INTERNATIONAL BACCALAUREATE

DIPLOMA PROGRAMME

BUSINESS MANAGEMENT RESEARCH PROJECT –

HIGHER LEVEL

“Can Heritage Group increase its revenue in India when it

increases its productivity?”

Session: May 2018

Candidate Personal Code: gwj561

Written Report: 2000
Executive Summary:171

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 Executive Summary (Abstract)

The research proposal was to investigate whether Heritage Foods Plc should consider
increasing productivity to boost up its revenue. The feasibility of the project was verified by
observing the organization’s present position in the market. It is found through thorough
interviews and research that increasing productivity will benefit Heritage Foods Plc in terms
of revenue and market share. Through research it is clear that this is the optimum time for
Heritage Plc to increase its productivity. It is found that increasing productivity will not alone
boost up revenue but also enhances Heritage Foods Plc’s market share amongst its
competitors. Heritage Foods Plc can also try market expansion to overseas market or can also
diversify into other dairy products. The firm can aim for economies of scale by improving the
efficiency of the workforce. These strategies will enhance the business’ image amongst its
competitors.

Word Count: 143

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 Acknowledgement

I would like to thank Mr. Umakanta Barik, the company secretary and all the employees of
Heritage Foods Plc. for their assistance in providing and allowing me to do the research on
your company. I would also like to thank my teacher Ms. Sreeharinee Raman and my
coordinator Mr. Kalai Rajan for guiding me throughout.

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Contents
Executive Summary (Abstract) .............................................................................................. 2
Acknowledgement .................................................................................................................... 3
Introduction .............................................................................................................................. 6
Research Proposal .................................................................................................................... 6
Main Results and Findings: .................................................................................................... 9
Analysis and Discussions ....................................................................................................... 14
Bibliography ........................................................................................................................... 18
Appendix-1.............................................................................................................................. 19
Appendix-2.............................................................................................................................. 21
Appendix-3.............................................................................................................................. 23

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5|Page
Introduction

Heritage is a public limited company and its headquarters is situated in Telangana. It is one of
the fastest growing public listed companies. Heritage foods plc has two divisions, Dairy and
Renewable division. Heritage Foods Plc was founded by the chief minister of Andhra
Pradesh, N. Chandrababu Naidu, and the company’s chairperson is, Seetharamaiah Devineni.
The company is having good sales in terms of dairy than renewable energy and heritage dairy
is one of leading dairy players with a capacity of 1.71 million liters per day and also has a
turnover of Rs. 2648.88 crores (Indian Rupees) in the financial year of 2016-2017. Heritage
Foods Plc has an average market share in the southern part of the country, India. Heritage
Foods Plc is facing huge competition even though it is established in the market for 25 years.
After a research it is clear than even though it is not the market leader Heritage Foods has
good annual turnover in terms of finance but Heritage Foods was unable to acquire even an
average market share in the any part of the India’s region. The company is having operations
throughout India but does not have enough market share and revenue.

Research Proposal

“Can Heritage Group increase its revenue in India when it increases its productivity?”

Rationale
Dairy Production is one of important contribution to sector of food in India. Dairy Industry is
one of the oldest industries in India.
The company I have chosen for research proposal is Heritage Foods Plc and it’s in the dairy
production for 25 years and operates in Andhra Pradesh, Telangana, Karnataka, Kerala,
Tamil Naidu, Maharashtra, Odisha, NCR Delhi, Haryana, Rajasthan, Madhya Pradesh,
Punjab, Uttar Pradesh, Gujarat and Uttarakhand.

Methodology
Throughout the research proposal various resources will be consulted to find the answer to
the research question. The primary research will be conducted by interviewing the manager in
the city, Visakhapatnam. Preliminary information will be collected from the manager and
employees during an interview at their office in Visakhapatnam to help the direction of the
essay. The questions will be based on the concept of revenue and productivity as even though
the company is having huge annual turnover, the revenue is less when compared with other

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companies. The questionnaires will be sent to the branches of Heritage Foods in the North
India via e-mail and will try contacting a few branches through phone.

Secondary Research- The company’s site will be consulted for any information required and
online chats with authorities if any further more details are required.

Methods used to collect and analyze data

Possible Problems Solutions

 Interviewing the Managing Director,
as the industry is in other region and I
live in a boarding school.
 Customers might give unbiased
information about the company.
 Financial information was not
available about the company online
 During vacations, will go to the
industrial unit to collect the data.
 Questionnaire with multiple choice
questions and some direct questions.
 Talking to secretary and managers.

THEORETICAL FRAMEWORK
I will present in my research proposal the challenges and the positive aspects of the business
upgrading its technology trough primary and secondary research. The tools and techniques
used will be SWOT analysis, PEST framework and financial analysis.

Key Area of Syllabus

a) 1.3-Organisational Objectives
b) 3.5- Profitability and Liquidity ratio analysis
c) 3.8- Investment Appraisal

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ACTION PLAN

DATE ACTION

30th June 2017 Topics and Company chosen

4rd – 8th July 2017 Initial Proposal

10th July 2017 Teacher’s Analysis of the proposal

12th – 15th July 2017 Research and analysis about the company and how the
market works
17th July 2017 Interview dates planned

18th July 2017 Designing interview questions

21th July 2017 Interview with the company secretary

22nd July 2017

PUBLIC SURVEY QUESTIONNAIRE CREATED
AND DATES DECIDED

29th July 2017 Basic Introduction started

2nd August 2017 Survey e-mailed to the public

10th August 2017 First Draft Submission and waiting for the survey

14th September 2017 Data collected from the survey

25rd September 2017 First Draft analyzed by the supervisor and given back

29th September 2017 Supervisor’s reviews appropriate business tools

8th November 2017 Changes are made and the data collected from the survey
is added to my IA
10th-22nd November 2017 Developing and formatting my IA

29th November 2017 Final Draft Submitted

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Main Results and Findings:
SWOT Analysis:
Strengths
1. Heritage Foods Plc already has
branches in India which gives details
about the market which means it
already has a clear idea on the market.
2. Heritage Foods already has the
equipment which is having enough
capacity for more output.
Opportunity
1. The company is operated as a
people’s initiative so getting
government subsidies in every state is
not hard.
PEST
Political
Economical
Weakness
1. Even though the company is
operating throughout India, it will
have to plan according to the place as
worker’s mindset differs from place
to place.
2. Increasing productivity can every
time not be successful as if there is
more supply than demand then prices
might come low (economic
condition), so only after a thorough
market research the company can
decide it which takes lot of time.
Threat
1. The competitors are having more
market share than Heritage Foods Plc
which can cause a few barriers in the
outlets for increasing market share.
The political scenario and is favorable for
any expansion or startups.
There is economic stability in the country
and in the state. People’s income level is also
based on economic effects.
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Social Customer call for changes and preferences
should be taken into consideration.
Technological The company is planning for increasing
productivity and should consider changes in
technology.

The company is planning to increase productivity so revenue and other financial details are
necessary in order to increase its productivity as it is very vast company and has many outlets
in India. The revenue details have been through primary research.

a)

This is the revenue graphs of Heritage Plc and kept on rising every year, however the
details of 2015-2016 is going in the graph and the annual turnover of 2015-2017 is more
than the previous years (gathered in primary research).

b)

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Net worth is the amount by which assets exceed liabilities. Another way to say this is, it’s the
value of everything you own, minus all your debts. Heritage Plc’s assets have been exceeding
its liabilities, which is a good indication for the company operations.

c)

Customer Response

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 Figure 4:

Heritage Foods Public Limited

8% Highly Satisfied
16%
Satisfied
51%
Improvement required
25% Not Satisfied

The Figure 4 illustrates the response of customers of Heritage Foods Plc. The response
only includes the products of dairy and not renewable energy.
(Figure 4) data has been extracted through primary research.

Financial Analysis

Net Profit Margin

2017
Net Profit Margin= (Net profits ÷ Net sales) x 100
Net Profit Margin= (98.82/2572.92) x 100
Net Profit Margin= 0.03819184525 x 100
Net Profit Margin= 3.819784525
2014
Net Profit Margin= (61.71/1695.06) x 100
Net Profit Margin= 0.03640579095 x 100
Net Profit Margin= 3.640579095

2017
Return on capital employed=98.28/ (23.20+280.25+69.45) *100
Return on capital employed=98.28/372.9 *100
Return on capital employed=26.35%

2014

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Return on capital employed=61.71/ (39.17+23.20+155.79) *100
Return on capital employed= 61.71/ 218.16 *100
Return on capital employed= 28.28%

Payback Period

100000000/85000000 = 1.17 years or 2 years 5 months

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Analysis and Discussions

Heritage Foods Plc has proposed to increase its productivity which is expected to
increase its revenue. The firm is operating good but has few challenges in terms of
revenue generation, so it chose an option of increasing its productivity. The main
problem here is not alone the revenue and productivity but also managing costs.

Increasing productivity will help Heritage Foods Plc to solve its problem of revenue as it
will boost up production process and so will help sell more and more dairy pro ducts
which will help Heritage Foods Plc to increase its revenue. The company does not have
to worry about the demand for the product as there is more than enough demand for
dairy in the country, India.

Increase in productivity will lead to produce more which means that the company can
acquire larger market share in the dairy market of India as its products will also be
widely used. This can also act as an opportunity for the company to improve its brand
image in India as the company is famous in south India and not much in Northern Parts
of India.
When it comes to revenue, the company is in a gradual rise (Figure 1). This is a positive
sign for the company as it has enough capital to invest into the objective it is planning to
take. This can indicate that the company will not have to borrow huge sums of money
from the bank and can invest on its own. However, we will also have to consider the
costs which is also in a gradual rise so, the company should be able to manage the cost
factor for its production. The company seems to running good as it has never turned back
in terms of dividends, payment made to shareholders, as the payments are always made
to them. The net worth, the amount by which assets exceed liabilities, is also in a rise
which is again a positive sign for the company.

Keeping the revenue apart, the customer base for a company is very important and it is
not compulsory that every customer should be satisfied with the product or service that
the business or company offers as people will have different perceptions, tastes and
preferences. After a survey sent to the customers of Heritage Foods Plc, it is clear that
most of the people (51%) are extremely satisfied with the product

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After all the finance, the analysis of those finance plays a vital role:
Net Profit Margin
The company has acquired around 3.8% of net profit margin and it seems be than it is a
rise of 0.2% from 2014 which is 3.6%. This can also be an indicator saying that the
company is doing good and can seek for increasing productivit y
Return on Capital Employed
The company has acquired 28.8 of ROCE (Return on Capital Employed) in the year 2014
which is quite high for a company but it has come down to 26.35. After a analyses it is
clear that an economic or a government policy is the reason for this decrease as a policy,
known as Demonetization has been take place in the country, India.
Payback Period
The estimated payback period for Heritage Foods Pvt ltd is 1.17 years or 2 years 5
months, given the values:
Investment- 100000000
Cash Flow- 85000000
The payback is extremely low which is a good sign for the company as the company is
able to get back its investment of 10 crores (Indian Rupees) in just 2 years 5 months.

SWOT helps a company to learn about its internal factors by analysing its Strength,
Weakness, Opportunity and Threat. The two main strengths for the company is that, one,
the company is having branches all over India which does not make it hard for the
company to know about the markets, secondly, the company does not have to replace its
current machinery with new machinery as the current machinery has the capacity to
produce more the current output. But the company will also have to look after human
resources as the company is having operations throughout India, it will have to take care
of people’s mindset. Another drawback is that, increasing productivity basing on the
current economic activity is profitable but the company will have to take care in terms of
future economic situations. The major opportunity for the company is that it is a service
based company which makes it easy for the company to attract subsidies from the
government. The company will have to look over its competitors as they will not want to
lose their market share so, they might use illegal practices against Heritage Foods Plc.

Having internal factors of a company will not support the company’s objective. Heritage
Foods Plc should also consider PEST an analysis of macro-economic factors for a
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company. The political situation in the country, India, is very favourable for any
company and moreover for a service oriented company like Heritage, it will not be a
problem to get subsidies and support from the company. The company is operating in a
country where milk is one of the major supplies and at present will not have to worry
about the economy but whereas will have to careful if in case there is a change in the
future. The company cannot alone depend on the economic situation as customer’s
preferences keep on changing and Heritage Foods Plc should be quickly responsive to
those changes and tastes of the customers. The company is planning on productivity and
will have keep on having a update on the technology as if there is machine which
produces more than the present machinery output but with a less cost than the company
can buy, depending on the situation.

Heritage Foods Plc in order to increase revenue, it can use productivity. After a thorough
survey and research, it is clear that even though the company choses to increase
productivity, it does not have make a lot of changes to the company but only a few
precautions so that any change in the future, the company can cope up with the change.

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Conclusion and Recommendation
The research proposal has investigated whether productivity will cause Heritage Foods
Plc to increase its revenue. The enhancement of Productivity for Heritage Plc is in a
good state as the company will be in good profitability ratio and can also result in an
increase in the market share among its competitors.

Heritage Foods Plc with a high Market share and revenue can also try to develop its
market to international markets or diversify into other dairy products. Dairy is one of
back bone to the food market in India and mostly will not deplete unless there is a hug e
change on the food market of India.

After a thorough research, the following recommendation can be used by Heritage Foods
Plc for an even more beneficial market:

1. The company can also plan to expand to international markets as its productivity
and revenue, both are high.
2. Adopt a diversification strategy to improve its market base and to become more
competitive in the dairy market.
3. Once the company has enough rise in the productivity and revenue, the company
can stop being dependent on Future Retail Ltd.
4. The company can train their workers so that they become more efficient and more
producible. This can lead Heritage Foods Plc to achieve economies of scale.
5. If at all the company is planning to expand its base to international markets, then
the company can have a benefit of increased brand image in the international
markets.

It is an optimum time for Heritage Foods Plc to increase productivity and can also
consider the option of entering into overseas market or can consider diversifying its
product. Both the options will lead the company to expand Heritage Foods Plc’s brand
image and enchances brand image amongst its competitors.

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Bibliography

http://www.moneycontrol.com/stocks/company_info/print_main.php
http://www.moneycontrol.com/stocks/company_info/print_main.php
http://www.heritagefoods.in

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Appendix-1

Heritage Foods Previous Years »

------------------- in Rs. Cr. -------
Consolidated Profit & Loss account
------------
Mar 17 16-Mar

12 mths 12 mths

INCOME
Revenue From Operations [Gross] 2,573.97 2,329.99
Less: Excise/Sevice Tax/Other Levies 1.04 1.04
Revenue From Operations [Net] 2,572.92 2,328.95
Other Operating Revenues 69.96 51.63
Total Operating Revenues 2,642.89 2,380.58
Other Income 6 6.55
Total Revenue 2,648.88 2,387.13
EXPENSES
Cost Of Materials Consumed 1,431.35 1,443.22
Purchase Of Stock-In Trade 639.32 492.97
Changes In Inventories Of FG,WIP And Stock-In
20.02 -28.08
Trade
Employee Benefit Expenses 164.73 139.99
Finance Costs 11.22 15.46
Depreciation And Amortisation Expenses 37.81 34.51
Other Expenses 246.16 201.72
Total Expenses 2,550.61 2,299.79
Profit/Loss Before Exceptional, ExtraOrdinary
98.28 87.35
Items And Tax
Exceptional Items 0 -1.37
Profit/Loss Before Tax 98.28 85.98
Tax Expenses-Continued Operations
Current Tax 28.09 30.87
Deferred Tax 4.44 -0.13
Tax For Earlier Years -1.07 -0.18
Total Tax Expenses 31.46 30.55
Profit/Loss After Tax And Before ExtraOrdinary
66.82 55.43
Items
Extraordinary Items 0 0
Profit/Loss From Continuing Operations 66.82 55.43
Profit/Loss For The Period 66.82 55.43

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Share Of Profit/Loss Of Associates 0 0
Consolidated Profit/Loss After MI And
66.82 55.43
Associates
OTHER ADDITIONAL INFORMATION
EARNINGS PER SHARE
Basic EPS (Rs.) 29 24
Diluted EPS (Rs.) 29 24
Indigenous Raw Materials 1,403.46 1,413.79
Indigenous Stores And Spares 15.62 13.66
DIVIDEND AND DIVIDEND PERCENTAGE
Equity Share Dividend 0 6.96
Tax On Dividend 0 1.42

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Appendix-2

Heritage Foods Previous Years »

------------------- in Rs. Cr. ----------------
Consolidated Balance Sheet ---
Mar 17 16-Mar

12 mths 12 mths

EQUITIES AND LIABILITIES

SHAREHOLDER'S FUNDS
Equity Share Capital 23.2 23.2
Total Share Capital 23.2 23.2
Reserves and Surplus 277.48 216.7
Total Reserves and Surplus 277.48 216.7
Total Shareholders Funds 300.68 239.9
Minority Interest 0 0.02
NON-CURRENT LIABILITIES
Long Term Borrowings 74.45 65.85
Deferred Tax Liabilities [Net] 19.75 18.68
Other Long Term Liabilities 11.48 10.45
Long Term Provisions 4.9 5.52
Total Non-Current Liabilities 110.58 100.49
CURRENT LIABILITIES
Short Term Borrowings 65.88 39.25
Trade Payables 60.15 84.67
Other Current Liabilities 112.53 94.71
Short Term Provisions 7.13 15.82
Total Current Liabilities 245.69 234.45
Total Capital And Liabilities 656.95 574.86
ASSETS
NON-CURRENT ASSETS
Tangible Assets 296.6 310.38
Intangible Assets 0.47 1.64
Capital Work-In-Progress 7.88 9.59
Fixed Assets 304.95 321.61
Non-Current Investments 148.82 0.8
Long Term Loans And Advances 6.15 23.72
Other Non-Current Assets 0.77 0.68
Total Non-Current Assets 460.7 346.81
CURRENT ASSETS
Current Investments 0.01 0.02

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Inventories 122.69 144.91
Trade Receivables 15.6 28.79
Cash And Cash Equivalents 47.03 45.32
Short Term Loans And Advances 9.83 6.81
Other Current Assets 1.1 2.2
Total Current Assets 196.25 228.05
Total Assets 656.95 574.86
OTHER ADDITIONAL INFORMATION
CONTINGENT LIABILITIES, COMMITMENTS
Contingent Liabilities 27.92 54.08
BONUS DETAILS
Bonus Equity Share Capital 11.6 11.6
NON-CURRENT INVESTMENTS
Non-Current Investments Quoted Market
Value 477.18 0.03
Non-Current Investments Unquoted Book
Value 0.78 0.8
CURRENT INVESTMENTS
Current Investments Unquoted Book Value 0.01 0.02

Source : Dion Global Solutions Limited

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Appendix-3

1.Since how many is the business running?

Ans. This company started in 1992. It has almost been 25 years since this started.
2.What are all the products your business offers?
Ans. We offer wide range of products like Dairy, Agriculture and Renewable Energy.
3.Where are all your products sold?
Ans. We are selling our products only in India.
4.In which all parts of India is major sales are?
Ans. We sell our products throughout India but major productivity and sales is in the
Southern Part of India.
5.Who are your major competitors in India?
Ans. Our Company has two major competitors that is Amul and Nandini Milk.
6.Do you have any plans of increasing your productivity?
Ans. Yes we do have plans for increasing the productivity.
7.In which place does your company want to increase productivity?
Ans. We are planning to increase the productivity in the Northern Part of India.
8.Is there any specific reason to increase productivity only in Northern part of India?
Ans. Yes as we are already well established in southern part and the productivity is high
where as we now we want to concentrate towards the northern part of India.
9.What are the marketing strategies you are planning to use while increasing productivity to
North India?
10.Do you think this increasing in productivity is going to increase the customer base?
Ans. Yes I think increasing productivity is going to increase the customer base.
11.Are you planning to take up any Strategic Alliance?
Ans. Our Company does not have any plans in joining a Strategic Alliance.
Employees
1.What is your Name?
Ans. My name is P. Uma Nageswar Rao
2.What is your Occupation?
Ans. I work as a marketing head in Heritage Group.
3.For how long have you been working as an employee in this company?
Ans. I have joined Heritage in 1997 and that is almost 20 years.
4.Are there any fringe benefits provided by the company?
Ans. Yes there are fringe benefits offered by the company that is bonus every year and share
in the business.
5.Are your working hours flexible?
Ans. Yes the working hours are flexible that is from morning 9:30 am to 6:00 pm. It is
different for other workers as their timings are different.

Customer
1.What is your Name?
Ans. My name is Arun.
2.Are you happy with the products offered by the company?
Ans. Yes the products offered are good.
3.Is the quality offered by the business up to the standard?
Ans. Yes the products, which the business offers, are up to the standard.
4.Are the retail shops available nearby?
Ans. There is a problem when it comes to retails shops of the business as many retail shops
are not available and we have to go a bit long way for the product and for the retail shops.

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