Kanpur Confectioneries Pvt Ltd

DECISION REPORT FOR

Kanpur Confectioneries Pvt. Ltd. (KCPL)

Submitted by:

Jaykishan Joshi (24) Sem 1 Batch (Group 1) 2008-10

Kanpur Confectioneries Pvt. Ltd PROBLEM:

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It is described as a situation which needs an action to be taken and keeping this in view the situations are: Short term situation:  Offer of A One Confectioneries Pvt. Ltd.(APL) Medium term situation:  Emerge as a strong competitor and reduce the cost of production Long term situation:  Become a leader in the market of glucose biscuits and extend the market segment to premier customers. Mohan Kumar Gupta had very good business foresight and skills but his sons who handled the business were not so efficient as him.

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SYMPTOMS:  Mohan Gupta captured the 2nd largest market share with production of 110 tonnes/month within 3yrs of commencement of KCPL but his sons were not able to increase production beyond 120 tonnes/month even after expansion of prod. capacity to 240 tonnes/month. The HR Manager Vivek Gupta failed to reduce the rate of absenteeism. Help of technicians was sought but improvement in production or other areas was not evident. Net profits of the company were declining even after increase in turnover.

CRITERIA: In deciding criteria SWOT Analysis is used to evaluate various aspects of business: {Internal factors} Strengths: Decision making is participative Ethical values Non-interference in management Production capacity = 240tonnes/month

Weakness: Under utilization of prod. capacity High percentage of absenteeism Wastage in more

{External factors} Opportunities: Explore new markets Increase current share in market Become CMU(Contract Man. Unit)

Threats: Government taxes Unorganized sector Organized sector Low cost ovens

(Positive)

(Negative)

(1) (2) (3) (4)

On the basis of SWOT Analysis the following criteria are developed: Profit Advantages to business Disadvantages to business Future of business and Brand name

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OPTIONS: i. ii. iii. iv.

Become CMU for A ONE CONFECTIONERY Re-structuring the production process and introduction of mechanized process Increase productivity of current workforce Supply to canteens of institutions

EVALUATION: i. Become CMU for A ONE CONFECTIONERS PVT.LTD.: (1)Profit: Conversion charge of Rs.1500/tonne is paid and the fixed expenses are: Rs. 3, 85,000(Salary=2, 75,000 + Interest=50,000 + Others=60,000) So to reach at break even point: BEP= fixed cost / contribution per tonne = 385000/1500 = 257(approx.) tonnes/month        

(2) Advantages: No expenses on advertisement, attracting customers or brand building. Regular income Expertise in production Low risk (3) Disadvantages: No independence in decision making Contract will bind KCPL to continue business as CMU for 3yrs Uncertainty of future relations with APL. If ACL asked to change production process or equipments then capital expenditure will have to be made by KCPL (4) Future of Business and Brand name: If the company is successful in carrying out the orders regularly the company can be associated with APL for a long time and assure its existence in the business. The Brand name will get eliminated from the market ii. Restructuring production process by introducing mechanical processes : (1) Profit:

The company will be able to utilize production capacity by increasing production and the cost of production will reduce. (2) Advantages: Less labor will be required for production Uniformity in quality No restriction of time to use machinery Production cost will reduce

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(3) Disadvantages:  Capital will be required and at present company may not be able to afford capital expenditure.  Availability of skilled labor to operate machines  High risk of investing in machinery (4) Future of business and Brand name: The business will be able to compete with other competitors and emerge as a leader. The brand name will also prosper owing to the quality and market share. iii. Increase the productivity of current workforce: (1) Profit: The productivity of employees will improve significantly and cost of production will reduce as well as the production will increase.        

(2) Advantages: Improved efficiency of employees Increase in production Reduction in production cost Healthy working environment Job satisfaction Low absenteeism High morale of employees Emerge as leader in market with the competitive advantage of satisfied workforce

(3) Disadvantages:  Employees may ask for higher wages  Some employees may leave job if they have to become efficient and regular at work (4) Future of business and Brand name: The business will prosper by reaping benefits of motivated and efficient workforce and the brand name will compete with the leaders in terms of low cost of production and people will prefer MKG Brand for its quality and competitive prices. iv. Supply to canteens of institutions: (1) Profit:

The margins of profits will be low but if sales are made to only canteens of institutions the expenses on advertisement and others to increase sales will reduce and so the profits will increase.

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(2)Advantages: Increase in sales to canteens of institutions. Reduction in promotion expenses. Regular supply. Production in accordance to requirements. Potential to compete on quality and cost basis as the competitors have not entered this market segment.

(3) Disadvantages:  In order to compete on cost basis the quality may be ignored  Canteens are not bothered about quality and only consider cost as important (4) Future of business and Brand name: The business will be able to earn profits and continue the business The brand name will not be so much important as the canteens give importance to cost not name. Also in the market the customers will be diverted towards other brands as KCPL will be selling only to canteens.

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DECISION:

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Increase the productivity of employees And the offer of APL is not accepted as the company will not be able to reach to break even sales at a very low conversion rate or Rs. 1500/tonne. The other two alternatives are not so attractive and reasonable keeping the financial position and future of business in mind.

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ACTION PLAN: Identify the reasons for absenteeism and eliminate them as far as possible Motivate employees for increase in production Increase in wages Introduce piece wage system Provide entertainment to employees in their free time Collect regular feedback of employees and review their complaints Set standards for job processes

CONTINGENCY PLAN: If the workforce does not respond favorably to the new changes then KCPL may think to start supply to canteens of institutions