KANPUR CONFECTIONERIES PRIVATE LIMITED (A)Presented by (Group-’E’) :- Shubham Rishav Shubham Chaudhary Kamal Veeslay Satyabrata Sahu Shweta Jha Sumit Khadse Deepak Kumar Vipul Panwar

MBA- Power ManagementUniversity of Petroleum and Energy Studies.

Assigned by-Dr. A.K. Jain

Date of Submission- 23rd August 2016.

Case Analysis presentation on-

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TOPICS TO BE DISCUSSED Company’s timeline Case briefing APL’s Proposal KPCL’s Problems KPCL’s Objectives Options to achieve their objectives Detailed analysis of options available Our recommendations Action plan to be followed

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COMPANY’S TIMELINE1945 KCPL Founded by Mr. Mohan Kumar Gupta in Jaipur dealing mainly in

Sugar Candies under brand "MKG".

1946 First Candy Production Unit in Jaipur

1950 30 production units in the unorganized sector in Rajasthan to sell variety of candies.

1954 New candy making units shifted to Kanpur.

1970 Diversify into making glucose biscuits and selling them under the same brand.

1973-74 Reached No. 2 position in the northern biscuit market.

1980-81 Capacity doubled from 120tonn/month to 240tonn/month.

1982 Mohan Kumar handed over the leadership of KCPL to Alok Kumar.

1985 Candy production line discontinued.

1986 Agreement with Pearson

1987 Offer from APL

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CASE BRIEF Kanpur Confectioneries Private Limited (KCPL), founded by Mohan

Kumar Gupta with the dealership of candies under the brand name ‘MKG’.

By 1970 he had emerged as a leader in candy business his region. He decided to invest his surplus cash to diversify into making glucose biscuits and selling them under the same brand.

In 1982, Mohan Kumar handed over the leadership of KCPL to his eldest son Alok.

The candy business become unattractive and uncompetitive. The family members decided to close the candy line in 1985.

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However in biscuits business, A-One Confectionaries Private Limited (APL) and International biscuits dominated the market and these new entrants made the market more competitive.

Between 1983-84 and 86-87 KCPL’s sales declined and it incurred heavy losses.

In 1986, the agreement with Pearson was signed, however It did not see Pearson as a competitor to KCPL.

APL, mentioned in the meeting of CMAI the company was interested in augmenting its supplying capacity by promoting contract manufacturing units (CMU).

KCPL was interested in this offer, but the offer had its own constraints.

CASE BRIEF CONTD…

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APL’S PROPOSAL It would inspect the production processes of KCPL and recommend changes

in processes and equipments, if needed. The changes had to be carried out by KCPL at its own cost.

It would also supply the ‘APL secret ingredient’ but KCPL would be required to buy the other ingredients like sugar, maida, and vanaspathi oil from one of the authorized suppliers of APL.

It offered to reimburse the raw material expenses as per its norms of consumption and pay a conversion charge of Rs. `1.50 per kilogram to cover the expenses on labour, overheads, and depreciation.

In terms of control, KCPL would be required to send daily production and raw material consumption report to APL.

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KCPL’S PROBLEMTo regain its position as one of the biscuit market leader and extent its market share to premier customers.

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KCPL’S OBJECTIVESObjectives in accordance with their priority are:-

To eliminate losses and bring profits To maintain the brand they have made over the years To abide by the principles laid down by the family To grow business and become no. 1 company of India.

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OPTIONS TO GET THEIR OBJECTIVESAccept APL’s offer and become CMU Increase efficiency of laborers and decrease absenteeism

Introduce new variant of biscuits for premier customers

Optimum utilization of the increased capacityFocus on canteens of institutions (Mass consumers)

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OPTIONS DETAILED ANALYSIS

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1) ACCEPT APL’S OFFER AND BECOME CMU

ADVANTAGES DISADVANTAGES Assured return on

investment (ROI) Access to APL’s

manufacturing expertise No marketing, brand

building and distribution expense

Help them to utilize the surplus capacity

Loss of independence in decision making.

Uncertainty of future relations with APL.

Dilution of ‘MKG’, company’s own brand and family prestige.

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2) INCREASE EFFICIENCY OF LABORERS AND DECREASE

ABSENTEEISMAdvantages: If workers will work efficiently it will definitely increase the productivity eventually decreasing the cost per ton of production.

Disadvantages: Workers may ask for higher wages. Also we may have to become a bit strict which may break the family principle of no labour exploitation.

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3) INTRODUCE NEW VARIANT OF BISCUITS FOR PREMIER

CUSTOMERSAdvantages: New variant will give a diversity to the company and options to the customers. Also it can be a way to cater a new market which was untouched till now.

Disadvantages: There is no guarantee of product being a hit in market. Also it will require a lot of capital as new assembly lines and machines will be required.

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4) OPTIMUM UTILIZATION OF THE INCREASED CAPACITY

Advantages: The Company will be able to utilize the capacity to its full potential which will bring down the cost encored per ton of production.

Disadvantage: More raw material will be required which company cannot afford at present as they are already making losses. For capital they can take loan but increased production means more labor.

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5) FOCUS ON CANTEENS OF INSTITUTIONS (MASS

CONSUMERS)Advantages: Profits will be low here but the risk involved is also low. Also there’s not much promotional or advertisement cost involved. As the sales will increase the cost per ton of production will go down.

Disadvantages: Canteens usually are not bothered about quality. They just want more quantity at low price. So we have to really work upon our cost reduction to increase our profit share.

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OPTIONS ANALYSISOptions →

Objectives ↓(Decreasing Importance)

Accept APL’s offer and

become CMU

Increase efficiency of laborers & decrease

absenteeism

Introduce new variant of biscuits for premier customers

Optimum utilization of the increased

capacity

Focus on canteens of institutions

(Mass consumers)

To eliminate losses and bring profits

 

To maintain the brand they have made over the years

 

To abide by the principles laid down by the family

   

To grow business and become no. 1 company of India

       

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OUR RECOMMENDATIONS As per the analysis option 4th and 5th both satisfy the same sets of objectives. But still I think option 5th i.e. focus on canteens of institution will be the best option. It will provide regular income and we will produce according to the order which will help us avoiding over production and inventory storage cost. Also total demand from institutional canteens is around 2400 tons per month and KCPL has only acquired only 1.25% (360 tons in a year i.e. 30 tons per month) of the total demand. So there’s a huge scope of increasing the market share here.

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ACTION PLAN(PLAN A)KCPL will have to make good relations with the institutes. Talk to premier institutes and take them into confidence that we will provide good quality at lower price. Keep profit margin less initially and as the customers increase and production increases, cost per unit of product will go down automatically increasing the profit margin.

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PLAN B If this plan doesn’t works or is taking too long then we can consider 4th option i.e. optimum utilization of increased capacity.

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THANK YOU