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Case Club League Round 1: Part 1

Analysis Based Over Geographical Locations & other policy factors

Malaysia

1. Logistic Cost Rs.13/ltr.

2. Mode of Production Vegetable Oil

3. Cost of BD from raw materials Rs. 30/ltr4. Quality High

5. Benefits High quality and

6. Problems Very high logistics cost, Large inter-country distance, Custom Duty

and High Manufacturing tax.

Madhya Pradesh

1. Logistic Cost Rs.2/ltr.2. Mode of Production Jatropha Seeds

3. Cost of BD from raw materials Rs. 40/ltr4. Quality Medium to Low

5. Benefits Very low logistics cost, abundance of contacts

6. Problems Less support from governments, potential protests and agitations bysocial group, 2% tax to state government.

Gujarat

1. Logistic Cost Rs.4/ltr.

2. Mode of Production Acid Oil3. Cost of BD from raw materials Rs. 37.50/ltr4. Quality Medium

5. Benefits Industrial Boost, No taxation, No large distance dependence.

6. Problems Land tax (4% around Rs. 1/Ltr), government proposal to reduce acidcontent.

We feel that Green Oil should consider waiting for the upcoming elections in Gujarat

before coming to any decision.

- In case the results are favorable i.e. either the incumbent government retainspower or the new government formed is pro-industrialist, Green Oil should set up

its plant in Gujarat at a place adjoining to Madhya Pradesh. (As both states share

border, this will make the start up plant share the same logistic and contact benefitas the firm would have at its Madhya Pradesh Plant.) Also as Gujarat hosts Surat

Vadodra industrial corridor railway link which caters to places not only in

Gujarat, but in Madhya Pradesh and Maharashtra as well, this can help the firm to

expand in more emerging markets along with retaining its traditional markets.

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- Present net Oil Cost in Gujarat is around Rs. 42-43 per Ltr. When compared to

Madhya Pradesh or Malaysia, its fairly competitive where the mentioned have

net costs of ~44 and ~ 45 respectively after including duties and logistics.- Gujarat has an Industrial GDP of over 10 % and is one of the most industry

friendly states in the world. We could also suggest Green Oil to use the residue

Acid Oil by supplying it to a local firm. This would bring down the costs andmake our product more competitive.

- Gujarat offers the maximum stability to the plant. Setting up a plant in Madhya

Pradesh offers a sizable amount of risk as Jatropha Seed production on farmlandscan result in mass agitation if the state or nation face food crisis. This could result

in factory sealing as well as long legal procedures. (We should take care of the

fact that setting up an industry involves a large amount of capital.)

- Gujarat has a great topographical, geographical and climatic advantage over theothers. Its well connected by highways and ports. It has a large coastline which

may be profitable to the company if it feels to ship its product in the near future.

- In case the election results are unfavorable and a populist government comes into

power in Gujarat, we feel Green Oil should scrap the idea of setting up a BD plantin near future. The reasons for rejecting the options

1. Policies and relations are highly government specific. India and Malaysiahave remained good friends, but this couldnt be extrapolated for the

future. If the things deteriorate, the future of our plant could go in big

danger if established in Malaysia. Also long distance transport costs andhigh custom taxations results in cutting profits, which could be avoided if

production happens in India.

2. Madhya Pradesh would have been an idol contender in this case because of

the cost factor, but the legal and social intricacies involving the issue,makes us to suggest Green Oil to refrain from setting up a plant there

3. For Gujarat, if the new form government is populist or socialist, we could

be faced to see similar or worse scenes compared to Madhya Pradesh.