Business Management HL

May 2017
Personal Code: gdd644

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Contents
Executive Summary................................................................................................................................. 3
Introduction ............................................................................................................................................ 4
Methodology........................................................................................................................................... 4
Main Results and Findings ...................................................................................................................... 5
Interview with CEO, Mr. Dinesh Agarwal- .......................................................................................... 5
Analysis ................................................................................................................................................... 6
SWOT analysis- .................................................................................................................................... 6
Analysis of SWOT- ............................................................................................................................... 7
Ansoff Matrix- ..................................................................................................................................... 7
Conclusion and Recommendations ........................................................................................................ 8
Bibliography ............................................................................................................................................ 9
Appendix - I ........................................................................................................................................... 10
Appendix- II ........................................................................................................................................... 11

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Executive Summary
The firm Prabhu Steel Industries Ltd. which operates in eastern Maharashtra plans to expand
their business to the western regions of the state. This paper aims to analyse the potential
effectiveness of this decision and the factors that may affect it. An interview was conducted
with the CEO of the firm and data was obtained through it. The questions asked about the
firm’s ambitions and his thoughts on the firm’s current state and ways to improve it. A
questionnaire was also given to some of the employees of the firm who are at higher posts to
know about their opinion on the matter and their satisfaction with their current job and wages.
This data was used to do a SWOT analysis on this decision the firm is planning to take and an
Ansoff Matrix was used to identify what the business exactly needs to do to achieve higher
profits. The conclusion also includes the limitations of the experiment and what factors it did
not consider. Recommendations were made to the business about future plans which said that
they should conduct further research before taking any decisions.

Word Count: 186

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Introduction
Prabhu Steel Industries is a pt. ltd. company, based in Nagpur, Maharashtra in India. It is a
medium sized firm which mainly operates in Nagpur and operates in the eastern parts of the
state. After years of good business, it has started to experience a reduction in sales and human
resources and since it hasn’t been taking advantage of economies of scale, it has experienced
reduced profits as well. One of the main reasons for this fall was believed to be the worsening
of the conditions of the steel market in not only Maharashtra, but also the whole country. A
way to get back to their original and dominant state would be to move into bigger and more
profitable markets of more developed cities in the western parts of the state. This brought me
to my research question-

Will expanding their business to western areas of

Maharashtra help Prabhu Steel Industries Ltd. increase
company profits?

Methodology

An interview was conducted with the CEO of the firm, Dinesh Agarwal, asking him about the
firm’s intentions of moving to newer markets in the state. His views about the positives and
negatives of the potential growth strategy were taken into account and his opinion on the
reasons for the fall in the firm’s profits and overall reputation was also recorded. There were
also questionnaires distributed to some of the employees of the firm and the CEO himself as
well. This questionnaire aimed to retrieve information about the employees’ views on the
subject and their satisfaction with their work. The questionnaire worked on a ‘Yes-No’ basis.
A problem encountered during the obtaining of this data was the language barrier shared with
some of the employees as the questionnaire was in English and had to be verbally translated
into Hindi, a language that they understood well. During the interview, the CEO also did not
give up any sensitive information about the firm such as employee relations etc. Using this
data obtained, analysis tools were used to find out if this move would be successful. A SWOT
analysis was done. The SWOT analysis analyses the Strengths, Weaknesses, Opportunities
and Threats the firm faces if they do move to the western parts of Maharashtra. The Strengths
and Weaknesses include the internal factors of the organization such as Finance and
Marketing that may affect the firm’s ambitions. The Opportunities and Threats include the
external factors such as the demographics, economy or market conditions that may affect the
same. The paper will also include an Ansoff matrix which will analyse whether they need to
do Product Development, Market penetration, Market development or Diversification.
Product development will analyse whether they can grow in their current market by
developing their products further. Market development will analyse whether they need to
change their marketing strategies for growth. Market Penetration will analyse if they can
possibly grow in their current market without any changes to their products and

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Diversification will analyse if they need to move to newer markets and diversify their
products as well in order to grow and flourish as an organization.

Main Results and Findings

Interview with CEO, Mr. Dinesh Agarwal-
Referring to Appendix-I
The interview conducted asked questions about the firm’s current state, ambitions and
limitations about the switch etc.
The CEO suggested that in his opinion, expanding would help the firm. He expects an
increase in profits by Rs. 7,000,000 in the second year of their functioning in the new market.
He also talked about potential competition in the new market such as Lloyd Steel or Jai Corp
and his intentions to closely watch these firms and analyse their actions and patterns and use
them to the advantage of Prabhu Steel Ltd. by forming an effective marketing strategy. He
also briefly spoke about employee relations.
Referring to Appendix-II
A questionnaire was also distributed to six employees of the firms who find themselves at
higher posts and are respected. The results-
Q: Are you happy with the current state of the firm?
Yes- 1
No- 5
Q: Do you think that the fall in your wages should be seen as a reason for job insecurity?
Yes- 3
No- 3
Q: Are you in agreement with the CEO over the expansion to the western parts of the state?
Yes- 4
No- 2
Q: Are you happy with the current working conditions?
Yes- 6
No- 0
Q: Do you think more market research should be done before the expansion?
Yes- 4
No- 2

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Secondary data was also obtained from online sources about rival firms in the new market
and their products etc. Prabhu Steel Industries Ltd. manufactures mainly steel pipes and
corrugated sheets and it was found that the rivals such as Lloyd Steel and Jai Crop produce
mainly the same products.

Analysis
SWOT analysis-

Strengths-
1. Experience of employees in the Steel market
2. Production factories already established
3. Capital available to set up factories in the western regions
4. Available stock because of reduced sales

Weaknesses-
1. Loss of employee confidence due to fall in profits
2. Outdated machinery in factories
3. Not enough capable managers to manage wider demographics

Opportunities-
1. Can sell at lower prices in new market than average price
2. Economies of scale would lower average cost
3. Markets in developed cities have higher sales in the steel sector
4. Other firms do not have high quality products

Threats-
1. Unexpected crashes in the steel market
2. Tata Steel controls much of the market
3. Government protects some big business by reducing regulation etc.
4. Customers may view lower priced products as being of cheaper quality

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Analysis of SWOT-
The SWOT analysis shows that the Strengths and Opportunities outweigh the Weaknesses
and Threats of Prabhu Steel Industries Ltd. expanding to western regions of the state. There
are many opportunities for the firm to take advantage of however unexpected market crashes
may backfire the whole plan of the firm. Increase in profits will also help them better the
confidence of the employees of the firm and improve efficiency as a result. However, they
may need to spend a lot on setting up new factories and paying for transport etc.

Ansoff Matrix-

The above image shows the Ansoff Matrix. According to the CEO, he sees no scope for any
Market Penetration since the current market in eastern Maharashtra is not in a good
condition. The products produced by the firm are highly sought out in today’s world and the
products are not outdates and therefore, they do not require any Product Development.
Market Development may be necessary for the firm if they want further growth as the current
market they operate in shows no signs of getting better. There also ample opportunities to
take advantage of in the new market and they can compete with the rival firms because of
their low prices. Diversification may also be necessary for the firm if they need to adapt to
changing consumer needs and not stick to producing the same product and become outdated.
The Ansoff Matrix concludes that Prabhu Steel Industries lies in the Market Development
section of the Matrix. They need to move to newer markets with existing products in order to
achieve more growth. However, diversification may be necessary depending on the changing
consumer needs. It should be noted that in the steel market, consumer needs do not change
very often and these products are mainly used in construction. Market development will
require them setting up production plants in the new market demographics which will cost a
lot and the return of the investment will be subject to change in market conditions and
regulation by the government regarding pollution or production and selling.

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Conclusion and Recommendations

The SWOT analysis for Prabhu Steel Industries Ltd. expanding to the western regions of
Maharashtra concluded that it would be profitable to expand and increase profits since they
can take advantage of market conditions which provide high sales and combine it with their
low prices and high quality to become a true driving force in the steel market in not only
Maharashtra but the whole country. The Ansoff Matrix helped realize that they need to work
on Market Development for further growth as the current market has no scope of
improvement. The data obtained from the CEO of the firm helped analyse the current state of
the firm and their thoughts and ambitions. The questionnaire also helped extract information
about the thoughts of the employees in the firm about the possible expansion and their
thoughts about the current state of their jobs. All this coupled together concluded that the firm
is in a good place to get what it wants with an ambitious CEO, loyal employees and a big
market where they can potentially move to achieve the main aim of any business organization
which is to obtain high profits.
There are also various limitations of the research. It does not take into account the consumer
perception of Prabhu Steel Industries as it is a fairly unknown brand especially in the new
market. It also does not take into account the difficulty the firm would face to get their
products to the consumers through retailers on their own as the new market is unknown to
them. It also does not consider the fact that the steel market is very unstable and there are
frequent fluctuations in the prices of steel and steel products. There are also many costs
involved like transportation etc. which can reduce the profit and make it not match the
estimate given by the CEO. The interview with the CEO also had limitations as sensitive data
and information was not disclosed.
In the future, the company should do further market research and analyse the market and
rivals better before taking any actions as many unidentified threats exist in the market. If all
signs are good, the form can expand their business and functioning to the western regions of
Maharashtra and increase company profits like they aim to.

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Bibliography

"Iron and Steel Companies, Firms Maharashtra India Asia 1." Iron and Steel
Companies, Firms Maharashtra India Asia 1. N.p., n.d. Web. 14 Mar. 2017.
< http://www.findouter.com/India/Region/Maharashtra/Steel>

"Indian steel surges ahead but needs demand to catch up." Platts. N.p., 07
Mar. 2017. Web. 14 Mar. 2017. < http://www.platts.com/news-
feature/2017/metals/india-steel/index>

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Appendix - I
Transcript of Interview-
Q: What do you think about the current state of the firm when compared to what it used to be
previously?
A: It obviously has changed a lot. We used to be one of the most profitable firms in Nagpur
but our sales and profits have significantly dropped. Ever since the crash of the market, which
affected us, we have not been able to get back what we used. Not only have we lost a lot of
employees since, but we have also experienced losses in some quarters.
Q: How do you think the current employees feel about this?
A: Of course, they have been very supportive of us. Some of them have been here since the
firm started in just a small room. Their loyalty cannot be questioned. This can rightly feel
insecure about their jobs since their wages have reduced but this something we are not proud
of and want to better the situation. Some of them left the business as well but they cannot be
blamed for it.
Q: Coming straight to the point, how do you feel you can better the situation for the firm?
A: Honestly speaking, I don’t see much scope for growth in the current market. Ever since
the crash, it has not been the same. I feel expanding our business to other markets in the state
may help us since the state of those firms is much better when compared with ours. But
moving would also threaten us with competition who know the market better. It is a risk but I
think it could work.
Q: Last year, Prabhu Steel Industries recorded an annual profit of Rs. 16,045,573. This is a
significant fall over your profits in the years prior. How do you see this figure changing in
you do ahead with the expansion to the western parts of Maharashtra?
A: There has been a significant fall in profits. We need to input a lot of financial capital if we
want to expand which may be difficult to obtain. But, if all things do go well, we estimate a
profit increase by Rs. 7,000,000 in our second full business year in the new market. This
however does not take into account any market crashes and changes in competition.
Q: Speaking of competition, who do you think are the toughest rivals in the market in the
western parts of the state?
A: The first names that come to mind are the big guns like Tata Steel and Grasim Industries.
We have done some market research which concluded that firms more on our range include
firms such as Lloyds Steel or Jai Corp. We need to look at the patterns of these firms selling
and come up with an effective marketing strategy.

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Appendix- II
Sample Questionnaire-

Question Yes No
Are you happy with the
current state of the firm?

Do you think that the fall in

your wages should be seen as
a reason for job insecurity?

Are you in agreement with

the CEO over the expansion
to the western parts of the
state?

Are you happy with the

current working conditions?

Do you think more market

research should be done
before the expansion?

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