decision sheet

Topics: Cellulose, Textile, 3rd millennium Pages: 2 (413 words) Published: October 12, 2014
Decision Sheet
Situation Analysis

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.

Problem Statement:
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

Textiles

Year
Total cotton textile production (Million Meters)
Cotton textile requiring premium packaging (%)
Non-cotton textile production (Million Meters)
Total Packaging material required (Tones of CF)
Cellophane Shares
 
 
 
 
 
%
Tonnes
1972
8400
50
1105
2971
74
2198
1973
8700
51
1150
3129
74
2315
1974
9000
52
1190
3287
74
2432
1975
9250
53
1235
3437
74
2543
1976
9550
54
1280
3605
74
2667
1977
9850
55
1325
3776
74
2795

Confectionaries

Year
Organized Sector...
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