Case No.

3 - Income Elasticity of Demand

10. [yoti Nagar, Bangalore

Telecommunication Department in Bangalore had their center for international connectivity located at village Jotanhalli about 30 kms from city center on Bangalore Hyderabad highway. Soon companies wanting to set up call centers found this location to be ideal due to the reliability, availability and easy to reach for communications needed to serve their clients. Fault rectification in communications could also be achieved quickly. Alternate routing of calls could be arranged through liaison in the event of prolonged non-availability of direct link. It was only natural that call centers would find this location to be irresistible. Six call centers were set up within 9 months and three more shifted from other parts of the city to this location. Working hours for call center employees were very inconvenient for employees to commute to Bangalore at odd hours. Instances of crime were also reported against women employees while being transported in company tars late at night to their residences. All the nine call centers built multi-storey hostels for their employees. This saved substantial transportation costs and provided convenience to the employees. All Single employees got one room, while married families were given two room flats. A wise man named the colony as Iyoti Nagar. The original village of [otanhalli, next to which [yoti Nagar had developed, provided facilities to staff of Telecommunication International Connectivity Center and many silk weavers who had been living there for generations. Jotanhalli had a market, which sold basic necessities, a government middle school and a temporary cinema hall. Residents of [yoti Nagar had five days a week and made a trip to Bangalore once a week to shop for items not available at Jotanhalli, dine in style and see a movie. However, children's education started posing a serious problem.

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Part II: Case Studies: Discussions about the Solution ...

Majority of employees were young and had young kids. These children needed a good nursery and a junior school of acceptable standards. These kids could not commute the up and down trip of 60 kms to Bangalore schools every day. Geeta Acharya, a senior teacher of Kids Convent in Bangalore, resigned her job and set up Geet Nursery and Junior School at [yoti Nagar. Geeta had a lot of enthusiasm, but limited amount of finances. She persuaded a couple of her colleagues to give up their jobs and join Geet Nursery and Junior School. She had to pay higher salaries and also to develop the institution because she had started from the scratch. She, therefore, charged high fees. She was aware that parents had little choice and they could certainly afford these expenses. Salaries at the call centers increased regularly and progressively. Well paid parents of call center, telecommunication department employees and rich weavers) withdrew their children from the government school at Jotanhalli and got them into Geet Nursery and Junior School. Salaries of call center employees were increasing rapidly and the fees of Geet Nursery and Junior School kept pace with these salaries. Geeta was clear that she was meeting the demand of her clients. She had built an institution which readily spent for setting up facilities which would add glamour to the school. She did that because she felt that the parents wanted it. She started classes to teach piano, dancing, sculpture, clay molding and so on. The size of the buildings of the Geet Nursery and Junior School had continued to increase to accommodate these services and so had the cost of infrastructure, buildings and maintenance. The staff and wage bill had multiplied many folds from the initial beginning. There was an environment of boom in [yoti Nagar and everybody was part of it. Even the government school at Iotanhalli had improved. It catered to the educational needs of children who were studying beyond the nursery school or whose parents had other family commitments and could not afford high fees of Geet Nursery and Junior School. Call center business had come to India because wages in India were a fraction of the wages of the developed countries. Wages in developed countries had been rising to overcome inflation. However, the increase in wages in those' countries was much 'lower than that in Indian call centers. This resulted in the gap between the two set of wages decreasing at a fast pace. Secondly,

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Part II: Case Studies: Discussions about the Solution ...

to above and may evolve your own solution. Give reasons to support your decision.
Maximum time to solve this case study: 28 minutes