CHAPTER-1

INTRODUCTION
 INTRODUCTION TO TAXI INDUSTRY

India taxi market stood at around $ 6.4 billion in 2016, and is forecast to grow at
a CAGR of 13.7% during 2017 – 2022, to reach $ 14.3 billion. Surging demand for taxi services
in India can be attributed to changing lifestyles of travellers and increasing disposable
income of consumers, especially in Tier-I and Tier-II cities. The market is witnessing
increasing traction as taxis offer hassle free travel experience to customers in addition to
various other tangible and intangible offerings such as booking convenience through mobile
applications, air conditioning, educated and skilled drivers, multiple payment options, 24×7
customer support, electronic fare meters, GPS enabled vehicles, etc.

Research has calculated the market size for India taxi market using a bottom-up
technique, wherein taxi operators’ volume sales data for different vehicle types (Hatchback,
Sedan, SUV/MUV and Luxury/Premium) was recorded as well as forecast for the future
years. Research has sourced these values from industry experts and company
representatives, and externally validated by analyzing historical sales data of respective taxi
operators to arrive at the overall market size. Multiple secondary sources such as directories,
company websites, company annual reports, white papers, investor presentations and
financial reports were also used.
 Key Target Audience:

 Taxi and Radio Taxi Operators

 Industry associations, organizations, forums and alliances related to taxi market

 Government bodies such as regulatory authorities and policy makers

 Market research and consulting firms

The study is useful in providing answers to several critical questions that are important for
industry stakeholders such as taxi companies and policy makers. The study would also help
them to target the growing segments over the coming years (next two to five years), thereby
aiding the stakeholders in taking investment decisions and facilitating their expan sion.

Report Scope:

In this report, India taxi market has been segmented into following categories, in addition to
the industry trends which have also been detailed below:

· By User Segment

 Individuals
 Corporate
 Tourist

· By Payment Mode

 Cash
 Online Payment
 Mobile Wallets

By Vehicle Type

 Premium/Luxury
  SUV/MPV

 Hatchback & Sedan

By Taxi Type

 Radio

 Regular

 Self-Driving
 GROWTH OF THE GLOBAL TAXI INDUSTRY

Global Taxi Market

Global taxi market is expected to grow at a fast pace during the forecast period, 2018-2023,
owing to increasing demand for ride sharing and rising online taxi booking applications.

Online vs Offline

In recent years, new and innovative technologies, and business models have appeared in many
countries and cities across the world, through smartphone apps. These involve booking and
payments systems, and ridesharing services, using private vehicles for passenger transport.

These technological platforms provide an extension for the on-demand transport market. For
instance, ‘sharing economy’ platforms make it easier for customers to negotiate and engage
directly with service providers. Consumers are also provided with a higher level of information
and opportunity for price comparison in advance.

Offline ridesharing and app-based booking systems have been readily taken up by consumers,
where they have been introduced. These market trends are expected to have significant
implications on the stakeholders in the taxi and hire car market from consumers, drivers,
operators, and taxi networks, in specific, taxi networks and license plate holders with significant
investments may face increasing competitive pressures.

Increasing Demand for Ridesharing

The ridesharing segment generally covers online platforms and apps, which brings together
both passengers and drivers. Consumers are increasingly embracing ridesharing. In countries
such as Australia, cities rely heavily on train services for commuting, there are consumers, who
are not in the vicinity of the station, and had to combine their journey with either buses or taxis
or driving and parking at stations, varying in terms of experience and cost. But the
aforementioned transportation modes face some hindrances, such as buses can be cheap but
are not frequent; and taxis and parking at the station are convenient but expensive. Thereby,
making ride sharing a convenient option.

Some of the major benefits that are driving the ridesharing in the country are as follows,
booking convenience, multiple payment options, 24x7 customer support, GPS-enabled vehicles,
and low fares, owing to less commission charged by drivers.

Retaining drivers and growing the driver network has been paramount for the companies’
growth. But the relationship has been fraught, as drivers have argued that they’re not
independent contractors and have asked for tipping options on Uber. Recently, Uber drivers
were angered after the company revealed that it owed its drivers millions of dollars due to an
accounting error.
As autonomous vehicles enter the equation -- with Lyft pairing up Waymo and General
Motors GM, -0.45% and Uber developing cars with Daimler and researchers at Carnegie Mellon
among others -- the analysts see the cars displacing approximately 6.2 million drivers.

Proliferation of cab aggregators has significantly impacted unorganized transport service

providers and the automotive industry

Consumers’ inclination towards owning an automotive is primarily to gain access to

transportation. Increasing consumer satisfaction through these service offerings has led to
significant negative impacts on automotive sales and local taxi service providers. Owing to
these impacts, automotive companies are forced to consider sales strategies in accordance to
cab aggregators’ presence. Chief automotive industry participants are focusing on
collaborations to enhance their sales. For instance, in the recent past, in India, Ola has
collaborated with Maruti, Hyundai, Nissan, and Tata to enable better loan facilities, repayment
choices, and financial benefits for drivers who opt to purchase cars through its channels.
Asia Pacific is expected to witness highest growth rates over the forecast period

Market in countries such as China, Indonesia, India, and Malaysia is expected to witness
significant growth over the forecast period. Consumers in these countries are inclined towards
mobile solutions, which is still in its nascent stage. Moreover, companies are increasingly
focusing on capitalizing opportunities through considerable investments and enhancing their
offerings in these regions. For instance, in May 2017, Ola announced plans to invest US$ 2
billion in India to ply one million e-vehicles on the Ola platform by 2020. In May 2017, Uber
announced plans to enhance its offerings by enabling offline booking options through SMS,
WhatsApp and calls; and enhance consumer safety by providing car safety related information.

Global cab aggregators industry is consolidated with the presence of few major participants
such as Uber, Lyft, Hailo, Ola, Grab Taxi, Didi Dache, Gett, LeCab, Cabify, and Bitaksi. Owing to
low initial investments and large growth opportunity, large number of new entrants are
expected to enter the market. New industry participants include Cabby, TenZillionCabs, HiCabs,
DropTaxi and Baxi Taxi. These are expected to present considerable challenge to major players
and create a competitive atmosphere in the market over the forecast period.

Key Developments in the Global Taxi Market:

 April 2018: Uber entered into an agreement to acquire JUMP Bikes, an electric, dockless
bike-sharing service, and have already started testing in San Francisco

Global Taxi Market Key Players: Uber, Ola, Lyft, Grab, Didi Chuxing, Curb, and mytaxi among
others.
 GROWTH OF THE TAXI INDUSTRY IN INDIA

Taxi market has gained prominence over last 2-3 years, in the backdrop of entry of app based
aggregators which has not only disrupted auto-rickshaw and traditional taxi market but also
forced automotive OEMs to revise their growth and marketing strategies.

A report released by ICRANSE -0.78 % stated that the Indian passenger vehicle industry is likely
to ride on the strong growth potential of domestic taxi segment in the near term, whereas
medium to long term growth will be supported by low car penetration level and increasing
income level.

“Considering strong demand and increasing penetration of such players in smaller town, Indian
taxi market is poised for robust double digit growth over next 2-3 years. In FY2016, fleet sales
(including cab aggregators) accounted ~9 per cent of Indian PV sales, which is expected to reach
15 per cent-17 per cent level by FY2020,” stated the report.Indian taxi market is still in nascent
stage, with huge scope for growth given low car penetration level and poor public
infrastructure. OEMs have also realized the market potential and have dedicated sales team to
cater fleet operators.

The entry of aggregators like Ola and Uber has changed competitive dynamics of taxi market
which till now has largely been fragmented and has lacked bargaining power with OEMs with
even larger organized fleet operators typically having less than 500 cars. However, the
aggregators like Ola and Uber have over 25,000 cabs in NCR mark market alone. Consequently,
this segment within PV industry now enjoys a significant clout, with some OEMs setting up
dedicated team to address aggregator market,” observed the report. On the challenges ahead
for the app based aggregrators, ICRA says considering most of the radio taxi operators as well
as the cab aggregators (Ola and Uber) are currently incurring losses, current tariff levels, with
an eye to increase market share, may not sustain for long. Driver incentives are also likely to dry
up with possible pressure from investors in these firms.
 COMPETITORS IN THE INDIAN MARKET

1. OLA CABS-

OlaCabs is an online cab aggregator based out of Bengaluru and among the fastest growing taxi
hiring firms. Taxi booking facility can be availed through app, website or through calls. It was
founded on 3rd December 2010 by Bhavish Aggarwal (CEO) and Ankit Bhati. By 2014, the
company has expanded to a network of more than 18,000 cars across more than 65 cities.
Today, Ola has more than 1,50,000 plus cabs registered on its platform and is present in more
than 100 cities across the country . It claims to clock an average of more than 150,000 bookings
per day and commands 60 percent of the market share in India.

It raised $330k in its initial round of funding on April 21, 2011. The company received Series A
funding of $5 million from Tiger Global Management; Series B funding of USD 20 million from
Matrix Partners and Tiger Global; Series C funding of $41.5 million from Steadview Capital,
Sequoia Capital and its existing investors. In Series D round of funding on Oct 25, 2014, it raised
$210 million from SoftBank Internet and Media Inc. and its existing investors.

On April 9, 2015, OLACabs raised $315 million in series G funding from ABG Capital, Accel
Partners, Mauritius Investments, Tiger Global Management & two other investors. The newest
funding rounds have been led by DST Global which has pumped about $40mn in Olacabs at a
valuation of $3.5bn. OlaCabs bought TaxiForSure on 1st March 2015 for about $200 million.

Ola leads the cab industry in India. Rising from the bottom since 2010, it acquired funding
successively in the past 6 years and now are the biggest cab service providers in India.

2. UBER-

Uber is an American international company headquartered in San Francisco, California. It

develops, markets and operates the mobile-app-based transportation network also called Uber.
The Uber app allows consumers to submit a trip request, which is routed to crowd-sourced taxi
drivers. Uber was founded as “UberCab” by Travis Kalanick and Garrett Camp in 2009 and the
app was released the following June. Beginning in 2012, Uber expanded internationally. In
2014, it experimented with carpooling features and made other updates. It continuously raised
additional funding, reaching $2.8 billion in total funding by 2015. It is estimated that Uber will
generate 10 billion dollars in revenue by the end of 2015.

The company received venture funding in late 2010 from First Round Capital and a group of
super angel investors in Silicon Valley that included Chris Sacca. In early 2011, Uber raised more
than US$11.5 million in Series A funding led by Benchmark Capital. In late 2011, Uber raised an
additional $32 million in funding from several investors, including Goldman Sachs, Menlo
Ventures, and Bezos Expeditions, bringing its total funding to $49.5 million. Google Ventures
invested $258 million in 2013. In December 2014, some successful investors the names of
which Uber did not disclose, participated in a competitive bidding process that lasted several
weeks, and their investments meant that Uber was worth US$41 billion.

The market is vast, but competition is fierce. Uber heads on with Ola and some other cab
aggregators, and being worldwide, profits more than them. Though in India, it is still struggling
to clinch the peak.

There are huge speculations about an impending Uber IPO. the company is expected to be
valued at $41 billion.This will make Uber the most valued startup ever.

Uber has also been embroiled in a number of controversies due to flak from an executive’s
inappropriate comments about women journalists and its questionable oversight of drivers.

3. MERU CABS-

Meru Cabs is a taxi aggregator company based in Mumbai, India. It provides cab booking
facilities through calls, website or through their mobile application and payment through cash,
card or wallet christened Cab Wallet. Meru Cabs integrated their cab service with Google Now
which will send passengers remainders for cab pickups, alerting them if they wish to book a cab
based on their location and other information through Now Cards within the Google app.

Meru cabs was founded by Neeraj Gupta in Mumbai on April 2007 and with the help of India
Value Fund (IVF), which is a private equity fund that took an equity stake in the company raising
funding over US $ 1.4 Billion. April 2015, Meru cabs received fresh funds of $50 million (Rs 300
crore) from existing investor India Value Fund Advisors. Another $100 million (Rs 600 crore ) is
expected by the end of this month. Siddhartha Pahwa, chief executive, has confirmed the
development.

4. CARZONRENT-

Carzonrent (India) Private Limited (CIPL) is an Indian car rental company with its headquarters
in New Delhi, India. Carzonrent operates a fleet of over 6500 cars in India covering New Delhi,
Mumbai, Bangalore, Hyderabad, Ahmedabad, Chennai, Gurgaon, Jaipur, Kolkata, Noida, Pune,
Ghaziabad and Faridabad.

The company was founded by Rajeev K. Vij in year 2000 and caters to over 6,000,000 customers
annually. Offering a fleet of cars from brands such as Toyota, Mahindra, Hyundai, Ford and
Maruti, the company provides corporate and personal car leasing and rental services 24X7.
EasyCabs and COR- Car Rentals are also radio taxi service units from Carzonrent. The company
offers a variety of rental services, including car leasing facilities for major cities throughout the
country. Corporate leasing program is also available, along with airport transportation services.
Apart from outstation and local car rental services, the company also provides self-drive
services, called MYLES along with EasyCabs- Radio taxi services and international services
through tie ups with other countries.

In 2005, Carzonrent India first received Rs 6 crore from SIDBI Ventures, for a 10% stake. In 2006,
Sequoia Capital invested $6 million into Carzonrent for a little less than 20% stake, which has
fallen further this week. BTS India’s portfolio comprises of Caravel Logistics Private Ltd., Mantri
Metallics Private Ltd., Microqual Techno Private Ltd., Parabolic Drugs Ltd., QAI India Ltd.,
Reliable Autotech Private Ltd. and Sai Sudhir Infrastructures Ltd, and invested Rs.36 crore, a
part of the Rs.100 crore deal made during Jan 2011.

Carzonrent being one of the oldest cab startups in India has good amount of experience and
hence in the race to become the lead.

5. SAVAARI CAR RENTALS-

Savaari Car Rentals is an online cab booking aggregator that aims to provide affordable and safe
taxi services to travelers. With operations across 60 cities in India, Savaari is uniquely placed as
the largest car rental company in terms of geographical reach. Savaari provides competitive
Airport transfers which includes toll, parking and waiting charges, cabs for outstation travel as
well as intra-city local cabs.

Travelers can opt for various taxi booking packages like 4 Hr/40 kilometers and 8 Hr/80
Kilometers for local travel. Do look for special packages that we have to offer in select cities like
Bangalore where you can travel unlimited kilometers for 8Hrs/10 Hrs without any restriction on
the kilometers travelled. The unlimited travel km package can be booked for airport pickups in
Bangalore.

Savaari was founded in 2006 to fill the gap where you can get quality car rental services at
nominal rates irrespective of which city in India you want to hire car rental services, thus
ensuring that you get the best value for your money at all times. In the past 5 years, they have
been able to prove their business and service model and currently, they are providing quality
car rental services at nominal rates in 53 cities across India.

The car rental market in India is expected to be Rs.12,500 crores. It has grown pretty much at
15% in the past few years except for 2008 and 2009 when it grew less because of the economic
slowdown. It is expected to grow at the same rate in coming years as well and they expect the
market to be around Rs.15,000 crores in 2011. They plan to increase the number of cities where
they provide their services and increase the number of local transporters in their existing cities.
 COMPETITORS IN THE BIKE TAXI INDUSTRY

Baxi

Baxi is a Gurugram-based bike-taxi service platform. It was founded in 2014 by Ashutosh Johri
and Manu Rana. Currently operating primarily around Delhi-NCR, Baxi has raised $1.4 million
seed funding in November 2015. The company, which is reportedly in talks to raise fresh funds,
is operationally profitable.

Bikxie

Founded in 2016 by Mohit Sharma, Divya Kalia and Dennis Ching, Bikxie offers bike-taxi services
for last-mile connectivity in Gurugram and Faridabad. The team raised funding of $315,200 in
January. Bikxie also offers an all-women service known as Bikxie Pink. The team claims to be on
the path to profitability.

Vogo

Founded two years ago by Anand Ayyadurai, Padmanabhan Balakrishnan and Sanchit Mittal,
Vogo is a dockless scooter sharing company. The platform lets consumers rent scooters for
short, one-way trips to different locations across Bengaluru and Hyderabad. The consumers are
charged Rs 5 per kilometre.

Bounce (previously Metro Bikes)

Founded by Vivekananda HR, Varun Agni and Anil G in 2015, Bengaluru-based dockless sharing
company Metro Bikes (now Bounce) raised $12.2 million Series-A funding led by Sequoia India
and Accel Partners last week. The average cost per kilometre is at Rs 6, and the team claims to
have seen over 2 lakh downloads on its Android and iOS platform so far.
 INTERNAL MARKETING- CONCEPT, FEATURES AND OBJECTIVES

Internal marketing was introduced in the mid 1970’s. This was initiated so companies could use
the concept as a way of achieving consistent service quality. Internal marketing became known
in the service marketing industry. The objective of this concept was to get a more improved
performance from the employees who regularly dealt with customers. Although this concept
began within the service marketing it has now broadened beyond and is included in many other
companies and organizations.

Tools and concepts for customer-focused management suggest that authors have many
definitions of internal marketing and from studying the literature they have highlighted 5 main
elements of the concept:

1. Employee motivation and satisfaction

2. Customer orientation and customer satisfaction
3. Inter-functional co-ordination and integration
4. Marketing-like approach to the above
5. Implementation of specific corporate or functional strategies

Employee motivation is a significant element of the concept, for many authors understand this
to be the essence of what internal marketing to be. An employee’s attitude towards their own
work place is believed to directly influence the value of the customer service that is given to
consumers. “Internal marketing efforts are assumed to result in employee satisfaction, job
involvement, work motivation, employee commitment, maximum employee effort on behalf of
the organizations and customers, increased job performance, service-oriented behaviors and
lower turnover which, in turn should improve service quality, customer satisfaction and
loyalty”.

When internal marketing is talked or written about, it is usually considered to be a process for
selling or promoting the company and its objectives to the employees. The purpose of this
process is to align every aspect of a company’s internal operations to ensure they are as
capable as possible of providing value to customers. While that may be a laudable theory, the
flaw lies in that while creating an internal selling process to employees, a divisive “them and us”
mentality can develop. Ideally, internal marketing should be seen as being the integrated
internal management of all those activities that directly and indirectly support the satisfaction
of customer requirements.

OBJECTIVES:

 a customer-oriented workforce
 enhanced external business relationships
 a better flow of information internally
 empowered employees
 increased compliance with standards and protocols
 improved brand reputation
 increased profits

FEATURES:

 Market research to uncover customer needs,

 Product planning and development –to make products that meet and satisfy customer
needs.

 Packaging, advertising and promotion – to create awareness and for brand-building

 Pricing and distribution –for long term revenue generation

In short, although the aim of marketing and sales is to increase revenue, marketing aims at
creating value for the customer and sees the customer as the reason for its existence. This calls
for a marketing plan based on the specific needs of the business.
INTERNAL MARKETING STRATEGY

Formulize your team

Getting your HR leaders involved initially is important for establishing processes and
communications with employees, but you’ll want marketing leaders and business leaders or
management that understand the brand the most. These leaders will help establish the work
culture, communicate the mission of the company, and sell employees on the product/services
best. Before you can start anything else, getting your team leads together is important.

Evaluate your internal marketing

Generally, whether you have a formalized one in place or not, some form of internal marketing
is probably happening within your company. Unfortunately, it’s also probably not that good.
This is a good time to identify and assess aspects that are considered an internal marketing
tactic.

From there you can start understanding if it’s working, what should change, and how to make it
more personal, or if you need to start from scratch. A good way to evaluate is to survey all
employees to see what they know, don’t know, their views on the company, etc. to start
correcting any branding gaps.

Align marketing messages and provide open training sessions/forums

After collecting information, your better able to align the company marketing messages and get
everyone on the same page. Of course, you want employees to have their own personal touch
when it comes to how they talk about the company, but they all should have a similar
perspective on the product/services.

This is also where non-required training sessions and open forums should be created, where
employees can openly suggest ideas, ask questions, and provide safe criticism. By having these
sessions, it opens the trust and dialogue among the workforce. Plus, it allows your company
leaders to share materials and encourage everyone to engage on behalf of the brand online.

Make it easy for everyone to get involved

Again, a major part of the new internal marketing is allowing employees to actively engage
online and sharing, via social, email, chat, forums, etc. This is what employee advocacy is
typically defined as and is a huge piece to internal marketing these days. Many companies try to
just send a newsletter to their workforce of the latest content or news, but many times it gets
buried or ignored.

To make it easier for everyone to get involved (especially companies of 200+ employees), an
employee advocacy program will be crucial for internal marketing to work effectively. These
platforms are used as a centralized location for hosting field marketing/sales materials, new
company content, personal content from third-party sources, and company announcements
which employees can share directly to their networks right from the platform.

Once everything is launched, keep working

Even after you have a formal internal marketing strategy in place, great work culture,
employees on the same page and engaging online on behalf of the brand, you’ll still need to be
open to feedback and working on improving the tactics.

Continue to provide training or meetings for open discussions, adjust processes if something is
broken or continual negative feedback, keep employees constantly in the know of what’s going
on and take their thoughts seriously. Re-evaluate as often as need, your work should never feel
too comfortable because that’s when mistakes or obvious improvements are missed.

IM and cross-functional process approach

IM questions traditional organisational structuring whereby companies continue to enact and

re-enact functional silos. Business have realised that they cannot continue to arrange work as
separate functions. Instead, businesses must structure operations around core business
processes, which are driven from the end-customer point of view. IM is based on the
understanding that no single management function is effective if it operates in isolation.
Multiple operations and people with different skill-sets have to be actively involved in creating
and delivering products and services. These cross-functional activities and the people who
perform them all have a major influence upon the final outcome. The implication of this is that
today’s managers must ensure that every employee in all parts of the organisation is involved in
the delivery of quality throughout the customer-supplier chain.

Unfortunately, too little attention has been paid to process organisation and process issues
both within research in IM as well as within external marketing. Marketing activities have
typically been examined as discrete windows without due recognition of systemic patterns and
consideration of the whole. Whilst inter-functional co-ordination has been highlighted as a key
enabling feature, both within IM and marketing orientation , the “how” of inter-functional co-
ordination remains relatively under-researched .Indeed, at a conceptual level IM is proposed as
a mechanism to facilitate this, but as yet far too little examination of IM’s role in this has been
researched.

IM and organisational anthropology: culture and behaviour

Through its focus on “employee”, IM helps the process of identifying current behaviours and
probes why they are occurring. Once specific employee behaviour patterns have been
established, it is then possible to create specific IM programmes to induce behaviours for
enhanced implementation. Through its anthropological focus IM builds an understanding of the
organisational environment, organisational hierarchy, organisational politics and structures.
Through this understanding, IM aspires to play an important role in the nurturance of the right
environment for implementation. IM’s understanding must be shaped by descriptive
anthropology of how individuals and their environment receive shape and meaning in their
continuous mutual interactions. This implies that IM must examine the irrevocable relationship
of employees to themselves, to other people, to the organisation and the world they live in.

IM places people centre stage in the equation of organisational success. Because IM links the
employee to strategy, it takes implementation to the very core of its enabling agency: the
employee. This direct link helps to cut through the layers that often act as multipliers of
confusion, conflict, frustration and eventually inaction. IM links specific strategy programmes to
developing competencies, which are in turn linked to each individual’s intelligence, creativity,
responsibility and experience. By doing so, IM not only manages the individual, but also the
collective that makes up the organisation. IM thus influences the formation of a “corporate
identity” and “collective mind”. These influences set in place foundations for an integrated
organisation. This means more than just putting together individual qualities and capabilities,
however important each individual and personal contribution may be. IM works by bringing the
individual into the collective. It is in this combination that individual creativity is transposed to
organisational effort and success.

IM and competences

IM examines what needs to be done, and by whom. IM can be used to identify the type of role
that innovation agents need to play to execute strategies. These roles are contingent to
organisational circumstance and situation. Which role is appropriate for whom is dependent
upon the individual’s orientation towards the desired end-goal at that specific moment in time.

This highlights the link between strategic implementation to the specific skills and capabilities
of the individual. By implication, this necessitates first knowing the skills and IM examines what
needs to be done, and by whom. IM can be used to identify the type of role that innovation
agents need to play to execute strategies. These roles are contingent to organisational
circumstance and situation. Which role is appropriate for whom is dependent upon the
individual’s orientation towards the desired end-goal at that specific moment in time. This
highlights the link between strategic implementation to the specific skills and capabilities of the
individual. By implication, this necessitates first knowing the skills .

To create outcomes from competencies, a company must target its competences in specific
directions. The problem is that most companies hardly understand their real core competences.
Many pay lip service to the concept but few are really able to pinpoint their core competences
let alone deploy them. Even worse, fewer still know the source of their competence basin.
Nurturing them is even more difficult. IM’s role is to create an assessment of core
competences, and plan for their nurturance and deployment. IM, by linking current
competences to planned strategies, assesses the gap in competencies to realise the plans. This
creates a strategic dialogue which forces strategic competence planning, not just strategy
planning. Unfortunately, most organisations stop once they have made strategy plans. They
hardly ever successfully make the transition from strategy plans to strategic competences
planning, which is at the heart of making actions occur and strategic plans to become realities.

IM as an enabling agency in building competences.

External marketing has already highlighted that marketing orientation holds performance
implications, and IM research (papers in this issue, as well as Gilmore (2000) and Gilmore and
Carson (1996)) are highly suggestive that IM and (associated inernal marketing orientation
(IMO)) is a key enabling competence toward marketing orientation and performance.

However, it is not sufficient just to know this. It is necessary to establish clearly what are the
antecedent enabling elements (e.g. internal service quality, internal customer satisfaction,
employee commitment, organisational socialisation are elements on which some light has been
shed by the empirical papers in this special issue) and how these can be built, strengthened and
sustained. Much further investigation is required to assess and clarify the impact of IM practice
on competence building and business performance.

IM and strategic alignment: challenge of integration, coherence and focus

Organisations are not monoliths. They consist of systems, subsystems and system interfaces.
Each system, or sub-system, is founded on specific capabilities and component processes, both
within and external to the firm. Only through the integration of these subsystems can the final
product/service outcome be successfully generated. The effectiveness of integration can
substantially impact on the cost incurred to the total organisational system. If all efforts are
integrated, the net result is a continuous stream of value-rich actions and outcomes. Yet,
integrated effort is arguably the most important, yet most difficult challenge facing firms.

IM generates involvement and commitment to organisational programmes. Involvement and

commitment coupled with clear sense of purpose are pre-requisite for the much needed
coherence and focus that are ultimately required to produce successful outcomes. Involvement
concerns not only people, but also includes all organisational resources such as systems,
equipment and information. It is suggested that one primary aim of IM is to assess and help put
in place processes to improve effort toward organisational ends. IM in this sense begins to
include all individual and organisational functions, activities, communications and elements
that a firm uses to create, develop and maintain appropriate inter-linkages that result in the
delivery of “quality” expected by the final customer. This raises questions as to what elements
engender involvement, commitment, and clarity of purpose. How do these, or other elements,
come together to create focus and coherence in strategy implementation? What is the
empirical evidence for this?

IM and the new covenant

IM is an interaction process between the organisation and its employees within a given
company context. IM works at the level of creating precisely the right type of atmosphere and
environment in which employees are encouraged to create, co-ordinate and improve the whole
business. This means that IM works towards actions, interactions and adaptations that enhance
customer satisfaction. This is engendered by creating an environment in which quality
enhancing behaviors become a reflexive part of employee action. This environment and the
accompanying quality enhancing behaviors by employees are formulated as a fundamental
source of competitive advantage. What is the implication of this assertion? At the basic level, it
suggests the need to understand and manage all these internal relationships, functions and
interactions in an effective and profitable manner so as to gain long-term competitive
advantages. However, at a higher level it is suggestive of the fact that employee perceptions of
corporate programmes are affected by their perceptions of other elements of the corporate
package. Employee motivation to do as the organization bids is driven by what they are being
offered, not just from the programmes they are being asked to implement, but also their
perception of the whole company. This higher-level interpretation indicates the need for
companies to establish a “high contract partnership” with employees along multiple
dimensions. The question then is: “What is the nature of this partnership and what are the
tools and mechanisms of establishing this?”. The studies suggest that IM works by establishing,
developing and maintaining successful reciprocal exchange relationships within the
organisation through:

 Understanding and intimacy.

  Trust.
 Commitment.

IM cannot work without the presence of these key ingredients. To attempt IM without these
would be disastrous, ultimately leading to employee cynicism and disillusionment.

A necessary condition, from an employee’s vantage is psychological safety. Psychological safety

is a state in which people feel safe to be candid in what they think and how they feel. Behaving
in new ways and doing things differently can involve some degree of fear. People act
transparently and with integrity when they are psychologically safe from threat. This means
that IM processes must be conditioned in trust: trust in leadership, trust in the processes and
system, and specifically, trust in the “rules of the game” maintained in the organization. For
instance, getting people to share their knowledge requires new processes but more
importantly, it requires setting a new covenant between employer and employees. Workers
have to be reassured that they will still be valued after they give up their “know-how”. In short,
it involves treating the employees as partners in the firm. This requires a big shift from the
current reality of organizational practice. A pertinent question here is to probe how many
companies have made this shift and how, as well as how well, have they managed this change.

IM is built on “trust”. When people trust that the organization will do what it says, then it
encourages behaviors within the organization that allow for quality to be embedded through
the entire supply-chain process. To build trust and commitment a company must intimately
know and understand its people and itself. By systematically aligning interactions through
explicit considerations to a full set of stakeholder needs, IM helps in the development and
growth of trust and commitment among parties. By looking after the needs of the employees,
IM provides a clear signal to the internal market that the company values its employees. This
begins the circle of reciprocity: when the company can demonstrate that it is committed to its
employees, only then is it likely that its employees respond in kind and become committed to
its success. Trust and commitment constructs have received considerable attention in the
relationship marketing literature but remain under-researched in relation to IM orientation. It is
an area highly worthy of further investigation.

IM and internal relationships

Following on from the point above, it is clear that in the twenty-first century companies can no
longer afford to maintain barriers between functions and departments. Success is driven by
integrating related functions within the organization – production, sales and distribution,
services, advertising, sales promotion, product planning and market research – to achieve the
business objectives. As suggested, IM looks to guide all people, functions and departments of
an organization by its systematic appreciation of the needs, aspirations and costs of each.

This underpins the internal customer-supply chain, which is replayed in organizational

interaction by every single employee, from top management to middle managers, all the way
down to shop-floor workers. Organizationally, this hierarchy results in a network of
relationships within which different collaborations evolve as a consequence of a multiplicity of
interaction episodes. Each of these relationships and interactions can be managed, where
appropriate, with a formal IM strategy and IM plan.

The task of managing and co-coordinating a web of customer-supplier relationships is certainly

not easy. It is important that everyone in the organization can see the linkage between what
she/he does and its impact on the “next customer”. Therefore, creating and aligning internal
relationships between departments, functions and employees inside the organization is
necessary to improve the performance of the company and its employees. IM examines and
manages the total set of relationships and interactions that bring about additional value-added.
Companies must gain an understanding of how to develop and manage these internal
relationships, with individuals and groups of individuals. This extends not only to employees,
but also to others who fall within the boundary of internal markets, such as suppliers and
distributors. It is the management of these organizational sets of relationships that allows the
“delivery” to what marketing has promised externally. This raises a key question: “How can the
company develop an effective process for structuring and managing internal relationships?”.
This area requires considerable further investigation. Relationship marketing provides an
obvious theoretical approach to these problems. Moreover the relational approach provides an
alternative framework to the transactional marketing approach that has underpinned much of
IM thinking.

IM, employee satisfaction and performance

A key premise underlying Berry’s (1981) “employees as customers” concept in IM is that just
like external customers, internal customers desire to have their needs satisfied. The logic of this
is that by satisfying the needs of internal customers, an organization should be in a better
position to deliver the quality desired to satisfy external customers. Implicit in this is the
assumption that fulfilling employee needs enhances employee motivation and retention, and as
a consequence the higher the degree of employee satisfaction, the higher the possibility of
generating external satisfaction and loyalty. While this assumption is intuitively plausible,
evidence supporting it remains sketchy. Papers presented in this issue raise several questions
with respect to the nature and meaning of this conceptualization which merit further empirical
investigation. One possible avenue is to examine whether employee satisfaction operates
through an intervening variable such as organizational commitment rather than directly on
performance.

IM and internal communication

Communication is an indispensable activity in the functioning of all processes, but it is critical in

highly cross-functional ones. Undoubtedly, one of the most common IM applications is in the
crafting of internal communication strategies. When this is done in parallel with external
marketing communications, advertised promises stand better chances of being fulfilled to the
required level of performance because staff is better prepared to perform them.

In this respect, IM, by creating messages and appealing to the emotions, can provide firms with
a rich source of advantage. Moreover, since employee behaviour is socially constructed,
idiosyncratic and largely holistic, it calls for a richer analysis of the employee experience. This
requires an immersion in the “consumption” experience of the employees. Companies that just
measure aggregate trends and statistics achieve little in the way of insight on how really to
motivate their employees. Aggregate employee satisfaction figures are typically lagging
measures; often they are out of date pictures of yesteryear’s sentiment. At worse, the
aggregations hide the realities of employee dissention and de-motivation. It is important to
note that IM itself needs to resort to ethnographic probes of the organizational milieu,
otherwise it ends up constructing superficial messages based on superficial insight, resulting in
little real impact. IM mandates more than straightjacket appeals for efficiency. IM forces
companies to be more empathic in the design of their communications to employees. If
companies do not appreciate the existence of different employee segments and their different
needs they will continue to produce messages that hold little meaning for the targeted
segments. Broad and diffuse messages create distance between the employee and the
organization and in worst scenarios confusion in action

IM and motivation: ideology of customer care or ideology of control and indifference

The historical subjection to mechanistic experience expressed through the precepts of scientific
management and in recent years through short-sighted application of business process re-
engineering (BPR) and organizational de-layering have played a heavy role in making
organizational environments barren and sterile places of work. Applied in their extremes, these
philosophies have robotized the workplace and stripped employees of their dignity as thinking
beings. While structured planning does posses its merits, it tends to bear down, on the
organization, a machine-like rationality. Acting like this serves only to drive underground the
realities and complexities of organizational practice, such as those embedded within the power
and politics processes, and ignores the fact that action and planning are interactive acts.

Without question the corporate workplace is laden with ideological content. To assume
neutrality is naive. Reality is a construction of a non-ideal, non-neutral state of affairs.
Understanding, however, of this status is important but it is not sufficient. It is also necessary to
strive forward toward ameliorative action. IM can and should play a role in this. It should
question the status quo and look at ways companies can re-engage and motivate employees. If
companies want a workforce that is both creative and committed they must think about and
set about nurturing the types of relationships that make their business environments conducive
ones. Thus far, if at all companies have focused on building relationships with employees then
they have done so at a superficial level, often deploying crude rational inducements. Needs of
employees are both rational and emotional.

IM must scrutinizes the rational and emotional content to build pictures of the reality of the
corporate environment. Only in this way is it able to create “packages” to meet the needs of
employees fully. IM must be proposed as an emotionally intelligent philosophy, one based on
the understanding that it is through the application of subjective emotions and empathic
awareness that employees are able to make judgments that may or may not end-up in the
realization of the long-term corporate interests. The challenge of IM is to force a rounded
understanding of the organizational readiness for a particular new initiative by examining the
full set of needs of the organization (demand of organization on the employees) in direct
relation to the full set of needs and aspirations of the employee (demands of the employee on
the organization). Only when there is balance in both these demands do conditions become
conducive towards motivated strategy implementation and therefore long-term prosperity.

While these points to some extent paint the extremes they do highlight the need to consider
the impact of different contexts on IM application, differences in relevance and perception of
IM according to employee levels (middle versus top managers versus employees etc), as well as
the need to consider the contingencies arising from different organizational histories and
managerial ideologies.
 CHAPTER-2

RESEARCH DESIGN