of bar graph that project managers use for
planning and scheduling. You can use them to simplify complex projects. Gantt charts
represent each task horizontally on a bar chart, which shows the start and end dates,
and they frequently include deadlines, dependencies and task owners. Using a Gantt
chart may make it easier to visualize the progress of a project and see how different
tasks interact with one another.
6. Simulation: A simulation is a technique that involves inputting different sets of
activities into a computer software program and allowing it to determine possible
timelines. With a simulation, you can factor in different uncertainties and variables so
if they occur during the project, you already have a plan for them. Businesses often
use a simulation technique called a Monte Carlo simulation, or Monte Carlo analysis.
With this technique, you input the best-case and worst-case duration scenarios for
each task. The Monte Carlo simulation analyzes all the combinations and
uncertainties, then provides you with probabilities. By using a Monte Carlo analysis,
you can get an early indication of how long a project might take and create a more
realistic schedule.
7. Task list: One of the simplest project scheduling techniques is the creation of a task
list. Using a word processor or spreadsheet software, you can create a list of tasks and
include important information like the task manager and deadline. This is a common
method project managers use when completing small or simple tasks that don’t
require extensive scheduling or analysis.
8. Resource leveling: Resource leveling is a project scheduling technique that allows
you to optimize resources to help you use them more effectively. This allows you to
create a task distribution plan that enables your teams to balance busy periods with
periods of inactivity, which can lead to a more consistent process. You can integrate
resource leveling into other project scheduling approaches to help you maintain
efficiency and stay on budget.
9. Calendar: Using a calendar can be a simple way to help you and your teams
visualize important tasks and their deadlines. Calendars make scheduling easy to
understand and can make project schedules readily accessible to teams and
stakeholders. You might consider using project calendar templates or color-coding
methods to identify tasks associated with particular aspects of the project, such as task
managers or types of resources.
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4.3 CASE STUDY IN APPLICATION OF PROJECT
SCHEDULING SYSTEM FOR CONSTRUCTION
SUPPLY CHAIN MANAGEMENT
ABSTRACT
The AEC industry traditionally operates on trust based relationships formed on a
project-by- project basis. Inefficiencies in the AEC industry lead to unreliable project
due dates, inability to meet project budgets, and low customer satisfaction levels. In
some cases, businesses involved in the AEC industry have capitalized on ill-defined
information to increase margins.
The paper will discuss these issues in the context of a case study of a large retailer
involved in the house reconstruction market. The retailer is attempting to change its
business process, manage their supply chain, and manage their orders that have
products and services as projects. The paper will describe the difficulties involved in
changing the business process and data collection and provide insight into issues
involved in implementing the objectives of the retailer.
It can be proven that by a fundamental change in the business process, if all the
people involved in the project to openly share information, the inefficiencies in the
project can be substantially reduced, if not eliminated. This can lead to on-time
intelligent procurement of materials, better on-site coordination of labor and material,
an overall increased utilization of labor, and ultimately to reduced project delivery
time. But in order to realize this objective, businesses must be willing to share
proprietary enterprise data, disparate legacy systems have to be integrated to exchange
information in a consistent format, and data essential to the new business model needs
to be collected. Finally, the savings realized through such streamlining has to be
shared among all parties to be fair.
KEYWORDS
Supply chain, collaboration, communication, retail, data collection, information flow,
information sharing, business process re-engineering
INTRODUCTION
The architecture, engineering, and construction (AEC) industry is one of the oldest
industries in civilization. For over two hundred years, the industry has operated on the
basis on trust- based relationships. The industry is largely separated along trade lines;
trade contractors either form teams or work together to complete a project. Typically
there is a project superintendent to oversee and coordinate construction of the entire
project. For example, in an office or residential building, the architect oversees the
work during the design phase of the project. He sub-contracts design work to the
structural engineer, HVAC engineer, electrical engineer etc. But, during the
construction phase of the project, the GC oversees the work and coordinates work
27
between the various trade contractors. In a house reconstruction project, a project
coordinator or sometimes the customer coordinates work between the various trade
contractors.
In recent years, several project based collaboration tools have been developed for the
AEC industry. But adoption of these tools has been restricted to big projects and
among big institutional players; players in small reconstruction projects still
collaborate in the traditional way: via phone and fax. In small house reconstruction
projects, the problems are different. First, job durations, although small, are difficult
to estimate accurately. Second, poor coordination causes the schedule to be extended.
Third, rescheduling and scope expansion is typical. All of these make it difficult for
downstream contractors to plan their schedule upfront. This causes project schedules
to be drawn out longer than necessary. The whole supply chain is fragile.
Traditionally, project durations are padded with conservative estimates based on
experience to reduce the impact of this variability. All these factors have led to low
customer satisfaction levels, high cost associated with variability, and a risk averse
trade contractor community.
In an attempt to change all this and improve customer service, a major retailer is
undertaking a huge challenge. They are attempting to share information from product
vendors and service vendors to increase visibility, better collaborate, and provide
future of home remodeling services. Their aim is to provide a more reliable due date
for home improvement projects when the customer initiates a project in their store
using product shipment information from product vendors and service provider
schedule and capacity availability information from contract service vendors. They
are modifying the supply chain to act as the orchestrator for the entire collaboration.
The following paper will attempt to discuss the retailer’s objective and where they are
in their charter to create a better customer experience. Their primary objectives are the
following:
Improve customer satisfaction by providing reliable due dates for project
completion
Streamlining their business to have better accountability, auditing, and
centralized control of good and information flow
Reduce project delivery timelines
Better forecast demand and plan for resource availability
PROBLEM
In their current business, the retailer is involved in selling thousands of home
improvement products. Starting from a simple carpet installation to a whole house
redesign including kitchen, bath, and flooring remodeling, the retailer historically is in
the business of selling products. Selling value added services on top of that has been
done through contractual relationships with relevant trade contractors or service
vendors. They have existing relationships with contractors that provide measure,
deliver, and installation services. But all collaboration is through phone or fax. There
are dedicated employees that handle the collaboration in the case of complex projects
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acting as project superintendents. The current construction supply chain for the
retailer is shown in figure 1. The supply chain can be described in the context of a
carpet installation. A typical carpet installation has the following process:
Customer orders carpet and store promises a phone call from measurer to get
measurements
Store calls measurer and gives information about customer
Measurer calls customer and schedules appointment for measure
After measure, measurer updates store with information
Store contacts customer and closes sale, orders product
Product vendor receives order, provides promise dates
Product is either received at the store or shipped directly to installer
If product is received at the store, it is reached to the customer.
Once product delivery confirmation reaches store, store contacts installer
Installer contacts customer for install schedule, installs carpet
Store calls customer to ensure order is done and closes the order
Figure 1: Current supply chain with existing business model
In the figure shown above, coordination of project happens with human intervention.
There are very few process controls and no real target deadline to meet for the
customer. Somebody has to remember the sequence of steps in the project to keep it
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on track. The only time the system notifies a human is when a job is delayed. There is
no proactive prompting. In the case of complex projects, this approach is error prone,
causes rework, and wasted trips for contractors reducing their utilization.
All of this has led to the following problems.
Multiple attempts by contractors to schedule services with customers
Job charges from vendor to retailer is higher than it has to be to account for
wasted resource utilization
Project due dates are difficult to quote to customer
Lack of proactive communication with customers and vendors in case of
delays, leading to dissatisfied customers and vendors.
From the contractor’s point of view, demand fluctuates and capacity planning
becomes infeasible. In case of rescheduling, and delays, lax in communication leads
to wasted trips for downstream vendors and reduces resource utilization. The
contractors perform work not only with the retailer, but also with other retailers in the
same business, and other general contractors. Their capacity is distributed among the
different demand sources. The fluctuating demand from various sources exacerbates
the situation and this multi-enterprise interaction effect makes proactive capacity
planning near useless. With no ability to project their demand service vendors buffer
their fluctuations with temporary labor and/or due date slippage, both of which cost
higher to complete the job.
SOLUTION
To address these problems, the retailer is looking to overhaul its business process and
put a system in place for better project coordination. A look at the construction supply
chain indicated that with a small shift in the flow of information, tremendous value
could be realized. See figure 2 for modified supply chain. The retailer acts as the
central orchestrator of information flow. The proposed solution works as follows:
Retailer promises dedicated demand to vendors in the form of percentage of
all orders from an assigned group of stores
Vendors sign agreement with retailer to promise dedicated capacity to meet an
agreed service level agreement (SLA). This helps isolate the capacity from the
influence of the multi-enterprise demand for the vendors.
Vendors will input and maintain capacity into the retailer’s resource planning
system
Project schedule will be computed based on average job durations and
standard product lead time
Individual job scheduling will be done on a schedule forward logic based on
available vendor capacity
Schedules and project execution will be based on a schedule forward basis.
Wherein one job has to be completed to trigger the scheduling of the next
downstream job.
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Electronic notification will drive communication between jobs, to customer,
vendor, and retailer
Collect better lead time data from product vendors
Historical data will be built to accurately predict demand for their service
vendors
and over time help their vendors manage their capacity more effectively. In
the modified supply chain, the carpet workflow gets modified as follows:
Customer orders product and system gives customer measure schedule date
based on measurer capacity
Measurer does measure and updates order with results
Store closes sale and places order for product
Product vendor responds with promise dates
Product arrival triggers installer notification and scheduling of the install job.
Installer completes job and that triggers order to be complete
Figure 2: Modified Supply Chain with new business model
By taking control of distribution of information, the retailer is essentially being more
accountable to the customer. The bullwhip effect of information lag is reduced. The
communication is more streamlined and centralized leading to reduction in project
schedules.
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DISCUSSION
REDUCED PROJECT DELIVERY TIME
The Table 1 provides a comparison of the expected benefit from the future business
process as compared to the current business process.
Table 1 Comparison of the expected benefit from the future business process
Figure 3: Project Schedule Comparison
If executed, the table above summarizes the effect of the new information flow. In the
case of a simple carpet installation, the table above reflects the project duration for the
current and modified supply chain. By streamlining this information flow, the
expected reduction in project duration is around 50%. From figure 3, the reduction in
schedule is primarily due to better collaboration of service providers to schedule jobs.
The primary reasons for the squeeze in schedule are the following:
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Elimination of needless back and forth between service vendor and customer
trying to coordinate schedules
No wasted trips for downstream vendors since they get notified only when
their job is schedule
Better resource utilization because vendor time is not wasted in coordinating
schedules
MODIFIED BUSINESS PROCESS
In the future, the retailer is hoping to move to a business process that will let them
schedule the entire project during project creation (schedule all). To achieve that goal,
the biggest gap is accurate data. Hence, with the new business process, they are
planning to collect history for demand data and product lead-time. They believe that
once they can increase the reliability of the data that runs the system, that will give
them adequate confidence to more a complete scheduling model. With the current
schedule forward business model, the project plan is estimated without the capacity of
all service providers needed to complete a project. Once the total system is in place
and the data is available to schedule the entire project, the project plan will reflect
constrained capacity of all service providers. Planning and execution of such a project
plan will be closer to emerging lean techniques (such as the last planner methodology).
RISKS
While there is a lot of value in this simple approach itself, there are still some
associated risks.
Integrity of the solution depends on good data from vendors in terms of
accurate lead times for products and capacity from trade contractors
Service vendor published capacity should match their ability to deliver
Service vendors have infrastructure problems – no computers and no
access to internet
Coordinating among variety of vendors involves rigor and discipline
For the whole system to work, it is data driven. Vendors have to continually update
their status. In a construction type environment, where being at the site and mobility is
critical, mobile access is crucial.
Computing complexity of durations based on attributes is also an unreliable science.
For example, the duration of carpet install varies widely depending on whether it is a
new carpet installation vs. remove and replace an existing carpet, glue down carpet
installation vs. stretch carpet installation, staircase vs. flat floor, existence of furniture
etc.
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CASE CONCLUSION
The potential value to be realized is huge. The expected value from the system once it
goes into production is to be realized in a number of ways.
For service vendors, payment is aligned with job completion and since system
tracks job status to trigger payment, workflow is more streamlined;
No wasted trips to customer site since system ensures coordination;
No wasted trips by installer to store to see if product has been arrived;
Better utilization of resources, higher efficiency for all parties;
For customers, painless experience, easier to follow status of order/project;
For retailer, better accountability, more satisfied customers, more business for
the retailer.
Changes in supply chain to streamline information flow and managing
capacity of contract labor to remove inefficiency requires changes in business
process and sharing information across enterprises. Technology is only an
enabler. Without adoption and fundamental business process changes, the
potential value will never be realized.
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CHAPTER 5: CONCLUSION
In conclusion, the study on effective implementation of project management
techniques in controlling schedule outbound project has revealed some critical
findings that can assist project managers in achieving their project objectives. The
research analyzed various project management techniques such as critical path
method, project scheduling, earned value management, and risk management, and
how they can be used to control schedules in outbound projects.
The findings showed that the critical path method is a vital tool for identifying the
critical path of the project and ensuring that it is completed within the stipulated time.
The study also found that project scheduling is essential in allocating resources,
defining tasks, and estimating durations, which helps in ensuring that the project
schedule is realistic and achievable.
Earned value management is another critical project management technique that helps
in measuring project progress, identifying cost and schedule variances, and predicting
project completion. Risk management, on the other hand, is essential in identifying
potential risks that may impact project schedules, and developing mitigation strategies
to prevent or minimize their effects.
The study concludes that the effective implementation of project management
techniques is crucial for controlling project schedules, and ensuring that outbound
projects are completed within the set timeframe. Project managers should, therefore,
incorporate these techniques into their project management practices to achieve
project success.
.
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REFERENCE
Links
https://in.indeed.com/career-advice/career-development/project-management-types
https://www.coursera.org/in/articles/types-of-project-management
https://www.knowledgehut.com/blog/project-management/project-management-
companies-in-india
https://blog.wearedrew.co/en/planning-management-and-control-of-different-projects
https://clockify.me/blog/productivity/project-management-techniques/
Books
Project Management Case Studies Author: Scott Berkun
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