Strengths of Nirmal Rayons
1.Duopoly in the market – only two major players
2.Unutilized capacity of 1200 tonnes - can be used in case of unexpectedly high demand 3. Capacity increase sanctioned by the government – can be used to service newer markets 4. Rising number of users for Cellulose film
Weaknesses of Nirmal Rayons
1. Increased supply – 2 existing firms and 3 new ones have been given letters of intent for increasing capacity 2. Substitutes – Cheaper alternatives like Cellophane like PVC have emerged in the market.
Nirmal Rayon’s MD needs to verify the accuracy of the consultant’s computations and to decide whether to install additional capacity or not.
Evaluation of the Consultants’ Estimation
The following issues were found with the consultants’ estimates: Textiles: The consultant has assumed that the share of cellulose film within will reduce due to competition from PVC. However, because of the increased supply in the market, prices will be driven down and this will counter the effects of PVC. Thus, we can assume a constant share (74%) which leads us to a demand estimate of 2795 tonnes. Confectionary: The computations for cellophane requirement are not consistent with the data provided in footnote in Exhibit A6 of the consultant’s report. Using the given conversion factor of 40kgs/tonne, we get a new estimated demand of 657 tonnes. Revised Calculations
Total cotton textile production (Million Meters)
Cotton textile requiring premium packaging (%)
Non-cotton textile production (Million Meters)
Total Packaging material required (Tones of CF)
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