Thursday, July 20, 2017

AMOS model fit measures

AMOS Model Fit Measures.

Contents
The Minimum sample discrepancy model: 1
  1. CMIN: 1
  2. P: 1
  3. CMIN/DF. 3
  4. FMIN.. 3
  1. NPAR: 4
  2. DF: 4
  3. PRATIO: 5
  4. PNFI: 5
  5. PCFI 5
  6. PCLOSE. 6
  1. NCP. 7
  2. F0. 7
  3. RMSEA: 7
  4. PCLOSE: 9
  1. AIC. 10
  2. BCC. 10
  3. BIC. 10
  4. CAIC. 11
  5. ECVI 11
  6. MECVI 12
  1. NFI 13
  2. RFI 15
  3. IFI 15
  4. TLI 16
  5. CFI 16
  1. PNFI 17
  2. PCFI 18
  3. GFI and related measures: 18
  4. GFI 18
  5. AGFI 19
  6. PGFI 19
  7. Miscellaneous measures: 20
  8. Hoelter index: 20
  9. RMR. 21
A.The Minimum sample discrepancy model:
The following fit measures are based on the minimum value of the discrepancy.
  • CMIN: CMIN is the minimum value, Description: 7244, of the discrepancy, C

  • P:P is the probability of getting as large a discrepancy as occurred with the present sample (under appropriate distributional assumptions and assuming a correctly specified model). That is, P is a "p value" for testing the hypothesis that the model fits perfectly in the population.One approach to model selection employs statistical hypothesis testing to eliminate from consideration those models that are inconsistent with the available data. Hypothesis testing is a widely accepted procedure and there is a lot of experience in its use. However, its unsuitability as a device for model selection was pointed out early in the development of analysis of moment structures (Jöreskog, 1969). It is generally acknowledged that most models are useful approximations that do not fit perfectly in the population. In other words, the null hypothesis of perfect fit is not credible to begin with and will in the end be accepted only if the sample is not allowed to get too big.If you encounter resistance to the foregoing view of the role of hypothesis testing in model fitting, the following quotations may come in handy. The first two quotes predate the development of structural modeling, and refer to other model fitting problems.

▪           "The power of the test to detect an underlying disagreement between theory and data is controlled largely by the size of the sample. With a small sample an alternative hypothesis which departs violently from the null hypothesis may still have a small probability of yielding a significant value of 7245. In a very large sample, small and unimportant departures from the null hypothesis are almost certain to be detected." (Cochran, 1952)
▪           "If the sample is small then the 7245 test will show that the data are 'not significantly different from' quite a wide range of very different theories, while if the sample is large, the 7245 test will show that the data are significantly different from those expected on a given theory even though the difference may be so very slight as to be negligible or unimportant on other criteria." (Gulliksen & Tukey, 1958, pp. 95–96)
▪           "Such a hypothesis [of perfect fit] may be quite unrealistic in most empirical work with test data. If a sufficiently large sample were obtained this 7245 statistic would, no doubt, indicate that any such non-trivial hypothesis is statistically untenable." (Jöreskog, 1969, p. 200)
▪           "... in very large samples virtually all models that one might consider would have to be rejected as statistically untenable .... In effect, a nonsignificant chi-square value is desired, and one attempts to infer the validity of the hypothesis of no difference between model and data. Such logic is well-known in various statistical guises as attempting to prove the null hypothesis. This procedure cannot generally be justified, since the chi-square variate v can be made small by simply reducing sample size." (Bentler & Bonett, 1980, p. 591)
▪           "Our opinion ... is that this null hypothesis [of perfect fit] is implausible and that it does not help much to know whether or not the statistical test has been able to detect that it is false." (Browne & Mels, 1992, p. 78).

CMIN/DF

CMIN/DF is the minimum discrepancy, Description: 7244, divided by its degrees of freedom:
Description: 7246.
Several writers have suggested the use of this ratio as a measure of fit. For every estimation criterion except for Uls and Sls, the ratio should be close to one for correct models. The trouble is that it isn't clear how far from one you should let the ratio get before concluding that a model is unsatisfactory.
Rules of thumb:
"...Wheaton et al. (1977) suggest that the researcher also compute a relative chi-square (Description: 7247) .... They suggest a ratio of approximately five or less 'as beginning to be reasonable.' In our experience, however, Description: 7245 to degrees of freedom ratios in the range of 2 to 1 or 3 to 1 are indicative of an acceptable fit between the hypothetical model and the sample data." (Carmines and McIver, 1981, page 80)
"... different researchers have recommended using ratios as low as 2 or as high as 5 to indicate a reasonable fit." (Marsh & Hocevar, 1985).

"... it seems clear that a Description: 7247 ratio > 2.00 represents an inadequate fit." (Byrne, 1989, p. 55).

 FMIN

FMIN is the minimum value, Description: 7248, of the discrepancy

Measures of parsimony

Models with relatively few parameters (and relatively many degrees of freedom) are sometimes said to be high in parsimony, or simplicity. Models with many parameters (and few degrees of freedom) are said to be complex, or lacking in parsimony. This use of the terms, simplicity and complexity, does not always conform to everyday usage. For example, the saturated model would be called complex while a model with an elaborate pattern of linear dependencies but with highly constrained parameter values would be called simple.
While one can inquire into the grounds for preferring simple, parsimonious models (e.g., Mulaik, et al., 1989), there does not appear to be any disagreement that parsimonious models are preferable to complex ones. When it comes to parameters, all other things being equal, less is more. At the same time, well fitting models are preferable to poorly fitting ones. Many fit measures represent an attempt to balance these two conflicting objectives—simplicity and goodness of fit.
"In the final analysis, it may be, in a sense, impossible to define one best way to combine measures of complexity and measures of badness-of-fit in a single numerical index, because the precise nature of the best numerical tradeoff between complexity and fit is, to some extent, a matter of personal taste. The choice of a model is a classic problem in the two-dimensional analysis of preference." (Steiger, 1990, p. 179)

NPAR:

NPAR is the number of distinct parameters (q) being estimated. Two parameters (two regression weights, say) that are required to be equal to each other count as a single parameter, not two.

DF:

DF is the number of degrees of freedom for testing the model:
Description: 7241.
where p is the number of sample moments and q is the number of distinct parameters. Rigdon (1994a) gives a detailed explanation of the calculation and interpretation of degrees of freedom.

PRATIO:

The parsimony ratio (James, Mulaik & Brett, 1982; Mulaik, et al., 1989) expresses the number of constraints in the model being evaluated as a fraction of the number of constraints in the independence model:
Description: 7242,
where d is the degrees of freedom of the model being evaluated and 7243 is the degrees of freedom of the independence model. The parsimony ratio is used in the calculation of PNFI and

PNFI:

The PNFI is the result of applying the James, Mulaik and Brett, 1982 parsimony adjustment to the NFI:
Description: 7309
where d is the degrees of freedom for the model being evaluated, and 7310 is the degrees of freedom for the baseline model.

PCFI

The PCFI is the result of applying the James, Mulaik and Brett, 1982 parsimony adjustment to the CFI:
Description: 7311
where d is the degrees of freedom for the model being evaluated, and 7312 is the degrees of freedom for the baseline model.

PCLOSE

Gets the "p value" for testing the null hypothesis that RMSEA is less than .05 in the population. (Browne & Cudeck, 1993)

Measures based on population discrepancy:

Steiger and Lind (1980) introduced the use of the population discrepancy function as a measure of model adequacy. The population discrepancy function, Description: 7249, is the value of the discrepancy function obtained by fitting a model to the population moments rather than to sample moments. That is,
Description: 7250
in contrast to
Description: 7251.
Steiger, Shapiro and Browne (1985) showed that under certain conditions Description: 7252 has a noncentral chi-square distribution with ddegrees of freedom and noncentrality parameter Description: 7253. The Steiger-Lind approach to model evaluation centers around the estimation of Description: 7249 and related quantities.
The present discussion of measures related to the population discrepancy relies mainly on Steiger and Lind (1980) and Steiger, Shapiro and Browne (1985). The notation is based on Browne and Mels (1992).

NCP

Description: 7254 is an estimate of the noncentrality parameter, Description: 7255.
The columns labeled LO 90 and HI 90 contain the lower limit (Description: 7256) and upper limit (Description: 7257) of a 90% confidence interval for Description: 7258Description: 7256is obtained by solving
Description: 7259
for Description: 7258, and Description: 7257 is obtained by solving
Description: 7260
for Description: 7258, where Description: 7261 is the distribution function of the noncentral chi-squared distribution with noncentrality parameter Description: 7258 and ddegrees of freedom.

F0

Description: 7262 is an estimate of Description: 7263.
The columns labeled LO 90 and HI 90 contain the lower limit and upper limit of a 90% confidence interval for Description: 7249:
Description: 7264
Description: 7265.

RMSEA:


Description: 7249 incorporates no penalty for model complexity and will tend to favor models with many parameters. In comparing two nested models, Description: 7249 will never favor the simpler model. Steiger and Lind (1980) suggested compensating for the effect of model complexity by dividing Description: 7249 by the number of degrees of freedom for testing the model. Taking the square root of the resulting ratio
gives the population "root mean square error of approximation", called RMS by Steiger and Lind, and RMSEA by Browne and Cudeck (1993).
Description: 7266
Description: 7267
The columns labeled LO 90 and HI 90 contain the lower limit and upper limit of a 90% confidence interval for the population value of RMSEA. The limits are given by
Description: 7268
Description: 7269
Rule of thumb:
"Practical experience has made us feel that a value of the RMSEA of about .05 or less would indicate a close fit of the model in relation to the degrees of freedom. This figure is based on subjective judgment. It cannot be regarded as infallible or correct, but it is more reasonable than the requirement of exact fit with the RMSEA = 0.0. We are also of the opinion that a value of about 0.08 or less for the RMSEA would indicate a reasonable error of approximation and would not want to employ a model with a RMSEA greater than 0.1." (Browne and Cudeck, 1993)

PCLOSE:

Description: 7270 is a "p value" for testing the null hypothesis that the population RMSEA is no greater than .05:
Description: 7271 .
By contrast, P is for testing the hypothesis that the population RMSEA is zero:
Description: 7272 .
Based on their experience with RMSEA, Browne and Cudeck (1993) suggest that a RMSEA of .05 or less indicates a "close fit". Employing this definition of "close fit", PCLOSE gives a test of close fit while gives a test of exact fit.

Information theoretic measures:

Amos reports several statistics of the form Description: 7273 or Description: 7274, where k is some positive constant. Each of these statistics creates a composite measure of badness of fit (Description: 7275) and complexity (q) by forming a weighted sum of the two. Simple models that fit well receive low scores according to such a criterion. Complicated, poorly fitting models get high scores. The constant k determines the relative penalties to be attached to badness of fit and to complexity.
The statistics described in this section are intended for model comparisons and not for the evaluation of an isolated model.
All of these statistics were developed for use with maximum likelihood estimation. Amos reports them for Gls and Adf estimation as well, although it is not clear that their use is appropriate there.

AIC

The Akaike information criterion (Akaike, 1973Akaike, 1987) is given by
Description: 7276 .

BCC


The Browne-Cudeck (Browne & Cudeck, 1989) criterion is given by
Description: 7277
where Description: 7278 if the Emulisrel6 method has been used, or Description: 7279 if it has not.
BCC imposes a slightly greater penalty for model complexity than does AIC.
BCC is the only measure in this section that was developed specifically for analysis of moment structures. Browne and Cudeck provided some empirical evidence suggesting that BCC may be superior to more generally applicable measures. Arbuckle (unpublished) gives an alternative justification for BCC and derives the above formula for multiple groups.

BIC

The Bayes information criterion (Schwarz, 1978; Raftery, 1995) is given by the formula,
Description: 7280.
Amos 4 used the formula (Raftery, 1993),
Description: 7281.
In comparison to AICBCC and CAICBIC assigns a greater penalty to model complexity, and so has a greater tendency to pick parsimonious models. BIC is reported only for the case of a single group where means and intercepts are not explicit model parameters.

CAIC

Bozdogan's (Bozdogan, 1987) CAIC (consistent AIC) is given by the formula,
Description: 7282.
CAIC assigns a greater penalty to model complexity than either AIC or BCC, but not as great a penalty as does BIC. CAIC is reported only for the case of a single group where means and intercepts are not explicit model parameters.

ECVI

Except for a constant scale factor, ECVI is the same as AIC:
Description: 7283.
The columns labeled LO 90 and HI 90 give the lower limit and upper limit of a 90% confidence interval for the population ECVI:
Description: 7284,
Description: 7285.

MECVI

Except for a scale factor, MECVI is identical to BCC:
Description: 7286,
where Description: 7287 if the Emulisrel6 method has been used, or Description: 7288 if it has not.

Comparison to baseline model

Several fit measures encourage you to reflect on the fact that, no matter how badly your model fits, things could always be worse.
Bentler and Bonett (1980) and Tucker and Lewis (1973) suggested fitting the independence model or some other very badly fitting "baseline" model as an exercise to see how large the discrepancy function becomes. The object of the exercise is to put the fit of your own model(s) into some perspective. If none of your models fit very well, it may cheer you up to see a really bad model. For example, as the following output shows, Model A from Example 6 has a rather large discrepancy (71.544) in relation to its degrees of freedom. On the other hand, 71.544 does not look so bad compared to 2131.790 (the discrepancy for the independence model).
Model
NPAR
CMIN
DF
P
CMIN/DF
Model A: No Autocorrelation
15
71.544
6
.000
11.924
Model B: Most General
16
6.383
5
.271
1.277
Model C: Time-Invariance
13
7.501
8
.484
.938
Model D: A and C Combined
12
73.077
9
.000
8.120
Saturated model
21
.000
0


Independence model
6
2131.790
15
.000
142.119
This things-could-be-worse philosophy of model evaluation is incorporated into a number of fit measures. All of the measures tend to range between zero and one, with values close to one indicating a good fit. Only NFI (described below) is guaranteed to be between zero and one, with one indicating a perfect fit. (CFI is also guaranteed to be between zero and one, but this is because values bigger than one are reported as one, while values less than zero are reported as zero.)
The independence model is only one example of a model that can be chosen as the baseline model, although it is the one most often used, and the one that Amos uses. Sobel and Bohrnstedt (1985) contend that the choice of the independence model as a baseline model is often inappropriate. They suggest alternatives, as did Bentler and Bonett (1980), and give some examples to demonstrate the sensitivity of NFI to the choice of baseline model.

NFI

The Bentler-Bonett (Bentler & Bonett, 1980) normed fit index ( NFI), or Description: 7289 in the notation of Bollen (1989b) can be written
Description: 7290,
where Description: 7291is the minimum discrepancy of the model being evaluated and Description: 7292 is the minimum discrepancy of the baseline model.
In Example 6 the independence model can be obtained by adding constraints to any of the other models. Any model can be obtained by constraining the saturated model. So Model A, for instance, with Description: 7293, is unambiguously "in between" the perfectly fitting saturated model (Description: 7294) and the independence model Description: 7295).
Model
NPAR
CMIN
DF
P
CMIN/DF
Model A: No Autocorrelation
15
71.544
6
.000
11.924
Model B: Most General
16
6.383
5
.271
1.277
Model C: Time-Invariance
13
7.501
8
.484
.938
Model D: A and C Combined
12
73.077
9
.000
8.120
Saturated model
21
.000
0


Independence model
6
2131.790
15
.000
142.119
Looked at in this way, the fit of Model A is a lot closer to the fit of the saturated model than it is to the fit of the independence model. In fact you might say that Model A has a discrepancy that is 96.6% of the way between the (terribly fitting) independence model and the (perfectly fitting) saturated model:
Description: 7296.
Rule of thumb:
"Since the scale of the fit indices is not necessarily easy to interpret (e.g., the indices are not squared multiple correlations), experience will be required to establish values of the indices that are associated with various degrees of meaningfulness of results. In our experience, models with overall fit indices of less than .9 can usually be improved substantially. These indices, and the general hierarchical comparisons described previously, are best understood by examples." (Bentler & Bonett, 1980, p. 600, referring to both theNFI and the TLI)

RFI

Bollen's (Bollen, 1986) relative fit index ( RFI) is given by

Description: 7297,
where Description: 7298 and Description: 7299 are the discrepancy and the degrees of freedom for the model being evaluated, and Description: 7300 and Description: 7301 are the discrepancy and the degrees of freedom for the baseline model.
The RFI is obtained from the NFI by substituting F/d for F.
RFI values close to 1 indicate a very good fit.

IFI

Bollen's (Bollen, 1989b) incremental fit index ( IFI) is given by
Description: 7302,
where Description: 7298 and Description: 7299 are the discrepancy and the degrees of freedom for the model being evaluated, and Description: 7300 and Description: 7301 are the discrepancy and the degrees of freedom for the baseline model.
IFI values close to 1 indicate a very good fit.

TLI

The Tucker-Lewis coefficient (Description: 7303 in the notation of Bollen, 1989b) was discussed by Bentler and Bonett (1980) in the context of analysis of moment structures, and is also known as the Bentler-Bonett non-normed fit index ( NNFI).
Description: 7304,
where Description: 7298 and Description: 7299 are the discrepancy and the degrees of freedom for the model being evaluated, and Description: 7300 and Description: 7301 are the discrepancy and the degrees of freedom for the baseline model.
The typical range for TLI lies between zero and one, but it is not limited to that range. TLI values close to 1 indicate a very good fit.

CFI

The comparative fit index (CFI; Bentler, 1990) is given by.
Description: 7305,
where Description: 7306, and NCP are the discrepancy, the degrees of freedom and the noncentrality parameter estimate for the model being evaluated, and Description: 7307 are the discrepancy, the degrees of freedom and the noncentrality parameter estimate for the baseline model.
The CFI is identical to the McDonald and Marsh (1990) relative noncentrality index ( RNI),
Description: 7308,
except that the CFI is truncated to fall in the range from 0 to 1. CFI values close to 1 indicate a very good fit.

Parsimony adjusted measures:

James, Mulaik and Brett, 1982 suggested multiplying the NFI by a "parsimony index" so as to take into account the number of degrees of freedom for testing both the model being evaluated and the baseline model. Mulaik, et al. (1989) suggested applying the same adjustment to the GFI. Amos also applies a parsimony adjustment to the CFI.

PNFI

The PNFI is the result of applying the James, Mulaik and Brett, 1982 parsimony adjustment to the NFI:
Description: 7309,
where d is the degrees of freedom for the model being evaluated, and Description: 7310 is the degrees of freedom for the baseline model.

PCFI

The PCFI is the result of applying the James, Mulaik and Brett, 1982 parsimony adjustment to the CFI:
Description: 7311
where d is the degrees of freedom for the model being evaluated, and Description: 7312 is the degrees of freedom for the baseline model.

GFI and related measures:

GFI

The GFI (goodness of fit index) was devised by Jöreskog and Sörbom (1984) for Ml and Uls estimation, and generalized to other estimation criteria by Tanaka and Huba (1985). The GFI is given by
Description: 7313
where Description: 7314is the minimum value of the discrepancy function defined in Appendix B and Description: 7315 is obtained by evaluating F with Description: 2159g= 1, 2,...,G. An exception has to be made for maximum likelihood estimation, since (D2) in Appendix B is not defined for Description: 7316. For the purpose of computing GFI in the case of maximum likelihood estimation, Description: 7317 in Appendix B is calculated as
Description: 7318
with Description: 7319, where Description: 7320 is the maximum likelihood estimate of Description: 7321.
GFI is less than or equal to 1. A value of 1 indicates a perfect fit.

AGFI

The AGFI (adjusted goodness of fit index) takes into account the degrees of freedom available for testing the model. It is given by
Description: 7323,
where
Description: 7324.
The AGFI is bounded above by one, which indicates a perfect fit. It is not, however, bounded below by zero, as the GFI is.

PGFI

The PGFI (parsimony goodness of fit index), suggested by Mulaik, et al. (1989), is a modification of the GFI that takes into account the degrees of freedom available for testing the model:
Description: 7325,
where d is the degrees of freedom for the model being evaluated, and
Description: 7326

Miscellaneous measures:

Hoelter index:


Hoelter's "critical N" (Hoelter, 1983) is the largest sample size for which one would accept the hypothesis that a model is correct. Hoelter does not specify a significance level to be used in determining the critical N, although he uses .05 in his examples. Amos reports a critical N for significance levels of .05 and .01. Here are the critical N's displayed by Amos for each of the models in Example 6.
Model
HOELTER
.05
HOELTER
.01

Model A: No Autocorrelation

164

219
Model B: Most General
1615
2201
Model C: Time-Invariance
1925
2494
Model D: A and C Combined
216
277
Independence model

11
14
Model A, for instance, would have been accepted at the .05 level if the sample moments had been exactly as they were found to be in the Wheaton study, but with a sample size of 164. With a sample size of 165, Model A would have been rejected. Hoelter argues that a critical N of 200 or better indicates a satisfactory fit. In an analysis of multiple groups, he suggests a threshold of 200 times the number of groups. Presumably this threshold is to be used in conjunction with a significance level of .05. This standard eliminates Model A and the independence model in Example 6. Models B, C and D are satisfactory according to the Hoelter criterion. I am not myself convinced by Hoelter's arguments in favor of the 200 benchmark. Unfortunately, the use of critical N as a practical aid to model selection requires some such standard. Bollen and Liang (1988) report some studies of the critical N statistic.

RMR

The RMR (root mean square residual) is the square root of the average squared amount by which the sample variances and covariances differ from their estimates obtained under the assumption that your model is correct:
Description: 7327.
The smaller the RMR is, the better. An RMR of zero indicates a perfect fit.

References:

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Friday, June 23, 2017

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3. Psychological pricing for whole purchase of grocery per month or on a selected products those costs above 100

4. Promotional pricing like buy 1 and get 1 free.

5.Cost plus pricing for commodities.

6. Providing credit either for few days or a month

7. Loss leader pricing for vegetables.

8. Providing private labels at a cheaper price.

9. Packaging the commodities

10 embracing the digital payments
(Source; https://www.businesstoday.in/current/economy-politics/63-per-cent-of-kirana-stores-in-tier-2-3-towns-want-to-embrace-digital-payment-options/story/265316.html)
11. Door delivery
12. Pick -up centers for other brands and retailers.
13. use of cloud information technology( Source; http://bwcio.businessworld.in/article/Why-Kirana-store-owners-in-India-are-moving-to-the-cloud-for-e-commerce/24-03-2017-115077/)

Friday, June 16, 2017

Business buying model : Bosch India case study

Business buying model:  Bosch India.
© Prasad Kulkarni, Faculty, 
This case let is prepared in 2008 and updated in 2019.
Introduction to MICO Bosch.
MICO- Bosch is the subsidiary of one of the world’s largest private industrial company Bosch Germany. Motor Industries Company Limited(MICO) founded in the year 1951  and later acquired by Bosch Germany(ibef.org, 2019). The company manufacturers its products from Bengaluru, Naganathpura, Nasik, and Jaipur
It is the largest manufacturer of diesel fuel injection equipment. The company operates in three major segments. They are automotive technology, consumer goods and building technology and industrial technology. Bosch uses Indian office as an outsourcing destination for diesel fuel injection equipment and pumps. Therefore it has to meet the international standards set for engineering products in different countries.  To ensure the adherence to international standards company should have best procurement system in place. 
Key success factors of MICO- Bosch 
 Mico- Bosch success today  is largely due to the adoption of technology. Further, new heights Mico Bosch has reached because of support of the parent company.Added to this, the company has spent considerable amount on research and development. Today, MICO spends 2-3% of total revenue on Research and Development(ibef.org, 2019). Apart from this, the company has diversified into car service business to boost their revenues.
MICO Bosch as the exporter:
 MICO Bosch emerged as the sourcing hub for the parent company. The Mono Block pumps manufactured at Czech republic, Multi cylinder pumps manufactured at Austria, Injectors and Nozzle from France, and regulators from cardiff plant shifted to Manufacture from India and MICO Bosch emerged as the sourcing hub for the parent company.
 Purchasing
 Mico Bosch purchasing department procures the materials from world class suppliers who can supply the goods at best prices. To obtain the required quality and efficiency Bosch always looks for the long term relationship with their suppliers. Major products procured by the Bosch India are steels, castings, forgings, turned and machined parts, sintered components, fasteners, springs, bearings, assemblies, sub-assemblies, packing materials, logistic services and capital goods.
Bosch worldwide is driven by a unique philosophy of BeQik. This represents Bosch Group's commitment towards Best Quality, Innovation, Customer Satisfaction and Continuous Improvement
Procuring the world class product at an affordable price is a challenge. To accomplish that challenge the company has set the following guidelines.
Ø  Customer Satisfaction
Ø  Quality ( Zero defect)
Ø  Supplier Development (training and development)
Ø  Fairness and Openness
Ø  International Activities
Ø  Systems Network
Ø  Market and Products
Ø  Environmental Responsibility
Ø  Continuous Improvement
Ø  Associate Development
As Bosch India procures large assortments it felt the need of dividing the purchasing deprtment into two divisions. They are corporate logistics and purchase ( CLP) and plant logistics and purchase(PLP). Corporate logistics and purchase division sources raw materials, standard components, trade goods and capital goods. They also ensure proper logistics contracts and customs clearance. The plant purchase department is responsible for plant specific parts, machined components, mechanical sub assemblies and capital goods.
Any company that wishes to become supply chain member of  Bosch India should  fulfill following criteria:
1. All suppliers should be QS 9000 certified manufacturers.
2. The supplier should get A rating from the company. the rating methodology is given below
Audit score %             
Ranking 
Meaning
90 to 100                            
A
Full compliance
80 to less than 90
AB
Mainly compliant
60 to less than 80
B
Conditionally compliant
Less than 60
C
Not compliant
Discussion Questions:
1. ‘Guidelines of BOSCH purchasing can be used as vendor rating parameter’ Do you agree with the statement? Comment.

2. Discuss the advantages of dividing the purchasing department.
References:
1.

(2019). Ibef.org. Retrieved 25 October 2019, from https://www.ibef.org/download/MICO.pdf

Radio Audience Measurement case study

Radio Audience Measurement (RAM): Understanding radio listener’s behavior.
© Prasad Kulkarni, 
This case let is prepared in 2008.
Radio has emerged as an attractive media to reach urban consumer. The radio once considered as u an attractive option to promote the product has shown its resilience. The entry of private companies in the FM space rejuvenated the competition. The big companies like Reliance, Sun network, Sky group, Bennett and Coleman and Jubilant group further fuelled the competition. Every company started declaring themselves as No.1. This has resulted in the utter confusion in the minds of advertisers. To avoid this confusion TAM India network, Neilson and IMRB introduced the concept Radio Audio Measurement (RAM).
A methodology used in the Radio Audience Measurement:
Radio Audience Measurement will pass through three phases. They are radio establishment survey, Panel recruitment, counseling and reporting, and training.
1. Radio establishment survey: In this stage radio ownership, a reach of the radio channels and habits of an audience are measured. This will help Ram to identify the target panel members by whom company gets continuous data. This survey was conducted for 7 weeks in which 4.5 weeks are used for field work, 1.5 weeks for validation and one week for reporting and analysis and presentation. This annual survey will have 3000 sample per city. The survey is conducted through random sampling method keeping in mind about the SEC, age and gender control.
2. Panel recruitment, counseling, and reporting: This phase involves three stages. In the first stage, survey sample profiling is done so that company can recruit the right audience for the panel. In the second stage recruitment of the profiled sample will take place and in the last stage which is called as cool off period panel performance are measured against set standard norms. This 11-week long phase will see that only one person is selected per home and 480 individuals are selected per city. This also keeps in mind that it selects 120 individuals /SEC, 240 individuals /gender and 96 individuals per age band.
3. Training:  The selected panel members are trained using dummy data and e- learning curriculum are given.
Conflicting views:
Radio audience measurement is not just TAM India’s domain; Media research users’ Council (MRUC) conducts ILT (Indian listenership track). ILT depends on the day after recall method i.e. listeners are asked about the program after one day of listening. RAM collects its data by monitoring the panel’s dairy system. Prashant Pandey CEO of Radio Mirchi openly expressed his reservations against dairy system used in the TAM’s research.  Contradictory views have emerged from the star group’s radio city which expressed their happiness about the TAM‘s radio audio measurement.  Some of the radio industry insiders feel that electronic system which measures automatically are better than sample-based surveys.  But the cost is a big issue in electronic measurement. Anand Chakravarthy of Big 92.7 feels that these radio audience measurement agencies should give weekly data rather than monthly data. Some industry observers feel that numbers of cities covered are not enough to conclude on radio listenership. Add to all these, IMRB a research agency introduced radio express another measurement system which further complicated the advertisers' media planning.
Discussion Questions:
1. Which one of the radio measurement do you think appropriate for the Indian industry? Comment.
2. Is it possible to measure the behavior of a listener through an electronic medium? If yes give reasons.


Just for your size case study

Just Your Size Designers: Understanding the consumer buying behavior.
© Prasad Kulkarni, Faculty.
Just Your Size Designers offers readymade and custom fit clothes for medium to plus size women who usually find it very difficult to find something they can wear, which fits great and looks good on them. If they go to their neighborhood tailor, there is no guarantee of quality, no advice, no fashion trends, no customization, low quality of work, no trials….phew! On the other side of the spectrum, there are exclusive designers who give you the latest but it costs the moon. So what does one do to get the best of both worlds? The answer is “Just Your Size Designers”.
Just Your Size offers custom fit and ready made clothing for medium to plus size women in Bangalore, India. Just Your Size Designers, offers value in terms of – the right fabric, the right cut and design, the right look and style to suit every individual, at the right price. The company encourages its customers to dress well and most of its customers compliment them and come back because of the ‘feel good’ factor. Some have also told the company about the compliments they get from their friends! Just your size designers make sure that the customers get the right style and fit by encouraging them to try the dress and even make a few changes, till they are happy. The range of fabric includes Cotton, Crepes, Chiffon, Georgettes, Linen, Jute and Satin. You can get a good collection of Indian and Indo Western wear – from Tunics, Kurtis, Shirts, Tops, Skirt sets, Pant sets, Loungewear and even maternity wear. The size range starts from M to XXXXL and the prices are reasonable – starting at Rs 400. Just Your Size Designers also specializes in bridal wear. If you want to look and feel gorgeous on that special day of your life, visit Just Your Size Designers 2-3 months before your wedding and based on your budget, you can get a custom made designer trousseau that will make you feel like a princess. The company believes in the mantra – look good, feel good at the right price. It helps customer to discover in a new way. According to shiwani talwar Director Just your size “we try and look at you as an individual and then advice you on how you can look better, it is important that every woman should make her own style statement rather than blindly following the latest fashion trends”.
a. What is the consumer behavior of just your size designer’s products?

b. Do you think Just for you designers should use celebrity endorsements to promote their products? Comment. 

Data fabrication case study

Data fabrication
©  Prasad Kulkarni, Faculty.
Topic: Marketing research.
      Mr. Suryaputra is working for Suchitra private limited, a marketing research organization since two months. Suchitra is a well known, recognized marketing research company. It offers market research solutions to large clients cutting across various industries.
      Mr. Ganesh and Mr. Narayan are working as business development executives in a marketing department of Suchitra Private Limited. Both of them get the research project from clients and give it to operation team. The operation team analyzes the data and marketing strategy is written on the basis of data interpretation by the research team. The final report is given to Miss Jhanvi Who looks after the operation department.  In turn, this report is handed over to Mr. Ganesh and Mr. Narayan who gives a verbal presentation to clients.        The research projects are assigned to 20 research analysts in the firm on the basis of their workloads. As numbers of clients are large it is very difficult for the company to have fixed analysts working on the project. Therefore operation department allocated the work internally and externally. Internal analysts work on a sample, construction of questionnaire and interpreting the data. Data collection and data processing is outsourced from Shankar Research Limited.
      Mr. Suryaputra’s responsibilities are interpreting the data and provide the recommendation to the clients. He has completed over 10 projects in the last two months and his works are well appreciated by the clients. He has completed the new assignment on a Friday and submitted to Miss Jhanvi. When Mr. Suryaputra returned to office on Monday he saw the changes in the data processed and a note to see Miss Jhanvi.
      Miss Jhanvi explained that Mr. Narayan would not like the report as client probably not agree with it. She explained that Mr. Narayan took permission to do some correction in the primary data and asked Mr. Suryaputra to write a new report.
      Questions for Assignment:
      1. Is it ethical to change the actual findings of the marketing research report? Support your answer.

      2. What is the impact on the business if the un-fabricated data sent to clients?

Reference checking

Employee Background and reference checking In India.
Prof. Prasad Kulkarni, Asst Professor, Gogte Institute of Technology, Udyambag, Belagavi.

Theoretical background:

Background screening confirms previous employment experience, education qualification, criminal record and drug test. The reference check is speaking with previous employers about skills and job requirement candidate possess. (Edward sandier) In India, employer asks the employee to provide few references in the selection process to verify later (Ashwatappa)
Background checking and reference checking is found to be necessary by the companies to reduce the risk of data theft, criminal activity, and workplace misbehaviors. (Tech story)

Background checks by the organization have immense benefits to the company. First, it authenticates candidates’ credentials. Second, eliminate any possible legal consequences. The employees with forged education certificates, fake salary slips if found by the external world will tarnish the image of the company. The background check will eliminate any concern of hiring a candidate with criminal background and anti-nationals. In future, it reduces sexual harassment, industrial accidents and labor unrest in the company. It reduces
Outcomes of reference checking
Reference checking will reveal following 10 areas of improvement
  1. Confidence
  2.  Communication
  3. Experience
  4. Knowledge
  5. Time management
  6. Delegation
  7. Overcommit
  8. Further education.
  9. Detailing
  10. Accuracy
(Source: the 20 common things that come during reference checks, Harvard Business review)

Indian reference checking and background verification Industry
Indian reference checking and background verification industry has touched Rs 250 crore in 2012. ( Kameswaran). The report by background check company Auth Bridge (2012) found that 19.47% employees fabricated their previous experience information. This has been followed by problems in references (9.93%), Fake addresses (7.08%) and forged education credentials (1.81%). (Check-out latest Employee Background check Trends- Industry wise)
Candidates can be screened pre-hire, pre-offer, pre-joining, post-offer or post-joining. Experts of the industry vouch that outsourcing these processes to background verification companies is a safer and securer way of ensuring that the workforce you hire is trustworthy, is compliant and does not come with any legal, criminal or terrorist history or links.
Employee Background Verification Services comprises of the following checks.
  • Previous work or job Verification
  • Colleagues and supervisors reference validation
  • Academic credentials verification
  • Personal data investigation
  • Criminal history
  • Disputes pending in the court
  • National skill registry verification
  • Frauds with banking and finance system
  • International criminal data check
  • Nationality verification
  • Drug addiction
  • CV Validation
Major players in background and reference checking industry in India
  1. ·         A.M.S. Inform Private Limited         
  2. ·         AuthBridge Research Services Private Limited
  3. ·         Baldor Technologies Pvt Ltd (IDfy) 
  4. ·         cFirst Background Checks India Private Limited     
  5. ·         SecUR Credentials Pvt Ltd   
  6. ·         EVAluationz India Private
  7. ·         Footprints Collateral Services Private Limited          
  8. ·         First Advantage Private Limited       
  9. ·         iCrederity Info Services Private Limited       
  10. ·         Integrity Verification Services Pvt. Ltd.
  11. ·         Integrated Information Services Pvt Ltd      
  12. ·         KPMG
  13. ·         Matrix Business Services India Private Limited        
  14. ·         Onicra Credit Information Company Limited
  15. ·         Pinkerton Corporate Risk Management India Pvt Ltd.
  16. ·         Premier Shield Private Limited          
  17. ·         Screen Facts Services Private Limited           
  18. ·         Supersoft Consultants Private Limited          
  19. ·         TOPSGRUP Risk Intelligence Private Limited
  20. ·         Verifacts Services Private Limited    
  21. ·         Vibrant Screen Private Limited         
  22. ·         Walsons Services Private Limited     
(Source: https://nationalskillsregistry.com/background-verification.htm)
Background and reference check cost: The cost for Background and reference check in India varies between Rs 300 to Rs 10,000 per candidate.

Background and reference checking process in few Indian firms. 

1.      Oracle Background and reference check:

In accordance with Oracle policy, background checks are required for individuals being considered for employment. Oracle’s background check vendor is Hire Right, a leading provider of on-demand background screening services. When Oracle initiates the process, Hire Right will e-mail a link to its online application, along with unique login and password information. Candidate should promptly use that information to login and complete (in its entirety) the online form. Hire Right will use the information candidate provided to prepare a background check report for Oracle. Oracle Human Resources will individually assess the results of this report.  
2.      Wipro background and reference check
Wipro hires approximately 10,000 people every year. After their in-house team and third party background Verification Company found that candidates using fake academic and experience certificates, it has delisted 300 companies and 150 colleges. 
3.      TCS background and reference check
 To avoid fraudulent academic certificates TCS has begun accrediting colleges. So far, TCS has accredited 350 campuses. This has resulted in drastic reduction in fraudulent cases to 200. For few positions, TCS even asked aspirants to submit passport in which criminal background check is done by the police. (Schwartz, K. D. 2005). 
4.      Cognizant background and reference check
Cognizant, another IT major, used third party service for background and reference checking. The third parties check the information from HR person of the old employer and also scrutinize the academic credentials of the employee. (Current market) 
5.      Kotak Mahindra background and reference check
The background check is done at the different level for companies. Kotak Mahindra accepts little deviations from age education and experience that may not harm the company at large. 
6.      Yes bank background and reference check
Similar to Kotak Mahindra Bank, Yes Bank allows candidates with minor deviations in age, education and experience details provided by the candidates. (Times of India) 
7.      Mankind Pharmaceuticals background and reference check
Mankind Pharmaceuticals use very stringent behavioral assessment techniques before background and reference checking. Candidates resume with too many skills and experiences were subject to background and reference checking. 
8.      PNB MetLife background and reference check
Fake CV’s are biggest problems to insurance company PNB MetLife. To verify the education and experience of the candidate, PNB MetLife asks the original documents at the beginning of the selection process itself. (Economic times) 
9.      Dell India background and reference check
Dell India not only have stringent selection process but also makes global compliance check mandatory to ensure proper selection.

Issues of background and reference checking in India.

  • Layoff technique: Many firms gather background and reference checking as the tool for layoff at the time of crisis.
  • Privacy: Many employees voiced the NASSCOM’s background and reference checking as the violation of privacy. In India, privacy laws are not clearly defined.
  • Part-time job: Many companies though blacklisted few training centers, colleges and companies yet; they recruit from these sources for a contract employee. Their main motivation is to reduce the Human resource cost. This creates the dilemma between accredited and non-accredited centers.
  • Lack of database: Unlike the USA where the data of citizens are clicked away, In India employee database is not formed. This makes third party background and reference checking companies to go physically and verify the documents. (Financial Express)

References:

1.      Andrea Edwards, the complete reference checking handbook AMACOM, page 4
2.      Ashwatappa, Human resource management, McGraw-Hill,  p 207
3.      Schwartz, K. D. (2005). The background-check challenge. InformationWeek, 1048, 59-61.
4.      http://techstory.in/authbridge/ October 14 2015)
5.      http://www.financialexpress.com/archive/india-lacks-the-required-database-for-background-screening/439988/
6.      http://articles.economictimes.indiatimes.com/2015-06-21/news/63671691_1_india-inc-rahul-sinha-background-checks
7.       http://timesofindia.indiatimes.com/business/india-business/Lying-your-way-to-a-new-job-just-got-tougher/articleshow/53834273.cms
8.      http://www.currentitmarket.net/2009/07/it-firms-gear-up-to-strong-background.html
9.      https://nationalskillsregistry.com/background-verification.htm
10.  the 20 common things that come during reference checks, Harvard Business review  August 2016
11.  Kameswaran, http://www.slideshare.net/kameshwerkc/trust-but-verify-52195431.




Tuesday, June 13, 2017

What are flagship brands in the retail store?

1. Flagship:
Categories providing high margin and high sale volume is classified as Flagships.
Retailers’ highlight these categories in their reports. Category managers should always see to it that this merchandise should not be out of stock.
Image result for category role matrix

                                                      Category Role matrix

                                                     

What is GMROI? and How to calculate GMROI?

 Gross Margin Return On Inventory investment ( GMROI)
Retailers across the world would like to have merchandise that has high sales and high margin. Many retailers shifted their concentration to store brands or private labels to ensure they get a better margin. Retailers are also interested to find the how much he or she should invest on getting the sales which leads to margin. This is calculated using GMROI.
Gross Margin Return on Inventory Investment (GMROI)
Formula to calculate:
GMROI          = Gross margin percentage * Sales to stock ratio
                        = (Gross margin/ sales) * ( Net sales/ average inventory)
                        = Gross margin/ average inventory
Importance of GMROI:
General margin analyses focus on total sales in the retail outlet and margin a retailer gets on it. It ignores the inventory held and operation costs involved with it. Retailer is interested in utilizing his assets effectively. GMROI has two components in the first part it looks at what is the margin a retailer gets on the sales and how much sales he can do it on the average inventory.
Example of GMROI:
A discount store in Ganganagar is able to sell Rs 25000 worth of ready to eat products and Rs 40,000 worth of Rice Retailer gets 10% margin on Ready to Eat products and 15% on the Rice. If he should hold average inventory of Rs 5000 and Rs 10,000 in ready to eat food category and rice products calculate what the GMROI for both products.
Solution:
GMROI= Gross margin/ average inventory
Gross margin for ready to eat products= Rs 25000* 10%
                                                              = Rs 2500
Gross margin fro Rice products            = Rs 40,000* 15%
                                                              = Rs 6000
GMROI for ready to eat products      = Rs 2500/ Rs 50000
                                                             = 0.5
GMROI for Rice products                 = Rs 6000/ Rs 10,000

                                                            = 0.6