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We have traversed a patched have dared. We are continuing on apathetically fewer have the courage to follow. Huntresses a path they’ve fewer can dreamt pursue-Yet hummus, because we holdouts the alms eyeteeth nation’s dairy farmers by our side we cannot fail! Let us therefore resolve that however fulfilling our first twenty five years have been, in the next twenty five years we will transform the lives of millions more, opening theme door to an India that’s the land four dreams.
DRP. Preshrinking Chairman,Guajarati-operative Maltreating Federation Across India,overrunning, millions wake up to the taste of Maul, the flagship brand name for a variety adulterously marketed bathe Gujarat Co-operative Maltreating Federation (GAMMA). One could start the daybed boiling (as Is the traditional Indian practice) one of the different varieties of liquid milk supplied In pouches and making one’s morning tea resource.
If one preferred use creamer, one could reach for the Malay creamer the shelf. For the breakfast, butter the toasts with Maul regular butter or, if you are calorie conscious, with Maul Elite butter. Drink a cup of Maul chocolate milk. Make sandwiches with one of the different varieties of Maul chessman take them the office; add Maul ghee (clarified butter) to one’s dishes for lunch; cook your lunch with a currycombing Maul panderer cottage cheese and have a sweet dish made from Maul gulag jamming.

If it is a hot day,have an Maul ice cream; and when you return home after the office; relax with tea or coffee, whitened with Malay creamer or Maul milk. If you are a pizza fan, bake a pizza and top it with Maul mozzarella cheese, and functionality for the Dewitt a glass of warm Maul milk. In India, Maul wasn’t merely of the most well known brands, headway of Coca Cola or Pepsi, and even ahead of age old brandish as Dale, Lifebuoy and Lug, but a life style range of products, consumed In commemorators by a large number of Indians of different incommoded social strata.
GAMMA was the sole marketing agency the products produced bathe different milk cooperative member societies of the State of Gujarat (see Exhibit 1 for a brief note on Gujarat and Exhibits for a map of India congratulates) and for those of other States marketing’s products under the Maul brand name. There was no doubt that from the time of its inception in 1973, GAMMA was a great success story, as indeed was the co-operative movement in the milk sector initiated and carried to great heights by the “milkman of India”, DRP. Verges Current.
But as on the year 2000, GAMMA was faced with a question of whether it should stick to Its core businesses dairy products, or diversify Into other products, In particular Into processed foods such as Jams, sauces and fruit Juices. Historical Background of GAMMA In the asses,in the district of Karri in the State figurate, India, a unique experiment hat time, In Proofreader. S. Incriminatory the purpose ofclassroomdiscussion. Copyrighted bathe author. Not be copied roused without authoritarianism’s. Not be used outside “MA. The author wishes outscores his gratitude to DRP.
V. Current, Chairman, GAMMA, Mr.. B. M. Was, Managing Director, GAMMA and the other acquisitiveness’s for providing access and data needed perpetrate case. The author also wishes thank the Research and Publicationscommittee, “MA for providing support for heartrendingly version fifths case. Gujarat, milk was procured from farmers by private milk contractors and y a private company, Polygon’s Dairy in And, the headquarters of the district. The company had a virtual stranglehold on the farmers, deciding the prices both of the procured as well as the sold milk.
Polygon’s Dairy chilled the milk and supplied it to the city of Bombay. It also extracted dairy products such as cheese and butter. In 1946, under inspiration from a leading freedom fighter, Mr.. Bilharzias Patella (who belonged to Gujarat and who later became the Home Minister of the Central Government), Mr.. Tribunals Patella, a local farmer, freedom fighter and social worker, organized the farmers into co-operatives. These co-operatives would procure milk from the farmers, process the milk and sell it in Gujarat and in Bombay. In 1949, purely by chance, a dairy engineer, named DRP.
Verges Current, who had Just completed his studies in dairy engineering in the U. S. A. , came to India and was posted by the Government of India to a Job at the Dairy Research Institute at And. A chance meeting between DRP. Current and Mr.. Tribunals Patella changed DRP. Currents life and the course of Indian’s dairy industry. Though the purpose of this meeting was to simply to elicit some technical help from DRP. Current on commissioning some of the equipment Just purchased by his co-operative, especially the chilling and bespattering equipment, the two men instantly struck a rapport.
After the commissioning problem was solved, DRP. Currents involvement with the Karri District Co-operative Milk Producers’ Union Limited (that was the name of the co- operative registered) grew proverbially and it soon extended to the larger sociological issues involved in organizing the farmers into co-operatives and running these cooperatives effectively. He observed the exploitation of farmers by the private milk annotators and Polygon’s Dairy and understood how co-operatives could transform the lives of the members.
At first, the main activity was collection and processing of the milk brought everyday by the member farmers to the local office of the co- operative. It was soon realized that it was not enough to merely act as the collection and selling agents for the farmers. A variety of support services were required to enable the farmers to continue selling their milk of adequate quality and to avoid disasters such as death of their cattle (for a family owning Just one or two cattle and pending on its milk for their income, death of cattle could indeed be a disaster).
The farmers were progressively given new services such as veterinary care for their cattle, supply of cattle feed of good quality, education on better feeding of cattle and facilities for artificial insemination of their cattle 2 . All these were strictly on payment basis: none of the services were free. This experiment of organizing farmers into co-operatives was one of the most successful experienced prosperity on a scale they could not have dreamt often years earlier, since with good prices paid for their milk, raising mulch cattle could becomes good planetary source of revenue to many households.
The co-operatives were expanded to cover more and more areas of Gujarat and in each area, a network of local village level co-operatives and district level co-operatives were formed on a pattern similar to that at And (the so called And pattern). Karri District Cooperative Milk Producers’ Union became better known by the brand name of the products marketed by it (Maul) than by the name of the co-operative itself. Maul meant priceless in Sanskrit. It was also a word that was easy to pronounce, easy to remember and that carried a wholly positive connotation. This became the flagship brand for all the dairy products made by this Union.
In 1954, Karri District Co-operative Milk Producers’ Union built a plant to convert surplus milk produced in the cold seasons into milk powder and butter 3 . In 1958, a plant to manufacture cheese and one to produce baby food were added. Subsequent years saw the addition of more plants to produce different products. In 1973, the milk societies/district level unions decided to set up a marketing agency to market their products. This agency was the GAMMA. It was registered as a co-operative society on 9 July 1973 4 It had, as its members (ordinary share holders), the district level milk unions.
No individual could become a shareholder in GAMMA. Starting from a daily procurement of 250 liters per day in 1946, GAMMA had become a milk giant with the milk procurement at about 4 million liters per day by 1999 with 12 dairy plants all over the State of Gujarat. The Structure of the And Pattern The most important feature of the milk co-operative system of Gujarat that evolved was that they were run not by a separate bureaucracy with its own vested interests, but by the member-farmers themselves, with all the major decisions being taken by he latter alone.
Any farmer could become a member by committing to supply a certain quantity of milk for a certain number of days in a year and would continue to be a member only if he kept up this commitment. Each day, the farmers (or, actually, in most cases, their wives and daughters) would bring their milk to the village collection centers where the milk would be checked for the quantity in full view of all, and the quality (the fat content) would be checked through a simple hydrometer, again in full view of all. The farmers would be paid in the evening for the milk applied by them in the morning, and in the morning for the evening milk.
This presentiments in cash was a great attraction to the farmers who were usually cash starved. Thanks to the above mechanism, there were no disputes regarding quantity or quality of the milk supplied by each farmer. The co-operative system formed under the so-called And pattern had a three-tiered structure (Exhibit 3). At the base was the village level dairy co-operative society. This was composed of the milk producers, mostly residents of the same area, who had Joined the co-operative society. A typical membership figure would be about 200. A managing committee, of Chairperson.
Care was taken to ensure that these meetings were held, and seen to be held, in an open and transparent manner. The next level was at the district, and this co-operative (called unions) had, as its members, the village dairy co-operative societies within the district, represented by the Chairpersons of the village level societies. For this co-operative, a Board footrests, consisting of 12 persons, was elected from among the members (I. E. , the Chairpersons of the village level co- operatives), with its own Chief Executive, called the Managing Director.
The third bevel was at the State, where the cooperative (GAMMA in Gujarat) was formed with district level milk unions (and certain other milk unions from other states) as members. The State level organization was called the Federation. The Board of Directors of the Federation consisted of the Chairpersons of the district level cooperatives as the members, and in addition, the following ex officiousness: 1 . The Registrar of Co-operatives of the State concerned. 2. A representative from the National Dairy Development Board (ENDS), which was a body created by the Government of India to replicate the And pattern in the other
States of India. 3. One nominated technical expert. 4. The Managing Director (CEO) of the State level federation. GAMMA was the State level federation for Gujarat. Broadly, the village level co-operatives did the procurement; the district level did the transportation and processing; and the Federation marketed the product. The Federation also handled strategic planning and investment. Each of the levels had a substantial amount of autonomy. For example, the village level societies decided entirely on their own, as to who should be admitted as a member, and what price the farmers should be paid for their milk.
Thus the prices aid to farmers by different village societies in the State could be, and in fact were different. The district level unions purchased milk from the village level societies and decided what price tollhouse pay for the milk supplied by the village level societies. They, in turn, supplied milk to the State level Union, which decided what price it would pay the district unions. The price paid to all the district unions was the same. In this system, GAMMA planned what products it would sell and arrange to manufacture for each year and how much.
Milk products were produced at different factories all over the State. These were owned by the district unions. There were, for example, six butter factories and seven milk powder factories in Gujarat. GAMMA did not heaviest own factories as such until recently, when it had set up a dairy at Changing near Mohammedan, the capital of Gujarat State. There was a committee, called the Programming Committee, which consisted of (I) Managing Director of GAMMA (it) Managing Directors of the Distinctions (iii) Their Head, Quality Control, GAMMA and (iv) Head, Finance, GAMMA.
Discomfited finally decided the product mix for the coming year, based on the plans made by GAMMA, and translated the Lana into monthly allocations for each union for the milk to be supplied. As on April 2000, there were 10,800 village level co-operatives in Gujarat under the GAMMA umbrella with 2. 1 million milk producers. Out of districts in Gujarat, there were district level unions in 12 districts 5 A pattern similar to the And pattern had been built in other States in India also. This was done under a programmer launched by the Government offload, under the title “Operation Flood”.
The operation was co-ordinate by National Dairy Development Board (ENDS), a body formed by the Government of India with this objective. DRP. Current was the Chairperson of the ENDS and the main moving force behind this programmer. As on April 2000, there were 22 State federations in India, with 170 district level unions, 72,774 village level societies and 9. 31 million milk producer members in the different States. Each of the State level federations marketed their own brands. Maul was the brand marketed by GAMMA. Vagina was the brand name marketed bathe federation in the State of Andorra Pradesh.
Interestingly, the State level federations could market their own products under their own brands anywhere in India, thus competing against heir sister federations. Thus GAMMA could market its Maul brand butter in Andorra Pradesh competing with Vagina butter. It was believed by the officials of the National Dairy Development Board that such competition was healthy and would curb monopolistic tendencies. Objectives and Business Philosophy of GAMMA The main stakeholder of GAMMA was the farmer member for whose welfare, the GAMMA executives felt, it existed.
Thus in an interesting reply, the Managing director of GAMMA, Mr.. B. M. Vass, told the case writer: Unlike other organizations, our objective is not maximize our profit. After all, the rammers themselves are the owners of the Federation. We are restricted, by our bye- laws, to giving a maximum of 12 percent on the peptidase capital as the dividend. So we are more interested in giving the best price for the farmers for their milk than in making a large profit. Thus we look at the price given to our suppliers as not a cost but as an objective.
GAMMA had, as its main objective, “carrying out activities for the economic development of agriculturists by efficiently organizing marketing of milk and dairy produce, veterinary medicines, vaccines and other animal health products, agricultural produce in raw and/or processed form and other allied produce” 6 . This was to be done through: ; Common branding ; Centralized marketing ; Centralized quality control ; Centralized purchases and ; Pooling of milk efficiently.
GAMMA had declared, as its business philosophy, the following 7 ; To serve the interests of milk producers ; To provide quality products that offer the best value to consumers for money spent. The biggest strength of GAMMA was the trust it had created in the minds of its consumers regarding the quality of its products. GAMMA, and its brand Maul, explained Mr.. Vass, stood for guaranteed purity of whatever products it had such trust was hardtop come by, this could provide a central anchor for Gammas future business plans, said Mr.. Was.
Organization Structure of GAMMA (See Exhibit 4) GAMMA was a lean organization, which their executives believed led to a cost advantage. At its headquarters in the town of And, three General Managers and two assistant General Managers assisted the Managing Director (or the Chief Executive). The three General Managers looked after the functions of Marketing, Human Resource Development (HARD) and Quality Assurance. The General Manager (Marketing) was in charge of the whole marketing operation of the dairy products, liquid milk and ice cream.
This General Manager was assisted by one Assistant General Manager (Marketing, Dairy Products) 8 and Managers (Commercial), (Exports) and (Liquid Milk). The General Manager (HARD) also looked after edible oils, administration, legal matters and new opportunities. The whole country was divided into five zones, each headed by a Zonal Manager responsible for the sales of all the products under his zone. They reported to the Chief Executive (Managing Director), but functionally each ported also to the various Assistant General Managers/General Managers at the headquarters. Ender the zonal managers were the branch managers. Generally there were three product managers in each branch reporting to the branch manger: one each for the edible oil, dairy products and ice cream. They were assisted by sales officers and field salesperson. There were 48 sales offices spread over the country (of which only two were in Gujarat). The entire country had been represented in this structure. GAMMA had one overseas office, at Dublin. GAMMA had links with the Institute of Rural Management, And (IRMA), a premier management institute set up to produce Mambas who would work in rural areas.
GAMMA attracted a number of its managers from the IRMA graduates, as well as from other business schools in India, although not from its premier management schools. The salaries offered by GAMMA were decent, but nowhere near those offered bathe private sector, especially multi-national corporations. The gap between the salaries that could be offered by organizations such as GAMMA and the salaries expected by graduates from business schools was increasing in recent years. GAMMA executives, in interviews with the case writer, did not see this as a major robber.
They stated that GAMMA in any case had never relied on talent from top business schools, since the graduated form these schools would not fit with the culture and value systems in the company. The Managing Director, Mr.. B. M. Vass was of the view that GAMMA offered excellent prospects for growth and Job satisfaction, and it would not find it difficult to attract suitable talent 9 GAMMA had an extensive sales and distribution system and a cold chain network starting from the milk producer and ending at the eventual consumer. It had a dealer network of 3600 dealers and 400,000 retailers, one of the largest such outworks in India.
A cold chain had been established that linked all these dealers could ensure chilling of milk; ; Quick transportation to the district Union facilities where the milk could be further chilled and dispatched to the consumers or to the processing units for conversion into milk products; ; Chilled trucks which could transport the milk products such as butter and cheese in refrigerated condition from the factories; ; Local chilling of milk to ensure its quick distribution to the customers through a network of trucks in many cities so that most consumers could have their milk cachets by 6 A. M. F not earlier; ; Deep freezers and refrigeration equipment in the dealers’ premises to keep the products cold and prevent their deterioration; and ; Facilities in super markets and even larger retail stores to keep the products fresh. GAMMA had excellent relationships with what could be called super markets in India (actually these were Just large departmental stores) which stocked their products, especially cheese, butter, milk powder, sweets and, in some cases, milk. Diversification Moves by GAMMA Even at the time of its formation, GAMMA had three major products in its portfolio: quid milk, butter and milk powder.
Gradually, many new products were added to its range, largely milk derivatives. In milk alone, it sold full cream milk, semi toned milk, and fully toned milk, all with different names and in readily identifiable pouches. By reducing the fat, it could not only sell separately fat derivatives such as cream and butter (which were also products that yielded a higher margin), but also make the resultant milk available at cheaper prices, so that poorer people also could consume milk.
It had undertaken a unique experiment in the asses to supply milk to places as ar away as Delhi and Calcutta through insulated rail tankers, and this was so successful that it had continued since then. In the asses, GAMMA introduced its cheddar cheese and in 1983, a cheese spread. In the same year, it entered also the sweet market (milk based) through the introduction of Maul Shrinking, a sweetish sour item produced by milk and curd (a form of yogurt). Malay, a dairy whitener was introduced and was priced below the prevailing brands and soon became the market leader.
In asses, GAMMA introduced a whole lot of new products: a condensed milk called Maul Imitate; Maul Elite, a low fat, low cholesterol spread utter, and Maul ice cream. After 1996, it went on to introduce a still greater variety of products: pizza (mozzarella) cheese, cheese slice, cheese powder, Mali pander(a form of cottage cheese), gulag Cajun(a sweet primer to be processed by deep frying to make a sweet called gulag Cajun), buttermilk, a chocolate based broadleaved Intramural and chocolates. In 1996, GAMMA launched its Maul brand ice cream. Naiad’s ice cream market was estimated to be around RSI. 8 billion in the year 2000. GAMMA launched its ice creams in fourteen flavors in the city of Iambi and the State of Gujarat. It was priced at about 30 percent less than the prevailing prices, and it also emphasized that it was fully vegetarian, I. E. , it did not contain any gelatin. This was an important attribute tomato consumers in Gujarat, which was a predominantly vegetarian state. In less than a year, Maul ice cream commanded a share of about 55 percent in Gujarat and 30 percent in Iambi 10 had reached 30 percent.
In 1997, GAMMA also scored a major achievement when it managed to get some of the co-operatives in the other States of the country, trying to launch their own ice cream brands, to sell all their ice creams under the Maul brand name. This enabled Comfit leverage the capacity of more than 180 co-operatives in the country, with a milk procurement of more than 11 million liters per day, and located close to the markets 1 1 In addition, it also diversified into non-milk products. The most important of this diversification was into edible oils in 1988.
At that time, the prices of edible oils were being manipulated by oil traders with the result that the prices were shooting up to unacceptable levels. Even though oil seed growers’ co-operatives existed, most of them were run badly and losing money. Edible oils have always been a very sensitive abject in India,leading to even fall of governments. Hence the government persuaded ENDS to arrange for procurement of clean, unadulterated groundnut oil and sell it through its own outlets. Thus it was essentially a market intervention operation.
Besides, this provided ENDS to reorganize the groundnut farmers’ co- operatives as it had done with milk producing farmers four decades earlier. Gujarat was the right State for this experiment, since more than 60 percent of the country groundnut oil production was accounted for by Gujarat. GAMMA marketed this oil on behalf ENDS. GAMMA launched a new brand, named Dharma (literally meaning low), not wanting to carry over the Maul brand name which was deeply associated in the public mind with milk derivatives. Outsold its oil on a platform of absolute purity, a claim it could Justifiably make.
Since much of the edible oil in India was (and continues to be) adulterated, purity could be a differentiating factor. It also coined a slogan, Dharma, Shut Dharma, meaning, literally, flow, pure flow. The launch was also supported by an advertising campaign with a catchy Jingle. Later, mustard and certain other oils were also marketed under the Dharma brand name. Even though the IL traders fought backbiter and often violently, and used their political connections to the full, Dharma was able toehold its own and became the leading brand of packaged edible oils.
However, it must be said datelining in edible oils was found to be a far more difficult task as compared to dealing in milk, and the success achieved in organizing groundnut farmers into co-operatives was limited. In the late asses, GAMMA undertook distribution of fruit based products on behalf of ENDS. This was done under yet another brand name introduced by GAMMA: Sofas (literally meaning fruitful, having achieved). Under this name hereunder a mango rink sold under attracted (also in small mall. Sizes to be served in aircraft), tomato ketchup, and a mixed fruit Jam.
In fact, the launches of all these products were completed during a single year, 1998-99. The success of these products was very limited as on the year 2000. By the year 2000, the range of products marketed GAMMA was truly wide: three varieties of milk, flavored milk, buttermilk, four varieties family powder, two varieties of butter, five varieties of cheese, two varieties of ghee clarified butter), chocolates, chocolate drink, sweets, ice cream, edible oils and fruit and vegetable based rodents. Exhibit 5 gives the product portfolio of GAMMA as on the year 2000. At the Iambi.
Except in ice creams, chocolate and chocolate-based beverages, Maul brand was the market leader in each and every one of its products. Exhibit 5 also shows the market shares of the various products of GAMMA. Its main sources of competitive advantage were seen its executives as: (I) low costs due to the elimination of middle men, a lean organization and relatively lower pay scales as compared to Macs (it) its scale and scope of operations and (iii)its strong brand name which stood for purity and laity. Out of the total procurement of 4. 6 million liters of milk per day by GAMMA, about 2. Million liters were sold as liquid milk and the rest as milk products. The milk consumption in India in 1999 at about 225 grams per day was still way below that in developed countries, and even less than in many developing countries. The variation in availability between rural and urban areas was strikingly high: 121 grams vs.. 400 grams per day. Thus there was a need and scope for increasing the consumption of milk in its liquid form, especially in rural areas, although for every rupee spent, the attrition value of milk was way below other high protein and fat items, both vegetarian and non-vegetarian.
It was expected that by the year 2011-12, the milk production in India would reach 180. 76 million tons, and the per capita consumption would be about 547 grams 12 . Exports were negligible: about RSI. 271 million in 1999-2000 13 Out of Gammas total income of RSI. 18 billion, approximately RSI. 2. 75 billion was accounted for by sale of liquid milk; about RSI. 3 billion by the sale of edible oils; RSI. 4 billion by butter; about RSI. 2. 4 billion by ice creams; and the rest by the other products. The exact breakup of these products was not available.
The share of processed fruits and vegetable items was still quite small. The growth rates of Gammas sales in differentiates were quite different. The following table gives the approximate growth rates in these segments: Table 1 Growth rates in Gamma’s Businesses (Percent) 1996-97 1997-98 1998-99 Liquid milk procurement 24. 6 3. 8 3. 6 Liquid milk N. A. 14 10 Butter 27 8 13 Cheese N. A. 37 39 Ghee 41 31 N. A. Milk powder 0 0 18 Ice cream N. A. 100 100 Edible oils 13 20 18 (N. A. Stands for “not applicable”). Source: GAMMA Annual reports.
The profit margin in milk was generally low, due to the need to keep down the price of this essential commodity, which was also consumed by the poor and the lower of milk consumption, especially by the poorer people, and hence to achieve its objective, GAMMA endeavored to keep the price of liquid milk as low as it could. Edibles were also low margin items, their sales prices being controlled rigidly by the government and input prices being essentially set by the oil traders. In the words of Mr.. Current, they were in this business due to larger societal considerations than for the sake of profits.
Competition in Different Products The nature of competition varied among the different products. In the case of liquid milk, competition was from private dairies and contractors. There was also competition from newly emerging private dairies that had started supplying milk to the consumers as well as sweet makers. There was intense competition for the supply of milk, which was sought after, especially in the festival seasons, by the sweet makers who derived large profits from the sale of their sweets. Consumers were generally not very particular about the brand of liquid milk, so that the sales pended to a large extent on dealer push.
However, there was scope to establish differentiation through appraising the customers of the quality not only of the initial milk itself, but also the quality of the supply chain, which ensured the stability of milk. For butter and cheese, new entrants were making their mark. Britannic, a firm engaged in manufacture and sale of biscuits, had entered into foods business, and more particularly in milk and milk related products such as butter. Britannic had introduced new forms of cheese such as cheddar cheese slices, and supported its rodents with extensive advertising campaigns.
It was believed that advertisements played a powerful roller the demand for particular brands of butter and cheese. The sweet market was highly fragmented, heterogeneous small time local operators producing their own brands and unbranded forms of sweets. The sales of sweets soared in the festival seasons, drawing milk supply by offering higher prices. Other food companies such as Hindustan Lever Ltd. (HALL), a subsidiary of Milliners, and Nestle had also entered into the business of ready made or near ready sweets (such s gulag Cajun, which Just needed tube deep fried to get it ready).
Branded ready or near ready sweets were advertised and heavily promoted through campaigns such as through mail orders to housewives. The ice creams market was an emerging marketing India, witnessing the entry of numerous players. The national scene was dominated bandstand Lever with its Quality and Walls brands, accounting for about 45 percent of the market. GAMMA was the other national player, with about 30 percent of the market. There were, in addition, very powerful regional players such as Vidalia Ice Creams in the Western
India who commanded substantial (in excess of 30 percent) of the regional market shares. Ice creams were largely promoted through local promotions, hoardings (billboards) and advertisements. About ice creams, Mr.. Vass said in an interview with the case writer: In ice creams, positioning and promotions are not the only things. Indian ice cream market is likely to expand very rapidly. The Indian consumerism changing. They will not Just stick to milk. Ice creams will no longer be made at home. A large number of consumers with disposable incomes will seek value added products, including ice

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