Introduction

The purpose of this business plan is to provide the reader with a comprehensive synopsis of Hero Agro Pvt. Ltd. and its plans of expansion. Hero PVC was established in 1997 in response to the consumer demand for discounted PVC products. The company manufactures and distributes a PVC pipes which is marketed as a high quality, but discount, alternative to the existing range of PVC products in the market. Hero Agro Pvt. Ltd. is a company that has glittering present and sparkling future. Within a comparatively shorter span of time, the company has scaled the highscoring reputation in Quality Product of ISI marked U-PVC Pipes, ISI marked Plumbing Pipes, SWR Pipes, ISI marked Conduit Pipes, Blue Threaded Pipes as per ASTM-D-1785, which has touched deep dusty frontiers of rural and also macadamized horizons of Urban. Having been well-equipped with the ultra-modern plant and laboratory, coupled with professional management, well-harmonized experienced labors, enterprising experts, the Company has been manufacturing striking variety of pipes, duly tested, quite in tune with quality control standards. The uncompromising thrust and the inherent quality emphasis throughout the manufacturing and testing process, it has gained ISO 9002 the coveted international mark of quality. Nicely located besides Plot No. 2309 & 10, G.I.D.C. METODA it has deep potential to have flourishing marketing possibilities. As the company is striving to cater to the varied needs of its all valued customers, here the customer has to invest his confidence only, so as to acquire the unfailing quality-bound products of his choice.

Since its founding, the business has proven to have met the market needs and has generated an impressive supplementary income for the owner, Nileshbhai patel , a reputed and a popular businessman. Given the company's record of success the owner now intends to devote all of his attention to Hero Agro by managing the business full-time and expanding its reach by enhancing existing production capacity, adding an additional product line for PVC pipes and expanding the company's sales efforts.

Mission Statement
The mission of Hero Agro is to provide consumers with, and to be the preferred brand for, medium as well as high quality PVC products at a reasonable price. Because of its small scale of operation and narrow focus, Hero Agro has been, and will continue to be, able to provide PVC products of equal or better quality than the major brands. Hero Agro will continue to market PVC pipes and plans to add a new range of PVC products to its product mix. These products will contain the same ingredients as the major PVC products and will have the same effects, yet will retail for about 10% lesser the price of existing brands. Hero Agro intends to increase its production capacity and expand its sales effort to include local discount retail chains, wholesale markets, agents and stockiest in the Massive City area. Eventually, the company will broaden its scope to include regional, then national distribution. Its typical customers are those quality conscious, yet frugal, consumers, many of whom are from lower-income families that seek to stretch their budgets wherever possible. Hero Agro intends to meet the needs of this broad segment of consumers through the provision of low cost, quality Products. The products will be marketed as such, with an emphasis on their quality to distinguish Hero Agro products from the more generic brands which emphasize price. In carrying out the above measures, Hero Agro expects to establish itself as a preferred brand in the market for PVC pipes for which a wide-range of consumers will come to recognize and trust.

Marketing Objectives
Hero Agro has set as its marketing objectives expanding its local market share for U-PVC pipes to 7% and capturing a 5% local market share for Plumbing pipes in the first twelve months following expansion. The company will achieve its shortterm objectives through an aggressive pull strategy, involving heavy advertising and promotions based on its themes of product salability, quality, reliability, effectiveness, affordability. The company's long-term goal is to capture a 1% share of the national market for each of its products within the next five years. This longer-term objective will be met by gradually relying more on brand identity and name recognition in the local market and shifting its advertising focus and marketing efforts to other regions of the country.

Required Capital
In order for Hero Agro to successfully complete its plans for expansion, an

investment of 20 lakhs will be required. The owner Nileshbhai patel will contribute 10 lakhs of his own funds and is seeking a lender to provide the remaining 10 lakhs. The business anticipates the terms of the loan to be 6 years with a 15% rate of interest that will be repaid in monthly installments.

Description of the Business

Hero Agro currently manufactures lesser quantities of PVC pipes for a few local discount stores. The company intends to expand its manufacturing capacity for UPVC pipes and will begin producing a line of PVC products. The company acquired its existing base of retail customers through industry contacts. The founder of Hero Agro Nileshbhai patel met the vice president of SPMA (Saurahtra Plastic Manufacturing Association) at a social gathering, and he urged Nileshbhai to go into business. This individual also provided Nileshbhai with the names of several purchasing agents for independent area local markets and discount stores. Many of these individuals expressed a desire to do business with a regional discount manufacturer which gave Nileshbhai the impetus to start a PVC pipe manufacturing operation. The results from the introduction of the company's lone product has been overwhelming, with Hero Agro unable to meet the local consumer demand for discount U-PVC pipes. Orders for U-PVC pipes exceeded capacity within the first three months of operation. The company's sales have increased fairly consistently over the last two calendar years, with some seasonal fluctuation. Peak sales for the PVC product are realized during the summer months. However, Hero Agro anticipates greater fluctuation in its U-PVC pipes sales. Summer months typically produce the largest sales volume for this product, and winter the lowest. Nonetheless, the product mix has been chosen, in part, to maintain revenues throughout each respective seasonal variation. Based on the demand for the current PVC products and strong interest in a similar HDPE products (which Hero Agro does not currently produce), the time is ripe for expansion. Given the company's ability to expand its production capacity and add a second product, Nileshbhai expects gross sales to exceed 2.5 crores in the first year of expansion.

History of the Business

Nileshbhai patel founded Hero Agro in response a suggestion from a vice

president of SPMA (Saurahtra Plastic Manufacturing Association). This person had mentioned Nileshbhai the potential for independent plastic companies to substantially undercut the prices of major plastic companies in manufacturing and selling products such as U-PVC pipes and PVC fittings. Nileshbhai realized the potential market for such products and decided to put his trading and manufacturing business backgrounds together to produce products catering to the discount end of the price spectrum. It was at this point that Hero Agro was set up as an independent PVC pipes manufacturing company owned and operated on a full-time basis, solely by Nileshbhai patel Dist.:RAJKOT) Nileshbhai recognized that U-PVC pipes sales were vulnerable to heavy fluctuations in sales volume due to variations in seasonal demand. He thus chooses to begin his manufacturing operation with the production of PVC threaded pipes on a limited basis for trial purposes. Within two months, demand for the product from retail stores, local independent markets and wholesale stores, and other neighborhood retail stores doubled to the point where his small operation was running at near capacity. Within six months, demand had exceeded the limited production capability of both the company and Nileshbhai, himself, based on the time and resources available to him. Based on this success, the time is now ripe for Nileshbhai to concentrate all of his time and effort on the expansion full-time operation of Hero Agro . at Plot No.2309 & 10, G.I.D.C. METODA (Tal.:LODHIKA,

Founder of the Business

Nileshbhai patel has a retail shop Deepak and company for machinery parts and a showroom of sanitary wares. He held this position for 25 years, and used to earn for his family living with his father. His father was a farmer and left his farming ever since they came to the city for doing business. Nileshbhai received his B.SC. Degree in chemistry from Virani Science College at Saurashtra University. He worked with his father and had an experience of 25 years for retail business. He is a partner in Sukhdev chemicals a chemical manufacturing company at Ankleshwar since 7 years. He also is a partner in RT flour mills at Junagadh since 15 years. After the success of Hero Agro Products Pvt. Ltd. manufacturing U-PVC pipes. Nileshbhai has recently started a new firm Deepak Blow Molding Pvt. Ltd. manufacturing LLDPE water tanks. Nileshbhais sweet statement ONE JUST NEEDS GUTS AND HE MAKES IT.

Regulations and Licensing

The following permits and licenses were obtained in order for Hero Agro commence business: Certificate of Incorporation (year 1996). Certificate of Sales Tax (year 1996). Certificate of Central Sales Tax (year 1996). Certificate of ISI (year 1998). Certificate of ISO (2000). All necessary licenses and permits to commence business, take production, make sales, etc. has already been granted to Hero Agro and its owner, Nileshbhai patel . to

Market Definition
The plastic markets are vast opportunities for existing and new companies. Hero Agro has been successful providing U-PVC piles at low prices for the end-users. This geographic area is represented by roughly a 100 kms radius from the company's location. According to the survey, the Saurashtra region contains approximately 10 thousand buildings, 250 thousand tenements and 15 thousand farms at present. In addition, of the current statistics the building and tenements are about to get doubled with in five years. There are about 200 dealers dealing in different brands of U-PVC pipes in the Saurashtra region. Due to large population the development of the Saurashtra region is rapid. The dealers of the U-PVC pipes are about to increase. Although a large percentage of population residing in the Saurashtra region is between average and low income people U-PVC pipe users are only 30% of the total population. Over the next five years there will be over 50% of the population using U-PVC pipes in the market. At present there are just a few cities and infinite villages in the Saurashtra region. In addition, the dealers and manufacturers for U-PVC pipe are about to increase up to 50% annually for the next five years. This is reflective of the region's concentration on the U-PVC pipe manufacturers. Manufacturing a low-priced U-PVC pipe could facilitate this growth, because more families could afford it. Current access to the U-PVC pipe for the users is due to the retail stores, wholesalers and dealers. After the survey Hero Agro has decided to increase its production capacity to achieve the targeted customers. Expansion of the business is a must for all the manufacturers of U-PVC pipes to achieve their market goals.

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Market Segmentation
Hero Agro s geographic market has been established. Given the small size of the company and fierce competition from large companies, Hero Agro s best strategy is to analyze the demographics of its potential end-users. Consumers The Hero Agro s customers have very specific demographics, found in the Hero Agro s Journal. Over 40% are farmers. Over 45% are builders. Average income is 20 thousand per month. 50% of users belong to low families who have lower income.

However, the Indian industry report indicates that by 2010, plastic users will reflect a normal distribution of the Indian population. Based on this projection, significant growth will be in the farmers, builders and lower income segments. Much of this growth will be supplied by the low-cost U-PVC pipes. With the growth of the plastic products, Hero Agro plans to target lower than average income areas with U-PVC pipes, threaded pipes and plumbing pipes. The market researcher will establish the top five cities in the area to segment. In addition, Hero Agro will be able to segment prior average income customers from its database and target those that live in these areas. These segments are less likely to own plastic products, but are very aware of their uses, especially given where they live. In addition, Saurashtra Plastic Market magazine reported that 38% of galvanized pipe and HDPE pipe users who had heard of U-PVC pipes were considering buying one. According to the report, this was the largest segment interested in U-PVC pipes.

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Market Research
Nileshbhai identified the need for discount U-PVC pipes when a local discount store owner asked him to produce such products based on the demand from the consumers at his store. Contacting several additional independent store owners in the local area (local dealers, open market agents, and other retail shops); Nileshbhai found others interested in offering these items as well. The national market for discount plastic products is well documented. The

National Journal of Business has reported that booming consumer interest in reliable value consumer products (such as those that open markets produce) has broadened to include plastic products as well. Finally, a recent edition of the Saurashtra Plastic Market named the city area as a specific example of an area where demand for discount plastic products was currently far exceeding supply. The research Nileshbhai has performed has led to the conclusion that these trends will continue in a positive direction. Further research has identified distinct groups of consumers in the broad market for plastic products by which the market can be segmented. The market can be broken into three distinct segments. First, those price sensitive, lower income consumers who primarily purchase products based on the lowest available prices make up a growing percentage of the market for plastic products. Next, an also growing segment of middle income consumers tend to make purchasing decision based on value (the best quality at the best price). Finally, higher income consumers, which make up a declining majority of the market, tend to be brand conscious in their buying behavior, meaning that they purchase products based on the perceived higher quality of major brands. Based on this market research and company forecasts, Nileshbhai has developed a winning strategy for capitalizing on the consumer demand for discount plastic products by effectively targeting certain segments of this market.

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Target Market
Consumers of U-PVC pipes and threaded pipes are similar enough to be considered as one target market. Thus, a dual product mix makes sense from a marketing perspective, apart from economic reasons. According to Industry Week magazine, the two largest customer segments for each product are dealers (who make purchases both for themselves and for their customers) and single individuals. For U-PVC pipes, there are also substantial sales to people with high quality occupations and those who are accustomed to low quality. Busy executives, farmers, and builders were cited as examples of individuals who make up this part of the market. More importantly, the company's market research has determined that the fastest growing market segment is the nice market composed of those individuals who prefer, and who give priority in their purchasing decisions to, discount products. This segment of the market for plastic products has been identified as those consumers whose primary consideration in purchasing decisions is the lowest available price. Further, the market segment consisting of those individuals whose primary purchasing decision revolves around value (i.e. the best quality for the best price) is also showing an upward growth trend as a percentage of the total market. These two growing market segments have been reflected in the trend in consumers preferences with regard to point-of-purchase decisions. While open markets and retail store chains continue to be the major sellers of plastic products, their market share has shown a declining trend. This decline is accelerating and is predicted to more substantially undercut their position in the market over the coming years. Discount stores, in the meantime, have shown a rapid increase in gross sales and a corresponding upward trend in their market share in contrast with the larger markets and store retailers.

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Hero Agro expects to capitalize on this regional and nationwide trend toward the discount end of the product spectrum by expanding its capability to provide low cost products which meet the needs of low income and value conscious consumers, the two market segments the company intends to target.

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Competition
Plastic manufacturers for U-PVC pipes and threaded pipes are neatly divided into two distinct categories within the industry: Huge plastic manufacturers research and development companies who outsource their production requirements or who have in-house manufacturing facilities, and the small, independent pipe producers. The huge plastic manufacturers R&D companies capitalize on their substantial research and development capabilities. Their capital backing, brand recognition, advertising capabilities, sales budgets, and effective distribution channels keep their products on the shelves and in consumers' minds. The much smaller, independent pipe manufacturers typically have a minimal research and development function consisting primarily of labs used to analyze products other companies introduce. They are usually very small (less than 50 employees), and have limited manufacturing facilities. They usually distribute locally or regionally, occasionally maintaining a regional account in another part of the country. These companies often compete on price due to the limited scope of their operations. Hero Agro manufacturers. fits into this industry cluster of independent

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Product, Branding, Packaging Strategy

The plastic product line is based on high quality and durability at a low price. The specific product will not contain any heavy objects nor will it require any cement to join the two parts. The plastic fittings required to join them are easily available at a local retail shop. The components used to assemble them are: Plastic pipes. Plastic fittings. Plastic solvent.

Hero Agro s products are offered as a generic alternative to the higher priced more established and recognized brands. However, Hero Agro has a loyal brand customer following and maintaining this is imperative. The Hero Agro

stands for quality and durability at low prices and represents the price sensitive customer who isn't willing to pay more for the same level of quality. Maintaining service and price / performance measures will facilitate the general brand strategy. The Hero Agro s U-PVC pipes will contain the Hero Agro s logo tag, as all their products do. In addition, the plastic bags used for packaging will contain the Hero Agro s logo in the center. This is an emerging trend and is expected to add brand recognition to the Hero Agro s label. The product strategy should address questions such as the following: What will be the main ("keystone") product attributes? What are the benefits (both functional and emotional) that we expect customers to derive from using our product? How do these attributes and benefits appeal to the target market and support the marketing position

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What shall be the strategy for branding? How will the product attributes and benefits be represented in the branding of the product? What will be the specific strategies for packaging? Product container (shape, size, etc.) Colors Copy (the words, slogans, etc. we use to describe our product) Typefaces Designs Illustrations Physical environment How will the product attributes and benefits be represented in the packaging of the product? Are there any unique packaging requirements or issues to be resolved? Will there be any product variations? What? Why? If applicable, how will different product lines be distinct from each other? Are there any product characteristics that will be de-emphasized? How? Will any products be eliminated from the current offering(s)? Which ones? Why? Why?

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Pricing Strategy
Hero Agro s competitive advantage is offering quality and durability at low prices. The plastic industry has several price points, depending on the product and market. For U-PVC pipes of 4 kgs, the price point is low. When U-PVC pipes of 6 kgs reach this point, consumer sales increase significantly. For ISI marked U-PVC pipes, the price point is high to medium. Low-priced U-PVC pipes, like those that Hero Agro currently provides, have price points from medium to low. A 5% volume discount and FOR is given to the retailers and dealers that buy direct on purchases of a truck load or more. The Plastic, a typical plastic magazine, and Plastic Today, a more technical trade publication, have consistently reported that high-price plastic products will not sell well until the price drops below the current prices. Currently, there are several options in the market, but they appear to be too expensive in relationship to the functionality they provide. Advances in plastic production and lower pricing for the plastics that make up the U-PVC pipes will allow Hero Agro to sell a complete quality U-PVC pipes starting from the low price. At this price point, the U-PVC pipes offered by Hero Agro are of medium category, not of high category. This makes it affordable to more households and farmers. Hero Agro will be able to continually reduce the price as the petroleum, and chemicals are reduced in price. Since the farmers do not require high quality UPVC pipes, Hero Agro can sell low-cost U-PVC pipes to them with a discount. It is not necessary to offer the high-cost U-PVC pipes to the builders and households as medium quality U-PVC pipes would do with them. Hero Agro can continue to purchase low graded raw materials and chemicals so as to reduce their prices and to give discount to its customers. The U-PVC pipes can be fixed by plastic as well as galvanized fittings so as to make it easier and cheaper for the end user to buy them.

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In accordance with Hero Agro s practice, the new U-PVC pipes will not be discounted for seasonality or type of buyer. However, some sort of volume discount price structure will be established prior to the product's introduction. The pricing strategy should address questions such as the following: Where we set our price in the price / value range? How we price our product / service (e.g. by the hour/day/week, by the unit of servicesingle, multi-pack, case, truckload, a set commission, a predetermined fee, etc.)? What is our price structure? Shall we have a discount structure? If so, what is it? Will prices vary according to geographic regions? Will prices vary according to seasons? When and how shall we decide to raise / lower prices? When and how shall we decide to change discount structures? What is our level of pricing flexibility (short-term profit vs. long term goals)? What are our pricing terms and policies?

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Distribution Strategy
Hero Agro does all its manufacturing and administrative functions from its head office. The company will distribute its products through its current 3 channels: Direct Sales: Approximately 75% of Hero Agro s products are purchased directly and either packaged for customer pickup or direct transporting. This demand is created through local advertising, repeat business, and word of mouth. This channel is expected to also represent 75% of its product sales volume. Plumbers: Approximately 15% of Hero Agro s products are distributed through plumbers to small and medium builders and households. Local consultants are aware of the inexpensive quality products that Hero Agro offers and use their equipments while installing the U-PVC pipes to price-conscious customers. It is expected that less than 15% of its product will be sold through this channel. Distribution Channels: What are the available types of distribution channels? What are the desired types of distribution channels? Why? What kind of geographic coverage is required? How shall we penetrate the desired distribution channels? How shall we negotiate agreements between our company and the selected distribution channels? How shall we monitor distribution channels? How shall we ensure consistent product / service positioning and image throughout our channels? What information needs to be exchanged back and forth with our distribution channels? 20

How will information be exchanged? What will be the terms with each distribution channel (e.g. payment, financing, warranties)?

Placement: Where will our locations be? Shall we add locations? Shall we purchase or lease? Should we use independent outlets?

Manufacturer / Wholesale Firms: What shall we do to reach market coverage and / or shelf space goals? What stores shall we target and when? Shall we include our entire product / service line or one at a time?

General: How shall we penetrate the market (i.e. market by market, greatest opportunity, simultaneous)? What shall we do to penetrate the market? Shall we use minimum order requirements? Shall we offer exceptions to the minimum order requirement? Shall we offer return privileges? How will orders be processed? How much inventory should be accumulated? Where that inventory should be warehoused? How and when should goods be transported?

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Advertising Strategy
Hero Agro operates on a minimal advertising budget using strictly print media. The company advertises daily in the Saurashtra regional newspapers, weekly in community newspapers, and periodically in local business publications. The advertising budget is 2% of gross sales and is planned to expand to 3% during the first 6 months of the plastic product. The advertising strategy should address questions such as the following: How will we use print, radio, and / or television ads? Shall we use other electronic media (e.g. videodisc, videotape, audiotape, etc)? How shall we exploit our logo or other characterizing motifs? How shall we use the packaging itself for advertising (e.g. bound or insert ads)? What kind of point of purchase actions shall we take? Shall we use signage (billboards, placards, or display signs)? Shall we utilize brochures, booklets, or related collateral?

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Sales Promotion Strategy

Hero Agro generally keeps its sales promotions to a minimum, since its strategy is to maintain everyday low cost pricing. To supplement advertising, Hero Agro provides its local retail channel brochures and product comparisons on reliability, service and price. In addition, Hero Agro provides the retailer with display logos and signs to differentiate its product line. With the introduction of the new plastic product, Hero Agro will run in-store demonstrations every other weekend for a period of 6 months in order to stimulate interest and demand for the product. During the demos, an Hero Agro T-shirts, hand-bags, key-chains, purses etc. will be given to the plumbers and retailers.

The sales promotion strategy should address questions such as the following: Shall we run coupon or rebate programs this year? Shall we offer premiums, contests, or sweepstakes? How many give-away or samples shall we plan and for whom? Shall we use cross-offers or tie-ins? What kind of actions shall we take with trading partners? Shall we use allowances (trade-in, attractive financing, bonus quantities, volume discounts)?

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Publicity and Public Relations Strategy

Hero Agro s public relations budget is very small. Hero Agro encourages its employees to become involved in their community and to voluntery for local causes. The company provides employees with free T-shirts to wear and handbags to carry, displaying the company logo at events. In addition, Hero Agro sponsors retailers, wholesalers and plumbers little league team. Since the plastics are currently used the most in the market today, Hero Agro plans to agree the introduction of the U-PVC pipes with a new PR program involving public places. Hero Agro will participate in technology seminars and workshops to demonstrate how easily U-PVC pipes can be used. The publicity and public relations strategy should address questions such as the following: What public events we have planned (seminars, workshops, open houses, presentations)? Do we need formal and / or informal lobbying efforts? What press releases do we have planned and when will they be released? Shall we need outside assistance with your efforts? Shall we conduct facility tours? Should there be any speeches given to community or professional groups? Shall we produce a company news letter? Who else receives copies? What is the time table for our annual report? Shall we engage in sponsorship relationships? How shall we interact with our immediate and extended community? Do we have a volunteer or charity affiliation? What are our plans for charitable donations and in kind contributions? Shall we fund the arts? Shall we retain a public relations firm?

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Strengths
The main strengths of Hero Agro are as follows: Consistently deliver quality products that exceed service records of competitors' products. Strong word of mouth advertising among existing customers. Strong repeat business among consumers and business market segments. Niche distribution channel relationships. Hero Agro maintains loyal distribution with small retail outlets and local wholesalers through consistent product and service. On order sales. Hero Agro maintains a knowledgeable and courteous inside sales staff. The small size of the company requires job rotations from manufacturing to sales to transporting and receiving to supplier and inventory management. All employees know many aspects of the business which helps provide a better customer experience when ordering. Location. Hero Agro is located in the heart of the Metoda industrial estate and most of its employees live 10 kms of work. purchasing trends. Living in the heart of the Saurashtras biggest industrial estate provides an added advantage to

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Weaknesses
The main weaknesses of Hero Agro are as follows: Economies of scale. Hero Agro s low volume doesn't allow for large volume purchasing like its bigger competitors. This creates lower margins. Marketing budget. Hero Agro advertising campaigns. Small staff. Absenteeism and employee turnover severely affect the day to day operations and service levels for Hero Agro . cannot afford expensive marketing and

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Opportunities
The main opportunities facing Hero Agro include: High growth rate of U-PVC pipe users. Potential customers over the next five years are about to increase up to 50%. Continually increasing percentage of current and targeted customers will help in having multiple dealers, agents, wholesalers and retail shop customers. Saurashtra region has the highest concentration of startup firms in the Gujarat, many needing low-priced reliable U-PVC pipes and fittings. Current galvanized and HDPE pipe households will consider purchasing the U-PVC pipes because of its low price.

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Threats
The main threats facing Hero Agro include: Shifting technology risks. The high tech industry is dynamic and everchanging. Although market studies predict incredible plastic user growth, growth rates may prove to be slower or new technologies may arise. Although Hero Agro maintains low inventory levels, the initial investment could be at risk or impede cash flow if the trends do not grow as expected. Current supplier might not offer the components necessary to produce U-PVC pipes. Switching suppliers can be costly and time-consuming, affecting service and price. New and up coming technologies could erode Hero Agro s market share through its specialization and engineering expertise. Consumers are becoming increasingly knowledgeable regarding plastic products and feel more comfortable servicing the U-PVC pipes themselves. Hero Agro s superior customer service may be less desirable in the future and Hero Agro effectively. Increasing commoditization of the plastic products. Plastic product prices have continually dropped. Hero Agro will need to stay competitive through efficient manufacturing and inventory control. will not be able to differentiate its products as

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Resulting Issues
The main issues that must be addressed by this plan include: Hero Agro has a stable market share and customer following. These

customers are indicative of the current market of U-PVC and fittings. Hero Agro product differentiation strategy is low price and service. Employee retention is the key to maintaining production and service levels. The target segment does not currently own U-PVC pipes and is very pricesensitive. Hero Agro will need to frequently update its market analysis to ensure that UPVC pipes growth projections are being realized and that it is properly serving this market with its product expansion.

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Financial
Nileshbhai has set two financial goals for Hero Agro : Increase Sales Revenue by 20% over last year by expanding product line. Increase Total Net Profit for the projected year by 17%.

Description

Last Year Mar-03

This Year Mar-04 3,50,00,000 1,75,00,000 50 96,00,000 12,00,000 1 25% 8%

Projection Mar-05 4,00,00,000 2,00,00,000 46 86,00,000 20,00,000 1.5 20% 6%

Projection Mar-06 6,00,00,000 2,50,00,000 44 78,00,000 30,00,000 2 10% 18%

Sales Revenue Sales Unit Volume Average Contribution Margin / Kg Total Fixed Cost Total Net Profit Average Profit Margin / Kg Return on Investment (ROI) Return on Assets (ROA)

3,75,00,000 1,87,50,000 47 80,00,000 6,00,000 1 40% 12%

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Marketing
Nileshbhai has set the following marketing goals for Hero Agro : Maintain current market share percentage in PVC product line as industry grows at 10%. Establish market share penetration in plastic category at same level as PVC product line. The following table (Marketing Goals) shows monthly marketing goals specifically related to the PVC product line.
Description Overall Market Share Number of Products Available Sales Closure Rate Repeat Purchase Rate Number of Distribution Channels Number of Target Segments Number of Customers 1 15 1 18 1 13 1 8 1 9 1 7 1 10 1 12 1 14 1 14 4 4 4 4 4 4 4 4 4 4 1% 1% 1% 0% 0% 0% 0% 1% 1% 2% 6% 5% 8% 10% 10% 7% 6% 6% 5% 6% 7 7 7 7 7 7 7 7 7 7 7% 5% 5% 3% 2% 2% 4% 6% 6% 5% April 2004 May 2004 June 2004 July 2004 August 2004 September 2004 October 2004 November 2004 December 2004 January 2005

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Product
Plastic pipes are the key to the future because they are built to last. They are corrosion and maintenance free in other words, totally reliable. And there are other advantages; they have a smooth inner surface and are very easy to joint. Moreover theyre light therefore easily handled, transported and installed. Per meter, plastic pipe system usually cost less than any other pipe system, especially when including installation costs in the comparison. This is because the low weight of plastic pipes, even in large diameters, means they can be handled manually rather than using expensive machinery. Add to this the case of jointing and lower installation costs result. Rigid PVC pipes have sufficient strength to withstand internal and external pressures, bend and impact. Thanks to its remarkable flexibility, the pipe is safe against both traffic loads and slight ground movements. Rigid pipes hate excellent non-aging property. The material does not age at all for long periods of time. Hero Agro pipes are a result of continuous research and development of higher quality and better performance PVC pipes. In the agricultural and industrial field, Hero Agro pipes have acquired an excellent reputation for its outstanding workability and functional versatility. Hero Agro is not a simple pipe and fitting manufacturer, but also undertakes the planning, design and installation of all kinds of pipelines. Come and consult Hero Agro on any problem you may have concerning pipes. The name Hero Agro is synonymous with good design, aesthetic appall, case of installation and efficiency in service when applied to rigid PVC pipes for agricultural and industrial pipe work systems. While the perception exists among consumers that discount products are not as effective, Hero Agro believes that a company such as it can further dispel this notion through clever advertising and promotion which will substantially broaden

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its appeal among brand-conscious consumers. This strategy will effectively allow Hero Agro to become the brand of choice for the value-conscious consumer and potentially an even broader market segment. Hero Agro has and will continue to stress its proximity to local markets and its just-in-time inventory system as a method for enhancing delivery of orders and providing quality customer service. By continuing to focus on the local market, Hero Agro can fine tune its operations for both products and establish limited brand awareness before expanding its scope regionally and nationally. General Properties of PVC pipes manufactured by Hero Agro are as under: Light Weight: The weight of Hero Agro rigid PVC pipes are at least 1/5

that of steel and 1/8 that of lead pipes. Such lightness facilitates handling, storage, transport and installation. Fire Retardant: Hero Agro Rigid PVC pipes do not support combustion

therefore they are non-inflammable and are self-extinguishing. Rust & Corrosion Resistance: Metallic piping materials give way to soil

corrosion but Hero Agro Rigid PVC pipes are not affected by liquid minerals in soil, bacteria, algae or fungi. Chemical Resistance: Hero Agro Rigid PVC pipes are highly resilient to

Acids, Alkalis, Alcohols, Aliphatic solvents, various other r chemical and gases. Weather ability: Hero Agro Rigid PVC pipes are unaffected by humid or

salty atmospheric conditions. Smooth Internal Bore: The smooth internal finish of the pipe ensures

better flow properties compared to metallic or cement pipes.

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Easy to Install: Hero Agro Rigid PVC pipes are installed by solvent jointing with solvent cement. It is the fastest and easiest method to produce good strong joints.

Comparison of PVC with Galvanized, Cast, Asbestos and Cement Pipes Economic factors Galvanized iron Pipes (GL) Wight Heavy Heavy Cast Iron Pipes (CL) Asbestos Cement Pressure pipes Lighter than CL but heavier than PVC Length In meters 5-6 3-4 3-4 Light, pipes weight 1/6th of CL & 1/6 of GL & 1/5 of AC 5-6
th th

Rigid PVC pipes

Economic advantages of PVC pipes Savings in handing and transportation costs, installation is easier Less number of joints, Savings in installation tie and costs Less frictional loss, Saving in pumping costs Better flow, More discharge of water 25% more flow than GL pipes Longer life of the pipe. Low maintenance and replacement costs

Inside Bore

Rough

Rough

Smooth

Mirror Like Smooth finish

Co-Efficient of flow (c) value

100 Decrease over a period of use

100 for new pipe 40-50 after 5 to 10 years Pipes are susceptible to (1) quality of water (2) aggressive soil conditions Cumbersome and time

140

150-Remains constant throughout its life Good Resistance to even strong acids, alkalis or salt solutions Very easy, simple and fast

Resistance to corrosion

Pipes are susceptible to (1) quality of water (2) aggressive soil conditions Involves threading

Good

Installation technique

Easy when compared to CL consuming

Reduces installation cost. Ensures speedy implementation of the scheme

Material cost

High

Lower than GL

Lower than CL, GL, 7 AC

Greater savings in material cost. Total cost considerably reduced due to

34

savings in both materials and installation cost.

PVC Compound Mixing Ratio:

Sr. No. 1 2 3 4 5

Raw Material / Grade PVC Resin (K-6701 / K-6711) One-Pack (RP-602 / 603 / 604 / 605 / 617) Filler: CaCo3 (TC-301/DL-1030) U.V.Stabiliser (TiO2+0.4%Carban Black) Lubricant: (External: - Paraffin wax Internal: - Calcium stearate)

Weight in KG 50.000 Kg 1.800 Kg 5.000 Kg 0.200 Kg 0.500 Kg 0.400 Kg

PVC is available in the following grades: Unmodified grade Molding grade Extrusion grade Impact modified grade Plasticized grade Flam retardant grade

Manufactures & Suppliers of PVC Resin: Reliance (K-6701) Finolax (FS-6701) IPCL (Indian Petrochemicals Corporation Limited)

Additives: The additives needed to manufacture PVC pipes are: FILLER: Though fillers are primarily known for use for cost reduction, there are other important advantages that can be derived from fillers. Viz. increased rigidity and flexural modulus, increased hardness and density and increased fire retardancy. Thus fillers can be classified as non-functional/extender and functional depending upon role they play in PVC compounding. Of course non

35

functional fillers used primarily with a view to cost reduction also inadvertently act as functional filler Calcium Carbonate (CaCo3): The most widely used filler, both as an

extender and functional filler, for PVC is calcium carbonate. It is available in three different forms, as pulverized limestone, as precipitated CaCo 3 and even as marble dust. The first two are extensively used in PVC. Their surface treated forms are also substantially used to improve their homogeneity with PVC and overall processing at higher filler loading. Naturally occurring CaCo3 as chalk or limestone is good extender for cost reduction. It contains small concentration of MgCo3 and Fe2O3 and up to 1% Aluminum silicate. It imparts good whiteness to PVC compound. CaCo3 obtained form lime by chemical reaction is also widely used in PVC industry; through it is somewhat more costly than the limestone based CaCo3. Use of precipitated CaCo3 leads to increase in impact strength, rigidity, weathering resistance as well as good gloss and finish. They further help reduce the plate-out of lubricants and add to specific gravity of the compound. They have moreover higher absorption of plasticizers, stabilizers and fillers compared to natured CaCo3, having greater surface areas, due smaller volume of fillers. UV Absorbers: Light in the damaging wavelength range excites the PVC polymer molecules, in the sense of imparting excess energy sufficient to break bonds in the molecular chains: the free radicals formed as a result initiate, and participate in, the degradation process, which is accelerated by the presence of oxygen Whilst many heat-stabilizers and antioxidants provide a measure of protection against photolytic and photo oxidative degradation of PVC materials for outdoor use afford additional and complementary protection, in that they

36

absorb and dissipate the incident UV radiation essentially before it can initiate degradation, without themselves undergoing de-activating chemical changes. Titanium dioxide (TiO2): Titanium dioxide is a UV absorber; it is evident that increase in the amount of this pigment in the PVC compound will reduce the amount of degradation, which takes place when the PVC is attacked by damaging UV radiation. Carbon Black: As a constituent of plastics compositions carbon

black can have three main functions. It may be incorporated to impart black color, or to improve to photochemical and thermal degradation, or to reduce electrical Resistivity. In the first two of these three applications the amounts added are relatively low (commonly a few phr), and the additive may be considered to function as, respectively, a pigment and a kind of stabilizer. The stabilizing effect is particularly utilized in some PVC compositions for outdoor use. Lubricant: Lubricants fall in to five categories: Metallic stearates, Fatty acid amides and ester, Fatty acids, Hydrocarbon waxes and Low molecular weight polyethylenes.

PVC needs large concentrations of calcium stearate and hydrocarbon waxes, one serving as an internal lubricant and the other as external lubricant low molecular weight poly ethylenes are reported to be among the most efficient external lubricants available. Heat Stabilizer: PVC resins as such are very heat sensitive and have to be processed at low temperature and as such, heat stabilization is extremely important. Whatever Stabilization may be used, all of them have common function-to arrest or retard PVC degradation by: 37

Neutralizing hydrogen chloride atoms with other groups which are Exchange or displace labile chlorine atoms on the polymer chain Inactivate Stabilizer degradation products.

more stable. with other groups of greater stability.

Impact Modifiers: Most PVC products are at risk of possible damage by impact at some point during their lifetime, either through accidental hits or drops (e.g. PVC pipes during transport and installation; PVC containers in transport in transport and storage). Effective Modifiers have the following requirements: Must be insoluble in the PVC matrix and must have good adhesion between the continuous glassy phase and dispersed rubber phase. It should not adversely affect other properties like low permeability and low order of taste and odor. It must retain the elasticity at low temperatures particularly for the Outdoor applications in colder climates. It must have good thermal and light stability. Processing Aids: The polymers used as processing aids in PVC are of the following kinds: Acrylates and methacrylates (acrylic processing aids). Styrene / methacrylate copolymers. Acrylonitrile / butadiene / styrene (ABS) polymer. Styrene / acrylonitrile (SAN) copolymers. Poly--methylstyrene (PAMS).

Processing aids are employed in rigid PVC compositions, in relatively low proportions to facilitate melt processing. The typical effects of their presence on the stock are:

38

 attributed

Increased rate of homogenization and fusion, except in the case of Improved strength, cohesion and extensibility of the melt. Reduction of melt modulus and nerve, die-swell, and tendency to Increased melt viscosity. Tendency to increase torque and back-pressure in extrusion, to the faster, higher-shear character of the fusion process.

lubricating processing aids which extend fusion time.

melt fracture.

39

Production
Hero Agro purchases its raw materials and chemicals from reputed brokers in the Massive City area. These raw materials and chemicals are delivered to Hero Agro directly, and are kept in special sealed plastic bags and drums in a temperature controlled environment with specially secured locks. Only the engineers will has access to these raw materials and chemicals, as some of them are highly hazardous and expensive. First of all the quality controller checks the grade of the raw materials and chemicals, then the raw materials and chemicals are put into the compounded mixture. Here the raw materials and chemicals are compounded accordingly. After mixing a batch of either one of its products, the engineers will supervise the mixing efforts. Next, the raw materials and chemicals will be automatically loaded onto an attached mixer in a highly compressed state, where they will be mixed into a base. Second after the mixing process is over the raw materials and chemicals are put into the cooling tank. After the cooling process is over the final material is loaded into the whopper through a suction pipe with a spring. Here the raw materials and chemicals are mixed thoroughly and filtered so that no dirt or other materials are mixed with them. Third the extruder is heated for about 4 hours before it starts operating. The die is fixed on the extruder according to the size of the pipe needed to extrude. As the pipe flows out of the extruder through the die the vacuum process is started to keep the pipe in shape. Cold water is sprayed on the pipe to get the temperature down so that the pipe gets hard and solid. A chilling plant is associated with the sprays which chills the water after it is sprayed on the pipe. Finally the extrusion process is done and the pipe is ready to flow out of the extruder. As the pipe flows out of the extruder the tracking machine tracks the pipe and the pipe flow is continuous till it reaches to the cutter. An ink-jet printer is

40

kept in between the tracker and the cutter which prints the labels, name and the logo of the company on the pipe. The cutter while cutting the pipe moves to and fro. The cutter is ready to cut the pipe as the pipe gets up to 6 meters. The pipe after it is cut goes to the tilting machine where the pipe is set to rest. The pipes are now sent to the belling machine where the belling process is done according to their sizes. Where as some pipes are sent to the lathe machines where threading is done according to their sizes. There will be very few hazardous activities associated with the manufacturing process. The machinery is having double-locking mechanism which will not permit operation while they are open, and is having few moving parts on the outside. The only hazardous elements of machinery operated in Hero Agro activities are safe and secured. Nileshbhai after consulting with an insurance team and the ISO team has determined solutions for most of these problems. Special cover will be applied to the exterior of the machinery which will prevent burning, cutting and other injuries. Finally, employees will be instructed on the proper distances and safety precautions necessary when working around the cutter and will be educated on the lanes and speeds used by the cutter during those few times it will be in operation. Finally, given the company's willingness to take these precautionary measures, his insurance company has agreed to extremely reasonable workers' compensation rates which will cover all work-related injuries in Hero Agro s facilities. design

scheme will be the cutter which cuts the pipe as it gets to 6 meters. Rest all the

41

Product Decisions
Hero Agro considered several options for adding another discount plastic product to its product mix. However, the company chose to introduce a product that will have the greatest similarities to its existing U-PVC pipes in terms of production requirements, marketability, and consumer demand. Hero Agro has decided to add plumbing pipes, thus, limiting its product mix to two: U-PVC pipes and plumbing pipes. These two products are believed to be the ones with the highest profit margin within the plastic industry, based on the market research Nileshbhai has performed. As well, the solid forms of these two products make them suited to the same production equipment and similar processes. Both products can also be produced economically on a small scale. Finally, the consumer demand appears to be increasing for both of these products even faster than the market average for over-the-counter plastic products in general. While each of these two products fills an important market need, they do not compete against each other since they are designed to install at different places as required. These areas also have different seasonal patterns of sales. Market research shows that U-PVC pipes sales are skewed toward the winter months when water lever increases. By contrast, sales of plumbing pipes, while more consistent, are skewed slightly toward the summer months when water lever decreases. Since most plastic products can be easily reproduced, Hero Agro has the potential to expand its business by moving into other related product lines. Similarly, Hero Agro has the capability to use its manufacturing equipment and laboratories in a flexible manner, adapting its production processes and manufacturing focus accordingly.

42

Plant and Machinery

Introduction: DGP WINDSOR KTS-140 twin-screw extruder (contra rotating) is used in a processing department of Hero Agro Products Pvt. Ltd. for making UPVC pipes for potable water supply and plumbing purpose. With size range from 20mm to 110mm outer diameter. It contains several parts like: Extruder. Sizing / Cooling Unit. Haul-Off Unit. Cutting Unit. Tilting Unit.

Extruder: Screw: No. of screws: 2 Screw Diameter: 65 mm L/D Ratio: 18: 1 Torque max / screw: 130 Kg.m. RPM range: 4.5 to 45 rpm Speed Reduction: Through Windsor design primary, secondary gear box and V belts Heating: Barrel: No. of heating zones: 4 Total capacity: 14.5 kW No. of cooling zones: In last two zones Temperature control: By anticipatory proportionating temperature controller Adaptor: Heating capacity: 3.5 kW

43

 Temperature control: By anticipatory proportionating temperature controller Die: No. of heating zones: 5

Capacity of each zone: 5 kW (max) Temperature control: By anticipatory proportionating temperature controller Main Drive: A.C. Motor: 11.25kW (15HP) Speed: 150-1500 RPM Hopper Feed Unit: Hopper capacity: Volume 110Ltr or 70 Kg polystyrene Capacity to deliver: 150 Kg/Hr. PVC resin Thrust Capacity: Set of bearings on to give a safe working for barrel pressure of 3000 psi life of bearing at 3000 psi and 40rpm. Venting: Vent provided on barrel at 9.2 D from end of feed pocket. Vacuum Pump for Venting: Max. Vacuum: 24 Hg Suction capacity: 10cfm Total Wattage of Heater (Without Die): Heaters on barrel: 19.5 kW Drive Motors: Extruder: 11.25 kW Blower (main motor): 0.20 kW Hopper feed: 0.37 kW Lubrication pump: 0.75 kW 44

 Barrel cooling blower: 0.75 kW TOTAL WATTAGE: 32.8 kW A.C. Supply: Voltage: 450 V 5% Frequency: 50 Hz 4% Main Drive: The main 15 HP A.C. motor with inverter control is accommodated within the base. The power from the motor is transmitted V belts & pulley. Gear Box Unit: The Drive from motor shaft is transmitted to the primary gearbox through V belts. Additional safety is ensured by shear pin arrangement that is mounted on input shaft of primary gearbox. This gearbox is connected to secondary gearbox shaft by coupling. Secondary gearbox transmits power equally to two output shafts with desired direction of rotation i.e. contra rotating. All the gears are case hardened and ground to obtain high wear resisting properties. Screw: The screws are contra rotating which provides a positive displacement of the material and better mixing and greater output for a given screw diameter. The twin screws are made up of nitralloy steel nitride hardened and polished to ensure very smooth surface. The screw profile is designed taking care of the various parameters of plastic materials behavior during processing. It represents the most up-to-data concept in twin-screw extruders. The screw is made up of six sections all of which form an integral screw. The core depth of screw is kept same but the pitch and number and starts are different for each section to tale care of the processing requirements during the material movement, in them. Very close tolerances are kept between screws and barrel and in between two screws to minimize the back flow of material during processing. The screw speed can be read form speed indicator and current form Ammeter on remote control panel. The screws have a through hole drilled in the center, which is partly filled with thermic fluid and plugged. The thermic fluid takes away the excessive heat generated in the metering zone and gives it away to the cold material in the feed zone. Thus it helps to maintain the temp. of the screw uniform throughout its length. The screws have a hole provided in the center, which is partly filled with THERMIC FLUID and plugged. The fluid takes away the excessive heat generated n the metering section and gives it away to the material in the feed 45

zone and thus helps to maintain the temp. of the screw uniform throughout its length. Venter Barrel: The barrel is manufactured in sections and section and section are bolted in line at6 their mating flanges by a split C clamp. The barrel section are made of Nitralloy steel duly nitride hardened. A Vent-hole is provided for removal of volatiles by means of a vacuum pump. For easy of cleaning the barrel bores, the whole barrel assembly is provided with an arrangement to pull the entire assembly in the forward direction and then swing on the vertical axis so that the bores can be approached easily from both the front and rear ends. For the purpose of temperature control, the barrel is divided into four zones. Individual heating of each zone is by single-phase resistance heater and the associated thermocouples are housed in a separate control cabinet. The front section of the barrel is equipped with heaters and blower to provide for air-cooling in case of temperature overshoot. This system controls the frictional heat developed in the metering section of the screws. This is especially useful when processing RPVC. The rear barrel section is divided in to two zones-barrel zone 1 and zone 2 and is heated by ceramic heaters. The chute connecting the hopper feed unit to the barrel is Water Cooled. Rear barrel section has a flanged end, which is bolted on cradle. This section of barrel has an opening for venting out unwanted volatile from the plastic melt through the openings provided in the barrel. The heating in this section is done by ceramic heaters of zone 3. A blower is mounted on cover of the heater, air is circulated on that particular zone, when temperature there in overshoots above the set temperature. Feed Unit: Feed of material from the hopper to the Extruder Barrel feed pocket is controlled by the single-flight screw, driven by a sleeplessly variable speed DC motor. The screw picks up material from the hopper and conveys it to the hopper pocket. The screw speed is selected as per the processing requirements. The screw speed can be increased or decreased in synchronization with main motor if the extruder is running in AUTO mode. Vacuum System: The barrel is provided with devoiatising system. Two holes are provided on barrel one on each side to remove volatile gases. These two holes on barrel are joined by common junction block having a hole at the side, which is connected to vacuum pump via a filter. On top of this junction block two glass

46

windows are provided to view the quality of plasticizing during processing. A vacuum gauge is provided to check vacuum at the vent and a valve is provided to adjust the vacuum as required. To enable cleaning of filter during processing three gate valves are arranged in such a way that by operating them filter can be opened, cleaned and fitted. It is advised that this filter to be cleaned to avoid the filter getting chocked up. Die: A typical die for pipe extrusion consists of an outer member comprising the die ring/die body assembly, concentrically enclosing a mandrel (with a torpedoshaped end on the inlet side) supported in position buy three or more legs of a spider. The internal annular gap between these two main components of the die is the flow channel for the melt. Appropriately shaped and dimensioned, it tapers conically towards the exit end, terminating in a parallel-sided annulus defined by the mandrel body and the die ring: it is this annulus which determines the crosssectional dimensions of the tubular extrudate issuing from the die and hence to a large extent also those of the finished pipe, although the annulus is normally slightly oversized in relation to the pipe dimensions required, to allow for the effects of draw-sown and of the sizing/cooling operation. At the spider, the die channel is spanned radially, at intervals, by the spider legs. The reduction factor in the cross-sectional area of the channel between the spider and the die orifice (outlet), resulting from the conical taper, May-as a rough guide-is about 8: a high degree of reduction is necessary to ensure that the melt is considerably compressed, and thus enabled to knit thoroughly, after being divided by the spider legs. To the same end, the legs should be kept to a minimum size consistent with securing the necessary strength and rigidity of the mandrel mounting, and hence of the whole die assembly, and should be suitably streamlined. Failure of the melt to re-unite properly after passing round the spider legs can result in the presence of weld lines in the pipe, which may become failure sites under impact or pressure. Other considerations important in die design include the following. The die geometry is responsible for a substantial part of the backpressure generated in the extruder, and hence affects such important process feature influenced by the backpressure as energy consumption, extrusion rate, and the completeness of gelation of the PVC stock. The constructional factors principally instrumental in the generation of pressure in

47

the die are (a) the configuration and dimensions of the conically tapering section of the channel and (b) the length and cross-sectional area of the annulus: this length is usually referred to as the land length, and its ratio to the width of the aperture as the land length ratio, values of 8-12 are fairly typical for land length ratios of pipe extrusion dies. Obviously, the smaller the cross-section and the greater the land length, the higher the pressure developed. The die design must promote generation of backpressure at the appropriate level: sufficient to secure the required throughput and good gelation of the stock, but not so high as to result in excessive generation of frictional heat in the material or cause abnormal wear of screw thrust bearings. In relation to the throughput aimed at, the die channel volume and configuration must be such that the dwell time of the material in the die is optimized to ensure that the homogenized melt is uniformly distributed in the parallel-side annular gap which imparts its shape to the emergent pipe. Sizing / Cooling Unit: Technical Data: Vacuum Sizing Unit: Application: Vacuum sizing of PVC pipes Range: Min. O.D. 16 mm, Max. O.D. 160 mm Working center height: 1150 50 mm Axial movement on rails: 1800 mm Vacuum pump: 5 HP water ring vacuum pump Pressure boosting: 7.5 HP Monoblock pump Max Vacuum: 24(600 mm) of Hg. Electricity Supply: 415V, 3 Phase, 50Hz Water Supply: Flow rate = 17.8 LPS Head pressure = 20 meter

Sizing (Calibration) Process: Sizing is an operation of cardinal importance in pipe manufacture, in that it finalizes the bore, or the outside diameter, and circularity of the pipe. It is performed n the hot tubular extrudate emerging from the die orifice. The four main methods of calibrating uPVC pipe are as follows:

48

Mandrel Sizing: An extended mandrel protrudes from the die and is cooled with circulating water. This system yields pipes with very smooth, calibrated bore, but can be troublesome to run and is less versatile than the other systems. Pressure Sizing: In this system the tubular extrudate passes directly into a metal tube (the sizing die or sleeve) having a bore equal to the OD required for the finished pipe. Air pressure is applied through the mandrel via one of the spider legs. The tube being extruded is sealed by means of a plug attached by a wire to the mandrel, and an internal pressure is built up sufficient to keep the pipe pressed against the metal tube (about 2lbf in-2). The tube is usually double-walled and cooling water is passed through the cavity. Such sizing dies are usually quite short (6-18 in) and the pipe being extruded passes directly from the die into a cooling bath. Vacuum tube Sizing: A similar arrangement to the pressure sizing die is used, but in this method a vacuum is applied to the outside of the extruded hot pipe via a number of small holes in the sizing tube. This obviates the need for a sealing plug. Vacuum ring and cooling tank: In this system the tubular extrudate is passed through a vacuum ring (a short vacuum tube) which affects the initial sizing of the pipe whilst cooling proceeds in a water bath kept under reduced pressure. The atmospheric pressure inside the pipe maintains its circularity during its passage through the bath. Modern vacuum sizing tanks can handle a range of pipe sixes, up to about 900mm diameter. Cooling Bath: High-velocity, finely atomized water sprays are used as the cooling medium in modern practice. Flooded immersion water baths are suitable only at very low take-off speeds otherwise inordinate bath lengths would be necessary to achieve the requisite heat transfer. In some modern take-off trains for the production of U-PVC guttering the extruded pipe can be slit longitudinally and post-formed in the cooling tank, the two halves forming guttering profiles of the desired shape. Construction and Functional Details: DGP WINDSOR Vacuum Sizing Tank Model VST-160/6V is a vacuum cum cooling spray bath suitable for pipes of thermoplastic materials ranging from 16 mm dial to 160 mm dia. The machine is simple and robust in construction and is placed on rails for mobility in the axial

49

direction. Adjusting screws are provided for center height adjustment. The machine is fitted with a 3.7 KW water ring vacuum pump for creation of vacuum, and a 5.6KW monoblock water pump to supply water to the spray pipes for pipe cooling. The tank is made with a 6 meters long vacuum chamber cum spray bath in order to cool the pipe sufficiently to avoid variation in the pipe outside diameter and ovality during traction, storage and subsequent handling. On the pipe entry side, the tank has provision of mounting former boxes suitable for various pipe diameters. The former box having slits at proper distance on its perimeter from which vacuum is applied to the outside surface of pipe. The hot pipe coming from the pipe die enters the former box and adheres to the internal surface of the former box due to the presence of vacuum inside the tank. A water trough is made in the vacuum chamber near former box. As the pipe passes through the rough maintaining contact with the internal surface of former box, its outer skin solidifies and takes the shape and size of former box. The cooling water sprays directed on the pipe cools the complete cross section of the pipe subsequently. At the exit end, pipe passes through a rubber ring held firmly between clamping ring and supporting thus ensuring vacuum seal. Haul-Off Unit: Technical Data: Pipe range dia: 16 mm to 110 mm Haul off speed: Refer speed chart. Effective length of track: 650 mm Center distance between: 1010 mm pulleys (drive & driven) Height of pipes center: 1200 mm Max line (adjustable by hand) 1060 Tracks: Rubber pads fixed on outside of endless Poly V belts Drive to individual track: From common main drive shaft and bewel Drive: By A.C. Motor gears. mm Min

Drive motor: A.C. Motor of 1.5 KW capacity Speed range 1500-3000 rpm Connected load: Motor load: 1.5 KW, Supply: Single-phase 240V, AC 50 c/s with earth.

50

Speed Chart:
Range 1 2 3 Motor Speed 1500 150 1500 150 1500 150 Sprocket Teeth Motor Gear Box 21 21 23 76 33 17 Gear Box Ratio 70 70 70 Haul off Speed Mtrs. /min 2.80 0.28 6.43 0.64 14.0 1.4

Tube Traction Process: The main function of this equipment are to pull the pipe away from the die and through the sizing and cooling units at the required rate and in such a way that it is kept straight during calibration and cooling; it also feeds the cooled pipe forward to the marking and cutting sections of the line. The haul-off is usually of the caterpillar or pneumatic-tyre type, employing these elements to grip the pipe securely and impart the necessary traction. The haul-off speed is normally set slightly in excess of extrusion speed, to achieve the requisite degree of drawdown. As is largely self-evident, the wall thickness of the pipe will decrease with increasing drawdown, whilst the uniformity of the take-off rate is an important factor in wall thickness uniformity. For these reasons close controllability and fine adjustment of haul-off speed are of cardinal importance in the process. Construction and Functional Details: DGP WINDSOR Tube Traction Unit Model TTU-110 has been designed to meet the requirements of pipe haul off at the required surface speed, matching with the extruder outputs obtained. The machine is simple and robust in construction and is fitted with castor wheels and leveling bolts. The drive consists of a variable speed A.C motor, controlled by a full wave Thyristor controller. A chain drive connects the motor to a robust worm reduction gearbox, the output of which is given to the haul off tracks through a rigid coupling and bevel gear drive. The Thyristor controller for A.C. motor is housed in the base of the machine. As an optional feature the Potentiometer, for the change of haul off speed of the traction unit, can be mounted separately on the extruder base for the convenience of operation. Cutting Unit: 51

Technical Data: Specifications: Range of diameter: 16 mm to 110 mm Max Extrusion speed: 10Mtr. / Min. Cut length tolerance: about 4 to 5 mm Max No. of cuts: 6 / Min. Trolley stroke: 1100 mm Saw blade dia: 350 mm Saw motor: 1.5kW, AC, 3000RPM, 3 phases

Optional: Swarf Collection Unit: Blower Type: Centrifugal Made: 28-160 Capacity: 600 CFM Pressure: 6 WG Speed: 2800RPM Blower motor: 1.5kW, AC, 2880 rpm

Cutting Process: Pipes are usually cut by so-called flying saws. A flying saw is a circular saw, which travels along with the pipe as it makes the cut. The saw is generally activated by a limit switch touched off by the end of the pipe when a desired length has passed under the saw position. On large pipes peripheral saws are used, which do not cut right across the pipe but move around the circumference, cutting through the well; such saws may be associated with a chamfering device. Construction and Functional Details: The tcu-110 (Tube Cutting Unit) is an automatic machine for cutting the plastic pipes to required length, which can be used for diameters from 16 to 110 mm. This machine has been so designed that it can be installed as part of an extrusion line so that continuously extruded pipes can be cut off to commercial lengths. The machine is available with a center

52

height of 1150 50 mm. The pneumatic and electrical panel is located on the base frame. Trolley Assembly: The trolley assembly contains trolley plate, which is made out of aluminum, on which clamp assembly and cutter assembly are mounted. The trolley plate is moving forward and backward on highly polished and hardened guide rods with the help of 4 Nos. linear bush bearings. For forward and backward movement of trolley, a pneumatic cylinder is provided and its speed can be regulating with help of pressure regulator, which are mounted on panel. In addition to control feed of trolley movement, 2 Nos. of F.C.V. are provided on pneumatic cylinder. A pipe guide tray with guide rollers are provided to guide the pipe up to fitting unit 2 Nos. guide blocks are mounted on trolley plate which guide the pipe before entering into the clamping assembly. The gaps between the guide blocks are to be adjusted according to pipe sixes. Clamp Assembly: Clamp assembly contains very few parts like aluminum casting cover with lifting handle and two Nos. cylinder mounting adjustable brackets. 2 Nos. cylinders are pressed the pipe on the trolley top plate with the help of rubber pad. According to pipe wall thickness clamping pressure can be regulate. Many types of clamps are used in clamping unit. Traditional clamps, Universal clamps, 3-arm universal clamps. Cutter Assembly: Cutter Assembly is mounted under top trolley plate. It contain cutter motor, saw blade, cutter cylinder etc, motor and cutter are mounted on motor plate which can be move up and down with the help of pneumatic cylinder. Two Nos. of adjustable limit switch are mounted on slotted plate and they are adjusted as per pipe size requirement. Outward stroke is restricted by limit switch and stopper bolt. Many types of cutter are used as saw in following fig. Swarf Collection: This assembly is an optional feature of this unit. This assembly contains blower, hose, and swarf collection unit and air filter. A swarf collection unit is joined to cutter protecting hood with the help of flexible duct. A blower sucks the valuable swarf from clamp assembly through cutter protecting hood, which is collected in swarf can be removed at regular interval from swarf collection unit through manhole. Pipe Tilting Unit:

53

Construction and Functional Details: The pipe-tilting unit receives cut pipe pieces from the Auto Saw and stacks them in a collection rack. The tilting operation can be matched to the extrusion speed and the cut length of a pipe so that in conjunction with the Auto Saw, cutting and stacking operations follow each other automatically in a cycle. Technical Data: Range of pipe diameter: 16 mm to 110 mm Tray Length: 6000 mm Tilting stroke/Min: 10 Center height of extrusion: 1150 50 mm

Operation sequence: The pipe coming from the Auto Saw moves in the tray. The front tip of the forward moving pipe presses the limit switch LS-1, which gives signal to Auto Saw motor for start of the cutting cycle. As the cutting of the pipe takes place, the Timer on the Auto Saw / Tilting unit receives Start signal. The timer period is to be set in such a way that the cut pipe piece can drop in the collection rack, when it is titled off from the tray. The timer period has to be adjusted to suit speed and cut length of pipe. The second timer (RTPN) provided on the Auto Saw / Tilting Unit acts as a delay timer. After tilting of the tray, the same should not return to its normal position unless pipe has dropped down. This holding time is to be set on the delay timer. Precautions: The pipe leaving the Auto Saw should enter the tray of Tilting Unit without getting deflected in any way. This means that the tray alignment and the tray height with respect to Auto Saw are to be maintained. The limit switch LS-1 with flap type lever is to be adjusted according to the pipe diameter in such a way that on-moving pipe grazes along the lever and operates the switch. While adjusting the tray height according to pipe diameter, care should be taken to retain the tray. Horizontal and Symmetrical with respect to the plumb line.

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Objectives and Strategies

In introducing its new plumbing pipes to the local market, Hero Agro has set its objective at capturing a 5% local market share in 12 months following the product's roll-out. Further, it seeks to expand its local market share for U-PVC pipes from 5% to 7% as a result of the increased production capacity and aggressive marketing strategy associated with its expansion. In the longer term, the company will seek to capture 1% of the national market for each of its products by within the next 5 years. These objectives will be pursued through an aggressive pull strategy of advertising and promotions aimed at end-users of the Hero Agro s products. This approach is designed to stimulate demand at the retail level by promoting the products to consumers who will then seek to find the pipes on the shelves of the local retail stores. This strategy will be supplemented with direct sales push aimed specifically at purchasing agents of chain discount stores, with a secondary target of purchasing agents for local and regional markets and retail stores. This push strategy is intended to communicate a specific message about the Hero Agro products -- which the products will appeal to consumers more readily than products perceived as generic. A secondary message aimed at retailers will emphasize that their product will be delivered more quickly and more reliably than those of major corporations The products will be marketed as low-cost alternatives to the expensive off-theshelf products sold by the big three major plastic companies. Since many of the potential retailers being targeted are already familiar with these products, Hero Agro will emphasize the unique selling features of its products. Finally, Hero Agro plans to use its growing customer base in the first two years to slowly expand its market concentration into other regions of the country. As the company grows and the marketing budget increases, Hero Agro marketing and promotions activities in other regions. will slowly capitalize on its brand recognition in it regional base in order to increase

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Unique Selling Advantage

The unique selling advantage of Hero Agro is its ability to induce both pricesensitive and value-oriented consumers to purchase its products through clever promotions and packaging. Hero Agro hopes to use its expansion as a mechanism to amplify these advantages substantially. While other companies are involved in the value plastic business, Hero Agro believes those companies have taken an improper approach to packaging and promotion of their product. Most independents have packaged their products in generic-type product labels with words such as "best value" and the ultimate in large, boldface type on the label. The company's market research, as well as some recent articles in economics journals suggests that plastics are one product type in which many consumers believe that the expensive products are substantially different (i.e. better) than their low-priced competitors. This line of thought has been well promoted by the three large companies which have fostered the impression from consumers that major brand products are significantly better than their smaller competitors in their quality product-specific ailments. However, little has been done by the independent producers to attempt to counter that image. Hero Agro believes that independent plastic companies are doing themselves a disservice by appealing to the value-conscious customers' sensitivity to low cost alone. The company believes it can attract a much more broad-based appeal if its packaging, labels and in-store promotions are as attractive and quality-oriented as its large counterparts. Hero Agro intends to sells its uniqueness in packaging and promotions not only to consumers, but also to distributors as a reason its value products will actually 56

sell more than one of the other independents. Hero Agro believes that consumers notice the lower price, and also are educated by the company's labeling and promotions about the complete lack of a difference in quality between an Hero Agro s product and that of a name brand.

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Selling Tactics
In its plans for expansion, Hero Agro will use manufacturers' representatives, rather than its own sales force, to sell its products to retailers in the local market. The manufacturers' representatives will use a direct sales strategy to penetrate the retail market. While Hero Agro will lose some control over the selling function, the company will still coordinate the selling process so that it is consistent with the company's marketing objectives. Hero Agro procedures. The company's primary sales goal is to win shelf space at discount retail chains, as well as open markets, retail stores and wholesalers. Nileshbhai believes that using this selling tactic will have two main benefits in helping to achieve this objective. First, the company will not incur the costs of directly employing a full sales force. Second, the manufacturers' representatives have a sales network in place at the retail level. This will allow Hero Agro to move its products into the retail outlets faster than if it sold the products itself. It will also give Hero Agro access to retailers it might not otherwise have. will also work closely with the representatives on such policies as pricing, area, distribution and order-handling

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Channels of Distribution
Hero Agro s distribution chain will involve the following steps: First, the company will source the raw material inputs from various suppliers on short-term contractual grounds as needed. These transactions will be brokered by a middleman who will shop the raw materials markets as demand conditions dictate to find the best prices for his client, Hero Agro . As Hero Agro begins to form more industry relationships and as the company establishes a fairly steady production schedule the supply channels are expected to become more concrete and longer-term. Second, Hero Agro will source its packaging and labeling products in the same manner, where short-term needs will be met as demand conditions dictates until a routine operating schedule is in place. Plastic bags to contain the U-PVC pipes will be ordered directly from the manufacturers as will the plastic cases that will contain the plumbing pipes. Third, Hero Agro will use local and regional wholesalers to distribute to retail chains. In order to keep inventory to a bare minimum, the production schedule for the Hero Agro products will be driven by new orders. Hero Agro will solicit orders through the manufacturers representatives and will guarantee that the company can load and deliver those orders anywhere in India in 3 weeks or less. These manufacturers' representatives typically add a 2-3% markup on the Hero Agro wholesale product price. Because of this fact, the financial statements do not reflect any commission for these individuals.

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Pricing
Although the range of markups in the plastic industry for the products described in this business plan is quite large, it is not very flexible at the upper and lower ends, and it does not change often. In fact, both upper and lower limits have remained within a few percentage points of each other for the big three manufacturers since competition has existed. The entrance of independents into the market introduced a lower pricing tier that, surprisingly, has affected the major companies very little. Almost all of the independents tend to stay in the same price ranges for their products, since variable costs such as raw materials tend to be consistent the world over. Those competitors that substantially exceed the lower tier price range or try to undercut it are not able to maintain a competitive position for long. For those who undercut the lower price range set by the market simply cannot sustain such a small profit margin. Likewise, those who exceed the upper end of the range price themselves in the tier where they compete with the high-end, name brand products. As a result, sales plummet because they cannot compete with the market leaders' advertising and promotions efforts to establish brand loyalty. Thus, the Hero Agro s pricing policy is very much in line with the industry standard for the independents.

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Description of Risks
Every business faces threats from various risk factors it may encounter. Hero Agro is no exception. A list of considerations the company has addressed includes: Competitive Response: There is little chance that major plastic companies will decide to slash prices based on the Hero Agro s expansion. For Hero Agro poses no real threat to the market share held by each of the primary manufacturers in the industry. As such no competitive response is expected from these major players that would negatively impact the position of Hero Agro in the industry. Similarly, the smaller, independent manufacturers are unlikely to respond significantly in price, because they are already operating toward the lower end of their potential profit margin. However, it is likely that independent competitors will at least take a look at some of the innovative techniques Hero Agro will implement. For example, there is likelihood that the Hero Agro emphasis on quality as a non-brand name may catch the attention of some competitors. If successful, these competitors may seek to capitalize on the company's emphasis on quality and change their labels and their promotional techniques to take advantage of this successful marketing strategy. Cycles: Since the U-PVC pipes business is especially seasonal (with summer being the period of greatest sales), there is the risk that Hero Agro will not be able to meet its obligation to its creditors and employees in the slower periods of summer due to revenue difficulties. There is a similar risk, though less serious, as a result of the seasonal variation in usage of threaded pipes and plumbing pipes which tend to peak in the summer months. Growing Pains: While Hero Agro has had experience in managing personnel in the plastic industry, there is a substantial likelihood that the company will grow extremely quickly, and will require the employment of additional personnel. This growth will bring with it a series of operational and managerial issues ranging from accounting and legal choices to marketing options, organizational structure and personnel questions.

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Contingency Plans
In its plans for expansion, Hero Agro has made plans to deal with the risks outlined above: Competitive Response: Hero Agro plans to make a quick and effective market entrance as the quality leader among discount U-PVC pipes. Traditionally, the first company to introduce and land an in-store display has priority on its space -stores typically do not want too many displays (especially of competing products) cluttering their aisles. Thus, a quick strike on the retail chain market will be especially effective at locking out competitors who have yet to use this promotional tool. As well, a quick entrance is designed to ingrain the notion that Hero Agro is the quality product among the variety of similar PVC products on the shelf. Finally, if other brands switch their labels and otherwise follow the company's promotional strategy, the company plans to respond with an advertising theme that emphasized its position as the quality leader in the market. Cycles: Hero Agro has chosen its product mix to offset the cyclical effect of UPVC pipes sales. The company's market research has shown that sales of threaded pipes and plumbing piles peak in the summer (especially where water supply is scarce). It is anticipated that this will, to some extent, counteract the effect of diminished sales during slow periods in the sales cycle for U-PVC pipes. As well, the company plans to position itself from a capital perspective to be able to ride out the slower months. The inventory planning system will reduce the amount of variable costs ordered during that period of time to help keep costs down. Growing Pains: Nileshbhai understands the difficulties that managing a quickly growing enterprise can pose. He received his B.SC. degree in what is widely regarded as one of the best science programs in the country at Saurashtra University. There, he was exposed to many situations where successful entrepreneurial enterprises had decisions to make that would determine their viability in a period of high growth. Nileshbhai knows that rapid growth will require him to increasingly delegate responsibility -- a characteristic he experienced in his successful management career. He also is committed to a semi-annual personal

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assessment and evaluation of his management skills and the company's direction. For this, he has budgeted of 20 thousand in outside services for next year to hire a consultant who is a regionally recognized expert in entrepreneurial management decision making.

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Research & Development

Like all other U-PVC pipe manufacturers, Hero Agro purchases its raw materials from inexpensive suppliers, most of which reside nation wide and overseas. Operating this type of business requires little product R&D. Hero Agro will need to stay informed of emerging technologies in order to maintain its performance and reliability standards. Most raw material suppliers inform their customers of this information. In addition, Hero Agro s management will need to regularly attend trade shows to stay abreast of technology and how consumers will use it.

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Sources and Uses of Capital

In order for Hero Agro to successfully complete its plans for expansion, an investment of 20 lakhs will be required. Nileshbhai will contribute 10 lakhs of his own money and is seeking financing for the remaining 10 lakhs from an outside source. The anticipated terms of the loan will be 6 years with an interest rate of 15% that will be repaid in monthly installments. The table below (Sources and Uses of Capital) represents the ways in which the funds will be utilized over a one-year period.

Description SOURCES Business Loan Owner Investment Other TOTAL SOURCES USES Raw Materials Machinery Salaries Working Capital Office Costs Professional Fees Miscellaneous and Reserve Fund TOTAL USES

Amount

20,00,000 10,00,000 10,00,000 20,00,000

20,00,000 95,00,000 7,00,000 25,00,000 1,00,000 20,000 2,00,000 1,50,20,000

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Balance Sheet
The following table (Balance Sheet) provides an overall picture of the company's assets and liabilities.

Description

Last Year Mar-03 ASSETS

Last Year Mar-04

Projection Mar-05

Projection Mar-06

CURRENT ASSETS Cash - Checking Accounts Receivable Inventory Certificate of Deposit / Other Investment Accts Total Current Assets 30,00,000 25,00,000 15,00,000 1,25,000 71,25,000 25,00,000 20,00,000 7,00,000 1,00,000 53,00,000 35,00,000 25,00,000 9,00,000 1,50,000 70,50,000 40,00,000 30,00,000 15,00,000 2,00,000 87,00,000

FIXED ASSETS Lease hold Improvements LESS: Depreciation - Leasehold Improvement Furniture and Fixtures LESS: Depreciation - Furniture & Fixtures Vehicles LESS: Depreciation - Vehicles Plant & Machinery LESS: Depreciation Plant & Machinery Total Fixed Assets 15,00,000 50,000 12,00,000 15,000 10,00,000 15,000 95,00,000 10,00,000 1,42,80,000 14,50,000 40,000 11,85,000 10,000 9,85,000 10,000 85,00,000 10,00,000 1,31,80,000 14,10,000 45,000 11,75,000 12,000 9,75,000 12,000 75,00,000 10,00,000 1,21,29,000 13,65,000 55,000 11,63,000 17,000 9,63,000 17,000 65,00,000 10,00,000 1,10,80,000

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LIABILITIES AND EQUITY

CURRENT LIABILITIES Accounts Payable Federal Withholding Taxes Payable FICA Withholding Taxes Payable State Withholding Taxes Payable Notes Payable Total Current Liabilities 20,00,000 5,00,000 8,00,000 3,00,000 2,00,000 38,00,000 EQUITY Additional Paid-in Capital Other Equity Items Retained Earnings Total Equity TOTAL LIABILITIES AND EQUITY CURRENT RATIO 20,00,000 5,00,000 8,00,000 33,00,000 71,00,000 70% 15,00,000 4,00,000 7,00,000 26,00,000 55,50,000 55% 17,00,000 7,00,000 9,00,000 33,00,000 74,50,000 75% 25,00,000 9,00,000 10,00,000 44,00,000 94,00,000 95% 15,00,000 4,00,000 7,00,000 2,00,000 1,50,000 29,50,000 20,00,000 6,00,000 9,00,000 4,00,000 2,50,000 41,50,000 25,00,000 7,00,000 10,00,000 5,00,000 3,00,000 50,00,000

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Income Statement
The following table (Income Statement) provides an overview of the company's income for historical, present and projected years.

Description

Last Year Mar-03

This Year Mar-04

Projection Mar-05

Projection Mar-06

EARNINGS Gross Sales 3,52,00,000 2,20,00,000 2,55,00,000 3,00,00,000

COST OF GOODS SOLD Beginning Inventory Purchases Less end of month inventory Cost of Goods Sold Gross Profit on Sales 15,00,000 70,00,000 5,00,000 3,00,00,000 20,00,000 7,00,000 35,00,000 6,00,000 1,80,00,000 22,00,000 9,00,000 40,00,000 7,00,000 2,20,00,000 25,00,000 15,00,000 55,00,000 9,00,000 2,50,00,000 35,00,000

GENERAL & ADMINISTRATIVE EXPENSES Advertising Capital Equipment Depreciation Leasehold Depreciation Contributions Entertainment Insurance Legal Expenses Licenses Rent Office Supplies Outside Services Postage Taxes (Income) Telephone Selling Expenses Travel Expenses Wages Interest Paid Total Gen. & Admin. Exp. Other (Non Operating Income) NET INCOME 60,000 40,000 50,000 70,000 20,000 75,000 20,000 55,000 8,000 25,000 12,000 7,000 15,000 20,000 17,000 8,000 15,000 20,000 5,37,000 20,000 6,00,000 75,000 35,000 40,000 50,000 17,000 60,000 15,000 45,000 7,000 20,000 9,000 5,000 12,000 17,000 15,000 6,000 12,000 15,000 4,55,000 15,000 12,00,000 1,00,000 40,000 45,000 80,000 20,000 65,000 17,000 50,000 8,000 35,000 10,000 8,000 17,000 20,000 20,000 9,000 17,000 17,000 5,78,000 17,000 20,00,000 1,25,000 45,000 55,000 1,00,000 25,000 70,000 20,000 60,000 10,000 40,000 15,000 10,000 20,000 25,000 25,000 10,000 20,000 25,000 7,00,000 20,000 30,00,000

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% of Gross Profit

10%

14%

17%

20%

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Cost Containment
Hero Agro is initiating an aggressive cost-control system as a means of limiting spending excesses as the company's expansion get under way. Given its relatively young position in the industry it is wise to control spending while the business gains market share and gradually increases its competitive position. Based on his business background, Nileshbhai has been able to map out a cost containment program and a timetable for implementation. The table (Cost Containment) is a basic version of that timetable. The self-directed cost audit containment will be comprised of several programs which will be used for internal cost control purposes. The Cost Reduction Reward Program is designed to enable employees to earn bonuses based on the projected cost savings of the suggestions they provide for improving business operations. Nileshbhai believes that there is always room to improve and he would like to encourage his employees to think about efficiency gains and potential reductions in the cost of such things as the production processes, packaging, and advertising. Further, an internal cost audit will be performed annually to evaluate the management structure and financial operations of the company. However, at this point, given the designs for a relatively flat organization structure and small-scale of operations, Nileshbhai feels the company will be organized for maximum efficiency. Additionally, a materials cost tracking program will be implemented in order to periodically evaluate the sourcing of raw materials, equipment, packaging supplies, and the like to see if there is room for economic improvement or efficiency gains in terms of channels or processes.

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Finally, Nileshbhai has planned a fairly rigid employee wage and training budget from the first year. Nonetheless, employees will be rewarded for their hard-work in helping the business become successful through incentives programs, bonuses and other compensation. Further, considerable investment in training has been budgeted for in order to educate employees from the start, as well as to upgrade their skills over time.

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Start-Up Costs
Hero Agro has determined those costs that it deems necessary for the start-up effort. A budget of the company's required resources has been compiled in the table (Start-Up Costs) below:

USE Equipment Initial Advertising Employee Training / Hiring Inventory (collateral material) Insurance Licenses / Permits Miscellaneous Expenses TOTAL START-UP COSTS

COST 6,00,000 28,000 40,000 3,00,00,000 75,000 55,000 48,000 3,08,46,000

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Justification for Loan / Investment

Nileshbhai is providing 10 lakhs in funding to expand the business of Hero Agro . The company also seeks 10 lakhs from an outside source to meet the financial requirements of this promising endeavor. This capital will be used to satisfy the company's expansion requirements as set forth in the Sources and Uses of Capital section of the business plan. The projected cash flow statement clearly shows the ability to pay even in a worst-case scenario situation.

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Milestones / Timetable
Hero Agro has identified a few key benchmarks it seeks to achieve and has laid these goals out on a timeline for company success. These objectives, when met, will give an indication of the success of the expansion effort and will provide the foundation for the future direction of the company. The following table (Milestones) depicts the name of the objective, the date the goal was set, the date action was initiated, the target date for achieving the goal, and the current status:

Milestone

Date Adopted

Date Enacted

Target Date

Current Status on

Capture 1% of the national market Reduce raw materials costs 10% Form strong business relationships with local agents and retail shop owners

01/09/2004 01/11/2004 01/12/2004

07/09/2004 07/11/2004 07/12/2004

30/09/2004 30/11/2004 31/12/2004

schedule ahead of schedule ahead of schedule

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Suggestion
First, Hero Agro needs to increase its marketing efforts. Second, Hero Agro should try and maintain its new product Galaxy U-PVC

pipes so as to keep in touch with the lower market. Third, Hero Agro should not loose its market for Deepak U-PVC pipes so

that the upper market is not disturbed. Fourth, Hero Agro should keep its prices low as compared to its

competitors so as to penetrate deep in the market. Fifth, Hero Agro should start collecting its debts before its too late looking

at the market position right now. Sixth, Hero Agro should use the (JIT) Just In Time principle to keep in

track with the inflation and competition.

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Details
Marketing Management: Phillip Kotlar. The Principles of Marketing: Adrian Palmer. Financial Management: Khan and Jain.

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