Case study – Suman industries limited - Deepak Dungaria XMBA-06

8/7/2019 Case study Suman industries limited - Deepak Dungaria XMBA-06

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By Deepak Dungaria

XMBA 06

ITM - Churchgate


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y 1 About the Case

y2 Objectives of Case Study

y3 SWOT Analysisy4 Questions & Answers


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y In early1994, Suman Industries Limited (SIL), a f lagshipcompany of Suman group, was in the process ofrestructuring its businesses for meeting the challenges ofliberalisation in industrial policy and emerging global

competition in India.y There was a very high level discussion on the road map the

company should go.

y Mr. Raj Suman the arch person of the SIL set out a goal forthe company

a) Market leader in core businesses;

b) Globally competitive in cost and capacity; and

c) One of India's top five business houses.


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yTo find out whether the SIL should

divest its holdings in internationalmarket or remain international playerto achieve the goals set by Mr. Raj

Suman.


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Strengths

y SIL, with 1 1 % share of Rs. 450 crone paper market,(consisting of paper, paper board and newsprint), was aleader in Indian paper industry and had technicalsuperiority for certain special varieties of paper amongIndian manufacturers.

y The only Indian paper company capable of makinginternational quality paper from short fiber tropical

hardwood, such as bamboos and eucalyptus.y Held 34% and 42% market share in coated paper and

laminates respectively.


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Weaknesses

y Their joint-venture in Thailand, Diamond Pulp andPaper Company Limited at Bangkok (DPL), which

had run into some control problems.


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Opportunities

y The plans were already afoot for investing Rs. 600crores in the paper division to, attain economy of scaleby increasing capacity from 600 tonnes per day (tpd) to100 tpd by 1997 and again to 2300 tonnes per day by2003.

y The industry had been lobbying with the governmentfor many years to hand over to them degraded forest

land for raising raw materials for pulp and therebymaking Indian paper mills globally competitive. It wasexpected that government would have to takefavourable decision.


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Threatsy With the raising of paper production, capacity, availability

of paper pulp was envisaged to become more critical.

y The yields from forests attached to the mills wereinadequate for manufacturing pulp and this necessitatedimport of pulp resulting in higher cost.

y Reduced share holding after the public issue by Thailandjoint venture.

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Unsubstantiated claims that Diamond waste water killedfish and was heavily polluted by toxins that producedharmful effects.

y Take over bid by some Thai NRI and their company Sunrise.


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y Should SIL divest its holding in Diamond Paper and Pulps Ltd?

Ans. SIL is leading in domestic market, given the opportunities in domesticmarket and the threats for the international market the SIL should divest itsholdings in international JVs and invest in India.

y Should SIL remain international player given the experiences of JVs so far?

Ans. Given the experience in international market, SIL as of day should notremain in international market and to concentrate on increasing domesticproduction.

y 3. In your view has the company made necessary preparation to make thejoint venture a success?What preparation would You advise?

Ans. In my view company has not made necessary preparation to make the JVsuccess. SIL should increase its production in domestic market, startexporting the same in the international market and once the profits startsfetching, it should look for JV in international market. The past lessonlearnt should be the key for success in JV.


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Thank you

Documents

Case study – Suman industries limited - Deepak Dungaria XMBA-06