Amritanshu Shekhar WAC 1.1

7/25/2019 Amritanshu Shekhar WAC 1.1

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School of Management and Entrepreneurship

Gautam Budh Nagar, U.P., 201314

Written Analysis and communication I

Assignment I: Kanpur Confectionaries Private limited

Submitted to

Dr. Gita Chaudhuri

By

Amritanshu Shekhar

Roll No.14101200006

6 November 2014


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Memo

DateSeptember 20th

, 1987

To: Mr A. Gupta, Chairman& MD, KCPL

From: Amritanshu Shekhar, Executive assistant to Chairman, KCPL

Subject: Memorandum (Memo)

Please find the attached report with the assessments and suggestions regarding the proposal from

APL.


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Summary

Situation Analysis/Critical Issues -

Family business of glucose biscuits.

Biscuit industry

Competitor analysis

KCPL: Positioning, History

Market change

Pearsons Agreement

Offer of APL.

Problem statement

What should KCPL choose, profit or dream or can they manage both?

Options

1.

Accept APL offer

2. Do not accept APL offer

3. Improve its own market share

Criteria

1. Profit

2.

Heritage/Vision/family values

3. Business nitty-gritty

Recommendation


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Based on the evaluation of different option, I would recommend Do not accept APL offer.

Situation Analysis

Kanpur confectionaries private ltd (KCPL), a family business of glucose biscuits. The founder of

KCPL has a strong bonding with the company. It is a proprietary business which has been

running since 1945 by the founder and now by his sons. It is currently running its biscuit product

under the brand name of MKG. The company owner had the vision of emerging as a leading

national brand.

The biscuit industry unlike some industry was easy to setup, it require low skilled labor andcompetition is very high. The competition of KCPL were from both organized and unorganized

sector. 70 new units started in the unorganized sector between 1975 and1980. They either sold

unbranded biscuits or sold them with brand names similar to the leading brands. In organized

sector eight new units were setup in UP.

KCPL is a popular brand in the north region, most of its consumer were middle class families in

urban and semi urban areas. After it reached the number two position in 1973-1974, the higher

management decided to increase the capacity to 240 tons from 120 tons in 1980-1981. The

market was getting more and more competitive, 15 % increase in excise duty and 7% increase in

sales tax has increased the labor and material cost required increase in price but competition

didnt allow it. The company slowly begin to lose profit and was currently running at half of its

capacity.

To offset its unutilized resource, KCPL made an agreement with Pearson Health drinks limited

for producing the health biscuit Good Health for it.Pearson promised an off take of 100-125

per month and a convert rate of Rs.3 per kilogram after reimbursing fully the cost of material,

but orders from Pearson initially was for 50 tons per month between 1986 and 1987. Pearson

didnt provide any technical guidance, it relied on the expertise of KCPL. The market response

to Good health biscuits was not very encouraging. Now that Pearson was using only 50 tons.

KPCL had a surplus of 70 tons (Total capacity- KCPL Own production- production for Pearson).


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A-One confectionaries private limited had offered KCPL to counterbalance its 70 tons unused

capacity by producing biscuits for them. The company was interested in augmenting its supply

capacity by promoting contract manufacturing units (CMU). APL offered 3 year contract but

required change in process and equipment. KPCL would be required to buy the other ingredients

from authorized supplier of APL. It offered to reimburse the raw material expenses as per its

norms of consumption and pay a conversion rate of Rs. 1.5 per kilogram to cover the expenses

on labor, overheads and depreciation. The advantage of the proposal was in terms of avoiding

marketing, brand building and distribution expenses, and minimizing the business risks. The

disadvantage of the offer is that KCPL night lose independence. They might not be able to

concentrate on strengthening the MKG brand built over years.

Problem statement

What should KCPL choose, profit or dream or can they manage both?

Options

4. Accept APL offer

5.

Do not accept APL offer

6. Improve its own market share

Criteria

4. Profit

5. Heritage/Vision/family values

6. Business nitty-gritty


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Evaluation

Profit Heritage Business nitty-gritty

Accept APL offer Profit will be positive

if the APL offer is

accepted and Pearson

also stays as

customer of

KCPL[Exhibit 2]

Loss of

independence, They

might not be able to

concentrate on

strengthening the

MKG brand built

over years.

No marketing, brand

building and

distribution expense

Do not accept APL

offer

KCPL will continue

to be in loss of

3006[Exhibit 1]

KCPL can continue

to work on its brand

building

KNPC will have to

handle all the

necessary business

nitty-gritty like

marketing, brand

building

Improve its own

market share

Company might not

have immediate profit

KCPL can work on

developing its

operations. It can

achieve the vision of

its owner someday.

KNPC will have to

handle all the

necessary business

nitty-gritty like

marketing, brand

building

Recommendation


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Based on the evaluation of different option, I would recommend Do not accept APL offer.

KCPL will never be able to expand as it will lose its independence. KCPL was among the top 2

companies in 1973-1974. It can again be among the top, if it could expand its capacity with

Pearson. It will not have to sacrifice its freedom if it does that.

Action Plan

KCPL should initiate conversation with Pearson and try to get the promised orders. It has its own

brand name and a very successful one, it can build on that and can be among the top.

KCPL can also develop its own R& D division to develop its own product and it should also

reduce it operating cost.

Exhibits

Exhibit 1 : KCPL with APL profit/loss account

components KCPL and

APL

Change charge 1.5

APL Units(tones) 70

APL Revenue 105000

APL Total cost 148105.2632

APL Profit -

43105.26316

MKG Units(tones) 120

MPG Revenue 2172000

MPG Total cost 2131902

MPG Profit 40098

NET PROFIT -

3007.263158


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Exhibit 2 : KCPL Pearson and APL profit/loss account

components KCPL ,

Pearson and

APL

Change Rate 3

APL Units(tones) 90

Pearson Revenue 270000

Pearson Total cost 168857.1

Pearson Profit 101142.9

APL Units(tones) 70

APL Revenue 105000

APL Total cost 148105.2632

APL Profit -

43105.26316

MKG Units(tones) 120

MPG Revenue 2172000

MPG Total cost 2131902.11

MPG Profit 40097.89

NET PROFIT 98135.64

Documents

Amritanshu Shekhar WAC 1.1