CASE STUDY: ORGANISATIONAL BUYING PROCESS
M/s Professionals is a private limited company which conducts training across Mumbai for various corporate top and middle level management executives. The company has tie up with foreign dignitaries, known personalities, Trainers, Experts to conduct the training for the Professional Pvt Ltd. There have been many problems in the past of pick up and drop for these dignitaries from Airport to hotel to corporate and back. The contract for pick up and drop has been given to M/s Fast Speed. The dignitaries have complained the training coordinator on number of occasions about the issue. The training coordinator Mr. Ramesh has felt the need for having company owned cars due to cost effectiveness and availability. The company has a purchase department headed by Mr. Paresh who is responsible for organizational purchase. Mr. Ramesh and Mr. Paresh both report to Mr. Ashutosh Tyagi who is the decision making authority for all major expenses.
1. Explain the protocol that Mr. Ramesh has to follow to initiate the process? (5 Marks) 2. If you would have been at Mr. Ramesh’s place what explanation you would have given to Mr. Tyagi for convincing him for the need of cars? (5 Marks) 3. Explain the organizational Buying process that Mr Paresh will follow? (5 Marks) 4. What decision you would have taken to purchase the car or to change the travel agent? Justify your answer. (5 Marks)
5. Kindly explain in detail which car you would Purchase if you would have been at Mr. Paresh’s place? Kindly justify your answer with features, cost comparison of minimum four cars and cost benefit analysis? (10 Marks)
Discussion: Mr. Ramesh is the training coordinator and has felt the need of the company owned car. So first of all he has to justify the need of car and then he has to write a comparative analysis and speak to his seniors and purchase department. Justification can be done on various parameters like Utilization of car on short / long term, Operating expense of car including drivers salary, Average monthly maintenance, Down payment, EMI, Taxes, insurance etc. Intangible benefits like comfort, convenience, psychological need etc also should be consider and then should have comparative analysis of the hiring services and owning car. This comparative analysis can be written as follows.
Lets Assume 3 years time for calculations. And current rate of car hire is taken at 15Rs./ Km for A/c. Car and 11 Rs./KM for Non A/c car. And historical statistics shows that company hire car for Average 5500 Km every month which include both A/c. and non A/c. vehicle.
Car HireOwn Car
Average Car Rental PMEMI PM
A/c.42000 X 36 = 151200015000 X 36 = 540000
Non A/c31000 X 36 = 111600011000 X 36 = 396000
Drivers Salary NA 8000 X 36 = 288000
Maintenance NAFor 1 year = 0 Free
2nd & 3rd Year = 24000
InsuranceNARs. 12000 PA = 36000
inclusive Taxes NAFor A/c. 108000 , 79200
Operating / Fuel Charges NAFor A/c. 15000, 11000 PM.
Total Operating cost for 36 month
A/c Car1512000For A/c. 1392000
Non A/c Car1116000For N A/c. 1104000
Depreciation can be claim NAfor 3 years 20% of value PA
For A/c. = 129600, For N.A/c. 95000
Resale Valueafter 3 years NAApprox 40% of Cost = 260000 or 200000
Interest paid on car loan will be considered as expense so reducing tax liability of company
Apart from that company will have its own car, So no need to rely on the third party service provider for having the services. So it will not be an inconvenience to our foreign delegates and guest. This will also add good will and positive impression on our guests.
With this comparative analysis he should write to Mr. Paresh who is in-charge of the organizational purchase. So here Mr. Ramesh will be initiator and Mr. Paresh will be...