RAJ VARDHAN ENTERPRISES

Reasons which precipitated the crises in RVE

The association between Mehta Sales Corporation (MSC) and Raj Vardhan Enterprises
(RVE) seems to be treating RVE as subsidiary. Though RVE was the brain child of Pranav
Choksi, MD of MSC, it had a different ownership structure, hence a independent company.
This restricted not only the scope of RVE’s business but also affected its productivity. Also
the individual directors had a different vision and structure in mind for RVE, which was not
in line with each other.

The Working capital was acting as a bottleneck to achieve the desired target of sales. This
was due to lack of cheap credit and inability to hypothecate work-in-progress. The problem
was exacerbated by long liquidating cycles. This forced them to borrow money at high
interest rates, increasing the interest cost in addition to limiting the turnover.

The current product lines were too narrow in scope and were commoditised in nature too.
Hence making the business risky and restricting the profit margins. They were exposed to
fluctuations in raw material prices as the margins were low. They faced the risk of
substitutions and new entrants in addition to existing industry competitors due to the
commoditised nature of products.

Lack of various systems was affecting productivity and growth. This led to longer operating
cycles, further worsening the working capital problem. Also the directors’ potential was not
being adequately used as RVE was a small company and the directors’ roles were not clearly
defined.

Recommendations for the growth of RVE

 RVE should work under a mandate independent of MSC, which focuses on improving its
profitability and growth.
 They should try to access additional cheaper source of funds either against work in
progress or increased equity. In addition, they should work towards shorter liquidating
cycles to better use the funds available. Also explore the possibility of accessing
government funds for leather industry and small industry.
 Expand the product lines. Starting with diversifying to other leather goods and other
grades of Calcium Carbonate. Then look at other lines where they have expertise such as
paper, limestone and upstream leather production.
 They should assign the directors with clearly defined functional roles so as to optimally
use their time and potential. They should develop proper systems and professional
management to increase productivity and profitability.

Analysis of recommendations made by Consultant

The SWOPT Analysis conducted by the consultant helps to categorise the different
occurrences and aspects of business. This not only leads us to better understanding of the
current situation of business but also gives the various options for moving forward.
Understanding of strengths tells us the areas to focus on to further our competitive advantage.
Weaknesses are the aspects whose affect we need to minimise. Problems tell us issues which
we need to resolve. Opportunities give us the possible options to explore so as to further our
profits. Threats tell us the possible risks to our business. These activities should be conducted
from time to time to ensure to re-align business strategy to attain our goals.

Generalisations from the experience of RV Enterprises

 While starting a new venture in addition to the business plan we should have an
organisation structure clearly defining everyone’s role and well-designed SOPs and
systems in place. These are critical to achieve the company’s goals and sometimes we
may not be able to incorporate them later on.
 While entering into a new association, we should not get over-whelmed by the advantages
but also consider its disadvantages.

Submitted by: Group 10

Aditya Somani (003/1)

Akash Gaurav (005/1)
Kshitij Sharma (025/1)
Shrey Kumar Singh (042/1)