Wac Kanpur Confectionary

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WRITING ANALYSIS AND COMMUNICATION-I

Assignment No. 2

CASE ANALYSIS

OF

KANPUR CONFECTIONORIES PRIVATE LTD. (A)

Name: Hitu Kanodia

1. EXECUTIVE SUMMARY

OBJECTIVE:

Kanpur Confectionaries Private Ltd (KCPL) has the vision of emerging as a leading national brand in the biscuit industry and thus maintaining the family name and dignity.

PROBLEM:

APL is a leading national player in the biscuit industry and is a major competitor of KCPL. KCPL has to decide their response to the proposal of A-One Confectionaries Private Ltd (APL) about becoming its contract manufacturer.

OPTIONS:

KCPL has the following 3 options:

• Option 1: Accept APL’s offer

• Option 2: Become an independent contract manufacturer.

• Option 3: Rebuild the “MKG” brand.

DECISION:

KCPL should work on reviving its brand.

ACTION PLAN:

KCPL has to work on technology upgradation, increasing capacity utilization and managing a efficient workforce. It also has to improve its brand image and target new profitable markets.

CONTINGENCY PLAN:

As a contingency plan, KCPL can accept the offer of APL.

2. MAIN REPORT

1. SITUATIONAL ANALYSIS

Mohan Kumar Gupta started Kanpur Confectioneries Private Limited (KCPL) in Jaipur in 1947 to sell sugar candy under the brand name of “MKG”. He later set up a production unit in Kanpur (UP) because of intense competition in Jaipur. He ventured into the biscuit industry with the “MKG” brand. Its turnover increased during the early 80’s. But with the stiff competition from the firms in the organized and unorganized sector its sales have declined and by mid 80’s it has started making losses (Exhibit 1). It became a contract manufacturer for Pearson Health Drinks Limited (Pearson) in 1985. But Pearson faced stiff competition from A-One Confectioneries Private Limited (APL).  Now in September 1987, KCPL has the proposal of becoming a contract manufacturer for APL. If KCPL accepts the proposal, they would be able to utilize the surplus production capacity and get assured return on investment, but they would lose their brand and their independence.

2. PROBLEM SITUATION

Mr. Alok Kumar and his brothers have to decide whether to accept the proposal to manufacture for APL. They even need to deal with the problem of surplus capacity.

3. OBJECTIVES

KCPL has the vision of emerging as a leading national brand in the biscuit industry and thus maintaining the family name and dignity. It is also looking for ways to utilize its surplus capacity and increasing its sales and profit margins.

4. OPTIONS

• Option 1: Accept APL’s offer

• Option 2: Become an independent contract manufacturer.

• Option 3: Rebuild the “MKG” brand

5. EVALUATION OF OPTIONS

Option 1:

APL has offered an initial production order of 70 tones of glucose biscuits per month with an contract of three years at Rs. 1.5/kg as the conversion rate. It has agreed to pay the material cost and supply the pre-printed packaging material. But it has stated that KCPL will have to make changes in its process and equipments by themselves. The advantages in accepting this proposal are assured return on investment, minimizing the business risks, utilization of surplus capacity and avoiding marketing, branding and distribution costs. This will help them get rid of the losses and break even. There is also the advantage of being able to utilize their excess production capacity.

Option 2:

KCPL can keep on producing for Pearson and also market themselves as contract manufacturers. This method will also help save on the additional expense needed to revive the MKG brand. This option will decrease the business risks considerably for Mr. Alok and his brothers.

One of the main reasons for declining APL’s offer is its low conversion rate. This conversion rate will make it very difficult...
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