KPCL Case Study Solution

Topics: Variable cost, Costs, Total cost Pages: 3 (1134 words) Published: October 29, 2014
Jitendra Kumar Chaurasiya
PCOM no. : 166
IIM Lucknow
KPCL Case Study Solution

Problem at hand:
This case is about KCPL which was started in 1945, by Mohan Kumar Gupta. It started business in the candy industry but subsequently moved to “Glucose biscuit” Industry with “MKG” brand. There were two national player “A-one and International biscuits” in the market. In year 1986-87 the company incurred losses. A-one with sales over 1200 tonnes/month wanted to increase its production capacity by outsourcing the manufacturing. It gave an offer to KCPL. Now the problem is to whether or not accept the offer of A-one (APL) .

Situation:
There were several issues which contributed to company’s low performance .Operation was dependent on both casual and permanent workers. Casual workers were hired to work on daily basis and absenteeism were very high. Thus Production varied from 2 tonnes/day to 6 tonnes/day. The packing was done manually which increased to the ineffectiveness. Help of technicians was sought but improvement in production or other areas was not evident. Net profits of the company were declining even after increase in turnover.

Competition were increasing in the organized and unorganized sector. It was apprehended that players in the unorganized sector avoided paying taxes resulting in the lower cost. With the technological advancement the big players mechanized their whole process because of economy of scale. It reduced the losses incurred in the process resulting in the low price. The KCPL could not increase its price because of lower price of the other players in market, but the cost incurred in the production were increasing.

SWOT analysis:
Internal Factors:
1. Strengths:
 Production capacity= 240 tonnes/month
 Decision making is participative
 Ethical values
2. Weakness:
 Underutilization of production capacity
 Higher absenteeism
 Mechanization of the process is difficult considering the initial investment required.  Wastage is...
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