strategy

Kanpur Confectioneries Private Limited (A) (CASE ANALYSIS)

Submitted by-Group Members:

Annie Arora (2011H149242)Nikhil Goyal (2011H149215)

Rahul Agarwal (2011H149207)Rahul Kumar Saha (2011H149214)

Rahul Singh Sangwan (2011H149213)Suman Malik (2011H149235)

Yogesh Gandewar (2011H149209)

(Department of Management)

Birla Institute of Technology and SciencesAugust 23, 2012

Table Of Contents

Title

Table of Contents 1

I. Executive Summary 2

II. Problem Definition 3

III. Alternatives 3

IV. Analysis of Alternatives 3

IV. Recommendations 4

V. Conclusion 4

Case Analysis, BITS Pilani

I. Executive Summary

The increase in the competition and loss of market shares due to inability to sustain through it has always been the core reason for the failure or slowdown of a business. KCPL, a family owned venture, started by Mohan Kumar Gupta has emerged as a leading national brand in biscuits industry after making its imprint in candy manufacturing. However, in the heavy competitive environment KCPL could not compete on costs as its costs were higher than the other manufacturers and it had no premium image to demand such higher price for its product because of lack of brand value. Also KPCL could not reduce its production cost. The main setback in operations was absenteeism of workers without notice which led to uneven production. Trying to combat this situation, it became a contract manufacturer for Pearson Health drinks Limited (Pearson) in 1985. Now in September 1987, KCPL has the proposal of becoming a contract manufacturer for APL which carries its own advantages in terms of getting assured return on investment and access to APL’s manufacturing expertise, however the disadvantages are a possible loss of independence in decision making and dilution of company’s own brand.The case attempts to presents a situational analysis of Kanpur Confectioneries Private Limited (KCPL) comprising the ACPL (A-One Confectionaries Private Ltd) proposal response to become its contract manufacturer in order to prevent its shut down.

II. Problem definition:-

KCPL has to decide their response to the proposal of A-One Confectionaries Private Ltd (ACPL) about becoming its contract manufacturer. Besides, KCPL has to reduce the cost of production and increase its productivity and reducing the rate of absenteeism. Other opportunities in terms of extending the line of business to premium customers and emerging as a leader in the market of glucose biscuits needs to be exploited.

III. Alternatives:-

Accept ACPL’s offer and become a CMU Don’t accept ACPL’s offer

Continue with the production of ‘Good Health’ by Pearson Re-establish the ‘MKG’ brand

- By improving productivity through adoption of quality control techniques - Reducing absenteeism through proper labour practices.


IV. Analysis of alternatives:

1. Accept ACPL’s offer: The breakeven analysis is given below -

The fixed expenses for KCPL are as follows (monthly) - Salary 275000interest payment 50000other fixed expenses 60000Total fixed costs (rupees) 385000 In case of ACPL contribution is (tonnes) 1500Hence the Break Even Point (tonnes) 256.6666667

A breakeven point of 256.67 tonnes makes the proposition of becoming CMU of ACPL bleak, as the initial order for biscuits to KCPL from ACPL is only 70 tonnes. KCPL will make a loss in this case.

Advantages:- Can minimize business risk Can avoid marketing, brand building and distribution expenses Access to ACPL’s manufacturing and technical expertise Assured return on its investment Proper utilization of waste resources

Disadvantages:- Loss of independence in decision making Dilution of company’s own brand, ‘MKG’ and family prestige

2. (a) Decline ACPL’s offer and continue working on ‘MKG’ and ‘Good Health’ as before :

Advantages:- Already popular and old brand Participative decision making in the family Running business on ethical lines Not exploiting labor maintains the ethical code of conduct. Appreciable Profit margin because of healthy conversion rate of Rs 3/kg making

the breakeven point at 12.83 tonnes only.

Disadvantages:- Pearson in not providing any technical guidance to KCPL and also the market

price of biscuits being high, the future is uncertain. High absenteeism among workers is reducing the productivity. Low capacity utilization.

(b) Decline ACPL’s offer and re-establish the MKG brand though retaining ‘Good Health’:


Advantages :– - The productivity will improve and hence the cost of production will reduce.- Healthy working conditions.- Low absenteeism of workers.- Increased penetration in organized and unorganized market.- Will be able to regain brand image in other areas.

Disadvantages :-- Requirement of appreciable capital outlay for machinery, marketing and

distribution purpose.- Availability of skilled labour is another challenge.- Risk of investing in the expansion process.

V. Recommendations:-

Don’t accept ACPL’s offer and continue working on ‘Good Health’ by Pearson and try to reestablish the ‘MKG’ brand. For this to work, they need to:-

Improve/ Upgrade their technology Reduce absenteeism Better capacity utilization Segment the market and position the brand accurately Target new markets Spend money on event marketing(like Good Health can sponsor some sports events) Come up with new varieties of Biscuits.

VI. Conclusion:-

To conclude we suggest that KPCL being an ethical and legal family run business should continue to work on its own. They should work on re-establishing the MKG brand as it denotes the family name and prestige. KCPL has to work on technology up gradation to combat the competition. It needs to reduce its absenteeism and increase its brand value by positioning in the market. This will go in sync with the vision of KPCL to increase the business and to make it a market leader.


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