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Case Analysis
INTRODUCTION
Biscuit making involved ingredients Maida, Sugar, Vanaspati and certain preservatives in proportion. Qualities of material was checked in laboratory for impurities. Biscuits were manually packed in packets of 100 grams. Dependent on both casual and permanent workers. Salary for permanent were 2.75 lakh/month and wage for casual labour Rs.50/day. Absenteeism were high. Production varies from 2 tonnes/day to 6tonnes/day.
Eldest son ALOK KUMAR joined business in 1960 and looked after FINANCE and LIASON department. Later became CHAIRMAN and MD of KCPL.
Second son vivek joined business in 1965 and looked after HUMAN RESOURCE and MANUFACTURING.
Youngest son sanjay joined business in 1974 and was responsible for MARKETING, LOGISTIC and ADMINISTRATION.
Advertised in vernacular news paper. Joined hand with local retailers to advertise the brand. Extended its range and offered cream, salt and Marie biscuit.
COMPETITORS
1973-74 Market was dominated by A-ONE Confectioneries private Ltd and International Biscuit Limited.
Sold them with a brand names sounding similar to the leading brands.
Could not increase price to take care of rising cost of labour and raw material. Did not have national scale to reduce the cost considerably. Did not have premium image to get higher price. 1983-84 and 1986-87 sales declined. The candy business was on decline. Candy business was closed.
In 1973-74 Monthly sale was 110 tonnes In 1980-81 Sale was increased to 15% and turnover was 2 crore and Net Profit. increased to 12% Profit was 20 lakh. Also in 1980-81 KCPL doubled its capacity from 120 tonnes to 240 tonnes per month.
PROPOSAL BY PEARSON
It promised a load of 100-120 tonnes. Conversion rate RS 3 per Kg. In 1986-87 its order was 50 tonnes. Reimburse full cost of material Allow KCPL to run on existing line of business.
PROPOSAL OF APL
OPTION 1
Contract capacity can be increased if KCPL meet expectation. KCPL can improve and evolve the production procedure with technical help that is been provided by APL.
It will be in profitable situation so it can be able to improve its own situation of MKG
OPTION 2:
Pearson can increase the production from 50 tonnes to 100 tonnes which will eventually increase the profit margin.
Since PEARSON biscuit is not doing good in maket as APL biscuits have already captured the market so probability to increase the production is less.
MKG is also running in loss.
PARTICULARS
"MKG"
APL
Total Of MKG
Total of APL(National)
MKG producing 50 MKG producing 100 tonnes for Pearson tonnes for Pearson
120
1200(National) 200(North)
18100
19000
Total Sales
2172000
3800000
22800000
1366866.67
1113750
2227500
750
700
900000
1372000
8232000
490000
375000
750000
Consumption of vanaspati per tonne(in kg) Consumption of sugar per tonne(in kg)
150
140
624000
933333.3333
5600000
326666.6667
260000
520000
200
190
288000
437000
2622000
152950
120000
240000
500
490
520
500
1200
1150
1000
1000
120000
200000
1200000
70000
50000
100000
300 50
400 80
36000
80000
480000
21000
15000
30000
275000 10000
NA NA
275000 10000
458333.3333 16666.66667
2750000 100000
160416.6667 5833.333333
114583.3333 4166.666667
229166.6667 8333.333333
60000
NA
60000
100000
600000
35000
25000
50000
TOTAL COST
2313000
3597333.333
21584000
1261866.67
963750
1927500
PROFIT
-141000
202666.6667
1216000
105000
150000
300000
PROFIT %ge
-6%
5.633802817
5.6338028
8.32100592
15.56420233
15.56420233
ACTION PLAN
KCPL accept the proposal of APL. Continue contract with PEARSON Group. Working for both company KCPL could also improve its own production line Brand image of MKG by their secret ingredients and technical up gradation.
THANK YOU
QUESTIONS IF ANY?