Professional Documents
Culture Documents
was not his fault if his client rammed the vehicle to a tree and the insurance company
was delinquent in paying up. The company had a great market share: over 2/3 of the
new business and of the repeat business would come to them. Thanks to friends
like the accountant, he had a good hold on the institution and corporate business as
part of the game. He was pushing for the company to go into consumer finance- a
lucrative growth area.
Katak finance had cornered the market and were competitively pricing their deals and
talking in terms of offering 48-60 month leases with attractive buy-back options.
Wearily he picked up the phone to see if Invicta would see reason well, in short
they did not. The bus which Moorthy had ordered was a one-off cancellation and the
only bus they had. Besides, an overtime-hungry operator had painted the Amla livery
and logo on the bus overnight and there was nothing they could do.
The trustee was a man with a short fuse. The accountant was told in no uncertain
terms to get a bus in by next week or else. He had burnt the Moorthy bridge- now
only Katak could save him.
Goota at Katak offered him tea and sympathy and rang Invicta to order a bus. The
reply he got was that there was a three month wait, sorry. The account gesticulated to
Goota to ask Invicta about Moorthys order- Invicta promptly replied that they were
not in a position to discuss other clients but it was suffice to say that the expected to
deliver the bus to Raleigh by Monday.
The accountant walked out of Katak in the RIP (Resignation In Pocket) mode- He
dragged his feet and walked the long walk back to his office. Moorthy too was in a
similar mood. He had committed a huge blunder and his world had unraveled. This
was only the proverbial tip of the iceberg.
Raleigh Leasing was a funny company to work for. Started by the chit-fund king
Rally, the company specialized in leasing trucks and buses to SMEs across India.
Coimbatore office was the hub for the 20 men sales team who covered the district.
Educational institutions were a major client and Rally personally had invested time,
sweat and money to cultivate this market. Besides a lot spinning mills regularly leased
buses for ferrying their employees and indeed Coimbatore was a lucrative market.
*Dr.Swamynathan, Asst.Professor (Senior Grade), PSG Institute of Management, Coimbatore
**Prof. Umesh Chandrasekar, Professor, PSG Institute of Management, Coimbatore
Given the share they had, certain complacency had set it. The branch had over 1000
live accounts and the default rate was very good at a 1-2% in numbers- in value if was
as much as 30%. That was worrying. The sales force was based on a fixed salary plus
overriding commission on the deals they managed to finalize. They worked to a set
template for due diligence enquiries and many times clients were deterred with the
sheer amount of paperwork. Kataks strategy was different. They worked only
through clients banks and even paid a fee to them to vet the applicants. Besides, they
spread their risks well, never exposing themselves to risks and hence their market
share was barely inching forward in the commercial business. In retail business, they
were the king since they had agreements with various companies for direct deduction
of vehicle loan installments from the salary accounts.
Moorthy decided to convince Abdul of Amla institutions to bear with the contract this
time for some lucrative offer in near future. His appointment was honored over phone
and Abdul was only insisting that he wanted that future promise to be delivered now
and so that their business relationship could continue longer. Something else
happened which made his life slightly better. The bank called to confirm the Amla
cheque he banked earlier in the day , just as a gamble, had cleared.
Abdul on the other hand had few more problems looming up. The first and fore-most
was that he was not in a position to buy the buses at full cash payment- for the trust
committee would object unanimously.
and admit it was his mistake that he delayed booking the school buses, and when he
booked, it was a time when Invicta was having a full order-book and was meeting
the peak demand of the school season. The parents of schoolchildren would not
accept
any excuses if the school buses were not running from the re-opening day.
This was the selling point for the school and parents would deeply resent this failure.
Raleigh Leasing Ltd, would not refund the Rs 1 lak cheque and, if at all they did, it
would be a good six months. Katak finance, though economical, could not get the bus
since Raleigh Leasing Ltd had paid the advance. Invicta motors would most certainly
claim for an indemnity if the bus was not purchased in 5 days for they had already
painted Amlas logo and name into it, and they could not sell it to some other party
immediately.
*Dr.Swamynathan, Asst.Professor (Senior Grade), PSG Institute of Management, Coimbatore
**Prof. Umesh Chandrasekar, Professor, PSG Institute of Management, Coimbatore
Imbran, the secretary of Amla Institutions had booked four fancy numbers with the
RTO office by paying Rs.25,000/- for each number .The RTO had asked him to
register those numbers within 10 working days or he would lose them.
The loss of
the numbers would dent their prestige further. The Tamilnadu government had started
looking closely into school education by introducing fee ceiling, Uniform syllabus
scheme, new safety regulations for the approval of school buildings etc. This would
have a real impact on the revenue of private schools in the State.
The question was, how could this mess be sorted out without making any enemies ?
1. What should Moorthy do as a team head to manage the current market share?
2. As a marketing/sales executive, can you understand the tensions involved in
this business deal? If yes list them and try to improvise certain sales strategies
for the same.
3. Abdul is an example for a typical corporate customer in India- comment
4. Identify the business operation strategies of RLL and Katak, and also the
benefits to corporate clients arising out of intense competition among
suppliers.
Exhibit - 1
1768389.94
1809506.81
1967241.29
Financial Assumptions
Cost
equipment
Annual
rate
Lease
Hire
Purchase
Rental
Purchase
date(month)
of
Return on
2260000.00 2260000.00
employed
interest
6.82 %
7.58 %
3 Years
3 Years
Monthly
Monthly
69005.36
69696.78
Term
Payment
frequency
Periodic rental
January
capital
Tax
End(month)
Year
12%
March
Tax Rate
19%
Tax Allowance
25% WDA
Cashflow analysis comparison is RENTAL with a net saving of 41116.87 over HIRE
PURCHASE and 198851.35 over CASH PURCHASE