U n d e rs t a n d i n g

a Company for
Value Investing
Business Efficiency, Business Effectiveness,
Innovativeness, Sustainability

Tamal Datta Chaudhuri

Calcutta Business School, India

KSP Books
http://books.ksplibrary.org
http://www.ksplibrary.org
U n d e rs t a n d i n g
a Company for
Value Investing
Business Efficiency, Business Effectiveness,
Innovativeness, Sustainability

Tamal Datta Chaudhuri

KSP Books
http://books.ksplibrary.org
http://www.ksplibrary.org
ISBN: 978-605-7736-91-8 (e-Book)
KSP Books 2020
Understanding a Company for Value Investing: Business Efficiency,
Business Effectiveness, Innovativeness, Sustainability
Author: Tamal Datta Chaudhuri
Calcutta Business School, Diamond Harbor Road, Bishnupur -743503, South
24 Paraganas, West Bengal, India.

© KSP Books 2020

Open Access This book is distributed under the terms of the Creative Commons Attribution-Noncommercial 4.0
IGO (CC BY-NC 4.0 IGO) License which permits any noncommercial use, distribution, and reproduction in any
medium, provided ADB and the original author(s) and source are credited.

Open Access This book is distributed under the terms of the Creative Commons Attribution Noncommercial
License which permits any noncommercial use, distribution, and reproduction in any medium, provided the
original author(s) and source are credited. All commercial rights are reserved by the Publisher, whether the whole
or part of the material is concerned, specifically the rights of translation, reprinting, re-use of illustrations,
recitation, broadcasting, reproduction on microfilms or in any other way, and storage in data banks. Duplication of
this publication or parts thereof is permitted only under the provisions of the Copyright Law of the Publisher’s
location, in its current version, and permission for commercial use must always be obtained from KSP Books.
Permissions for commercial use may be obtained through Rights Link at the Copyright Clearance Center.
Violations are liable to prosecution under the respective Copyright Law. The use of general descriptive names,
registered names, trademarks, service marks, etc. in this publication does not imply, even in the absence of a
specific statement, that such names are exempt from the relevant protective laws and regulations and therefore free
for general use. While the advice and information in this book are believed to be true and accurate at the date of
publication, neither the authors nor the editors nor the publisher can accept any legal responsibility for any errors
or omissions that may be made. The publisher makes no warranty, express or implied, with respect to the material
contained herein.

This article licensed under Creative Commons Attribution-NonCommercial license (4.0)

http://books.ksplibrary.org
http://www.ksplibrary.org
Preface

T
eaching courses on Financial Management, Security
Analysis and Portfolio Management, Corporate
Finance and Critical Analysis of Organizations
requires reference to profit and loss accounts and balance
sheets of companies. The last course that I have been
teaching over the years also refers to qualitative traits of
companies like strategy, vision and leadership qualities.
Reading annual reports of companies is essential to
appreciate the above mentioned courses and in Calcutta
Business School we inculcate this habit among our students.
This also helps in delivering lectures in Marketing,
Operations Management and Human Resource
Management. It is very difficult to develop appreciation of a
company, if a student does not read annual reports of
companies.
Tracking performance of companies over time requires
metrics of measurement, and the book emphasizes
throughout the need for such metrics. The book divides the
performance of companies under the heads of business
efficiency, business effectiveness, innovativeness and
sustainability and metrics under each of the heads are
defined. Even to understand qualitative traits of companies,
metrics are defined.
The book emphasizes the utility of management concepts
like BCG Matrix and Balanced Scorecard in understanding
companies. Concepts of Transient Advantage, Blue Ocean
Strategy and Porter’s Five Forces are discussed in the book
and their role in understanding companies. It is reiterated
that so long as a company is in existence, there must be
customers and the company must be delivering value. A
company has various activities and they are all interwined
together in harmony. Only when the harmony breaks,
companies face complications. Business cycles and
associated ups and downs will be there in sales and
profitability. However, continuity is ensured by
management response, and this also determines the quality
of a company.
The book covers performance of medium and small scale
enterprises through a sample study. The purpose is to
highlight the relationship between innovativeness,
productivity, nature of industry, size, skill sets and access to
technology. These factors are also true for companies of
larger size, and some of my research papers have dealt with
these aspects.
After reading the book, I hope the reader gets some idea
as to how to perceive a company.

T.D. Chaudhuri
May 20, 2020
For the Students of Management
Contents

Introduction 1

Chapter 1
A company is not a company
9
Type of product/service 9
What is a company? 10
What makes a company? 11
Product/service, price, technology, raw materials 12
Human resources, training and development, employee
retention 13
Vision, competitor analysis, strategy, business plan 14
Market research, marketing, product support, logistics 15
Research & development, innovation 15
Customer 16
Sources and pricing of financial resources 17
Compliance 18
Chapter 2
Various approaches to evaluating a
company
20
Framework 1 – The BCG Matrix 21
Framework 2 - The Ansoff Matrix 22
Framework 3 – Porter’s Five Forces 23
Framework 4 – 7-S of McKinsey 24
Framework 5 – SWOT Analysis 26
Framework 6 – Balanced Score Card 28
Framework 7 – External Factor Evaluation Matrix
(EFEM) 30
Framework 8 – Competitive Profile Matrix (CPM) 31
Framework 9 – GE McKinsey Matrix 32

Chapter 3
Business efficiency, business
effectiveness, innovativeness and
sustainability
34
Business efficiency 35
Business effectiveness 35
Innovativeness 37
Sustainability 38
Chapter 4
How does a company grow?
40
Generic growth 40
Growth through innovation 41
Growth as depicted by the Ansoff Matrix 42
Growth through development of new product or
services 43
Sustainable growth 44

Chapter 5
Long term orientation and value creation
47
Long term orientation 47
Innovation – R&D expenses/Sales 48
Increase in Net Fixed Assets (NFA) 48
Sales growth 48
ΔY / ΔK 49
P/E multiple 49
Ability to attract external funds – Increase in long term
borrowings 49
Value creation 49
Economic Profit 50
RORE 50
Chapter 6
Leadership, strategy, innovativeness and
economic moats
53
Leadership 53
Strategy 54
Innovativeness 55
Economic moats 56

Chapter 7
Global conditions, the domestic
macroeconomy, industry outlook and
company performance – The
interconnectedness examined
58

Chapter 8
Innovativeness, skill intensity and growth
– A study of MSMEs
71
Evidence of extent and type on innovation 76
Information, skill & innovation 85
Information, skill & growth 94
Zone wise, growth cluster - Innovation mapping 95
Size wise, growth cluster - Innovation mapping 97
Innovation, skill intensity and growth mapping 101
Constraints for innovation 103

References 108
List of Figures

Figure 1.1. Various aspects of a company 12

Figure 2.1. The BCG matrix 24
Figure 2.2. The ansoff matrix 25
Figure 2.3. Porter’s five forces 29
Figure 2.4. 7S McKinsey framework 29
Figure 2.5. SWOT matrix 29
Figure 2.6. The balanced score card 29
Figure 2.7. Competitive profile matrix 29
Figure 2.8. GE McKinsey matrix 29
Figure 4.1. The Ansoff Matrix 43
Figure 7.1. Movement in country wise stock market indices 60
Figure 7.2. Movement in nifty and Dow Jones industrial average 61
Figure 7.3. Movement in CBOE VIX and India VIX 62
Figure 7.4. Movement in sensex, mid cap index and small cap index 65
Figure 7.5. Movement in sectoral indices in India 66
Figure 7.6. Recent movements in sectoral indices in India 67
Figure 7.7. Movement in auto and IT sectoral indices in India 68
Figure 7.8. Movement of oil and gas sector index and stock prices of
companies in the sector 69
Figure 7.9. Movement of FMCG index and stock prices of companies in
the sector 69
Figure 8.1. Venn diagram of types of innovation 82
List of Tables

Table 8.1. District wise distribution of units surveyed 72

Table 8.2. Size wise distribution of units surveyed 73
Table 8.3. Size wise district wise distribution 74
Table 8.4. Industry wise district wise distribution of units (aggregate) 74
Table 8.5. Industry wise distribution of total innovation 76
Table 8.6. Size wise distribution of total innovation 77
Table 8.7. District wise total innovation 78
Table 8.8. Distribution of types of innovation 78
Table 8.9. Industry wise distribution of types of innovation 79
Table 8.10. Size wise distribution of types of innovation 81
Table 8.11. Type of innovation, skill set and size 83
Table 8.12. Types of innovation - size wise spatial distribution 84
Table 8.13. Size, space and type of innovation of different sectors 85
Table 8.14. Sources of information for innovation 87
Table 8.15. Size-wise distribution of sources of information for
innovation 87
Table 8.16. District-wise sources of information for innovation 88
Table 8.17. Industry wise distribution of source of information 88
Table 8.18. Distribution of skilled manpower 90
Table 8.19. Industry wise distribution of skilled manpower 91
Table 8.20. Size wise distribution of skilled manpower 92
Table 8.21. District wise distribution of skilled manpower 93
Table 8.22. Innovation and skilled manpower 93
Table 8.23. Innovation and skilled manpower district wise 93
Table 8.24. Innovation and skilled manpower size wise 94
Table 8.25. Skilled manpower and type of innovation 94
Table 8.26. Source of information for innovation and skill intensity 94
Table 8.27. Zone 1 – Growth cluster innovation mapping 96
Table 8.28. Zone 2 – Growth cluster innovation mapping 96
Table 8.29. Zone 3 – Growth cluster innovation mapping 97
Table 8.30. Zone 4 – Growth cluster innovation mapping 97
Table 8.31. Size 1 – Growth cluster innovation mapping 98
Table 8.32. Size 2 – Growth cluster innovation mapping 98
Table 8.33. Size 3 – Growth cluster innovation mapping 99
Table 8.34. Innovation leading to increased capacity of production or
service provision 100
Table 8.35. Innovation leading to reduced labour cost per unit of output
100
Table 8.36. Innovation leading to reduced material and/or energy cost 100
Table 8.37. Skill intensity innovation mapping 101
Table 8.38. Growth cluster = 0: Skill intensity innovation mapping 102
Table 8.39. Growth cluster = 1: Skill intensity innovation mapping 102
Table 8.40. Growth cluster = 2: Skill intensity innovation mapping 102
Table 8.41. Growth cluster = 3: Skill intensity innovation mapping 102
Table 8.42. Growth cluster = 4: Skill intensity innovation mapping 102
Table 8.43. Growth cluster = 5: Skill intensity innovation mapping 103
Table 8.44. Constraints for innovation (aggregate) 103
Table 8.45. Constraints for innovation (district wise) 104
Table 8.46. Constraints for innovation (size wise) 105
Table 8.47. Constraints mapped on types of innovation 106
Introduction

T
he purpose of this book is to provide a framework for
understanding a company. I provide further purpose
by using the word “Value Investing”, which can mean
either, or all of five different things namely
i. Acquiring shares of a company for financial gains,
both through dividends and/or through capital gains arising
out of future price appreciation.
ii. Lending money to a company, either directly, or by
subscription to debentures such that there is timely payment
of interest and repayment of interest.
iii. Acquiring a company such that gains arise from
complementarity, scale economies, upstream/downstream
integration and market size enhancement.
iv. Spending time in a company, working, leading to
personal upliftment through training, exposure, portfolio of
tasks handled, and interacting with co-workers.
Introduction
v. Being a partner in a company that has high corporate
governance standards, invests in CSR activities and/or is
involved in sustainable ventures.
There are many books on principles of stock selection and
fixed investments and the book that is most referred is
Security Analysis (1930) by Benjamin Graham and David
Dodd. They speak extensively on fundamental performance
of companies and the indicators to watch out for value
investing. For understanding companies, some of the books
that I have found useful are In Search of Excellence (1982) by
Thomas J. Peters and Robert H. Waterman, Built to Last
(1994) by Jim Collins and Jerry Porras, Blue Ocean Strategy
(2005) by W Chan Kim and Renne Mauborgne, The End of
Competitive Advantage (2013) by Rita Gunther McGrath
and 3 Box Strategy (2016) by Vijay Govindrajan. These books
draw their views from observing companies over time and
look at their historic background and growth process. A
recent book titled Strategy Beyond the Hockey Stick (2018)
by Chris Bradley, Martin Hirt and SvenSmit provides a yet
interesting approach to understanding performance of
companies. By evaluating companies on the basis of
economic profit, they identify that whatever be the strategic
decisions taken by a company for maintaining competitive
advantage, it is the dynamics of different sectors that play a
crucial role in shaping the future of a company. They
advance the hypothesis that in the overall scheme of things,
companies tend to be myopic in their approach and put too
much emphasis on self-belief while designing business plans
and strategic plans. The book demonstrates that many of the
plans may not be successful, not because they are ill-
conceived, but because the sector is overall not positioned
well.
In the literature, the emphasis has been on understanding
the fundamentals of companies and their functioning. While
financial performance has been the main focus, leadership,

T.D. Chaudhuri, (2020). Understanding a Company for Value Investing. KSP Books
2
Introduction
strategy, work environment, product diversification,
technology etc. have also been seriously looked into.
Research has demonstrated why some companies tend to
survive in the long run and also why companies can go
through ups and downs, not because of business cycles, but
due to internal functioning. The need for realignment with
markets, use of appropriate technology, identifying markets
for products, continuous search for markets, upgradation of
the skills of the employees, creating a happy workplace for
improved productivity, encouraging innovativeness have
been the subject matter of research. The studies have focused
on both qualitative and quantitative factors.
There is also a literature on the extent and effect of
innovation on company performance. Studies have
distinguished between innovating companies and non-
innovating companies. The reasons cited for innovation
include
a) Staying ahead of the competition through increased
efficiency
b) Accessing global markets
c) Growth
d) Taking advantage of the demographic composition of
the customer base and their expectations
e) Creation of an environment conducive for exchange
of ideas from different minds and encouraging group
thinking and team work.
f) Attracting the best talent
g) Pursuing business collaborations
In this book, I provide a methodology through metrics
which measure factors that are important for understanding
a company. If factors affecting performance cannot be
quantified, then the analysis becomes subjective and very
company specific. Any individual would not have access to
the internal functioning of a company and also may not
understand what to look for. Many also do not have the

T.D. Chaudhuri, (2020). Understanding a Company for Value Investing. KSP Books
3
Introduction
patience or the time to sift through annual reports. The
balance sheet and the profit and loss account in the public
domain is all that is available for public use. The book relies
on balance sheet and profit and loss account entries (along
with the notes to accounts) to help the reader understand a
company.
Chapter 1 titled “A Company is not a Company” brings
out the various facets of a company. A company is not just
an entity that produces a product or service, or is a brand, or
employs people, or whose stocks are traded in the stock
market. It is an entity which has to be understood in terms of
what value it is delivering in the market, the consumers it is
targeting, its organizational structure, its people, its
technology, its marketing, its branding, its market position,
its adaptability to market changes, its ways of handling
disputes, its recruitment and training process, its retention
policies, its R&D capabilities and the need for such research
etc. A company should be understood as a living entity
which eats and breathes, but never sleeps. It is a collection of
people, ideas, processes, machines, raw materials, frenzied
activities, delivery deadlines, customer feedback and
realignment, market survey, continuous innovation,
exploiting opportunities for growth, arranging finances to
make things happen, looking at suppliers for seamless
delivery of raw materials, talking to stockists, whole sellers
and retailers, and maintaining delivery schedules.
Chapter 2 deals with “Various Approaches to Evaluating
a Company”. There are certain frameworks available in the
management literature which can be a starting point for
understanding a company. The approaches are different,
giving a partial view of companies, but are nonetheless
useful. The reader can use the frameworks to understand
a) What is the product mix of the companies and how
each of the products is positioned? This will help in

T.D. Chaudhuri, (2020). Understanding a Company for Value Investing. KSP Books
4
Introduction
prioritization of efforts and allocation of scarce financial
resources.
b) The extent of competition that the company faces and
in which products. This will help the company to formulate
appropriate strategy.
c) That exploration of markets is essential for survival in
the market place
d) The financial position of a company
e) Forward looking efforts of the management
f) The importance of strategy
Chapter 3 titled “Business Efficiency, Business
Effectiveness, Innovativeness and Sustainability” lays out
various metrics for evaluating companies and classifies them
under four heads. By business efficiency we mean how
efficient is the company in converting inputs into output,
thus generating sufficient surplus for reinvestment and
distribution to the shareholders. This category includes short
term indicators and is flow based. The metrics for measuring
business effectiveness combine short term and long term
variables and indicates medium to long term stability of an
organization. It is a reflection of the stability of the
business/sector they are in and how well they have been able
to exploit the situation to grow.
National Knowledge Commission (NKC), Government of
India (2007) defines Innovation as “… a process by which
varying degrees of measurable value enhancement is
planned and achieved, in any commercial activity. This
process may be breakthrough or incremental, and it may
occur systematically in a company or sporadically; it may be
achieved by:
- introducing new or improved goods or services and/or
- implementing new or improved operational processes
and/or

T.D. Chaudhuri, (2020). Understanding a Company for Value Investing. KSP Books
5
Introduction
- implementing new or improved organizational/
managerial processesin order to improve market share,
competitiveness and quality, while reducing costs.”
The literature has considered three types of innovation
namely process innovation, marketing innovation and
product innovation and examined their impact on
competitiveness, output and productivity. This chapter lays
out different metrics for measuring innovativeness.
The purpose of the category of sustainability is to identify
variables that indicate whether the company can sustain
itself in the long run. For this the company has to create an
eco-system within the organization which takes the
company’s objective beyond profit maximization. The
metrics in this category that one can use are the P/E ratio,
ratio of training & development expenses to sales, volatility
of share prices etc.
Chapter 4 titled “How does a Company Grow?” starts
with understanding the factors behind generic growth of a
company. The other factors that are discussed are
innovation, growth in existing products in existing markets
due to improved operational efficiency, growth with existing
products in new markets through marketing innovation,
growth through development of new product or services
and focus on sustainable growth.
A company can be evaluated either in terms of its
orientation, or in terms of whether it is creating value, or
both. Companies having long term orientation creates the
confidence that they there for the long run. While
profitability will always remain the driving force and the
principal objective, there is always a trade-off between short
term and long term profitability. The nature of business
decides this trade-off and it is adaptability that makes a
company survive in the long run. However, how do we
know that a company has long term orientation? How can
we tell that a company creates value? In Chapter 5 titled

T.D. Chaudhuri, (2020). Understanding a Company for Value Investing. KSP Books
6
Introduction
“Long Term Orientation and Value Creation” we explain
these two terms and provide metrics for measurement. For
assessing long term orientation we focus on
1. Innovation – R & D expenses/Sales and Marketing
Expenses to Sales
2. Increase in Net Fixed Assets
3. Sales growth
4. ΔY/ΔK – Incremental Output (Y) Capital (K) ratio
5. P/E multiple
6. Ability to attract external funds – Increase in long term
borrowings
For value creation we consider the following metrics:
1. Economic Profit
2. Returns on Retained Earnings (RORE)
3. Free cash flow/Sales – economic moat
4. Returns on Invested Capital – ROIC
5. Returns on Assets
6. Asset Turnover Ratio
Chapter 6 titled “Leadership, Strategy, Innovativeness
and Economic Moats” gives an outline of some other factors
that affect the performance of a company. Certain questions
are asked and are the subject matter of current research of
the author. While innovativeness and economic moats can be
measured, the chapter provides ways to measure leadership
and strategy.
A company belongs to a sector/industry, the sector is part
of the domestic economy and the domestic economy is part
of the global economy. In today’s globalized environment,
any shock in any part of the world, gets transmitted very
quickly to other parts of the world. The recent COVID 19
pandemic is a classic example to today’s globalized
environment. The worldwide effects of oil price shocks and
the global financial crisis of 2008 are some other examples.
While internal factors are important for successful operation
of companies, industry specific developments and domestic

T.D. Chaudhuri, (2020). Understanding a Company for Value Investing. KSP Books
7
Introduction
macroeconomic developments also shape the functioning of
companies. Chapter 7 titled “Global Conditions, the
Domestic Macroeconomy, Industry Outlook and Company
Performance – The Interconnectedness Examined” brings
out these relationships through stock price movements,
movements in stock market indices, and other market
indices. It also brings out that market orientation is an
important aspect of understanding companies.
The literature has emphasized on the innovative abilities
of Micro, Small & Medium Enterprises (MSMEs) and
attributed this to their size, scale of operations, flexibility and
low overheads. These units have been found to be adaptive,
quick to respond to market changes and their success has
been due to their innovativeness. Chapter 8 titled
“Innovativeness, Skill Intensity and Growth – A Study of
MSMEs” is based on a sample study of MSME units in the
state of West Bengal. It focuses on the extent of innovation,
spread of innovation, type of innovation undertaken,
assesses whether the innovation varied depending on the
location, sector, size, and skill availability and tries to
understand the sources of innovation for the a sample set of
firms. A part of the study also looks into the constraints
these units face, both overall, and also for innovation.

T.D. Chaudhuri, (2020). Understanding a Company for Value Investing. KSP Books
8
1 A company is not a company

Type of product/service

A
company produces a physical product or delivers a
service (See Box 1.2a & 1.2b). Examples of physical
products would be steel, shaving cream, generators,
cars, electric heaters and detergents. Services would include
investment banking, mobile telephony, audit services,
consultancy, and logistics.
A close look at the two boxes will reveal that within the
category of products and services, a company can produce a
range of products, or offer a range of services. Box 1.2a
provides an overview of products that, Hindustan Unilever,
an FMCG company, produces. The products range from
detergent, ladies cream, dishwashing soap, tea, ice cream
and ketchup. Box 1.2b gives the range of services of an
Entertainment & Media company, Sun TV Network Ltd.
Ch 1. A company is not a company
Lux – Body Soap Fair & Lovely – Fairness Cream
Dove – Luxury Soap Vim – Kitchen Cleaner
Sunsilk – Hair Shampoo Brooke Bond – Tea
Knorr – Soup Kwality – Ice cream
Domex – Bathroom Cleaner Surf Excel – Washing Powder
Box 1.1a. Physical Products of an FMCG company like Hindustan
Unilever (HUL)

Producing and Broadcasting Satellite Television Content

Radio FM programs in all South Indian Languages
Regional TV channels in South India
News Dailies
Direct to Home (DTH) Services
Film Production
Box 1.1b. Services provided by Sun TV Network

What is a company?
A student of management needs to develop insight into
functioning of companies. This is independent of whether
the student decides to work for a corporate, or join the
family business, or starts his/her independent enterprise.
Specifically, profitability, scale of operations, organizational
structure, product mix, industry scenario, employee
composition, corporate governance standards, ownership
pattern and innovativeness are some of the areas that has to
be analyzed to understand a company and also its extent of
competitiveness for long term existence. Any company in
operation must be producing some product, or delivering
some service, which has value. A student needs to
understand how the company generates this value,
continues to survive, and be in operation year after year. The
understanding has to be deep enough to develop
appreciation of companies.
In the beginning of their book titled “In Search of
Excellence”, Thomas J Peters and Robert H Waterman, Jr.
refer to a series of pipes painted by the Belgian painter Rene
Magritte carrying the caption Cecin’est pas une pipe (This is
not a pipe). It is interesting to ponder on why an artist would

T.D. Chaudhuri, (2020). Understanding a Company for Value Investing. KSP Books
10
Ch 1. A company is not a company
use such a caption on a painting of a pipe, and say it is not a
pipe. It is also interesting why the authors of the above
mentioned book refer to this painting in their attempt in
identifying traits of successful companies.
My understanding of the above can be summarized as “a
company is not a company”. A company is not just an entity
that produces a product or service, or is a brand, or employs
people, or whose stocks are traded in the stock market. It is
an entity which has to be understood in terms of what value
it is delivering in the market, the consumers it is targeting,
its organizational structure, its people, its technology, its
marketing, its branding, its market position, its adaptability
to market changes, its ways of handling disputes, its
recruitment and training process, its retention policies, its R
& D capabilities and the need for such research etc. A
company should be understood as a living entity which eats
and breathes, but never sleeps. It is a collection of people,
ideas, processes, machines, raw materials, frenzied activities,
delivery deadlines, customer feedback and realignment,
market survey, continuous innovation, exploiting
opportunities for growth, arranging finances to make things
happen, looking at suppliers for seamless delivery of raw
materials, talking to stockists, whole sellers and retailers, and
maintaining delivery schedules.
Maybe, now one gets an idea that a company, which is
there in the market, cannot be dismissed as a “bad
company” or a “good company”. All companies are good as
they are capable of undertaking a series of activities to create
value for customers. If a company has a customer, it must be
good. It can be large or small, but that is a matter of scale of
operations.

What makes a company?

There are so many things that make a company. The
following Figure 1.1 depicts the various attributes that make

T.D. Chaudhuri, (2020). Understanding a Company for Value Investing. KSP Books
11
Ch 1. A company is not a company
a company. We will discuss each of these and leave detailed
discussions for later chapters.

PRODUCT AND TECHNOLOGY RAW MATERIALS

PRICE
HUMAN TRAINING AND EMPLOYEE
RESOURCES DEVELOPMENT RETENTION
VISION COMPETITOR STRATEGY
ANALYSIS BUSINESS PLAN
MARKET MARKETING PRODUCT SUPPORT
RESEARCH
LOGISTICS RESEARCH & INNOVATION
DEVELOPMENT
CUSTOMER SOURCES OF COMPLIANCE
FINANCE & AND
PRICING
Figure 1.1. Various Aspects of a Company

Product/service, price, technology, raw

materials
Every company has an end product or service to deliver.
Otherwise there is no purpose for the company. It requires
raw materials to produce the product or deliver the service
and there is a technology which converts raw materials to
output. A car has steel, plastic, rubber, glass, forged iron,
human labor etc. combined through technology. Soap has
chemicals, human labor combined through technology.
Further, each product or service has to have a price.
Otherwise, the raw materials cannot be paid for and there
will be no surplus left to put back in the company for
expansion.
There are products and services which are available for
free. Like the air we breathe and the roads we use as
pedestrians. These are free goods and pricing them is
difficult. Such goods and services are provided by the state
and are produced with tax payer’s money.

T.D. Chaudhuri, (2020). Understanding a Company for Value Investing. KSP Books
12
Ch 1. A company is not a company

Human resources, training and development,

employee retention
A very important part of a company is its people. It
requires talent, skill, hard work, commitment of the work
force to convert inputs into output and keep the company
functioning. Without human resources, a company cannot
function. For improved efficiency, the human resources need
to be trained and upgraded. Further, besides their salary,
they need to be incentivized to remain with the company
and keep delivering. Thus, every company needs a strong
and effective retention policy. Performance bonuses, ESOPs,
profit sharing are many such incentives that are used for
retention of human resources. It must be understood that to
train an employee to perform requires time and money. It
also takes time for an employee to get used to the
environment and culture of an organization.

Our people form the core of our operations. We invest in employee

welfare and happiness to drive performance excellence. Our work culture
ensures safety, health, competency enhancement and overall well-being
of our employees. Harmonious presence among our neighboring
communities bears a testimony to the value we place in community
development initiatives, while partnering with them in their growth story.
We believe in building long-term, transparent and trust based
relationships with our partners, while adhering to applicable norms and
corporate ethics. We also invest in building our partners’ capacities and
sharing knowledge with them.
Box 1.3.2. What the Annual Report for 2017 of Tata Steel, a premier steel
producing company in India and the world, states about human resources
Vision, competitor analysis, strategy, business
plan
Every company has a Vision which outlines what the
company wants to be and where it wants to go. Besides
purpose, there has to be direction in which the company
wants to move. Every student dreams of what they want to

T.D. Chaudhuri, (2020). Understanding a Company for Value Investing. KSP Books
13
Ch 1. A company is not a company
be and they have a vision of their future. Similarly, a
company also has a vision.
In order to move according to the vision, a company has
to have a strategy. This is a serious concept and should not
be confused with business plan or annual plan. A strategy is
not a collection of business plans. Business plans can be
defined, once the strategy is in place. A strategy is a non-
imitable sequence of interrelated activities of a firm which is
difficult to imitate, and is not a sum of parts. It is difficult to
understand and cannot be adopted by parts and be
successful. A successful strategy is not about achieving
targets. It is a way of doing things.

Vision
To enhance global healthcare through innovative and affordable
biopharmaceuticals for patients, partners and healthcare systems across
the globe.

Mission
To be an integrated biotechnology enterprise of global distinction.
Essential to this mission is excellence in: intellectual asset creation
through discovery, research and development state-of-the-art
manufacturing capabilities, internationally benchmarked quality and
regulatory systems, new medical insight through disease specific clinical
research, customer relationship through outstanding products and
services, human resource development through training, mentoring and
empowering, management of research and business partnerships.
Box 1.3.3a. The vision and mission statements of Biocon Ltd., a premier
bio pharma company in India

Growing the core, evolving the portfolio and developing channels are at
the heart of our strategy to deliver long-term, compounding growth and
sustainable value creation.
Box 1.3.3b. Strategy statement of Hindustan Unilever Ltd.

Market research, marketing, product support,

logistics
A company zeroes in on a product or service after
conducting detailed market research about demand,
T.D. Chaudhuri, (2020). Understanding a Company for Value Investing. KSP Books
14
Ch 1. A company is not a company
location, availability of raw materials, infrastructure and
other elements. Once the product/service is identified, ways
of marketing the product has to be decided upon. We have
seen advertisement of products, looked at sales promotion
methods, discounts, TV commercials etc. Product support is
an important area and relates to the various processes that
should be in place for getting the product from the design
desks to the stores. This involves a whole area of logistics
which makes the product available to the customer. Product
support also includes after sales support.

Research & development, innovation

To remain competitive, a company must innovate. This
can be product innovation, process innovation, or marketing
innovation. To withstand competition, to stay ahead of the
competition, a company has to devote resources for research
and development. This enables the company to remain in the
market by reducing costs, keeping the customers engaged
through new features and superior performance and also
expand by discovering new channels of marketing and also
new markets.

The company has adopted Industry 4.0. They have selected the
ThingWorx Internet of Things (IoT) platform for rapid application
enablement, connectivity, machine learning capabilities, Augmented
Reality (AR), and integration with leading device cloud offerings.
The ThingWorx platform will: – Leverage Industry 4.0 technologies –
artificial intelligence and machine learning technologies to reduce
product failures – Reduce downtime caused by unplanned events by
sending breaking news alerts of the errors to the proper parties and
predicting the amount of time until a system fails – Improve the quality of
products by providing a full digital reporting of the products produced –
Reduce delays in decision making by enabling team members with real-
time detailed data and creating dynamic visualizations of the status of the
production systems – Identify trouble spots within the facility by
observing real-time data on the factory floor with AR, providing a bird’s
eye view Digitization of Services.
Box 1.3.5a: Innovation in Bharat Forge

T.D. Chaudhuri, (2020). Understanding a Company for Value Investing. KSP Books
15
Ch 1. A company is not a company
1990 – Biocon scales up its in-house research program based on
proprietary solid substrate fermentation technology
1994 – Biocon establishes Syngene International Pvt. Ltd. As a custom
research company
1996 – Biocon leverages its technology platform to enter
biopharmaceuticals and statins
2000 – Bocon establishes Clinigene, India’s first Clinical research
Organization
2001- Biocon’s proprietary bioreactor, PlaFractor, granted worldwide
patent
2003 – Biocon is the first company worldwise to develop human insulin on
a Pichia expression system
2006 – Biocon inaugurates Biocon Park, a biotechnology hub in
Karnataka, India. Biocon Launches India’s first anti-cancer drug,
BIOMAb EGFR
2007 – Biocon launches its Nephrology Division
2017 – US FDA accepts Biologics License Application for Mylan and
Biocon’s proposed BiosimilarPegfilgrastim for review US FDA
accepts Biologics License Application for Mylan and Biocon’s
proposed BiosimilarTrastuzumab
2018 – The European Commission approves the sale of biosimilar Insulin
Glargine
Box 1.3.5b. Research & Development in Biocon Ltd.

Customer
According to Peter Drucker, the purpose of business is to
create a customer. We have heard of phrases like customer is
king. Without a customer there cannot be a product. Every
company fights in the market to either retain a customer or
create a customer. According to Blue Ocean Strategy, there
are three classes of non-customers, and a company should
try and convert them into customers. These consist of people
who are sitting on the fence and with no loyalty, people who
have not heard about the product, and people who do not
like the product. They have to be converted to customers.

Sources and pricing of financial resources

The entire activity of producing a product or service
requires money. Machinery has to be purchased, a space has
to be located, raw materials have to be procured, people
T.D. Chaudhuri, (2020). Understanding a Company for Value Investing. KSP Books
16
Ch 1. A company is not a company
have to be engaged and expenditure on product promotion
and advertisement has to be made. All of it requires money.
This is a very important for every company and there are
three aspects to it. The first is the source of funds. The
second is the method of raising funds. The third is the
pricing of these funds. Sources of funds include friends and
family, angel investors, venture capital funds, banks,
financial institutions and the financial market. While the
others are negotiated between parties concerned, to raise
funds from the financial market requires instruments like
equity and debentures. These are negotiable instruments and
are listed in stock exchanges. The source of the funds decides
whether a financial instrument will be required for raising
funds. While raising money from the market by way of
equity is raising risk capital and the subscribers will be part
owners of the company, debentures require a fixed interest
to be paid and subscription to these debentures depends on
the credit worthiness of the company. For this, debentures
need to be credit rated. Box 1.3.7 provides an example of a
NCD issue with the characteristics.
Next comes the cost at which funds are to be raised. This
is quite an involved exercise and requires the help of
financial experts. For equity, price per share has to be fixed.
For debentures, the rate of interest on the instrument
(coupon rate) and the tenure needs to be determined.
Further, the timing of payment of the coupon viz. yearly,
half yearly, quarterly has to be fixed also.

Issuer SREI Infrastructure Finance Limited

Issue Type Secured Redeemable Non-Convertible Debentures
Issue Period Issue Opens: Tuesday, April 09, 2019
Issue Closes: Thursday, May 09, 2019
Coupon Rate 10.75% p.a– payable half yearly
Issue Type Secured Redeemable Non-Convertible Debentures
Issue Size Base Issue of Rs.100 Crore with an option to retain
Oversubscription up to Rs.400 Crore aggregating upto

T.D. Chaudhuri, (2020). Understanding a Company for Value Investing. KSP Books
17
Ch 1. A company is not a company
Tranche I Issue Size of Rs.500 Crore
Face Value Rs.1000 per NCD
Credit Rating BWR AA+ (Outlook Stable) by Brickworks
Box 1.3.7. Structure of an NCD issue

Compliance
Every company needs to comply with rules and
regulations of the country. On one hand there are laws
related to insurance, environment, taxes and duties,
employee’s provident fund and sexual harassment in work
place. On the other hand there are disclosures required by
Companies Act, stock exchanges and the central bank
relating to foreign exchange transactions. There could be
binding clauses related to technical collaborations and also
disclosures related to shareholders’ interest.
The reader can now appreciate why the title of this
chapter is “A Company is not a Company”. Each of the
eighteen items shown in Figure 1 can be elaborated in detail
and can form chapters by themselves. The objective here was
to demonstrate that a company represents a large number of
interlinked activities which are important in their own way.
If any aspect malfunctions, it can cause considerable harm to
the functioning of the company.

T.D. Chaudhuri, (2020). Understanding a Company for Value Investing. KSP Books
18
Ch 1. A company is not a company

T.D. Chaudhuri, (2020). Understanding a Company for Value Investing. KSP Books
19
2 Various approaches to
evaluating a company

Introduction

T
he are certain frameworks available in the
management literature which can be a starting point
for understanding a company. The approaches are
different, giving a partial view of companies, but are
nonetheless useful. In this chapter we will have a discussion
on these frameworks and see what we can learn about
companies with their help.
The reader can use the frameworks to understand
a) What is the product mix of the companies and how
each of the products is positioned? This will help in
prioritization of efforts and allocation of scarce financial
resources.
b) The extent of competition that the company faces and
in which products. This will help the company to formulate
appropriate strategy.
Ch.2. Various approaches to evaluating a company
c) That exploration of markets is essential for survival in
the market place
d) The financial position of a company
e) Forward looking efforts of the management
f) The importance of strategy
g) That the demographic composition of the customer
base is changing and so are their expectations

Framework 1 – The BCG Matrix

The first framework that we will discuss is the BCG
Matrix (Table 2.1). The matrix splits the product profile of
companies into four categories in terms of market growth
and market share. Consider a product of a company whose
market growth rate is high and the market share of the
company in the market is also high. This implies that the
company is a leader in the market for this product, which is
also getting increased acceptance. Such a product is a Star
product and all efforts of a company will be focused on this
product. A company can get identified with this product and
at time times the name and the brand merge. An example
would be Parachute Oil, cocoanut hair oil, of Marico
Industries.
A product that is a Cash Cow, sustains a company’s cash
flow, and is an old established product of the company. The
market growth rate of the product is not high, but it is the
largest player. An example would be Boroline of G D
Pharmaceuticals. Products that are growing very fast in the
market, but the company is a new entrant in this segment
and has a low market share, are Question Marks for the
company. The choice is whether to ride the growth and try
to increase market share, or to withdraw from the market
being a late entrant. The small car by Tata Motors, Nano, is
an example. Divisions of companies that are Dogs should be
shut down.

T.D. Chaudhuri, (2020). Understanding a Company for Value Investing. KSP Books
21
Ch.2. Various approaches to evaluating a company
The BCG matrix provides an understanding of companies
through their product profile. It gauges success in terms of
positioning of products and suggests possible strategies for
growth. Products are the face of a company, and a company
is known by its products.

Market Share
High Low
Market Growth
High STAR ?
Low CASH COW DOG
Figure 2.1. The BCG matrix

Framework 2 - The Ansoff Matrix

It is possible to get clarity on the path of growth and
survival of a company through the Ansoff Matrix. The
matrix divides the frame into four zones along products and
markets. New and existing products are mapped against
new and existing markets. If a company is with existing
products in existing markets, and if it continues to survive
and remain profitable, it must be focused on business
efficiency, business processes and smarter way of doing
things. If a company wants to push existing products in new
markets, it has to be through marketing innovation.
Introduction of new products in existing markets can be a
result of product innovation. Introducing new products in
new markets is exploratory in nature and would combine
both product and marketing innovation.
The matrix enables understanding a company’s potential
for long run sustainability and gives insight into
innovativeness of the company. A company is always
looking at opportunities for space where it can operate and
be profitable. The matrix provides a simple conceptual
structure for companies that innovativeness is important,
and depending on the strength of the company, it needs to

T.D. Chaudhuri, (2020). Understanding a Company for Value Investing. KSP Books
22
Ch.2. Various approaches to evaluating a company
focus on either product innovation, or process innovation, or
marketing innovation, or a combination of these. If a
company is not innovative, it may not survive in the long
run.

Markets
Existing New
Products
Existing Market Penetration Market Development
New Product Diversification
Development
Figure 2.2. The Ansoff matrix

Framework 3 – Porter’s Five Forces

The third way for understanding a company is present in
Porter’s Five Forces framework. For competitive advantage,
Porter (1985) has mentioned five elements namely
1. Threat of new entry
2. Competitive rivalry
3. Buyers’ power
4. Supplier’s power
5. Threat of substitution
Clearly, understanding a company requires
understanding of how a company is managing threats of
new entrants, handling competition, controlling both buyers
and suppliers, and also looking at features of substitute
products. Each company’s products have to be different
from others, and cater to specific needs of the customers.
This requires continuous monitoring of market conditions,
identifying needs of customers, entering the market early
and take leadership position, develop a unique delivery
chain and also be continuously innovative.

T.D. Chaudhuri, (2020). Understanding a Company for Value Investing. KSP Books
23
Ch.2. Various approaches to evaluating a company

Threat of New Entry Buyer Power

Competitive
Rivalry

Supplier Power Threat of Substitution

Figure 2.3. Porter’s five forces

Source: Image from the web

To handle threat of entry, the company should operate at

a scale where there are economies of scale, cost advantages
and also technological edge. It should have ring fenced its
operations and business processes such that it will be
difficult for a new entrant to imitate. This has to be
addressed by process innovation and also customer loyalty
through marketing innovation. Business processes have to be
such that there is continuous flow of information regarding
the supply chain of raw materials and sourcing alternatives.
Use of ICT is of great importance and so is use of data
analytics tools.

Framework 4 – 7-S of McKinsey

The McKinsey 7-S framework has seven interdependent
factors which can be categorized as either "hard" or "soft"
elements. The Hard elements are Strategy, Structure and
System. The Soft elements are Shared values, Skills, Style
and Staff. Both the Hard and the Soft elements are important
for a company, are interlinked, and the framework clearly
indicates that these are the things that make a company. A
company needs a strategy to begin with, which includes
marketing strategy, financial strategy, HR strategy,

T.D. Chaudhuri, (2020). Understanding a Company for Value Investing. KSP Books
24
Ch.2. Various approaches to evaluating a company
operational strategy, IT strategy etc. It requires human
beings and their skill sets. It develops a style over time,
inculcates values within the people, and at the same time
needs processes and systems for support.
Note that it is difficult to quantify all the seven factors,
but they are crucial to the functioning of a company. The
interlinkages are important and Figure 2.2 is drawn
accordingly. Strategy defines what kind of staff will be
required with what skill sets and will operate within which
structure. The systems and shared values will also help in
framing strategy, as for success of a strategy, complete
understanding and commitment is necessary. Innovation in
a company is a result of the environment. The latter needs to
be created for excellence and will attract the necessary
people with appropriate skill sets. System of functioning of a
company creates values and a distinctive style. These values,
if not shared across the organization, cannot generate
harmony. Operating on the efficiency frontier for a company
requires faith and belief that the strategy will work. This
creates style and also modifies people to work in harmony.

Style

Skills System

Shared
Vision
Structure Staff

Strategy

Figure 2.4. 7S McKinsey framework

Source: Image from the web

T.D. Chaudhuri, (2020). Understanding a Company for Value Investing. KSP Books
25
Ch.2. Various approaches to evaluating a company

Framework 5 – SWOT Analysis

A company can be understood by analyzing its Strengths,
its Weaknesses, market Opportunities that it can exploit, and
the Threats it faces. These four factors can place a company
in perspective, and the various relevant questions in each
area is presented in Table 2.3. Seeking answers to these
questions on a continuous basis is the task of the
management and handling these with care is the mark of a
successful organization.
To begin with we need to understand
 What product/service is the company selling?
 What processes are in place to sell the product?
 Who are the customers?
 What would be the mode of delivery of the product
to the customers?
 What are the financial requirements to produce and
sell this product?
For a SWOT analysis, it is important to have data. This is
required to estimate the size of the market and also the
internal capabilities. The data and its analysis can show, on
real time basis how the products of the company are doing
in the market.
Next comes seeking answers to the questions laid out in
Table 2.3. Analyzing unique selling points is important to
identify the customer base and understand their needs.
Exploring new markets and forging new alliances helps in
market expansion and also technology upgradation.
Financial leverage is important to withstand market
competition and business downswings. Flexibility in
management style is crucial for fast adoption of new ideas,
products and technology. Retention of skilled manpower is
essential for continuity of plans and success of business
strategy.

T.D. Chaudhuri, (2020). Understanding a Company for Value Investing. KSP Books
26
Ch.2. Various approaches to evaluating a company
All the questions point to traits of an organization and the
external environment it faces. The SWOT framework does a
good job in bringing many of the facets in one place.

What are your Strengths? What are your Weaknesses?

 What is your unique selling  What factors are limiting the
proposition? size of your market?
 Why do your customers like  What internal processes are
your product? limiting your expansion
 What is it that you do better efforts?
than others?  How motivating is the top
 How well can you study management and whether
market movements? they have clarity in the
 What are the skill sets of your strategy they have adopted?
people?  What is the extent of financial
 How motivating is the top leverage?
management?  Why are sales falling?
 What financial leverage do you  Why are talented people
enjoy? leaving?
What are your Opportunities? What are your Threats?
 How good are you in  How good is your
understanding market trends? competition?
 How good are you in  Is adoption and absorption of
exploring new markets? new technology a problem,
 How nimble is the given the current skill set?
organization in adopting new  Are their adverse reports in
technology and new ideas? the social media?
 How open is the top  Are quality and after sales
management to new ideas? service inadequate?
 What partnerships can you  Are new products dislodging
forge, both for domestic your products?
operations and international  Are new substitutes cheaper?
markets?
Figure 2.5. SWOT matrix

T.D. Chaudhuri, (2020). Understanding a Company for Value Investing. KSP Books
27
Ch.2. Various approaches to evaluating a company

Framework 6 – Balanced Score Card

The Balanced Score Card developed by Kaplan & Norton
(1992) is another way of understanding a company. It is a
framework aimed at managers who can evaluate the
performance of the company on four broad parameters
namely operational efficiency, customer perception,
shareholder perception and learning for growth. It is like a
dashboard which gives a quick idea about the organization,
not only based on financials, but also on qualitative factors
like employee satisfaction and internal processes and
systems. The balanced score card of a company brings
together various metrics of evaluating a company and comes
up with a comprehensive score.
Figure 2.3 gives an overall idea of the various components
of the balanced score card. It is balanced as it does not
depend solely on financials or operational efficiency. It has
forward looking elements like innovativeness and also
highlights the importance of human resources.

T.D. Chaudhuri, (2020). Understanding a Company for Value Investing. KSP Books
28
 Ch.2. Various approaches to evaluating a company

•Customer
•Internal processes
satisfaction
and systems
•Customer retention
•Technological
•Brand recognition upgradation
•After sales service •Inventory Turnover
Customer Internal ratio
Perspective Perspective •Current ratio

Innovation
Financial and
Perspective Learning
•Cash flow Perspective •Employee retention
•Returns on invested and upgradation
capital •Product innovation
•P/E multiple •Marketing
•Returns on retained innovation
earnings •Process Innovation
•Sales growth •Training

Figure 2.6. The balanced score card

Source: Image from the web

The figure above attempts to provide some details of the

four perspectives. The financial perspective lists some
metrics which helps the shareholder understand the
functioning of the company. While cash flow provides
cushion from shocks, sales growth indicates the presence of a
market and also can mean increase in competitive share. The
P/E multiple provides information to the shareholders about
the future growth potential of the company. The internal
perspective on the other hand includes metrics which throw
light on the efficient functioning of the company. This
includes reduction in waste, better input management, and
also technological efficiency. Customer perspective is of
great importance as market size depends on customer
perception, and this depends on value delivered. Porter
(1996) provides a tradeoff between price and value delivered

T.D. Chaudhuri, (2020). Understanding a Company for Value Investing. KSP Books
29
Ch.2. Various approaches to evaluating a company
where he emphasizes that in products where there is very
little value addition, competition will be the fiercest there. In
value added products and services, prices are not a major
concern. The position of the company is secure in such
products. This leads to the fourth perspective namely
innovation and learning perspective. According to the
authors, any organization has to continuously learn and
upgrade its employees. Otherwise, there cannot be
innovation. Without innovation, a company is doomed for
failure or little growth. As Mary Gunter McGrath (2013) has
observed, competitive advantage is transient. To be a leader,
one has to be innovative. To achieve this the organization
has to foster a culture that supports innovation and growth,
and there is a need for organizational alignment, employee
motivation, executive leadership, and communication.

Framework 7 – External Factor Evaluation

Matrix (EFEM)
We have already observed that in SWOT analysis,
opportunities and threats need to be analyzed. These
constitute the EFEM. The external factors would include i)
social, cultural, demographic, and environmental variables;
ii) economic variables; and iii) political, government,
business trends, and legal variables. Achieving continued
success in the market place would involve understanding
demographic shifts in the customer base and the social and
cultural practices of the countries. This is true of companies
who go transnational where they have to interact and
understand the local social practices. Every product may not
be suitable for all cultures. Understanding economic
variables would mean among others, assessing the
competition, barriers to entry, growth of the economy, rate
of inflation, exchange rates, stock market trends and
economies of scale. To do business, it is essential to

T.D. Chaudhuri, (2020). Understanding a Company for Value Investing. KSP Books
30
Ch.2. Various approaches to evaluating a company
understand the legal practices and enforceability of
contracts. Every country has its own set of rules, and they
need to be clearly understood. Government rules and
regulations define the business environment, and they have
to be complied with.
Each of the factors needs to be evaluated on a scale of 1 to
4. They then would be aggregated and averaged to arrive at
a composite score. The composite score cannot be less than 1
and cannot be greater than 4. If the score is tracked over
time, then the impact of external factors on competitiveness
of a company can be evaluated.

Framework 8 – Competitive Profile Matrix

(CPM)
A typical CPM is shown in Table 2.4. Critical success
factors are listed and weights are attached. The rating of a
company by each of the factors, multiplied by the weights
and added, will give a score. This score can then be
compared with the scores of competitors.

Walt Disney Warner Bros Universal

Critical Weight Rating Score Rating Score Rating Score
success 1-4 1-4 1-4
factors
Advertising .12 4 .48 4 .48 3 .36
Market share .10 3 .30 4 .40 2 .20
Financial .10 4 .40 3 .30 2 .20
position
Management .08 3 .24 3 .24 3 .24
Global .10 4 .40 4 .40 4 .40
expansion
Technology .15 3 .45 4 .60 3 .45
Customer’s .10 3 .30 3 .30 2 .20
loyalty
Brand .15 4 .60 4 .60 3 .45
awareness
Creativity .10 4 .40 4 .40 4 .40
Total 1.00 3.57 3.72 2.90
Figure 2.7. Competitive profile matrix

T.D. Chaudhuri, (2020). Understanding a Company for Value Investing. KSP Books
31
Ch.2. Various approaches to evaluating a company

Framework 9 – GE McKinsey Matrix

Another framework for evaluating companies is through
the GE McKinsey Matrix. Here, a company is positioned as
per the industry attractiveness and the company’s
competitive position in the industry. Table 2.5 gives an
example of the matrix.

Competitive High Medium Low

Position

Industry
Strength
High Safe Safe Prudent
Investment Investment Investment
and and Growth
Growth
Medium Safe Prudent Divest and
Investment Investment Exit
and
Growth
Low Prudent Divest and Divest and
Investment Exit Exit
Figure 2.5. Competitive position & industry strength

The business model of a company can be predicted from

the matrix. A company in a high growth industry and in
high to medium competitive position should consolidate
their position further and invest. Again companies in a low
growth industry having low competitive position should exit
the business. In medium growth industries, companies
should have a careful strategy for investment. It is possible
that the near term prospects are bleak in view of new
products, new technologies, new customer base or
government policies. The strategy for investment should be
geared towards marketing innovation and/or product
innovation. Industry slowdown can be due to product cycle
T.D. Chaudhuri, (2020). Understanding a Company for Value Investing. KSP Books
32
Ch.2. Various approaches to evaluating a company
maturity, demographic reasons, technological changes
and/or government policies. On the other hand if a company
cannot compete due to scale diseconomies, lack of qualified
human resources, high licensing fees etc., they should quit
the business.

T.D. Chaudhuri, (2020). Understanding a Company for Value Investing. KSP Books
33
3
Business efficiency, business
effectiveness, innovativeness
and sustainability

Introduction

T
he previous chapter gave alternative approaches for
understanding a company. The approaches are not
mutually exclusive, but are complementary, and the
logic of each of the approaches have merit. Further, the
chapter also defined some metrics for evaluation. In this
chapter, we will focus exclusively on metrics for
understanding a company, as without measurable yardsticks
it is difficult to track a company over time, and also compare
between companies belonging to the same sector. The reader
can refer to the discussions in Anca Draghici, Anca-Diana
Popescu, Luminita Maria Gogan (2014), Robert S. Kaplan
and David P. Norton, (1992), Donald W. Beard and Gregory
G. Dess, (1981), Jeffrey S. Conant, Michael P. Mokwa, P.
Rajan Varadarajan (1990) and Kim Cameron (1986).
I have divided the metrics under four broad heads
namely:
Ch.3. Business efficiency, business effectiveness, innovativeness and sustainability
A. Business Efficiency
B. Business Effectiveness
C. Innovativeness
D. Sustainability

Business efficiency
By business efficiency we mean how efficient is the
company in converting inputs into output, thus generating
sufficient surplus for reinvestment and distribution to the
shareholders. Gross Profit margin (GPM), Net Profit Margin
(NPM) and profit per employee would reflect operational
efficiency. Inventory turnover ratio is an indicator of
efficiency as it has to do with processes and systems. Current
ratio indicates short term balance between current liabilities
and current assets and thus ensures liquidity support to the
firm. Any imbalance here can spill over to long term
liabilities and disturb the asset liability balance. For
companies with outstanding long term debt, the interest
coverage ratio shows, in the short run, whether the company
can service its long term debt obligations and continue
operations. If a company defaults on its long run obligations,
then its short term borrowings can get adversely affected.
This category includes short term indicators and is flow
based.
a. Gross profit margin
b. Net profit margin
c. Current ratio
d. Interest coverage ratio
e. Inventory turnover ratio
f. Profit per employee

Business effectiveness
The metrics in this category combine short term and long
term variables and indicates medium to long term stability

T.D. Chaudhuri, (2020). Understanding a Company for Value Investing. KSP Books
35
Ch.3. Business efficiency, business effectiveness, innovativeness and sustainability
of an organization. It is a reflection of the stability of the
business/sector they are in and how well they have been able
to exploit the situation to grow. The indicators and their
implications are given below.
a. Growth in sales: indicates growth of the sector and
the company
b. Growth in employment: indicates real growth and
not nominal growth
c. Growth in plant & Machinery: indicates real growth
and good future prospects
d. Growth funded by fresh equity, Retained Earnings,
Fresh debt: ability to access external funds is an indicator of
the trust and faith of stakeholders and the firm’s prospects of
continuity
e. Returns on net worth: an indicator with history in the
denominator. It is a flow variable (net income) divided by a
stock variable (net worth).
f. Asset turnover ratio: an indicator of productivity
with again a stock flow combination. Its increase speaks well
for the prospects of the company.
g. % Free float: a higher value indicates public faith and
more accountability leading to professionalism
h. Dividend pay out ratio: consistency in dividend
payout over time shows operational stability

There are certain indicators of business effectiveness,

which are qualitative in nature, and difficult to measure.
These include
i. % Achievement in goals/targets set in the beginning:
objective oriented organization.
j. Specific mission: clarity
k. Specific vision: long term view
l. Values and objectives: value based organizations
enjoy shareholder faith

T.D. Chaudhuri, (2020). Understanding a Company for Value Investing. KSP Books
36
Ch.3. Business efficiency, business effectiveness, innovativeness and sustainability
m. Professional company or owner driven company:
professional driven company has external shareholder value
creation in mind and is more stable. It also is driven by
experts and thus tends to be efficient.

Innovativeness
Why does a company innovate? Broadly speaking,
according to the literature, companies innovate
a) To stay ahead of the competition through increased
efficiency
b) To access global markets
c) To grow
d) As the demographic composition of the customer
base is changing and so are their expectations
e) As it creates an environment conducive for exchange
of ideas from different minds. It helps in group thinking and
team work.
f) As they can attract the best talent
g) As business collaborations require innovation.

National Knowledge Commission (NKC), Government of

India (2007) defines Innovation as “… a process by which
varying degrees of measurable value enhancement is
planned and achieved, in any commercial activity. This
process may be breakthrough or incremental, and it may
occur systematically in a company or sporadically; it may be
achieved by:
- introducing new or improved goods or services and/or
- implementing new or improved operational processes
and/or
- implementing new or improved organizational/
managerial processes in order to improve market share,
competitiveness and quality, while reducing costs.”

T.D. Chaudhuri, (2020). Understanding a Company for Value Investing. KSP Books
37
Ch.3. Business efficiency, business effectiveness, innovativeness and sustainability
The literature has considered three types of innovation
namely process innovation, marketing innovation and
product innovation and examined their impact on
competitiveness, output and productivity. The metrics that
can be considered to measure innovativeness are
a. Ratio of R&D Exp to sales: direct focus on
innovativeness
b. Ratio of R&D Exp to total expenses: direct focus on
innovativeness
c. Incremental output capital ratio (Δ Sales/Δ Capital):
indicate process innovation and impact of adoption of
appropriate technology
d. Marketing expenses/Total expenses: marketing
innovation
e. Company sales/Industry sales: competitive position
as a result of all product, process and marketing innovation

Certain qualitative variables can also represent

innovativeness like
f. Market innovation: expansion of markets
g. Process innovation: adoption of new technology
h. Product innovation: bringing new products to the
market
i. Technological collaboration: pushing the possibility
frontier
j. Marketing colaboration: creating new markets, new
channels
k. Mergers and/or acquisitions: marketing innovation,
creating synergies

Sustainability
The purpose of this category is to identify variables that
indicate whether the company can sustain itself in the long
run. For this the company has to create an eco-system within
the organization which takes the company’s objective
T.D. Chaudhuri, (2020). Understanding a Company for Value Investing. KSP Books
38
Ch.3. Business efficiency, business effectiveness, innovativeness and sustainability
beyond profit maximization. The metrics in this category
that one can use are
a. P/E ratio– outsiders see long term value
b. P/BVPS ratio – market price versus intrinsic value
c. Ratio of training & Dev exp to sales
d. Ratio of training & Dev exp to total expenses
e. Ratio of CSR Expenses to sales: readiness of the
company to sacrifice profit for long term sustainability
f. Company D/E / Industry D/E – financial
sustainability
g. Returns on retained earnings: this is elaborated
elsewhere in the book
h. Volatility of share prices: stable companies have low
volatility of share prices

In this chapter we have tried to provide the reader with

measurable metrics for understanding a company. In the
spirit of the book where we perceive a company as an entity
that creates value, this chapter provides both static and
dynamic indices to measure performance. The purpose is not
only in measurement, but also in providing a framework as
to what can go wrong and where to look for solutions.

T.D. Chaudhuri, (2020). Understanding a Company for Value Investing. KSP Books
39
4 How does a company grow?

Introduction

A
company has to grow to survive and remain
competitive. The basic source of growth comes from
population growth and that is how the market
expands. At a micro level, a firm can grow by exploiting
market opportunities, but the overall size of the market can
only grow through growth in population. Growth in income
and living standards can lead to expansion of market size,
but this also generates demand for new products. So
companies have to grow not only in their own business line,
but also need to innovate to cater to the changing needs. This
chapter provides an idea about how a company can grow,
and more importantly to understand the sources of growth.

Generic growth
The growth rate, g, of a company can be defined as the
growth rate in sales, X.
Ch.4. How does a company grow?
So g = (Xt – Xt-1)/Xt-1 where t is time.
Or
g = [(Xt – Xt-1)/It-1] * [It-1/Xt-1], where It-1 is the level of
investment in period t-1.
The first component on the right hand side is the
incremental output capital ratio, assuming price of the final
good is constant between two periods. If we assume that the
company does not borrow during this period and also that
investment in the previous period affects output in the
current period, then the second component is the proportion
of sales that the company retains for reinvestment in period
t-1, or the propensity to save. So, the growth rate of a
company is a function of the propensity to save and
technology.
The assumption behind this generic growth is that, given
the technology and the propensity to save, the market is
growing and there is no dearth of demand. This implies
growth in a growing market. The company could also be
able to maintain its market share.

Growth through innovation

A company can grow in a stagnant market by
outcompeting others, or can grow in a growing market and
increase market share. Both assume improved operational
efficiency and can happen due to process innovation or
marketing innovation or both. This will get reflected in the
incremental output capital ratio and also in R&D
expenditure.
Growth through innovation will also cover product
innovation. In this the company is creating a market for a
new product. Here the company need not worry about price
competition. Porter (1995) draws a trade-off between price
and quality delivered. He shows that companies operating in
a red ocean has to be continuously price competitive to

T.D. Chaudhuri, (2020). Understanding a Company for Value Investing. KSP Books
41
Ch.4. How does a company grow?
survive and grow. Whereas for new products, price
competition is not relevant.
There is a rich literature on the impact of innovativeness
on firm growth and sustainability. Drucker (1985) has
discussed at length seven sources for innovative
opportunity. Four of them are internal to the company and
three of them are external to the company. The internal
reasons for innovation are the unexpected, the incongruity,
the process need and changes in industry structure. The
external reasons are demographics, changes in perception
and emergence of new knowledge. Christensen et al. (2004)
and Tellis (2013) are some important books which deal with
different aspects of innovation and their impact on firm
value.

Growth as depicted by the Ansoff matrix

A company can grow in existing products in existing
markets and success would depend upon improved
operational efficiency. Growth with existing products in new
markets can happen by discovering new geographical areas
for sale and consequent
i.) direct exports
ii.) appointment of agents for sale in those markets
iii.) supplying in those markets through production
licensing arrangements
iv.) acquisition of production units in those markets
v.) setting up own production facilities there

Companies can grow by introducing new products in

existing markets. This is product innovation. If we look at
the trade-off diagram in Porter (1995), we can see that here
pricing is not an issue so long as value is being delivered.
This edge remains for a while till such time other producers
start imitating. The strategy definition of Porter rests on this

T.D. Chaudhuri, (2020). Understanding a Company for Value Investing. KSP Books
42
Ch.4. How does a company grow?
where the processes are so interlinked that it will be almost
impossible to imitate this business model.
Then there are new products in new markets which is a
combination of product innovation and marketing
innovation.
With globalization, production facilities are spread all
over the world and a lot of licensed work is carried on by
producers. This ranges from manufacturing, to services, to
contract research. A company can grow through widening of
markets through collaborations, technology licensing, patent
protection etc.

Figure 4.1. The Ansoff matrix

Source: Image from the web

Growth through development of new product

or services
This is pure product innovation and creation of a market.
Before the product was introduced, it was not conceived that
a market for such a product could exist. Examples of such
products are discussed in Kim & Mauborgne (2005). Uber,

T.D. Chaudhuri, (2020). Understanding a Company for Value Investing. KSP Books
43
Ch.4. How does a company grow?
Amazon, Facebook, Twitter, Zoom, WhatsApp are also
examples of such products.
In order to grow, Kim & Mauborgne (2005) emphasize
that companies need to understand the non-customers. They
classify non-customers into three groups namely those who
are sitting on the fence with options of other products, those
who are unaware of the product of the company, and those
customers who are aware of the product, but dislike the
product.
McGrath (2013), while elaborating on the concept of
Transient Competitive Advantage, focuses on the
combination of internal stability and external agility. An
opportunity portfolio is constructed in an uncertain world
where two kinds of uncertainty are highlighted. These are
“Technical and Execution Uncertainty” and “Market and
Organizational Uncertainty”. In a product profile where
both of these are low, the prospects of growth are low and
the focus is on efficiency. One cannot achieve breakthrough
results from such products. On the other hand, “Stepping
Stones” are described as those efforts by companies which
try to strategize to take advantage of a probable market for
products for which the technology is not yet there. It is an
evolving area for both products and technology and
execution. The book, however, emphasizes that the core of a
company has to be strong to move to launching new
products and their positioning.

Sustainable growth
Upon thorough examination of companies of repute,
Collins & Porras (1997) arrive at factors for sustainable
growth. These are
a. Organizing Arrangements which include organizing
structure, policies and procedures, systems, rewards and
incentives, ownership structure and general business
strategy;
T.D. Chaudhuri, (2020). Understanding a Company for Value Investing. KSP Books
44
Ch.4. How does a company grow?
b. Social Factors such as company’s style of functioning,
cultural practices, atmosphere, group dynamics;
c. Physical Setting such as geographical location, plant
and office layout;
d. Technology and its appropriateness, regular
updations, advanced job configurations;
e. Leadership style, family based or professional
management, transition systems, leadership selection
process and criteria;
f. Products and Services and their market position.
Were there product failures? Did the company play in the
existing market or did it introduce new products. Did the
company discover new markets?
g. Presence of Vision, Mission, Core Values, Purpose,
Goals;
h. Financial performance;
i. Market Environment and the changes, industry
structure, government regulations.

The Three Box Solution by Govindrajan (2016) provides a

strategic approach to creating new businesses, while
optimizing on the existing one. The reasons for focusing on
the current business is obvious as it provides the necessary
elements for continuity in the immediate future. Plus, there
are less unknowns in this approach. Delving into new
businesses requires resources to be diverted to unknown
territories. Falling into success traps is easy and comforting.
However, organizations that do not innovate and
continuously learn, will perish. It will be swimming in the
red ocean. While emphasizing on managing the present and
creating the future, Govindrajan (2016) also equally
emphasizes on forgetting the past. It is not possible to create
a successful future path, unless we can get out of our
approaches and thoughts that brought success in the past.

T.D. Chaudhuri, (2020). Understanding a Company for Value Investing. KSP Books
45
Ch.4. How does a company grow?

T.D. Chaudhuri, (2020). Understanding a Company for Value Investing. KSP Books
46
5 Long term orientation and
value creation

Introduction

A
company can be evaluated either in terms of its
orientation, or in terms of whether it is creating
value, or both. Companies having long term
orientation creates the confidence that they are there for the
long run. While profitability will always remain the driving
force and the principal objective, there is always a trade-off
between short term and long term profitability. The nature
of business decides this trade-off and it is adaptability that
makes a company survive in the long run. However, how do
we know that a company has long term orientation? How
can we tell that a company creates value? In this section we
will explain these two terms and provide metrics for
measurement.

Long term orientation

The following are the metrics for assessing long term
orientation.
Ch.5. Long term orientation and value creation
1. Innovation – R&D expenses/Sales and Marketing
Expenses to Sales
2. Increase in Net Fixed Assets
3. Sales growth
4. ΔY/ΔK – Incremental Output (Y) Capital (K) ratio
5. P/E multiple
6. Ability to attract external funds – Increase in long term
borrowings

Innovation – R&D expenses/sales

A company that innovates through investment in
Research and Development (R & D) is a thinking company.
It is evaluating the competition, assessing market growth
and reorienting itself well in advance to outcompete the
other players. Such a company has an eye for novelty and is
trying to bring a new flavor to the customers. It is not a run
of the mill company doing the same thing over and over
again. It reinvents and repositions itself time and again.

Increase in Net Fixed Assets (NFA)

Increase in NFA implies capacity expansion, and an
expanding company has long term orientation. It also
signifies that it is operating in a growing market. Increase in
NFA embodies new technology in new machinery, and with
it comes improved productivity.

Sales growth
A consequence of increase in NFA is growth in sales, and
a growing company generates confidence in stakeholders.
The latter includes lenders, shareholders, customers, vendors
and employees. Sales growth generates confidence of the
management and enables innovation. It gives the flexibility
to think differently and experiment with ideas.

T.D. Chaudhuri, (2020). Understanding a Company for Value Investing. KSP Books
48
Ch.5. Long term orientation and value creation

ΔY/ΔK
This is the ratio of increase in Sales (ΔY) to increase in
NFA (ΔK). It is the incremental output capital ratio
indicating productivity of capital. This can be the result of
improved technology embedded in new machines or
improved processes. A company which can achieve increase
in this ratio over the years is a forward looking organization
with long term orientation.

P/E multiple
This ratio is used by stock market players to evaluate
investment options. The inverse of this ratio indicates
returns from holding the stock and low multiples are
generally preferred over high multiples. High P/E ratios are
indicative of future growth potentials of companies and high
price in relation to current earnings discounts this future
growth. Investors keep paying high price for stocks of
companies that have long term prospects, expecting further
appreciation.

Ability to attract external funds – Increase in

long term borrowings
Lenders of long term funds are banks or financial
institutions that have strong appraisal teams. They have
systems of assessment and only lend when the companies
(borrowers) pass the risk assessment tests. Since such
lending are for long periods, and are to be serviced from
future cash flows, this can be taken as a proxy for long term
orientation of companies.

Value creation
We now turn to the meaning of creation of value. In order
to understand whether long term orientation creates value,
we need to have metrics to measure value and then map

T.D. Chaudhuri, (2020). Understanding a Company for Value Investing. KSP Books
49
Ch.5. Long term orientation and value creation
them to the metrics of long term orientation. The following
metrics are considered to represent value.
1. Economic Profit
2. Returns on Retained Earnings (RORE)
3. Free cash flow/Sales – economic moat
4. Returns on Invested Capital – ROIC
5. Returns on Assets
6. Asset Turnover Ratio

Economic profit
Economic profit is arrived at after subtracting the
opportunity cost of capital from operating profit. Operating
profit divided by capital employed gives the return from
capital employed. By subtracting the opportunity cost of
capital from this, we arrive at the rate of economic profit.
This, multiplied by capital employed, gives the level of
economic profit. Being profitable is not enough. A company
has to earn also the opportunity cost of capital or the “hurdle
rate”. If we take out interest earnings and arrive at profit
after tax, then the latter should cover the cost of equity.

RORE
One of the many principles of investment outlined by
Warren Buffett is “Returns on Retained Earnings” (RORE).
Over a 5 year period it is calculated as

Retained earnings in period t + 5 – Retained earnings in period t

∗ 100
Sum of retained earnings in period t to period t + 5

According to Buffett, if this return exceeds 15%, then the

company shares are attractive to buy. Of course, there are
other principles that also need to be taken into account. This,
by itself, is not enough.
Retained Earnings (RE) is the amount from PAT that is
retained by the company after distribution of dividend to the

T.D. Chaudhuri, (2020). Understanding a Company for Value Investing. KSP Books
50
Ch.5. Long term orientation and value creation
shareholders. This RE is to be used for the purpose of
reinvestment in the activities of the company which will
enhance shareholder value in the future. Thus, instead of
paying the entire PAT to the shareholders, a part is retained
for gain to the shareholders in future. Clearly, the
shareholders would agree to forego a part of the PAT if they
are convinced that the company would be able to utilize
these funds in a way that would generate returns higher
than what they would have been able to generate by
themselves, if they had received it as dividend.
An indicator for efficient utilization of RE is RORE. If the
RE is invested efficiently each year, then it would generate
increased PAT each year. Thus, even if we assume a small
growth in dividends, RE would rise. The question is whether
the growth in RE significantly large as a % of aggregate RE
over the period.
It is an interesting ratio and needs elaboration. If the RE
each year is not used efficiently and is kept in the form of
cash balances by the company, clearly it is inefficient as it
would earn only the bank savings rate. If the company
speculates with this money in the stock market, then disaster
is imminent. So only if it used for productive purposes can
we say that shareholders may agree to forego dividends.
Take an extreme example
•where no dividend is paid
•the entire PAT is retained
•the company does not either borrow long term, or raise
fresh equity from the market
•the entire PAT goes for fresh fixed asset acquisition
•the ratio between PAT and production (α) is constant.

Then RORE looks like

T.D. Chaudhuri, (2020). Understanding a Company for Value Investing. KSP Books
51
Ch.5. Long term orientation and value creation
{(PAT in period t + 5) – (PAT in period t)}
∗ 100 (1)
Increase in fixed assets in period t to period t+5

or

α {(output in period t + 5) – (output in period t)}

∗ 100 (2)
Increase in fixed assets in period t to period t+5

Expression (1) is a standard ratio and is the incremental

returns to fixed assets. Expression (2) has an economic
interpretation and is the incremental output capital ratio.
Both (1) and (2) show how efficiently fixed assets are being
used in production or how productive is the physical capital.
RORE is a nice intuitive ratio and provides an indicator to
shareholders about the effective utilization of RE. It is
certainly an efficiency indicator and a good benchmark for
share acquisition.

T.D. Chaudhuri, (2020). Understanding a Company for Value Investing. KSP Books
52
6 Leadership, strategy,
innovativeness and economic
moats

Introduction

T
his chapter puts forward some questions related to
understanding companies and is the subject matter of
current research work by the author.

Leadership
The literature has emphasized on many qualitative factors
that contribute to the successful operations of a company.
Some of these are leadership quality, customer focus, work
place environment, innovativeness, employees with
entrepreneurial mind set, transparency, collaborative
environment, clear vision, core ideology and organizational
culture. In the balanced score card approach to measuring
the standing of a company, many of the components of
Customer Perspective, Internal Business Perspective, and
Innovation and Learning Perspective are qualitative in
nature. The analysis in Built to Last is based on attaching
grades to the factors, as they are not quantifiable. The body
Ch.6. Leadership, strategy, innovativeness and economic moats
of research has thus been based on intensive in-house study
of specific companies for identifying distinguishing
characteristics. They have been questionnaire based, and
most of the information is not available in the public
domain.
How does one measure organizational structure,
leadership, values, work environment etc.? The purpose of
our research in this area is to find proxy variables of the
qualitative traits of companies from their published annual
reports and then explore some hypotheses relating these
traits to indicators of performance. The questions that we ask
are
1. If we assume that good leadership gets reflected in (1
– free float %) indicating control, then can we relate this to
P/E, volatility in stock returns, sales growth, competitive
position, ability to consistently raise external resources,
innovativeness?
2. If market perceives a company to be in good hands
through the P/E ratio, then can we relate P/E to volatility in
returns, sales growth, competitive position, ability to
consistently raise external resources, innovativeness?
3. If good leadership gets reflected through consistent
sales growth and improving/retain competitive position,
then does it correlate with innovativeness?
4. If employee expenses/sales [(human resource
sustainability (HRS)] reflect focus on human resources, then
does it lead to innovativeness, improved GPM, better ROI,
ROCE, Asset Turnover Ratio, Inventory Turnover Ratio?
5. Does HRS lead to higher P/E and lower volatility of
stock returns?
6. Does HRS correlate with size and age?

Strategy
Porter (1996) defines what strategy is. It has elements of
marketing strategy, innovation strategy, financial strategy,

T.D. Chaudhuri, (2020). Understanding a Company for Value Investing. KSP Books
54
Ch.6. Leadership, strategy, innovativeness and economic moats
HR strategy and also operational strategy. In today’s
digitalized world, use of the IT platform is also part of
strategy. If we focus on marketing strategy, then this
includes advertising, marketing and sales and distribution.
The questions that we ask in our research work are
1. Does marketing strategy have anything to do with
size – do large companies spend more on advertising. Is it
true that smaller companies cannot afford to advertise?
2. Does marketing strategy have anything to do with
age – is it true that new companies advertise more rather
than older companies because the latter have already
established their brand?
3. Which marketing strategy has generated economic
profit the most?
4. The difference *(ΔY/ΔK)t+5 – (ΔY/ΔK)t] represents
improvement in productivity. This can be due to either
technological improvements, or innovations, or both.
Innovations include marketing innovation also, and the
latter is a result of marketing strategy which gets reflected in
either increase in advertising expenses, marketing expenses
or sales and distribution expenses. Increase in productivity
would get reflected in growth in sales, or in profit margins,
or both.
Our research focuses on mapping *(ΔY/ΔK)t+5 – (ΔY/ΔK)t]
against each of the constituents of marketing strategy,
growth in sales, and profit margins.

Innovativeness
DattaChaudhuri (2018), Jhunjhunwala & DattaChaudhuri
(2020) have extensively dealt with this aspect with respect to
Indian companies. We have used measures like ratio of
Research and Development expenses to Sales and Marketing
Expenses to Sales to evaluate the extent of innovativeness.
The influence of industry specific characteristics, skill
intensity, information, size, age etc. has been examined. In a

T.D. Chaudhuri, (2020). Understanding a Company for Value Investing. KSP Books
55
Ch.6. Leadership, strategy, innovativeness and economic moats
recent paper, DattaChaudhuri, Nath & Sarkar (2020)
examines whether Free Cash Flow leads to Innovation and
did Free Cash Flow cause improvement in productivity?

Economic moats
Dorsey (2004) explains that economic moats protect a
company from adverse market conditions and they enjoy
investor confidence. Free Cash Flow is taken to represent
economic moat. The questions that we are examining in our
current research work are
1. Do economic moats reduce volatility?
2. Do economic moats encourage innovation?
3. Do economic moats help in growth?
4. Does shareholding pattern have an effect on size of
economic moats?
5. Does size matter for economic moat?
6. Does leverage matter for economic moat?
7. Does the market perceive the importance of economic
moat?
8. Do economic moats help in securing strong
competitive position?
9. Do economic moats affect Returns on Retained
Earnings?
10. Are economic moats different, industry-wise?

T.D. Chaudhuri, (2020). Understanding a Company for Value Investing. KSP Books
56
Ch.6. Leadership, strategy, innovativeness and economic moats

T.D. Chaudhuri, (2020). Understanding a Company for Value Investing. KSP Books
57
 Global conditions, the

7 domestic macroeconomy,
industry outlook and company
performance – The
interconnectedness examined

Introduction

B
usiness efficiency, business effectiveness, innovati-
veness and sustainability of companies depend on
both internal and external factors. Internal factors
include use of appropriate technology, skilled human
resources, managerial effectiveness and leadership. External
factors would be domestic macroeconomic conditions, policy
environment, age, taste and preferences of the customer base
and global economic conditions. In this chapter, we will
provide a framework to examine the relationship between
performances of companies in relation to external factors like
the performance of the sector within which they belong,
domestic macroeconomic conditions, and the global
economic environment. Portfolio composition and its
realignment has to take into consideration these external
factors.
For our purpose, we will use stock prices and stock
market indices to understand a company. Our contention is
Ch.7. Global conditions, the domestic macroeconomy, industry outlook and…
that stock prices include within them all the information that
is required to understand the fundamental position of a
company. If the fundamentals of a company are good, they
will get reflected in the stock prices. If the future prospects of
a company are good, they will get reflected in stock prices.
Stock prices of companies also get affected by the industry
outlook and overall market sentiment. The latter, in turn,
gets affected by global market sentiment. At an analytical
level, attempts have been made in Ghosh & DattaChaudhuri
(2019) to discern the effects of global and domestic market
sentiment on stock prices. In this chapter, we will provide a
diagrammatic approach.
We will start with the influence of global market forces on
the Indian economy and Figure 1 provides some information
regarding this. Different global market indices are shown in
different colors and Dow Jones Industrial Average (yellow),
Frankfurt Dax (red), Bovespa (pink), Nikkei 225 (black),
Strait Times (dark green), Hang Seng (purple) and Ftse 100
(light green) are plotted against Nifty 50 (blue) over a
specific time period. It is expected that different global
indices will reflect market sentiment in their own countries,
and the figure covers market sentiment in the US, Europe,
Japan, Hong Kong, Singapore and Brazil. They have been
plotted along with Nifty 50, the index of stock market
sentiment in India.
Stock markets reflect the macroeconomic condition of an
economy, the savings level, the risk perception of the
population and also their risk appetite. Any change in the
rate of inflation, the rate of unemployment, productivity of
industry and agro climatic conditions get reflected in stock
market sentiment. In todays globalized environment,
changes in stock market sentiment gets transmitted to other
countries very quickly, and this is reflected in Figure 7.1. If
we look at the global financial crisis of 2008, we can observe
that all the world stock market indices fell simultaneously

T.D. Chaudhuri, (2020). Understanding a Company for Value Investing. KSP Books
59
Ch.7. Global conditions, the domestic macroeconomy, industry outlook and…
and fast. The rate of recovery was, however, different for
different countries depending on the macroeconomic stance
that they took.
Economies world over react to the US economic outlook,
and Figure 7.2 shows the movement in Nifty along with the
Dow Jones Industrial Average (DJIA). The data covers the
period where the whole world is feeling the impact of the
Corona virus. Nifty (blue) and DJIA (red) has moved
together and has crashed together with billions of dollars
leaving the Indian market for covering positions in the US
market and elsewhere.

Figure 7.1. Movement in country wise stock market indices

Source: Metastock

To gauge the economic environment, it is equally

important to understand how volatility in the rest of the
world transmits to the domestic economy. Figure 7.3 plots
the implied volatility index in to US market through the
CBOE Volatility Index (blue) against the implied volatility
index, India VIX (red), in India. Implied volatility is derived
from the options market, and it is an indicator of market
fear. Market sentiment and implied volatility are inversely
related. Thus, when markets are in a bear grip, the implied
volatility indicator rises. When implied volatility in one

T.D. Chaudhuri, (2020). Understanding a Company for Value Investing. KSP Books
60
Ch.7. Global conditions, the domestic macroeconomy, industry outlook and…
economy spills over to other economies, it is of concern and
has to be factored in investment decisions. Figure 7.3 shows
that CBOE VIX and India VIX tend to move together,
showing the vulnerability of the Indian economy to shocks
to the US economy.
We now move over to domestic macroeconomic
conditions and for that we look at market capitalization
(MC) defined as Σipiqi where pi is the price of the ith stock
on a given date and qi is the number of paid up equity shares
of the company. If we write it as the following,

MC = pq
then
dMC = pdq + qdp

MC of the stock market as a whole can increase in three

ways. First, if the number of listed companies rises; second,
if the existing companies in the economy raise additional
equity capital

Figure 7.2. Movement in nifty and Dow Jones industrial average

Source: Metastock

T.D. Chaudhuri, (2020). Understanding a Company for Value Investing. KSP Books
61
Ch.7. Global conditions, the domestic macroeconomy, industry outlook and…

Figure 7.3. Movement in CBOE VIX and India VIX

Source: Metastock

from the market by issue of fresh shares; and third if the

share prices of the existing listed stocks go up. The first two
reasons are signs of a growing economy and represents
increased economic activity. The third implies increased
activity, but through increased allocation of household and
corporate savings to the stock market. The latter can also be
due to funds inflow through FIIs which are foreign savings.
If increase in MC is through fresh issue of shares, then it
implies capital formation which will lead to growth in the
Gross Domestic Product (GDP). Thus the ratio MC/GDP will
first rise, but then fall or remain steady, with the multiplier-
accelerator fully working itself out. However, if the ratio
MC/GDP continues to rise, then after some time there will be
a separation between fundamentals and speculative action.
At any point of time, for a given level of GDP, there is a level
of savings which gets allocated among different instruments.
If MC/GDP continues to rise, it would imply that savings in
other instruments are getting liquidated and are moving to
the stock market. It may also happen that, for reasons we
will discuss later, more and more FII funds are entering the
Indian market. This is often interpreted as the robustness of
growth of the Indian economy or expectations of future

T.D. Chaudhuri, (2020). Understanding a Company for Value Investing. KSP Books
62
Ch.7. Global conditions, the domestic macroeconomy, industry outlook and…
growth potential of the economy. The common investor
should stay away from such logic and not get swayed by
market sentiment. The basic lesson is that if the ratio
MC/GDP rises too much, it is time to liquidate ones holding
in stocks and not pump fresh savings into the market.

At the company level we define the Index of Speculation

as

MCij/Xij
IOS =
MCi/Xi

where
MCij and Xij are the market capitalization and value of
output of the jth company in the ith industry respectively.
MCi and Xi are the market capitalization and value of output
of the ith industry to which this jth company belongs.
The ratio thus indicates the stock market activity of a
particular scrip in relation to its output vis a vis that of the
industry to which it belongs. If IOS is greater than one, we
would say that the company’s share price is showing signs
of speculative activity as it is more buoyant not only in
relation to its fundamentals, but also with respect to the
industry as a whole.
Another way of looking at the ratio is to define it as

MCij/MCi
IOS =
Xij/Xi

Defined in this way, the ratio shows the competitive

position of the company in the denominator in terms of its
fundamentals and the numerator indicates its share in
market capitalization. Again, if IOS is greater than one, it
implies that the stock market perception of this company is

T.D. Chaudhuri, (2020). Understanding a Company for Value Investing. KSP Books
63
Ch.7. Global conditions, the domestic macroeconomy, industry outlook and…
more than in proportion to its competitive position in the
industry. This would suggest overvaluation. It can also be
said that if this ratio is significantly less than one, then it
would indicate undervaluation of the company.
Thus, while MC/GDP gives an idea about the financial
sector development of the economy, IOS gives the relative
position of the company in the industry and speculative
bubbles, if any. Understanding a company for portfolio
formation requires evaluating this ratio and finding out
whether a stock is overvalued or undervalued. IOS also
builds a bridge between a company and the industry. We
will dwell on this relationship later.
In the stock market, stocks are classified by their market
capitalization and we have large cap stocks, mid cap stocks
and small cap stocks. To represent the class of stocks as a
whole, we have BSE mid cap index, BSE small cap index and
Sensex stands for the large cap index. Market sentiment is
broken down segment wise, and it would be interesting to
see how an individual stock moves with the segment specific
index as well as overall market sentiment. First, we will look
at how the segments move with overall market sentiment,
and this is shown in Figure 7.4. It is interesting to observe
that whereas Sensex (blue) has a upward sloping trend from
2017, that of the mid cap index (green) and small cap index
(red) are downward sloping.

T.D. Chaudhuri, (2020). Understanding a Company for Value Investing. KSP Books
64
Ch.7. Global conditions, the domestic macroeconomy, industry outlook and…

Figure 7.4. Movement in sensex, mid cap index and small cap index
Source: Metastock

Small cap stocks are speculative in nature and mid cap

stocks are those that are aspiring to be large cap stocks
someday. Small cap stocks are of companies that are small in
size and medium size companies have larger size of
operations. The figure shows that the indices at times tend to
move together, but there are times they move in opposite
direction. It is quite reasonable to say that funds flow into
large cap stocks first and then trickle down to midcap, and
then small cap stocks. This represents market perception and
a company can be evaluated from which segment is belong
to.
As mentioned in the beginning, this chapter is about
understanding a company from the perspective of the stock
market. The contention is that stock prices not only the
present functioning of a company, but also its future
prospects. It is not fundamental analysis, but provides an
alternative perspective. For example, free cash flow of a
company forms part of fundamental analysis of a company.
However, stock analysts look at free cash flow as economic
moat, and gives great importance to this variable for stock
selection.

T.D. Chaudhuri, (2020). Understanding a Company for Value Investing. KSP Books
65
Ch.7. Global conditions, the domestic macroeconomy, industry outlook and…
We have till now focused on global factors and the
domestic macro economy that can affect the fortunes of a
company. We now turn to stock market indices that reflect
different industries to which various companies belong.
Figure 7.5 provides information on performance of various
industries over time, as represented through stock market
indices. The various colors representing the sectors are
healthcare (light green), capital goods (dark brown), IT (light
brown), FMCG (purple), bank (dark green), auto (red), oil
and gas (black), metal (blue) and consumer durable (pink).

Figure 7.5. Movement in sectoral indices in India

Source: Metastock

In the figure, we have considered a long period starting

from 2008. As we can see, with the 2008 global financial
crisis, all the sectors in India collapsed. However, when
recovery took place, it was backed by government spending
in India. Sectors like metal, capital goods and oil & gas led
the recovery process. As the government spending was
reduced, these sectors slowed down. The metal sector has
not recovered significantly after that.
Let us now look at a closer history, which covers the
recent effects of the corona virus. This is shown in Figure 7.6.

T.D. Chaudhuri, (2020). Understanding a Company for Value Investing. KSP Books
66
Ch.7. Global conditions, the domestic macroeconomy, industry outlook and…

Figure 7.6. Recent movements in sectoral indices in India

Source: Metastock

Starting from middle of February 2020, all sectoral indices

have collapsed. This looks similar to the pattern observed
during the global financial crisis. Sectoral indices are made
up of stock prices of individual companies belonging to the
sector which have relatively high market capitalization in the
sector, and which are more liquid. However, prior to the
impact of the virus, the Indian economy has shown signs of
slowing down, and the auto sector slowed down
significantly as is reflected in the fall in this sectoral index.
So has been the case with the metal sector and the capital
goods sector over a significant period of time. These indices
also reflect the change in the industrial structure of India.
Understanding a company has to be done with respect to the
industry to which it belongs, and a study of the sectoral
indices do reflect the prospect of the industry.
Just to demonstrate that sectors differ from each other, in
Figure 7.7 we present two sectors, auto (red) and IT (blue)
sectoral indices in India. The figure shows that they had
dissimilar patterns. While the Indian auto industry caters to
the domestic market, the Indian IT industry revenue is
mostly generated from the world market. Portfolio

T.D. Chaudhuri, (2020). Understanding a Company for Value Investing. KSP Books
67
Ch.7. Global conditions, the domestic macroeconomy, industry outlook and…
construction has to keep this market orientation of sectors in
mind.

Figure 7.7. Movement in auto and IT sectoral indices in India

Source: Metastock

In the following figures, we present stock price

movements of a few companies, along with their sectoral
indices and overall market sentiment. It has to be kept in
mind that many companies belong to the sectoral indices
also, and hence we may observe similar movements. We
have tried to consider companies that do not belong to the
sectoral index.
In Figure 7.8, we consider stock prices of two companies
Petronet LNG (black) and Oil and Natural Gas Commission
(ONGC) (green), along with the Oil & Gas Index (Red) and
the overall market sentiment (blue). All of them have fallen
since mid-February 2020, but ONGC stock prices has been
falling before that. Prices of Petronet LNG has been rising,
even when ONGC prices were falling. So, belonging to the
same sector, two stock prices can behave differently,
providing some indication of their market position and
fundamentals.
Figure 7.9 provides information on two companies
Hindustan Unilever Co. Ltd. (black) and Marico (green).
Both belong to the FMCG sector (red). Overall market
T.D. Chaudhuri, (2020). Understanding a Company for Value Investing. KSP Books
68
Ch.7. Global conditions, the domestic macroeconomy, industry outlook and…
sentiment is given in blue. Not all the time have the
company stock prices followed the sectoral index, or overall
market sentiment. If this happens in the upswing of
company stock prices, in the presence of fall in market
sentiment or sectoral index, these companies are worth
looking at for portfolio purposes.
The reader can conduct many such exercises and here we
provide a couple of examples. The relation between global
events, domestic macroeconomic developments and sectoral
outlook shape the fortunes of a company.

Figure 7.8. Movement of oil and gas sector index and stock prices of
companies in the sector
Source: Metastock

Figure 7.9. Movement of FMCG index and stock prices of companies in

the sector
T.D. Chaudhuri, (2020). Understanding a Company for Value Investing. KSP Books
69
Ch.7. Global conditions, the domestic macroeconomy, industry outlook and…

T.D. Chaudhuri, (2020). Understanding a Company for Value Investing. KSP Books
70
8 Innovativeness, skill intensity
and growth – A study of
MSMEs

Introduction

A
s per latest data available from MSME Annual
Report 2014-15, Government of India, the Micro,
Small and Medium Enterprises (MSME) sector in
India, consisting of around 489 lakh working enterprises,
with market value of fixed assets worth Rs.1363701 crore,
and employing around 1114 lakh people, is of significant size
and has emerged as a dynamic and vibrant sector. It has not
only provided employment, but has helped in reducing
regional economic imbalances through industrialization of
rural and backward areas. They are complementary to large
industrial enterprises as low cost ancillary units. By
providing means of livelihood to many, the MSME sector
has contributed to the socio economic growth of the Indian
economy. The gross value of output of this sector is around
Rs.1809976 crore and contributes around 38 per cent to
India’s GDP. The state of West Bengal in India ranks second
Ch.8. Innovativeness, skill intensity and growth – A study of MSMEs
highest among all states in India with around 36.64 lakh
MSMEs employing around 85.78 lakh people.
The literature has emphasized on the innovative abilities
of the MSME units and attributed this to their size, scale of
operations, flexibility and low overheads. These units have
been found to be adaptive, quick to respond to market
changes and their success has been due to their
innovativeness. This report is based on a sample study of
MSME units in the state of West Bengal. It focuses on the
extent of innovation, spread of innovation, type of
innovation undertaken, assess whether the innovation
varied depending on the location, sector, size, and skill
availability and understand the sources of innovation for the
a sample set of firms. A part of the study also looks into the
constraints these units face, both overall, and also for
innovation. This study is based on primary data collected
from a ground level survey, with a structured questionnaire.
The survey was conducted with the help of officials of
District Industries Centers (DICs) of different districts in the
State of West Bengal, which are the nodal agencies for the
growth of the MSME sector in India.
This chapter is based on a sample of 217 MSME units
spread over 4 districts of the state of West Bengal. Of all the
districts in the state of West Bengal, manufacturing units in
the MSME sector are mostly located in these four districts.
The district wise distribution of the sampled units is given in
Table 8.1.

Table 8.1. District wise distribution of units surveyed

District Count
Howrah 50
South 24 Parganas 73
Burdwan 50
Nadia and North 24 Parganas 44
Total 217

T.D. Chaudhuri, (2020). Understanding a Company for Value Investing. KSP Books
72
Ch.8. Innovativeness, skill intensity and growth – A study of MSMEs
According to the provisions of Micro, Small & Medium
Enterprises Development (MSMED) Act, 2006, of
Government of India, the definitions of the different size
classes are as under:

Manufacturing Sector

Enterprises Investment in plant & machinery (X)

Micro Enterprises X < = Rs. 25 lakh

Small Enterprises Rs.25 lakh < X < = Rs. 5 crore

Medium Enterprises Rs. 5 crore < X < = Rs. 10 crore

Service Sector

Enterprises Investment in equipment (X)

Micro Enterprises X < = Rs.10 lakh

Small Enterprises Rs.10 lakh < X < = Rs.2 crore

Medium Enterprises Rs. 2 crore < X < = Rs. 5 crore

Given the above definition, the size wise distribution of

the units in the sample is given in Table 8.2.

Table 8.2. Size wise distribution of units surveyed

Size Count
Micro 85
Small 111
Medium 21
Total 217

Combining the above two tables gives us the district wise

size wise distribution of the sample set of units and this is
shown in Table 8.3. The four districts are evenly represented
in the sample while the representation of medium scale units
are on the lower side compared to the other two size classes.

T.D. Chaudhuri, (2020). Understanding a Company for Value Investing. KSP Books
73
 Ch.8. Innovativeness, skill intensity and growth – A study of MSMEs
This also reflects the paucity of medium scale units in the
state.

Table 8.3. Size wise district wise distribution

Size
District Total
Micro Small Medium
Howrah 13 26 11 50
South 24 Parganas 49 22 2 73
Burdwan 6 38 6 50
Nadia & North 24 Parganas 17 25 2 44
Total 85 111 21 217

One aspect of any sample study is that the sample

constituents should be representative in nature. Table 8.4,
depicting the industry wise district wise distribution of the
sample units, as per ASI 2 digit classification, bears this out.
Howrah district has a long history of industrialization and it
had been home to many manufacturing units. Similarly, the
units in Burdwan district are also mostly manufacturing
units being mainly from the Durgapur and Asansol area,
which is the home of the Duragpur Steel Plant and
numerous ancillary units. The coal belt of Ranigunge is also
nearby. It is thus also not surprising that the total number of
small and medium units from the manufacturing sector are
mostly from these two districts. Small and micro textile
units, mainly denim, are concentrated in South 24 Paraganas.

Table 8.4. Industry wise district wise distribution of units (aggregate)

District
Description Code digit South 24 Total
Howrah Burdwan Nadia
2 Paraganas
Manufacture of food
products 10 1 9 7 9 26
Manufacture of
beverages 11 0 1 2 0 3
Manufacture of textiles 13 5 0 0 4 9
Manufacture of wearing
apparel 14 2 27 0 3 32
Manufacture of leather 15 0 1 0 0 1

T.D. Chaudhuri, (2020). Understanding a Company for Value Investing. KSP Books
74
 Ch.8. Innovativeness, skill intensity and growth – A study of MSMEs
and related products
Manufacture of wood
and products of wood
and cork, except
furniture 16 1 1 0 2 4
Manufacture of paper
and paper products 17 1 0 0 1 2
Printing and
reproduction of recorded
media 18 0 0 0 1 1
Manufacture of
chemicals and chemical
products 20 1 3 3 2 9
Manufacture of
pharmaceuticals,
medicinal chemical and
botanical products 21 0 0 0 1 1
Manufacture of rubber
and plastic products 22 11 6 4 4 25
Manufacture of other
non-metallic mineral
products 23 0 2 18 3 23
Manufacture of basic
metals 24 3 4 3 0 10
Manufacture of
fabricated metal
products, except
machinery and
equipment 25 8 1 6 3 18
Manufacture of
computer, electronic and
optical products 26 1 0 0 0 1
Manufacture of electrical
equipment 27 3 10 1 1 15
Manufacture of
machinery and
equipment n.e.c. 28 10 2 2 0 14
Manufacture of other
transport equipment 30 1 0 0 0 1
Manufacture of furniture 31 0 2 0 2 4
Other manufacturing 32 1 3 0 6 10
Electricity, gas, steam
and air conditioning
supply 35 1 0 2 0 3
Waste collection,
treatment and disposal
activities; materials
recovery 38 0 0 0 1 1

T.D. Chaudhuri, (2020). Understanding a Company for Value Investing. KSP Books
75
 Ch.8. Innovativeness, skill intensity and growth – A study of MSMEs
Retail trade, except of
motor vehicles and
motorcycles 47 0 0 0 1 1
Information service
activities 63 0 0 2 0 2
99 0 1 0 0 1
Total 50 73 50 44 217

The sample covers quite a large number of industries, and

this distribution is good for identifying sectors where
innovation takes place. It indicates strong presence of
manufacturing units producing non-electrical machinery,
rubber and plastic products, non-metallic mineral products,
and fabricated metal products (except machinery and
equipment) in the districts of Howrah and Burdwan. Units
manufacturing wearing apparel (mainly denim) and
electrical products are concentrated in South 24 Paraganas.

Evidence of extent and type on innovation

Table 8.5 provides an overall idea of the number of firms
that have innovated, and those who have not innovated,
industry wise. Of the total number of 217 units, 180 units
stated that they have innovated, and only 37 units did not
innovate. This innovation has been across industries.

Table 8.5. Industry wise distribution of total innovation

Code Innovation
Total
Description digit 2 Yes No
Manufacture of food products 10 18 8 26
Manufacture of beverages 11 2 1 3
Manufacture of textiles 13 6 3 9
Manufacture of wearing apparel 14 29 3 32
Manufacture of leather and related products 15 0 1 1
Manufacture of wood and products of wood and
cork, except furniture 16 3 1 4
Manufacture of paper and paper products 17 1 1 2
Printing and reproduction of recorded media 18 0 1 1
Manufacture of chemicals and chemical
products 20 9 0 9

T.D. Chaudhuri, (2020). Understanding a Company for Value Investing. KSP Books
76
 Ch.8. Innovativeness, skill intensity and growth – A study of MSMEs
Manufacture of pharmaceuticals, medicinal
chemical and botanical products 21 0 1 1
Manufacture of rubber and plastic products 22 21 4 25
Manufacture of other non-metallic mineral
products 23 18 5 23
Manufacture of basic metals 24 9 1 10
Manufacture of fabricated metal products,
except machinery and equipment 25 15 3 18
Manufacture of computer, electronic and optical
products 26 1 0 1
Manufacture of electrical equipment 27 14 1 15
Manufacture of machinery and equipment n.e.c. 28 14 0 14
Manufacture of other transport equipment 30 1 0 1
Manufacture of furniture 31 3 1 4
Other manufacturing 32 9 1 10
Electricity, gas, steam and air conditioning
supply 35 3 0 3
Waste collection, treatment and disposal
activities; materials recovery 38 1 0 1
Retail trade, except of motor vehicles and
motorcycles 47 1 0 1
Information service activities 63 1 1 2
99 1 0 1
Total 180 37 217

If we take size wise distribution of innovation, then as

shown in Table 8.6, the medium scale units have,
proportionately, innovated more. The number of units not
innovating is concentrated more in the micro and small scale
sector. As against 90% of the firms innovating in the medium
scale sector, the figure for the micro and small scale sector is
around 82%.

Table 8.6. Size wise distribution of total innovation

Innovation
Size Total
Yes No
Micro 70 15 85
Small 91 20 111
Medium 19 2 21
Total 180 37 217

T.D. Chaudhuri, (2020). Understanding a Company for Value Investing. KSP Books
77
Ch.8. Innovativeness, skill intensity and growth – A study of MSMEs
Information on district-wise innovation is given in Table
8.7.

Table 8.7. District wise total innovation

Innovation
Zone Total
Yes No
Howrah 44 6 50
South 24 Parganas 69 4 73
Burdwan 39 11 50
Nadia 28 16 44
Total 180 37 217

South 24 Paraganas leads in innovating firms, and given

their strong presence in the apparel sector, the innovation is
mostly in this segment. Firms in Howrah and Burdwan have
also innovated, but in Nadia the extent of innovation has
been less.
In this study, we asked the firms about the nature of the
innovation undertaken. Specifically, we asked whether they
had undertaken product innovation, and/or process
innovation, and/or market innovation. Their response is
given in Table 8.8. On an aggregate level, the extent of firms
engaged in product innovation is more.

Table 8.8. Distribution of types of innovation

Innovation
Type of Innovation Total
Yes No
Product 142 75 217
Process 127 90 217
Marketing 124 93 217

Table 8.9 classifies type of innovation with nature of

industry. We observe that manufacture of wearing apparel
has gone in relatively more for product and marketing
innovation, as compared to process innovation. Whereas,
units involved in manufacture of chemicals and chemical

T.D. Chaudhuri, (2020). Understanding a Company for Value Investing. KSP Books
78
 Ch.8. Innovativeness, skill intensity and growth – A study of MSMEs
products have gone in more for process innovation. Units
involved in manufacture of rubber and plastic products,
manufacture of other non-metallic mineral products,
manufacture of basic metals, manufacture of fabricated
metal products, except machinery and equipment,
manufacture of electrical equipment and manufacture of
machinery and equipment n.e.c. have all undertaken all the
three types of innovation. Interestingly, manufacture of
other non-metallic mineral products has not seen much of
marketing innovation. Electricity, gas, steam and air
conditioning supply units have gone more for process
innovation.

Table 8.9. Industry wise distribution of types of innovation

Code Product Process Marketing
Description Total
digit 2 Yes No Yes No Yes No
Manufacture of food
products 10 14 12 14 12 12 14 26
Manufacture of
beverages 11 1 2 1 2 2 1 3
Manufacture of textiles 13 5 4 3 6 4 5 9
Manufacture of wearing
apparel 14 23 9 12 20 18 14 32
Manufacture of leather
and related products 15 0 1 0 1 0 1 1
Manufacture of wood
and products of wood
and cork, except
furniture 16 2 2 3 1 1 3 4
Manufacture of paper
and paper products 17 1 1 1 1 1 1 2
Printing and
reproduction of
recorded media 18 0 1 0 1 0 1 1
Manufacture of
chemicals and chemical
products 20 6 3 8 1 6 3 9
Manufacture of
pharmaceuticals, 21 0 1 0 1 0 1 1

T.D. Chaudhuri, (2020). Understanding a Company for Value Investing. KSP Books
79
 Ch.8. Innovativeness, skill intensity and growth – A study of MSMEs
medicinal chemical and
botanical products
Manufacture of rubber
and plastic products 22 18 7 18 7 17 8 25
Manufacture of other
non-metallic mineral
products 23 16 7 15 8 6 17 23
Manufacture of basic
metals 24 7 3 5 5 7 3 10
Manufacture of
fabricated metal
products, except
machinery and
equipment 25 12 6 11 7 10 8 18
Manufacture of
computer, electronic
and optical products 26 1 0 1 0 1 0 1
Manufacture of
electrical equipment 27 10 5 9 6 12 3 15
Manufacture of
machinery and
equipment n.e.c. 28 10 4 11 3 13 1 14
Manufacture of other
transport equipment 30 1 0 1 0 1 0 1
Manufacture of
furniture 31 3 1 2 2 1 3 4
Other manufacturing 32 8 2 7 3 7 3 10
Electricity, gas, steam
and air conditioning
supply 35 1 2 3 0 1 2 3
Waste collection,
treatment and disposal
activities; materials
recovery 38 0 1 0 1 1 0 1
Retail trade, except of
motor vehicles and
motorcycles 47 1 0 1 0 1 0 1
Information service
activities 63 1 1 0 2 1 1 2
99 1 0 1 0 1 0 1
Total 142 75 127 90 124 93 217

T.D. Chaudhuri, (2020). Understanding a Company for Value Investing. KSP Books
80
Ch.8. Innovativeness, skill intensity and growth – A study of MSMEs
Moving on to size wise and type of innovation mapping,
it may be observed from Table 8.10 that medium scale units
have gone in more for process and marketing innovation,
rather than product innovation. A reason could be that they
have tie ups with larger units and the end product
specification is made by the larger firms leaving little room
for product innovation. For the small and micro units who
are selling mostly end products, the data shows that small
units are more into product and process innovation, whereas
micro units are more involved in product innovation. Table
8.10 is interesting as it indicates the nature of the products
produced and end product user. For medium units, process
and marketing is relatively important for improving profit
margin. For small units, profitability depends relatively
more on both novel products and processes. Whereas, for
micro units, the market may not be clearly defined, and
markets are created through innovations in products. The
products are not standardized as those of the medium and
small units.

Table 8.10. Size wise distribution of types of innovation

Product Process Marketing
Size No Total
Yes No Yes No Yes
Micro 63 30 45 48 51 40 85
Small 74 37 71 40 64 47 111
Medium 10 11 14 7 15 6 21
NA 5 3 3 5 6 2 8
Total 142 75 127 90 124 93 217

From the responses to the questionnaire, the evidence on

innovation is shown by way of a Venn diagram in Figure 8.1.
From the sample, only a relatively small percentage of firms
(17.05%) did not innovate at all and 35% of the firms was
involved in all three types of innovation. It is interesting to
observe that there were few firms which did both process
and market innovation. This is correct as these two types of

T.D. Chaudhuri, (2020). Understanding a Company for Value Investing. KSP Books
81
Ch.8. Innovativeness, skill intensity and growth – A study of MSMEs
innovation are disjoint. If there is process innovation, then in
essence the product has also undergone some change. Thus
we observe there are more firms that have undertaken both
product and process innovation and product and marketing
innovation. This is one of the observations that leads us to
believe that the respondents have understood and answered
the questions correctly and validates the sample
constituents.

Figure 8.1. Venn diagram of types of innovation

The literature has related innovation to availability of

skilled manpower and also education. Table 8.11 relates skill
set of the sampled units to their innovativeness and maps
this across various sizes. From the table, the following
observations can be made:
1. Across all sizes, “no innovation” is associated with low
skill levels present in the units. This finding is consistent
as innovativeness requires some extent of skill and
training.
2. The skill sets in the medium scale units were moderate to
high. This follows from 1.
3. The skill sets in the micro and small units were low to
moderate.

T.D. Chaudhuri, (2020). Understanding a Company for Value Investing. KSP Books
82
 Ch.8. Innovativeness, skill intensity and growth – A study of MSMEs
4. While product innovation required relatively high skill
sets, process only required low to moderate skill sets. The
latter is not consistent as process innovation requires skill.
For example, the medium scale units required moderate
skill sets for process innovation.
5. Only marketing innovation required moderate to high
skill. As the product and the process was standardized, it
was marketing skills that could make the units survive.
6. Medium scale units, whether undertaking only marketing
innovation or process and marketing innovation or all
three kinds of innovation, had moderate to high skill sets.
7. Some non-innovating firms did have moderate to high
skilled manpower. It is possible that at the time of
conducting the survey, they were not engaged in any
form of innovation.
The observations made above from the sample do
strengthen the link between skill and innovation.

Table 8.11. Type of innovation, skill set and size

Size Micro Small Medium
Moderate

Moderate

Moderate

Total
High

High

High
Low

Low
low

Skill

No 7 5 3 10 8 2 1 0 1 37
Product Only 4 0 6 0 1 2 0 0 0 13
Process Only 2 0 1 3 3 1 0 2 0 12
Marketing Only 3 4 1 1 2 2 1 1 3 18
Product & Process 4 5 3 8 6 3 2 0 0 31
Product & Marketing 2 1 7 3 6 3 0 0 0 22
Process & Marketing 0 1 0 0 2 3 0 0 2 8
Product, Process &
Marketing 8 10 8 15 10 17 0 6 2 76
Total 85 111 21 217

Once we have established the relation between type of

innovation, skill set and size of firm and given our

T.D. Chaudhuri, (2020). Understanding a Company for Value Investing. KSP Books
83
 Ch.8. Innovativeness, skill intensity and growth – A study of MSMEs
distribution of units across different districts, Table 8.12
maps type of innovation against size and space. As Howrah
district has more medium scale units, more manufacturing
units, and also relatively better skilled workers, they have
undertaken all three types of innovation. In small scale units,
Burdwan has more units involved relatively more in product
and process innovation. The mainly micro and small denim
producing units in South 24 Paraganas have gone for all
three types of innovation. These are small units and are
flexible enough to adjust to market needs.

Table 8.12. Types of innovation - Size wise spatial distribution

Size Micro Small Medium

Nadia & North 24 Parganas

Nadia & North 24 Parganas

Nadia & North 24 Parganas

South 24 parganas

South 24 parganas

South 24 parganas
Burdwan& other

Burdwan& other

Burdwan& other
District
Howrah

Howrah

Howrah
Total

Innovation
No 2 3 3 7 3 1 8 8 1 0 0 1 37
Product Only 0 8 0 2 1 1 0 1 0 0 0 0 13
Process Only 0 2 0 1 0 0 5 2 1 0 1 0 12
Marketing
Only 2 2 0 4 1 0 3 1 3 0 2 0 18
Product &
Process 1 8 2 1 0 1 10 6 0 0 1 1 31
Product &
Marketing 1 8 1 0 1 8 3 0 0 0 0 0 22
Process &
Marketing 1 0 0 0 4 1 0 0 2 0 0 0 8
Product,
Process &
Marketing 6 18 0 2 16 10 9 7 4 2 2 0 76
Total 85 111 21 217

If we aggregate the industries in our sample from 2 digit

classification to Primary, Manufacturing and others, then
Table 8.13 permits us to map them against size, space and
type of innovation. We can observe that the manufacturing
T.D. Chaudhuri, (2020). Understanding a Company for Value Investing. KSP Books
84
 Ch.8. Innovativeness, skill intensity and growth – A study of MSMEs
sector is relatively stronger in terms of product, process and
marketing innovation as compared to the primary sector.

Table 8.13. Size, space and type of innovation of different sectors

Sector
Primary Manufacturing Other Total
Yes 33 27 10 70
Micro
No 8 4 3 15
Yes 21 61 9 91
Size

Small
No 10 10 0 20
Yes 5 13 1 19
Medium
No 1 1 0 2
Yes 7 34 3 44
Howrah
No 3 3 0 6
Yes 36 27 6 69
South 24 Parganas
Districts

No 3 1 0 4
Yes 5 31 3 39
Burdwan& other
No 4 6 1 11
Nadia & North 24 Yes 11 9 8 28
Parganas No 9 5 2 16
Yes 46 80 16 142
Product
No 32 36 7 75
Innovation
Types of

Yes 34 78 15 127
Process
No 44 38 8 90
Yes 38 72 14 124
Marketing
No 40 44 9 93
Total 78 116 23 217

Information, skill & innovation

To understand why MSMEs units innovate/or do not
innovate, it is important to ascertain the sources of
information of these units on advances in technology in their
respective fields. On one hand, it is possible that these small
industrial units do not innovate because they have no
information on the advances in technology that have taken
place in their area. No institution has come forward to
enlighten them in this regard. On the other hand, given the

T.D. Chaudhuri, (2020). Understanding a Company for Value Investing. KSP Books
85
Ch.8. Innovativeness, skill intensity and growth – A study of MSMEs
availability of information in the internet, one could presume
that the units would gather sufficient information on their
own. The government needs to ascertain whether the plans
and schemes that they have initiated, are getting delivered in
a proper fashion. Given the government’s effort towards
dissemination of technical education through engineering
colleges and IITs, this project tries to bring out the real
picture at the ground level. It is expected that the results
presented in this section will help the policy makers in
optimal intervention. However, discussions with a few
entrepreneurs revealed that there is not much help that these
units have received from engineering and research institutes.
The government of West Bengal is trying to get the various
stakeholders together, with the help of DICs, in this regard -
but this movement has not led to any perceptible effect yet.
It is also true that absorption and execution of technical
knowledge depends on the distribution of skill in the units.
Thus, innovativeness and sources of information for
innovation, has to be understood together with the skill
intensity of the units. This chapter covers all the three areas
for the units that have been surveyed.
Table 8.14 gives the distribution of sources of innovation
for all the units. We can observe that 25 units did not have
access to any information. We have also seen in the previous
tables, that out of 217 units, 37 units did not innovate at all
during the period of the study. It is possible that some of
these units did not innovate as they had no information.
However, there will be 12 units who did not innovate, in
spite of having information.
Of the various sources of information, mostly information
on technological advances has been sourced by the company
themselves or has been procured from qualified engineers. It
is thus a very micro oriented result and does not reflect
systematic institutional intervention. Machinery suppliers

T.D. Chaudhuri, (2020). Understanding a Company for Value Investing. KSP Books
86
Ch.8. Innovativeness, skill intensity and growth – A study of MSMEs
have helped with providing information on updated
machinery and innovation has taken shape.

Table 8.14. Sources of information for innovation

Technology Source No. of Units
None 25
In House 97
Local Market 6
Machinery Suppliers 11
Qualified Engineers 72
Foreign Sources 6
Total 217

Table 8.15 indicates three things. First, lack of information

was mostly in the case of micro or small units. Second, micro
and small units depended mostly on in-house information
for innovation. Third, the role of qualified engineers was
more in medium and small units. These results are expected
as micro units do not have the wherewithal to approach
institutions for help and have to depend on in house
expertise. Medium scale units require the help of qualified
engineers as their scale of operations are large. The small
scale units seeking the help of qualified engineers are the
ones that are aspiring for growth.

Table 8.15. Size-wise distribution of sources of information for

innovation
Technology Source / Micro Small Medium Total
Size of Firm
None 12 9 4 25
In House 57 38 5 97
Local Market 4 2 0 6
Machinery Suppliers 3 7 1 11
Qualified Engineers 12 51 9 72
Foreign Sources 0 4 2 6
Total 85 111 21 217

T.D. Chaudhuri, (2020). Understanding a Company for Value Investing. KSP Books
87
 Ch.8. Innovativeness, skill intensity and growth – A study of MSMEs
Table 8.16. District-wise sources of information for innovation
Technology Source/ Howrah South 24 Burdwan Nadia Total
District Paraganas
None 3 19 0 3 25
In House 31 45 0 0 97
Local Market 1 5 0 0 6
Machinery Suppliers 0 1 5 5 11
Qualified Engineers 15 0 37 20 72
Foreign Sources 0 3 2 1 6
Total 50 73 50 44 217

We stated at the outset, that of the 4 districts that have

been covered in the study, Burdwan and Howrah districts
are industrial belts where most of the manufacturing units in
West Bengal are located. It is thus not surprising to observe
from Table 8.16 that qualified engineers have contributed
most in these two areas. Significant in house expertise is
observed in Howrah and South 24 Paraganas.

Table 8.17. Industry wise distribution of source of information

Code In- Local Machinery Qualified Foreign
digit 2 None house Market Suppliers Engineers Sources Total
10 5 7 1 4 9 0 26
11 1 0 0 0 2 0 3
13 1 5 0 0 3 0 9
14 0 28 4 0 0 0 32
15 1 0 0 0 0 0 1
16 1 3 0 0 0 0 4
17 0 1 0 0 0 1 2
18 0 0 0 1 0 0 1
20 2 4 0 0 3 0 9
21 0 0 0 0 1 0 1
22 4 10 0 2 9 0 25
23 2 4 0 2 15 0 23
24 0 5 0 1 3 1 10
25 2 6 1 0 8 1 18
26 0 1 0 0 0 0 1
27 4 6 0 1 3 1 15
28 2 6 0 0 5 1 14
30 0 1 0 0 0 0 1

T.D. Chaudhuri, (2020). Understanding a Company for Value Investing. KSP Books
88
Ch.8. Innovativeness, skill intensity and growth – A study of MSMEs
31 0 2 0 0 2 0 4
32 0 7 0 0 3 0 10
35 0 0 0 0 3 0 3
38 0 0 0 0 1 0 1
47 0 1 0 0 0 0 1
63 0 0 0 0 2 0 2
99 0 0 0 0 0 1 1
Total 25 97 6 11 72 6 217

Table 8.9 classifies type of innovation with nature of

industry. It was noted that manufacture of wearing apparel
has gone in relatively more for product and marketing
innovation, as compared to process innovation. Table 8.17
indicates that these units under 2 digit classification 14, have
depended mostly on in house expertise and information.
Units involved in manufacture of chemicals and chemical
products have gone in more for process innovation. Units
involved in manufacture of rubber and plastic products,
manufacture of other non-metallic mineral products,
manufacture of basic metals, manufacture of fabricated
metal products, except machinery and equipment,
manufacture of electrical equipment and manufacture of
machinery and equipment n.e.c. have all undertaken all the
three types of innovation. These are the units that have
depended mostly on qualified engineers. Electricity, gas,
steam and air conditioning supply units (classification 35)
have gone more for process innovation and have depended
on qualified engineers.
One of the objectives of the study was to relate
innovativeness with skill availability in the industrial units.
Skill matters for technological absorption and execution of
new methods of production. In this study skill intensity has
been defined as ratio of skilled to unskilled manpower.
Cluster 1 is defined as low skilled where the ratio of skilled
to unskilled manpower is <50%; Cluster 2 is defined as
medium skilled where the ratio of skilled to unskilled

T.D. Chaudhuri, (2020). Understanding a Company for Value Investing. KSP Books
89
Ch.8. Innovativeness, skill intensity and growth – A study of MSMEs
manpower is between 50%-70%; Cluster 3 is defined as high
skilled where the ratio of skilled to unskilled manpower is
>70%. The overall distribution of skill intensity was observed
to more or less even among the 217 units (Table 18). We can
observe from Table 8.19 that with the exception of wearing
apparel, skilled manpower was concentrated in the
manufacturing sector. Manufacture of other non-metallic
mineral products has a proportionately large number of
unskilled labour. This could be because of small size of
operations, repetitive in nature, involving low level of
technology. Table 8.20, indicates that medium scale units
have larger proportion of skilled workers. The micro and
small units have relatively low and medium skilled workers.

Table 8.18. Distribution of skilled manpower

Skilled Manpower No. of Units
Low Skilled 77
Moderate Skilled 73
High Skilled 67
Total 217

The district wise distribution of skilled manpower, as

shown in Table 8.21, indicates that Howrah has greater
concentration of skilled workers than the district of
Burdwan. The concentration of wearing apparel in South 24
Paraganas requires relatively higher skilled workers. Units
in Nadia have relatively low skilled workers, whereas those
in Burdwan have low to middle skill workers. This skill
distribution provides some idea about the pattern of
industrialisation in the districts represented in the sample.

T.D. Chaudhuri, (2020). Understanding a Company for Value Investing. KSP Books
90
Ch.8. Innovativeness, skill intensity and growth – A study of MSMEs
Table 8.19. Industry wise distribution of skilled manpower
Description Code Skill Cluster Total

Low Medium High

skilled skilled skilled
Manufacture of food 10 18 6 2 26
products
Manufacture of 11 1 2 0 3
beverages
Manufacture of textiles 13 3 4 2 9
Manufacture of
wearing apparel 14 9 11 12 32
Manufacture of leather
and related products 15 0 0 1 1
Manufacture of wood
and products of wood
and cork, except
furniture 16 2 2 0 4
Manufacture of paper
and paper products 17 1 0 1 2
Printing and
reproduction of
recorded media 18 0 1 0 1
Manufacture of
chemicals and chemical
products 20 4 4 1 9
Manufacture of
pharmaceuticals,
medicinal chemical and
botanical products 21 1 0 0 1
Manufacture of rubber
and plastic products 22 7 14 4 25
Manufacture of other
non-metallic mineral
products 23 12 5 6 23
Manufacture of basic
metals 24 3 3 4 10
Manufacture of
fabricated metal
products, except 25 4 7 7 18
machinery and
equipment

T.D. Chaudhuri, (2020). Understanding a Company for Value Investing. KSP Books
91
Ch.8. Innovativeness, skill intensity and growth – A study of MSMEs
Manufacture of
computer, electronic 26 0 0 1 1
and optical products
Manufacture of
electrical equipment 27 2 7 6 15
Manufacture of
machinery and 28 3 2 9 14
equipment n.e.c.
Manufacture of other
transport equipment 30 0 0 1 1
Manufacture of 31 2 1 1 4
furniture
Other manufacturing 32 2 3 5 10
Electricity, gas, steam
and air conditioning 35 1 0 2 3
supply
Waste collection,
treatment and disposal
activities; materials 38 0 0 1 1
recovery
Retail trade, except of
motor vehicles and 47 1 0 0 1
motorcycles
Information service 63 1 1 0
activities 2
99 0 0 1 1

Table 8.20. Size wise distribution of skilled manpower

Size Skill Level Total
Low skilled Moderate skilled High skilled
Micro 30 37 18 85
Small 42 30 39 111
Medium 5 6 10 21
Total 77 73 67 217

T.D. Chaudhuri, (2020). Understanding a Company for Value Investing. KSP Books
92
 Ch.8. Innovativeness, skill intensity and growth – A study of MSMEs
Table 8.21. District wise distribution of skilled manpower
Skill Level
District Low Skilled Medium Skilled High Skilled Total
Howrah 3 23 24 50
South 24 Parganas 19 21 33 73
Burdwan& others 21 22 7 50
Nadia and North 24 Parganas 34 7 3 44
Total 77 73 67 217

One of the objectives of the study was to relate innovation

with skill intensity of the units. Tables 8.22, 8.23 and 8.24
show that units, across all skill intensities, all sizes, and in all
the districts have innovated. The state of West Bengal has in
recent years taken specific steps to support MSME units in
marketing their products, in particular to micro and small
units.
If we try to map innovation type with skill intensity, then
as shown in Table 8.25, the proportion of skilled manpower
is higher in units which have gone for process and product
innovation. Units going in for marketing innovation are such
units whose technical skill requirement is low.

Table 8.22. Innovation and skilled manpower

Innovation
Skill Level Total
Yes No
Low Skilled 60 17 77
Medium Skilled 66 7 73
High Skilled 62 5 67
Total 192 25 217

Table 8.23. Innovation and skilled manpower district wise

District
Nature of hired
Howrah South 24 Parganas Burdwan Nadia Total
manpower/Innovation
Yes No Yes No Yes No Yes No
Low Skilled 21 1 34 2 4 2 9 4 77
Medium Skilled 17 1 17 4 22 1 10 1 73
High Skilled 7 3 12 4 18 3 19 1 67
Total 45 5 63 10 44 6 38 6 217

T.D. Chaudhuri, (2020). Understanding a Company for Value Investing. KSP Books
93
Ch.8. Innovativeness, skill intensity and growth – A study of MSMEs
Table 8.24. Innovation and skilled manpower size wise
Size of firm Total
Skill Level
Micro Small Medium
Yes No Yes No Yes No
Low Skilled 20 10 36 6 5 0 77
Moderate Skilled 32 5 21 9 5 1 73
High Skilled 16 2 34 5 9 1 67
Total 68 17 91 20 19 2 217

Table 8.25. Skilled manpower and type of innovation

Skill Level Innovation Type
Product Process Marketing
Yes No Yes No Yes No
Low Skilled 24 53 29 48 42 35
Medium Skilled 31 42 35 38 29 44
High Skilled 28 39 32 35 21 46
Total 83 134 96 121 92 125

Table 8.26. Source of information for innovation and skill intensity

Technology Source/ Skill Intensity Low Medium High Total
skilled Skilled Skilled
None 5 12 8 25
In House 30 31 36 97
Local Market 2 0 4 6
Machinery Suppliers 7 3 1 11
Qualified Engineers 31 27 14 72
Foreign Sources 2 0 4 6
Total 77 73 67 217

Table 8.26 indicates that in house source of information

was distributed evenly among units of different skill
intensities. However, qualified engineers have contributed
more in units with low skill intensity. High skill intensity
units have been able to exploit both local market information
and foreign source of information more to their advantage.

Information, skill & growth

In the questionnaire, the respondents had been asked to
provide data for the past three years. This was a difficult task

T.D. Chaudhuri, (2020). Understanding a Company for Value Investing. KSP Books
94
Ch.8. Innovativeness, skill intensity and growth – A study of MSMEs
and the units could not provide detailed data for three years.
Of the 217 units in the sample, only 191 units could provide
data for the last two years. On the basis of their responses we
have tried to map the information on district-wise, size-wise,
industry-wise, innovation type-wise, skill profile-wise, and
source of information for innovation-wise distribution of the
sampled units with growth of the units over the period 2013-
14 and 2014-15. We present the data to understand whether
we can combine size, source of innovation, skill profile and
type of innovation with growth. The definitions used in the
following tables are as under:
1. Zone – Howrah (1), South 24 Paraganas (2), Burdwan
(3), Nadia (4)
2. Size – Micro (1), Small (2), Medium (3)
3. Whether innovated: No (0), Only 1 (1), Any 2 (2), All
3 (3)
4. Ratio of skilled to unskilled labour – Cluster 1 low
skilled (<50%), Cluster 2 medium skilled (50%-70%),
Cluster 3 high skilled (>70%)
5. Sources of innovation – None (0), In-house (1), Local
Market (2), Machinery Supplier (3), Qualified
Engineers (4), Foreign Sources (5)
6. Growth Cluster = Sales growth – Negative (0), Upto
10% (1), 10%-20% (2), 20%-30% (3), 30%-100% (4),
>100% (5)

Zone wise, growth cluster - Innovation

mapping
Tables 8.27 to 8.30 show zone wise, the relationship
between growth and innovation. In zone 1, we can observe
that the mostly, units undertaking all three types of
innovation, have experienced some growth. For all the units
taken together, the growth rate overall was mostly between
10% to 20%. There are some units that undertook all three

T.D. Chaudhuri, (2020). Understanding a Company for Value Investing. KSP Books
95
Ch.8. Innovativeness, skill intensity and growth – A study of MSMEs
kinds of innovation, but did not grow. There is one unit that
did not innovate, but grew. This is where the lag between
innovation and its effect on sales growth is reflected.

Table 8.27. Zone 1 – Growth cluster innovation mapping

Growth Cluster / No Only 1 Any 2 All 3 Total
Innovation Mapping
0 0 0 1 1 2
1 0 3 3 10 16
2 0 1 2 6 10
3 1 0 1 5 6
4 0 2 1 3 6
5 0 0 1 0 1
Total 1 6 9 25 41

In zone 2, Table 8.28, where mostly wearing apparel units

are located, the growth concentration is in units that have
undertaken any 2 or all 3 types of innovation. During the
period, of the 66 units in this zone, 50 units have experienced
significant growth of 20% or more.

Table 8.28. Zone 2 – Growth cluster innovation mapping

Growth Cluster / No Only 1 Any 2 All 3 Total
Innovation Mapping
0 1 0 3 5 9
1 1 0 3 2 6
2 0 4 2 7 13
3 0 3 10 2 15
4 1 4 7 10 22
5 1 0 0 0 1
Total 4 11 25 26 66

For zone 3, Table 8.29, the growth experience has been a

bit different. Innovativeness and growth cannot be
correlated. Many innovating units have not grown at all or
have grown by less than 20%.

T.D. Chaudhuri, (2020). Understanding a Company for Value Investing. KSP Books
96
Ch.8. Innovativeness, skill intensity and growth – A study of MSMEs
Table 8.29. Zone 3 – Growth cluster innovation mapping
Growth Cluster / No Only 1 Any 2 All 3 Total
Innovation Mapping
0 3 4 5 3 15
1 1 2 5 3 11
2 3 2 2 2 9
3 0 0 1 0 1
4 0 1 2 1 4
5 1 1 0 1 3
Total 8 10 15 10 43

For zone 4, Table 8.30, the number of non-innovating

units is large in number, and many have not experienced
growth or low growth. This zone is the weakest among the
four zones in terms of presence of manufacturing units and
also has not innovated to a large extent.

Table 8.30. Zone 4 – Growth cluster innovation mapping

Growth Cluster / No Only 1 Any 2 All 3 Total
Innovation Mapping
0 4 1 0 5 10
1 5 3 3 2 13
2 0 1 3 0 4
3 4 3 1 1 9
4 1 1 0 1 3
5 1 0 1 0 2
Total 15 9 8 9 41

Size wise, growth cluster - Innovation

mapping
In this section we look at growth and innovation among
units belonging to the micro (1), small (2) and medium (3)
scale sector. In the micro sector, Table 8.31, of the 70 units
that responded, 56 units have grown by 10% or more and 59
units have innovated in some form. This sector has units
who have to really fight it out in the market to survive. They
face a lot of hurdles and are not financially strong. They have

T.D. Chaudhuri, (2020). Understanding a Company for Value Investing. KSP Books
97
Ch.8. Innovativeness, skill intensity and growth – A study of MSMEs
to continuously innovate, although it may not be very
cutting edge technological advancement. That is why, the
units are uniformly distributed between types of innovation.

Table 8.31. Size 1 – Growth cluster innovation mapping

Growth Cluster / No Only 1 Any 2 All 3 Total
Innovation Mapping
0 4 1 4 5 14
1 3 2 2 3 10
2 1 4 4 5 14
3 1 4 6 2 13
4 1 6 4 7 18
5 1 0 0 0 1
Total 11 17 20 22 70

Table 8.32. Size 2 – Growth cluster innovation mapping

Growth Cluster / No Only 1 Any 2 All 3 Total
Innovation Mapping
0 4 3 5 8 20
1 4 3 11 10 28
2 2 3 4 8 17
3 2 2 6 6 16
4 1 3 5 7 15
5 2 0 2 1 6
Total 15 14 33 40 102

In the small scale sector, Table 8.32, the picture is a bit

different. Most of the growth is observed in units that have
undertaken any 2 or all 3 types of innovation. These are units
that innovating to grow, and not innovating to survive.
During the period, some units have innovated but not
grown. It is possible that we will observe their growth in the
next couple of years.
Medium scale units, Table 8.33, are the ones who are
financially strong, have access to bank finance, are
technically competent, and are in a position to innovate. We
can observe that most of the units have innovated and most

T.D. Chaudhuri, (2020). Understanding a Company for Value Investing. KSP Books
98
Ch.8. Innovativeness, skill intensity and growth – A study of MSMEs
of the units have also grown. The growth rate is mostly in
the range of 10% to 20%, which is quite good.

Table 8.33. Size 3 – Growth cluster innovation mapping

Growth Cluster / No Only 1 Any 2 All 3 Total
Innovation Mapping
0 0 1 0 1 2
1 0 3 1 4 8
2 1 1 1 2 5
3 1 0 1 0 2
4 0 0 1 1 2
5 0 0 0 0 0
Total 2 5 4 8 19

At every stage of interpreting the tables, the credibility of

the data collected needs to be questioned. It appears from
the above that the data is quite reflective of what can be
expected. The data collection by the field surveyors, under
the close supervision of the DIC officials, has been excellent.
Moving away from growth, we now turn to whether
innovation led to reduction in labour cost per unit of output,
or led to increase in capacity of production. Table 34 shows
that some kind of innovation, overall, has been associated
with expansion. Although, innovation could be for increased
efficiency of production, keeping output constant. This can
be observed from Table 8.35 where we have mapped
innovation against reduced labour cost. It is interesting to
observe that many units without innovating, have reduced
labour cost per unit of output.

T.D. Chaudhuri, (2020). Understanding a Company for Value Investing. KSP Books
99
Ch.8. Innovativeness, skill intensity and growth – A study of MSMEs
Table 8.34. Innovation leading to increased capacity of production or
service provision
Type of innovation No Yes Total
None 26 11 37
Any 1 23 20 43
Any 2 16 45 61
All 3 16 60 76
Total 81 136 217

Type of innovation No Yes Total

None 26 11 37
Any 1 23 20 43
Any 2 16 45 61
All 3 16 60 76
Total 81 136 217

Table 8.35. Innovation leading to reduced labour cost per unit of output
Type of innovation No Yes Total
None 25 12 37
Any 1 17 26 43
Any 2 14 47 61
All 3 18 58 76
Total 74 143 217

Type of innovation No Yes Total

None 26 11 37
Any 1 23 20 43
Any 2 16 45 61
All 3 16 60 76
Total 81 136 217

Table 8.36. Innovation leading to reduced material and /or energy cost
Type of innovation No Yes Total
None 28 9 37
Any 1 25 18 43
Any 2 16 45 61
All 3 23 53 76
Total 92 125 217

T.D. Chaudhuri, (2020). Understanding a Company for Value Investing. KSP Books
100
Ch.8. Innovativeness, skill intensity and growth – A study of MSMEs

Innovation, skill intensity and growth

mapping
In the previous section, we presented the relationship
between skill distribution and innovativeness of the sampled
units. Here, we link it further to growth. Our objective is to
understand that for units that have innovated and grown,
whether presence of skill played any role. Overall, Table 8.37
provides the distribution of the units according to their skill
intensity and innovativeness. It is interesting to observe that
the distribution of the sampled units across skill intensity is
almost the same. However, the number of units that have
high skill intensity, but have not innovated, is low.

Table 8.37. Skill intensity innovation mapping

Innovation/ Skill Intensity 0% – 50% 50% - 70% 70% Total
None 18 13 6 37
Only 1 14 13 16 43
Any 2 19 21 21 61
All 3 26 26 24 76
Total 77 73 67 217

Interesting results emerge when we consider the above

relationship, growth cluster wise. From Table 8.38, 8.36
units have not grown, in spite of innovation. Their overall
skill intensity is on the lower side. From Table 39, we can
observe that, irrespective of skill intensity, with some
innovation, units have grown by at least 10%. From
subsequent Tables 8.40 and 8.41, skill intensity has increased
with growth. This tapers off subsequently as shown in
Tables 8.42 and 8.43, where the growth clusters are higher,
but skill intensity is not increasing.

T.D. Chaudhuri, (2020). Understanding a Company for Value Investing. KSP Books
101
Ch.8. Innovativeness, skill intensity and growth – A study of MSMEs
Table 8.38. Growth cluster = 0: Skill intensity innovation mapping
Innovation/ Skill Intensity 0% – 50% 50% - 70% 70% Total
None 6 2 0 8
Only 1 1 2 2 5
Any 2 3 3 3 9
All 3 8 3 3 14
Total 18 10 8 36

Table 8.39. Growth cluster = 1: Skill intensity innovation mapping

Innovation/ Skill Intensity 0% – 50% 50% - 70% 70% Total
None 4 1 2 7
Only 1 3 3 2 8
Any 2 5 4 5 14
All 3 3 7 7 17
Total 15 15 16 46

Table 8.40. Growth cluster = 2: Skill intensity innovation mapping

Innovation/ Skill Intensity 0% – 50% 50% - 70% 70% Total
None 1 2 1 4
Only 1 2 2 4 8
Any 2 3 3 3 9
All 3 4 5 6 15
Total 10 12 14 36

Table 8.41. Growth cluster = 3: Skill intensity innovation mapping

Innovation/ Skill Intensity 0% – 50% 50% - 70% 70% Total
None 2 2 0 4
Only 1 3 1 2 6
Any 2 3 2 8 13
All 3 1 2 5 8
Total 9 7 15 31

Table 8.42. Growth cluster = 4: Skill intensity innovation mapping

Innovation/ Skill Intensity 0% – 50% 50% - 70% 70% Total
None 1 0 1 2
Only 1 2 3 3 8
Any 2 2 7 1 10
All 3 5 6 4 15
Total 10 16 9 35

T.D. Chaudhuri, (2020). Understanding a Company for Value Investing. KSP Books
102
 Ch.8. Innovativeness, skill intensity and growth – A study of MSMEs
Table 8.43. Growth cluster = 5: Skill intensity innovation mapping
Innovation/ Skill Intensity 0% – 50% 50% - 70% 70% Total
None 1 2 0 3
Only 1 1 0 0 1
Any 2 1 0 1 2
All 3 1 0 0 1
Total 4 2 1 7

Constraints for innovation

The previous sections have given us some areas for policy
intervention. In this section we look at the various
constraints that the units have perceived to be important, in
either their day to day functioning or in their innovativeness.
We identified fourteen (14) constraints and asked the
respondents to rank them in decreasing order of importance,
starting from 1 being the most important constraint. The
fourteen constraints are listed in Table 8.44 and the average
score also has been tabulated. A lower number would
indicate that the constraint is important. For all the 217 units,
price competition and adequate source of funding came out
to be the most important constraints. This was followed by
high cost of labour, poor infrastructure, lack of suitable
personnel and technological competition. Lack of
information dissemination or availability of raw material
was not perceived as binding constraints.

Table 8.44. Constraints for innovation (aggregate)

Constraint Average
Constraints (description) Code Score
Limited demand in the local/domestic market a 7.92
Limited demand in foreign market b 11.18
Limited availability of suitable new personnel c 7.95
Availability of raw material d 8.80
High cost of labour e 6.63
Technological competition f 7.41
New entrants in the market with the latest technology g 7.78
Price competition h 5.68
Regulatory framework i 8.63

T.D. Chaudhuri, (2020). Understanding a Company for Value Investing. KSP Books
103
 Ch.8. Innovativeness, skill intensity and growth – A study of MSMEs
Lack of fiscal incentives j 9.36
Difficult access to information technology k 9.86
Poor infrastructure l 6.28
Adequate source of funding m 5.64
Lack of information dissemination n 9.88

Table 8.45. Constraints for innovation (district wise)

District
Constraints Constraint South 24
(description) Code Howrah Parganas Burdwan Nadia
Limited demand in the
local/domestic market a 6.74 8.84 6.36 9.50
Limited demand in
foreign market b 11.00 10.48 10.94 12.84
Limited availability of
suitable new personnel c 7.42 8.21 6.88 9.36
Availability of raw
material d 6.66 9.38 7.56 11.66
High cost of labour e 3.94 7.93 4.32 10.14
Technological
competition f 5.36 8.67 4.92 10.50
New entrants in the
market with the latest
technology g 5.80 7.86 8.08 9.55
Price competition h 3.96 6.05 4.42 8.45
Regulatory framework i 8.26 7.48 7.14 12.64
Lack of fiscal incentives j 9.90 7.18 9.14 12.61
Difficult access to
information technology k 9.78 6.10 12.48 13.23
Poor infrastructure l 10.62 4.01 4.88 6.68
Adequate source of
funding m 5.18 4.97 7.96 4.61
Lack of information
dissemination n 11.22 7.08 10.54 12.23

When we look at the constraints, district wise (Table 8.45),

we observe that whereas price competition, high cost of
labour, technological competition and adequate source of
funding were extremely important for Howrah district units,
for South 24 Paraganas, poor infrastructure was extremely
important. For units in Burdwan district, again price
T.D. Chaudhuri, (2020). Understanding a Company for Value Investing. KSP Books
104
Ch.8. Innovativeness, skill intensity and growth – A study of MSMEs
competition, technological competition and high cost of
labour came out as important constraints. For units in Nadia
district, it was adequate source of funding which was the
binding constraint.
While medium scale units find price competition and
high cost of labour as important constraints, micro and small
units find poor infrastructure and adequate source of
funding as obstacles to any effort in their part to grow.
Discussions with the units revealed that although their
products were of equal quality, their sustenance in the
market were being jeopardized by liquidity constraints.
The response of the units size-wise, as shown in Table 46
indicates that for all size classes of units, price competition
was seen as an important threat. In a competitive economy,
this is a reality. It is possible that units of smaller size will be
driven out of competition by relatively larger units. No
social intervention is possible. However, what is doable is
that these smaller size units should get their bills cleared
quickly. Otherwise, coupled with their weak borrowing
status, they will run into liquidity problems.

Table 8.46. Constraints for innovation (size wise)

Constraint
Constraints(description) Code Micro Small Medium
Limited demand in the
local/domestic market a 8.13 8.25 7.10
Limited demand in foreign market b 11.74 10.98 11.38
Limited availability of suitable new
personnel c 8.60 7.88 6.95
Availability of raw material d 9.99 8.69 6.00
High cost of labour e 7.17 6.70 4.62
Technological competition f 8.03 7.09 5.86
New entrants in the market with
the latest technology g 7.45 8.05 6.67
Price competition h 5.31 5.88 4.76
Regulatory framework i 8.73 8.65 8.10
Lack of fiscal incentives j 8.73 9.44 10.48
Difficult access to information k 9.29 10.41 10.33

T.D. Chaudhuri, (2020). Understanding a Company for Value Investing. KSP Books
105
 Ch.8. Innovativeness, skill intensity and growth – A study of MSMEs
technology
Poor infrastructure l 5.70 6.04 8.33
Adequate source of funding m 4.34 6.39 6.19
Lack of information dissemination n 9.01 10.36 11.33

If we try to relate the constraints to types of innovation,

from Table 8.47 we can observe that poor infrastructure,
adequate source of funding, price competition and high cost
of labour were the major constraints towards innovation.
Many of the MSME units in the state of West Bengal are
unable to think beyond day to day survival as they find
these constraints to be overpowering. Each of the areas that
they have pointed out needs social intervention. We have to
create a level playing field if we feel that MSME units are
important for the Indian economy.

Table 8.47. Constraints mapped on types of innovation

Innovation type
Constraints Constraint
(description) Code Product Process Marketing
Yes No Yes No Yes No
Limited demand in
the local/domestic
market a 7.99 7.79 7.89 7.96 7.75 8.14
Limited demand in
foreign market b 10.8 11.88 11.07 11.34 10.54 12.04
Limited availability
of suitable new
personnel c 8.12 7.64 7.86 8.09 7.86 8.08
Availability of raw
material d 8.83 8.73 8.61 9.07 8.39 9.34
High cost of labour e 6.86 6.19 6.72 6.49 6.15 7.27
Technological
competition f 7.60 7.07 7.48 7.32 7.38 7.46
New entrants in the
market with the
latest technology g 7.67 7.99 7.66 7.94 7.28 8.44
Price competition h 6.10 4.89 5.96 5.29 5.92 5.37
Regulatory
framework i 8.39 9.07 8.45 8.88 8.45 8.86

T.D. Chaudhuri, (2020). Understanding a Company for Value Investing. KSP Books
106
Ch.8. Innovativeness, skill intensity and growth – A study of MSMEs
Lack of fiscal
incentives j 8.51 10.96 9.01 9.86 8.97 9.88
Difficult access to
information
technology k 9.15 11.20 9.49 10.39 9.11 10.86
Poor infrastructure l 5.68 7.41 6.30 6.24 6.35 6.17
Adequate source of
funding m 5.84 5.25 5.88 5.29 5.46 5.87
Lack of information
dissemination n 9.21 11.13 9.46 10.47 9.48 10.40

T.D. Chaudhuri, (2020). Understanding a Company for Value Investing. KSP Books
107
References

Bansal, P. (2005). Evolving sustainably: A longitudinal study of

corporate sustainable development, Strategic Management
Journal, 26(3), 197-218. doi. 10.1002/smj.441
Bradley, C., Hart, M., & Smit, S. (2018). Strategy Beyond the Hockey
Stick’, John Wiley & Sons.
Collins, J.C., & Porras, J.I. (1997). Built to Last: Successful Habits of
Visionary Companies, Harper Business, New York.
DattaChaudhuri, T., Ghosh, I., & Eram, S. (2016). Application of
unsupervised feature selection, machine learning and
evolutionary algorithm in predicting stock returns – A study of
Indian firms, The IUP Journal of Financial Risk Management, 13(3),
20-46.
DattaChaudhuri, T., & Sen, J. (2016). An alternative framework for
time series decomposition and forecasting and its relevance for
portfolio choice: A comparative study of the Indian consumer
durable and small cap sectors, Journal of Economics Library, 3(2),
303-326.
DattaChaudhuri, T., & Sen, J. (2016). An investigation of the
structural characteristics of the Indian IT sector and the capital
References
goods sector – An application of the R programming in time
series decomposition and forecasting, Journal of Insurance and
Financial Management, 1(4), 68-130.
DattaChaudhuri, T., & Ghosh, I. (2016). Artificial neural network
and time series modeling based approach to forecasting the
exchange rate in a multivariate framework, Journal of Insurance
and Financial Management, 1(5), 15-25.
DattaChaudhuri T, & Sen, J. (2017). A time series analysis-based
forecasting framework for the Indian healthcare sector, Journal
of Insurance and Financial Management, 3(1), 66-94.
DattaChaudhuri T, & Somnath, M. (2019). Different length genetic
algorithm-based clustering of Indian stocks for portfolio
optimization, in J.K. Mandal et al. (Eds.), Advances in Intelligent
Computing, Studies in Computational Intelligence, Springer Nature
Singapore Pte Ltd.
DattaChaudhuri, T., & Ghosh, I. (2019). A wavelet approach
towards examining dynamic association, causality and
spillovers, International Journal of Data and Network Science, 3, 23-
36. doi. 10.5267/j.ijdns.2018.11.002
DattaChaudhuri, T., Ghosh, I., & Singh, P. (2017). Application of
machine learning tools in predictive modeling of pairs trade in
Indian stock market, IUP Journal of Applied Finance, 23(1), 5-25.
DattaChaudhuri, T. (2017). Report on extent of R&D and
innovation in MSMEs in West Bengal: Strategies, Determinants
and Effects, Department of Science and Technology,
Government of India.
DattaChaudhuri, T., & Ghosh, I. (2018). Fractal investigation and
maximal overlap discrete wavelet transformation (MODWT)
based machine learning framework for forecasting exchange
rates, Studies in Microeconomics, 5(2), 105-131. doi.
10.1177/2321022217724978
DattaChaudhuri, T., & Ghosh, I. (2019). Stock market portfolio
construction: A four-stage model based on fractal analysis,
South Asian Journal of Management, 25(4), 117-149.
Donald, W.B., & Dess, G.G. (1981). Corporate-level strategy,
business-level strategy, and firm performance, The Academy of
Management Journal, 24(4), 663-688. doi. 10.5465/256169

T.D. Chaudhuri, (2020). Understanding a Company for Value Investing. KSP Books
72
References
Dorsey, P. (2004). The Five Rules for Successful Stock Investing:
Morningstar's Guide to Building Wealth and Winning in the Market,
John Wiley & Sons.
Draghici, A., Popescu, A.D., & Gogan, L.M. (2014). A proposed
model for monitoring organizational performance, Procedia -
Social and Behavioral Sciences, 124, 544-551. doi.
10.1016/j.sbspro.2014.02.518
Drucker, P. (1985). Innovation and Entrepreneurship, Harper & Row,
New York.
Flammer, C., & Bansal, P. (2017), Does a long term orientation
create value? Evidence from regression discontinuity, Strategic
Management Journal, 38(9), 1827-1847. doi. 10.1002/smj.2629
Govindarajan, V. (2016). The Three Box Solution: A Strategy for
Leading Innovation, Harvard Business Review Press, Boston
Jeffrey S. Conant, Michael P. Mokwa, P. RajanVaradarajan (1990),
Strategic types, distinctive marketing competencies and
organizational performance: A multiple measures-based study,
Strategic Management Journal, 11(5), 365-383. doi.
10.1002/smj.4250110504
Jhunjhunwala, A., & DattaChaudhuri, T. (2020). Innovation,
growth and value creation: A study of Indian companies,
International Journal of Business Innovation and Research, 1(1), 1.
doi. 10.1504/IJBIR.2020.10026121
Jhunjhunwala, A., DattaChaudhuri, T., & Bhamrah, G.K. (2019).
Value creation by Indian Companies: A comparative study over
two time periods, Turkish Economic Review, 6(1), 44-61.
Kim, W.C. & Mauborgne, R. (2005). Blue Ocean Strategy, Harvard
Business School Publishing Corporation.
Kim C. (1986), A study of organizational effectiveness and its
predictors, Management Science, 32(1), 87-112. doi.
10.1287/mnsc.32.1.87
McGrath, R.G. (2013). The End of Competitive Advantage. How to Keep
Your Strategy Moving as Fast as Your Business, Harvard Business
Review Press.
National Knowledge Commission, Government of India, (2007).
Innovation in India.
Porter, M.E. (1985). Competitive Advantage, Free Press, New York.
Porter, M. (1986). What is Strategy?, Harvard Business Review.

T.D. Chaudhuri, (2020). Understanding a Company for Value Investing. KSP Books
73
References
Robert S.K., & Norton, D.P. (1992). The Balanced Scorecard—
Measures, that Drive Performance, Harvard Business Review.
Understanding Innovation, Indian National Innovation Survey:
With Special Focus on MSMEs, (2014). DST, Government of
India. [Retrieved from].

T.D. Chaudhuri, (2020). Understanding a Company for Value Investing. KSP Books
74
References

ISBN: 978-605-7736-91-8 (e-Book)

KSP Books 2020
© KSP Books 2020

Copyrights
Copyright for this Book is retained by the author(s), with first publication rights granted to the
Book. This is an open-access Book distributed under the terms and conditions of the Creative
Commons Attribution license (http://creativecommons.org/licenses/by-nc/4.0 ).

T.D. Chaudhuri, (2020). Understanding a Company for Value Investing. KSP Books
75
T.D. Chaudhuri, (2020). Understanding a Company for Value Investing. KSP Books
162