Вы находитесь на странице: 1из 9

Main Report

Situational Analysis
KCPL was started in 1945 by Mohan Kumar Gupta, in Jaipur, Rajasthan to sell sugar candies under the brand MKG. But due to the high competitive environment in Rajasthan in candy market he could not compete with the other manufacturers who were selling the product at lower price. So, in 1954 he decided to move to Kanpur, Uttar Pradesh where competition was less fierce. He struck an instant success and became the leader in candy business in northern region by late sixties. He diversified and invested his surplus money in Glucose biscuit market as the market seemed profitable and started selling them under MKG brand. They primarily targeted middle class families in urban and semi-urban areas. In 1973-74 KCPL reached the number two position in the market with monthly sell of 110 tonnes. In 1980-81 they increased their production capacity to 240 tonnes. Till 1983-84 their business flourished and net profit increased to Rs. 25 lakhs. KCPL saw downturn from 1983-84 to 1986-87 and incurred losses as the cost of labour and material were increasing. In this situation they could not compete with the

unorganized sector which was growing fast and was selling biscuits at a lower price. They could not increase the price of their biscuits as they dont have the premium image to get a higher price. KCPL struck a deal with a multinational company named Pearson for contract work initially of 50 tonnes to tackle with this issue, but market response to Pearsons biscuits was not very encouraging as price was higher. In 1987, then KCPL chairman and MD, Mr. Alok Kumar Gupta received an offer from the national leader in biscuit Industry APL for contract work. APL offered to provide manufacturing expertise and process for the same. Now, the decision was in the hand of Mr. Alok Gupta and his brothers to go ahead with this proposal or not, especially when the company was confronting an adverse situation.

Problem
The central problem in this case is decline in the sales of KCPL biscuits as they are not able to comprehend with increased competition and upsurge in the cost of labour and materials. The detail of the losses they incurred is due to downturn in sales is provided in Exhibit 1.

Other associated problems are: The main problem in operations is absenteeism of the

workers. The absenteeism is 50% percent and adding to that workers used to refrain from work without further notice. Emergence of unorganized market between 1975 and

1980. They are selling biscuits at lower price and KCPL is not able to compete with them. Moreover, The Kirana shop owners are selling KCPL biscuits loose, which put them in direct competition with unorganized manufacturers.

Who is facing the problem? Mr. Alok Kumar Gupta and his brothers Vivek and Sanjay are facing the problem as they are the decision makers for the company.

Objectives
Increase sales and overall profit. Improve technical proficiency and reduce

dependence on workers. Increase the production capacity. Adopt better marketing strategy to differentiate MKG from unorganized producers.

Options
KCPL has two options available with them to tackle with this situation. To accept the proposal of APL Reject the proposal of APL, concentrate on development of MKG brand

Evaluation of Options
Option 1: Accept the proposal of APL

Advantages: 1) KCPL will be able to use its extra capacity of production. They currently have capacity of 240 tonnes out of which they are using only 120 tonnes for MKG. 2) APL will provide them all the technical requirements to produce quality brand. KCPL is in need of technical improvement to reduce its reliance on workers to reduce absenteeism. 3) APLs initial order is of 70 tonnes; by producing this order KCPL would reduce the losses from 141,000 to 36,000 which

is described in Exhibit 2. If APL is satisfied with KCPLs work then this order is only going to rise. 4) APLs product is already established, so it wont fail like Pearsons Good Health Biscuits and KCPL will continuously get orders for 3 years as mentioned in proposal.

Disadvantages: 1) MKG might get diluted because of this contract work. 2) APL might interfere too much and can also ask for extra investments in manufacturing. In a nutshell, KCPL could lose its independence. 3) They are not aware of the Pearsons view if they accept this offer as the deal with Pearson has not been dissolved yet.

Option 2: Reject the proposal by APL, Concentrate on development of MKG brand


Second option available with Mr. Alok kumar is to reject the offer made by APL and concentrate on their own brand. As mentioned earlier currently KCPL is only utilizing 120 tonnes per month capacity but they are actually capable of 240 tonnes. They are at present incurring loss of 141,000. To reach break-even point they need to produce additional 83 units which has been explained in detail in exhibit 3.

Another area in which they can improve is technical proficiency to reduce their dependence on casual labour and increase their overall production capacity. Lastly, they have to work upon their marketing strategy and improve the position of MKG in the market. The main agenda of this marketing should be to distinguish MKG from unorganized products.

Action Plan
The most feasible option available in this case is 1st option which is to accept APLs offer. At present scenario, KCPL is in dire need of money to survive in the market, APLs proposal is the opportunity they can use for the same. APL is giving technical expertise to KCPL which is useful in improving quality of their MKG brand. Considering long term future; if APL is completely content with KCPLs work then they can extend the contract after 3 years and can order in larger quantity which would yield higher profits for KCPL. In this case KCPL needs to add a clause in the contract suggesting that APL cannot demand them to stop producing MKG brand in future, only after addition of this clause KCPL should accept this offer.

Contingency Plan
If APL is not ready add this clause than KCPL should continue with the second option which is to improve and strengthen market position of MKG brand.

Word Count 1005

Exhibit 1

Revenue per ton =18100 Variable cost: Cost of Maida used per ton = 7500 Cost of Vanaspati used per ton = 5200 Cost of sugar used per ton = 2400 Cost of preservatives and packaging per ton = 1000 Casual labour cost per ton = 300 Total variable cost per ton = 16400.(1) Fixed cost: Cost to wages per ton= 2291 (2.75 lakhs/120) Interest per month per ton = 83 Other fixed Commitments per ton = 500 Total fixed costs per ton = 2874(2) Total cost incurred per ton = (1) + (2) = 19274 ` Loss incurred per ton = 19274 18100 =1174 ` Loss incurred for 120 ton = 1174*120 = 140880 `

Вам также может понравиться