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Case Study Solution Sample for How to Solve a Case Ajanta Packaging

Start with facts given in the case in bullet points. If SWOT, Porter, Ansoff is asked in the questions given at the end then explanation becomes essential. If they are not a part of the questions given in the end, then you may substantiate your solution with any of them, if you find them relevant. In this case, all the three are a part of questions, so explanation has been included.

ASSIGNMENT QUESTIONS

1. Discuss the major characteristics of the glass -bottle industry in India.

2. Conduct a SWOT analysis and Porter’s five forces analysis of Ajanta Packaging.

3. What should be Ajanta Packaging’s strategic objectives while considering diversification?

4. Suggest STP (Segmentation, Targeting and Positioning) for Ajanta Packaging to increase its PET- bottle business.

ANALYSIS

1. Discuss the major characteristics of the glass-bottle industry in India.

User Segments

Large buyers in each segment

Buyers are quality-conscious

Increase in the use of other forms of packaging materials

Aesthetics gaining importance

Demand is highly seasonal, especially for products such as soft drinks Industry

Dominated by a few large players in each segment

Caters to a few large players in each segment

Plants located close to user industries

Long credit periods in the industry

Industry affected by increased use of PET bottles in user segments

1. Conduct a SWOT analysis and Porter’s five forces analysis of Ajanta Packaging.

SWOT (Strengths, Weaknesses, Opportunities, Threats)

A SWOT analysis can be an effective tool for analyzing the current scenario of Ajanta.

Strengths (Internal)

Weaknesses (Internal)

Regarded as one of the primary glass-bottle suppliers.

95 per cent of business is from glass products (overreliance).

Net sales realization yields are good (excellent distribution network).

Able to offer just-in-time supply to customers via marketing offices (low lead times).

Rising operating expenses.

Slipping profit margins because of price sensitivity.

Quality-focused, customized and timebound packaging.

Loyal customers (90 per cent of orders are from repeat customers).

Good products and professional expertise, coupled with a wide range of products.

Opportunities (External)

Threats (External)

Packaging industry has estimated compound annual growth rate of 3.1 per cent; India’s industry has grown 15 per cent over the past few years.

Growing middle class and urbanization with changing consumer patterns.

Increased use of flexible packaging.

Product substitutes for glass, such as PET.

Growing PET-bottle market is effectively shrinking glass-bottle usage.

Increased competition due to shrinking market for glass packaging.

Increased inflation has negative impact on raw material cost.

 

Reduction of duty on imported spirits and wine.

Pharmaceutical industry is moving towards substitute packaging and away from glass.

PORTER’S 5 FORCES ANALYSIS

Industry Rivalry (High) Bargaining Threat of Power of New Buyer Entrants Industy (Glass- bottle- packaging
Industry
Rivalry
(High)
Bargaining
Threat of
Power of
New
Buyer
Entrants
Industy
(Glass-
bottle-
packaging
Industry)
Bargaining
Threat of
Power of
Substitutes
Suppliers
(High)
(Low)

Porter’s five forces analysis

The five forces model developed by Michael E. Porter identifies and analyzes five competitive forces that define any industry. It allows an organization to discover opportunities and threats within the market, and can be used with regard to the packaging industry in India.

Threat of New Entrants (Low)

In its current business model (95 per cent glass), the threat of new entrants in the glass -packaging industry is low. Many companies are recognizing the decline of the glass -packaging industry and diversifying. As such, Ajanta should maintain a certain percentage of its product portfolio in glass and charge a premium. This is also an opportunity to strengthen its presence in the glass -packaging industry. On the other hand, there is a huge threat of new entrants coming into PET packaging. Hence, the threat of n ew entrants can be considered low for the glass-bottle-packaging industry.

Industry Rivalry (High)

There is very high industry rivalry because of the shrinking market for glass packaging. Ajanta has found its competitors targeting the remaining glass bottle customers. This has led to intense price wars between companies, which has pressured Ajanta to increase its operating costs to target profits.

Bargaining Power of Suppliers (Low)

Suppliers have less power, as they are fragmented and spread globally. With multiple suppliers, power resides with Ajanta Packaging. Also, the supply of glass-bottle packaging has relied largely on returnable bottles. With the decline in the use of glass bottles, there is a glut of supply, in the form of a floa ting stock of approximately one billion bottles valued at INR6 billion. This could be seen as an advantage for the company, but it also shows how much the industry has moved away from glass.

Threat of Substitutes (High)

The threat of substitutes for Ajanta’s glass products is very high. As discussed in the case, customers and industries are moving towards other packaging materials that are lightweight, tough, easy to use, have better shelf lives and are easy to stack, such as PET bottles, Tetra Pak and aluminium cans. In addition to the major threat from PET bottles, Tetra Pak has been well received because of its low environmental impact.

Bargaining Power of Buyers (High)

Buyers have strong power and influence over glass bottles, which are typically seen as commodity products without much value added. Also, many substitutes are available for the buyers in different industries. Many buyers are also increasingly moving to new packaging like PET and Tetra Pak, and this is further increasing buyers’ negotiation powers. Many customers have re-negotiated their deals with Ajanta to get better pricing (see Exhibit TN-2).

2. What should be Ajanta Packaging’s strategic objectives while considering diversification?

One way of analyzing the different strategies that Ajanta may use to grow the business is with Igor Ansoff’s 1 matrix. This matrix deals with the prospects of offering existing and new products within existing and/or new markets and the levels of risk associated with each. Ansoff’s matrix proposes four alternative marketing strategies:

Market penetration: This strategy recommends market penetration by selling glass bottles in existing markets, usually by increased promotion, price reductions or better routes to market.

Product development: This strategy involves developing new products for the packaging industry and placing them in the existing markets of Ajanta.

Market development: This strategy suggests taking existing products and selling them in new markets. The export of glass bottles in international markets can be an option for Ajanta Packaging.

Diversification: This strategy involves developing new products like PET bottles and promoting them to new markets and new customers at the same time. Diversification is usually considered to be the riskiest strategy, as the business has to expand into areas outside its core activities and experience as well as target a new set of customers in many cases.

the following strategic objectives that Ajanta should achieve while considering any diversification plans:

Decrease overreliance on glass products over time

The main objective of the diversification plan for Ajanta Packaging should be to decrease overreliance on its glass business. Currently, 95 per cent of its business is glass -based. As the packaging industry moves to advanced and better packaging, Ajanta should consider launching new products to reduce its dependence on glass bottles. Here, the company can also explore different product innovations to stay relevant and modern for its customers.

Maintain good customer relationships and undertake product innovation

The company has always maintained a high standard of customer relationships and should strive to retain its high percentage of repeat customers (90 per cent). The company could achieve this by analyzing its customers’ portfolio of products and packaging options available and then exploring different product innovations in packaging to retain its customers and get more business from curr ent customers.

Increase the sales volume of glass bottles

In contrast to the option of decreasing overreliance on glass products over time, Ajanta also has the option of increasing the sales volume of its glass bottles by targeting more customers in the current industry. The company can follow a market/product development strategy to get more business from its current industry and from new customers. This strategy can also be useful in getting orders from new customers for other products that Ajanta Packaging has on offer.

Utilize current and proven distribution networks to gain an advantage over competitors

Ajanta Packaging has a proven distribution network with good net sales realization numbers and good lead times. This is an asset and the company s hould utilize this in its diversification strategy. Its distribution network can be strengthened to manage the distribution needs of its new PET portfolio. And where overscaled for the distribution of glass, operations can be reworked to be lean and efficient for new PET products.

Synergize marketing and logistics teams on diversification plans and new product portfolios

It is very critical to synergize the marketing and logistic teams in the diversification strategy. Ajanta’s four marketing offices across India should be on board with the any strategy. Marketing policies should also be updated to reflect the new objectives of its product portfolio. some of the following plans:

The company can also help its main customers in their transition from glass t o PET packaging.

It should offer higher incentives for PET products instead of glass.

Switching customers from glass to plastics should be pursued; the company is involved in PET now.

Do not participate in intense price wars for glass. Instead, introduce customers to economical PET alternatives.

3.

Suggest STP (Segmentation, Targeting and Positioning) for Ajanta Packaging to increase its business of PET bottles.

Segmentation

Pharmaceutical industry

Soft drinks industry

Indian Made Foreign Liquor (IMFL) industry

Fast-moving consumer goods (FMCG) industry.

Also, these segments can further be divided into types of products they need:

PET bottles

Cans

Glass

Flexible packaging

Aluminium foils and blisters.

Targeting

targeting the pharmaceutical industry- the pharmaceutical industry’s growth over the last two decades and the expectations of it becoming a US$15,490 million industry by 2014. Also, the Indian packaging industry is estimated to be worth US$23 billion and growing at a ra te of 15 per cent annually. Ajanta already has a good presence in this industry and can further strengthen its position.

targeting the FMCG and IMFL industries to increase its presence in these markets. targeting of the IMFL industry- negatives can be- as the liquor market still has the majority of its packaging in glass. Assuming that the government will reduce the levy on imported liquor, local manufacturers will need to compete harder, which could leave Ajanta with very little scope for PET packaging in this industry.

Positioning

Positioning is the act of designing a company’s offering and image to occupy a distinct place in the minds of consumers. Ajanta can position its PET-bottle business on the basis of attributes such as good products, excellent service quality, cost-effectiveness and offering timebound and customized packaging solutions. These attributes, coupled with a wide range of products and a good distribution network, have provided Ajanta with competitive points of difference to position itself as a preferred supplier in the target market.