A report on short term and long term strategy.

Problem situation:
Mr. Vora has started a company without much research. His brand oI 'Blossom, Quick Cooking
Oats is Iaring very badly in the market. Its only competition is Ganesh Mill`s Champion Oats.
Both these companies started production aIter the exit oI Quaker oats oI America. However, they
have not been able to capture the market as they expected. Mr. Vora approached the SSI
consultants to Iind out the next best thing to be done.



Question that needs to be asked is, what are Mr. Vora, plan?
It has been identiIied Irom careIul analysis oI the Iacts presents to us that his short term plan is to
make profits and stop the immediate loss of money. We the group oI LM11 have Iound 2
ways Ior Mr. Vora to make his short term and long term plans achievable.
O Cost per case Rs.59.92
O Cases sold per month 83

O Loss made per month Rs.172.06
(Sale price Rs.5808 per month; Cost Price Rs.5980.06)

O Cost Analysis
4 Material 40.25
4 Packing 42.72
4 Labor 9.01
4 Railway Ireight 8.01

O Commission 20

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1) Mr. Vora has a break even point in terms oI number oI crates he needs to sell in order to
stop losses and start making proIits. This has been calculated to be crates oI blossoms
quick cooking oats. From the demographic inIormation available through the census
bureau oI India, the population oI India in1961 was reported to be: .2 million. Out oI
this population, the percentage oI rural and urban split was Iound to be: . million.
This was approximately 17 oI the total Indian population. Also, .illion people
were below the poverty line in urban areas in 1961. This leaves us with a total oI
72.25Million. From the Iacts provided to us, it was clear that there was a very large
untapped market segment. This segment can be contributed to the upper class urban
population, a market segment which is beginning to Ieel the burden oI shortage oI time
on their hands, and need a breakIast cereal to save .443 time and money. This is the
target audience oI lossom quick cooking oats.



From the inIormation provided, MR. Vora, has to IACREASE HIS SALES Irom 83 crates a
month to 167 crates a month at least. This can be achieved by what is called 'Spider eIIect.
Spread out, and like a spider, gain stability Irom your Iar spread legs. It has been given that he
has sales representatives in 8 regions oI the country. That means cases at least in regions.
II we break up the number even smaller, we get 2 cases in each region. This works out to about
cans in each region. This is a very reasonable number as the population oI urban India was
around 2.2 million.

arket-Product-Business Analysis

Market
Attractiveness

-Market size
-Market growth rate
- ProIit margin
- Competitive intensity
High
High
Low*
Low
63000 Iamilies

High commissions
Only one competitor

Competitive
Position
- Market share
- Product quality
- Unit cost
- Distribution network
Low
High
Medium
Poor
Vast scope Ior improvement
Matches with competitors

Agents/Distributors not
competitive


How does Mr. Vora achieve the target set by his consultant to achieve the breakeven point and
then Iurther on to proIit?

The break even point can be achieved in three ways.
I) He increases the sales.
II) He increases the price oI the crates.
III) Decreases the cost oI production by reducing the variable costs.

Increasing Sales:
Currently Mr.Vora\'s setup is such that his subagents are the people doing the actual direct
selling. This does not ensure that Mr. Vora\'s interests are met properly as the subagents have
nothing to loose. They get a commission oI 20 on the product. As they do not have any
commercial interests in the product since they stock non competitive goods, Mr. Vora should
instill marketing people directly, who will be responsible Ior the actual sale. As we have seen
that the numbers required are NOT such large numbers given the Iacts, this is one option oI
making money. The increase in sale Irom 83 crates to 250 crates can be done in a matter oI 5
months. Taking to account, the increase in sale, it has been increased by a mere 40 every
month. Which are just extra crates in every month. This works out to about extra crates
in every region every month. This is NOT a very large increase in terms oI numbers.




2) The next step to make sure that the revenue starts coming in; Mr.Vora needs to increase
the price. This will not hit the sales Ior two reasons.
a. There are dedicated sales people to take care oI the sale aspect so they can push
Ior the sale even iI the price goes up marginally.
b. The selling price increase will happen over a month period. This is done to
ensure that the price increase is not Ielt too badly. As the current price oI the
product is Rs.85 per crate, which works out to around Rs.2.p per can oI
Blossom Quick cooking Oats, the new price works out to around Rs. 2.p per
can, which is an increase oI just . over a span oI months. From the given
Iacts it has been established that Blossom quick cooking oat`s competitor
Champion Oats is selling his product approximately around Rs.2.60p.




This step ensures proIits start coming in Iaster than just improving one step. The increase in
production is not necessary at this point oI time. The product is not getting sold properly, and
there are huge inventories and these can be used to adjust the Iuture demand increase. Even
though there have been no preliminary market analyses which have been conducted, Irom
statistics provided to us, we believe that this is a viable step.

Hence we do not have to reduce the costs. We are able to achieve a break even in sales and in
numbers hence it not being necessary to reduce the cost. However in the long run it will help
Mr.Vora to reduce costs.

These are some oI the short term plans that can be implemented Ior Mr. Vora`s company.

Long Term Plans:

Once the immediate need oI the hour is met, i.e. the ceasing oI the incurring oI losses, Mr. Vora
should Iocus on making money and making his business establishment a more viable process.

We identiIied several key areas where he can invest money and thereby increase his market share
through careIul selection oI market segments and product mix.

1) Changing Processes: currently Mr. Vora`s distribution is handled Irom Lucknow
(Central India) alone. In this unit, the crates are packed and shipped to their
regions directly. This implies that there are increased costs due to increased
Ireight. One way oI reducing this can be to have decentralized packaging. Mr.
Vora can set up two packaging units in north and south India. This will Iacilitate
him to reduce costs at the Lucknow plant by shipping the contents in bulk to the
packaging plants. These plants will act as distribution centers to the south and
western region, and the north and eastern regions. Also, the cost oI Ireight will
reduce as there will be more content traveling per wagonload. It was Iound that it
works out to about Rs.10.55p (present Rates) per kilometer, per wagon load. This
would help reduce overall packaging costs. This will help in two ways :
i. When selling to institutions, the items do not have to be repacked.
This would help reduce costs oI packaging. This would also bring in some
more revenue in terms oI sales as it will help tap a new market segment.
ii. Packaging centers closer to the markets serves in many ways
a. It will help the turn around time oI the company.
b. It will also help in the time it takes to restock shelves and
restock the inventories.
c. Help and assist in repacking the goods. HOW?

It can be seen that the crate contains 36 tins. Each tin has a volume oI 550 cubic mm. which
gives a total volume oI 19800 cubic MM. iI this has to be redistributed over repackaged goods; it
will work out to around 2 Rectangular boxes holding the same 550Gms oI Blossom Quick
cooking oats. This will enable Mr. Vora to repackage the goods into cardboard cartons and
thereby increase the optimum utilization oI the resources available to him.
2) Redesigning the packaging covers: As a methodology Mr. Vora should not claim
he has a 'Me too product. He has to push Ior an independent brand and some
sort oI brand coverage. This can be achieved by redesigning the layout oI the can,
changing the colors and the graphics.

onclusion: Hence with some oI the above suggestions Mr. Vora can help his company and
Blossom Quick Cooking oats to stop short term losses and on the long run make some serious
proIits.




Executive Summary:

Yes, Vora should continue but however, he must Iix the problems that are preventing his
company Irom growing proIitably.
Major Problems:-
Proper understanding oI the demand oI product lacking. For instance Vora and Company is not
clear regarding:-
4 Total size oI the market.
4 Market share held by his company vis-a-vis competitors.
4 Vora & company is over-spending on distribution and under-achieving in terms oI
reach.
4 Product segmentation It is not clear to Vora and Company, whether a bigger package
will increase sale.
4 Failed to realize its market share, even in the southern market, where both demand and
realization are higher compared to other markets.
All these above problems are contributing to Vora`s loss.

Strategies:-
Short term
a) Improve product distribution eIIiciency
4 PerIormance related commission
4 Turnover commission Ior dealers, distributors and retailers
4 Stopping distribution expenses in regions where sales success is diIIicult and long drawn
b) Product Mix
4 Packing in diIIerent quantity in order to cater to diIIerent requirements
4 Attractive, competitive wrapping with beneIits visible boldly.
4 Bulk packing Ior bulk users to reduce expenses in packing.

c) Price
4 Optimize between selling at retail end and distribution cost.

Long term
A proIessional approach to rigorous planning by Vora and Company.
4 Demand analysis
4 Reduce cost base in packing (II we are able to reduce packing cost by Rs.2.56, we can
reduce the cost by 4)

4 Explore possibilities in cost reduction in importing cereal
4 Reduce logistic cost (dispatch to diIIerent distribution points Ialling under the same route
might be synchronized.
4 Negotiate a longer credit term Irom suppliers oI grain and packing materials which will
result in better proIit.
4 Rationalization oI distribution points to save costs.