Opportunity Analysis & Implementation Plan

FACULTY OF MANAGEMENT STUDIES M S UNIVERSITY OF BARODA

Roll No : 23 Name : Neha Pithwa Subject : Business Policy

Date : 13 Jan 2011

has attributed a highly dynamic nature to the 2 . Highlights that growing affluent middle class population. According to consumer durable companies. India has an increasingly affluent middle class population that. growing disposable income and availability of easy finance schemes. The Indian consumer electronics market stood at an estimated US$ 4 Billion as of the end of 2004.1: Identify the opportunities available for cool king in its business domain. microwave and washing machines. the consumer electronics goods. posted high demand. has made the country’s consumer electronics industry highly dynamic.Q. Evaluate them which in your opinion should cool king accept for implementation. representing vast room for future growth. changing lifestyle and rapid urbanization. With the temperature going up in India. the markets for these products are shifting to the average income families. northern and southern parts of India. encouraged by rapid growth in the economy. According to Industry reports since the penetration of several products like AC’s and refrigerators are reaching saturation in the upper class. The industry has been witnessing significant growth in recent years due to several factors. sales of refrigerators and air conditioners going to increase by 20-25% in coming years. such as retail boom. the demand for air conditioners has outshined the supply. particularly. But still. the Indian consumer electronics industry is forecasted to grow at a rapid rate of 20% to 22% in the coming few years There is very big potential market for Air conditioners in India. like Air conditioners refrigerators. have low penetration in the country. As the mercury has sharply rises in April months. on the back of rapid economic growth. and is further projected to grow at a CAGR of around 15% during our forecast period Propelled by growing middle class population.

Consequently. Factors like booming retail sector. However. Indian consumers have grown increasingly price-conscious and are mainly spending on the economy segments. such as AC’s. which represents enormous future growth potential. Penetration level as per the case study is about 1-2% in India." 3 .consumer electronics industry of India. demand for higher rated products is poised to soar in coming times. "Lower electricity bills have successfully compensated the premium on products having higher star ratings. as compared to 35% in USA & 30% in Singapore. many international companies are looking forward to enter the Indian market. with consumers getting increasingly aware of energy efficiency. consumer electronic goods. increasing disposable income and easy availability of finance have led the industry to experience commendable growth in past few years. In wake of economic slowdown. In view of production constraints. companies are offering window AC’s only upto three-star rating while all star ratings are being offered for split AC’s. washing machines and refrigerators are having low penetration in India. According to a Research Analyst at RNCOS. like one-ton split AC’s. Despite this.

07 4 .Key Trends which are driving Growth & Giving Opportunity for Cool King Projected Growth rates for 2003.

• Expected availability of quality power as a consequence of government investment on infrastructure and implementation of economic reforms .as the availability of power in remote areas is a major hurdle for AC penetration 5 . Strategic Decision: The above Factors give a very clear indication that Cool King has a greater opportunity in their hand to get in to the Window Ac business in a large Scale and they have to take this strategic decision to Focus on Window AC’s. The factors which are favoring apart from the above are as follows.If you see the below Pie chart of the market distribution of the major consumer durables the Air conditioning industry in India is in its nascent stage with lowest penetration world wide.

All the above three skills are easy to copy and any foreign entrant can give stiff competition to the Cool King. Cool King Limited Establish its own manufacturing Facility Joint Venture with a ForeignPartner & Manufacture Setting up an assembly unit and Outsource Parts As per my opinion Cool King should go for a Joint venture with the foreign partner who can also have a solar technology for Air conditioning on a profit sharing or royalty basis. So there is a larger threat to the existing business which can be negated by entering in to Window AC business. profit margin can be increased This opportunity can be utilized for the company to generate high revenue growth and enhanced profitability Apart from this the existing business of cool King runs on Technological Know how. so there is no need for a larger investment. Strategic decision of Going for Window AC’s can be opted through following options. Cool king’s strengths in Technology and its understanding of the business along with its existing manufacturing facility. 6 . project execution skills and application engineering talent. Manpower available in India is less costly as compared to other countries.• • • • The growth in the need for comfortable work and commercial environments as a consequence of economic liberalization and enhanced industrialization. So.

Q. Success in this Window Ac market being a consumer product will happen provided we have focus on the following areas 7 . Opportunity selected here is to have a Joint venture with a foreign partner .2: Based on the opportunity selected. create a detailed plan.Here it is assumed that Cool king got a lot of opportunities earlier to have a joint venture with MNC’s who want to enter the Indian Market . Detail out the financial requirements for implementing the plan. duly giving logic & assumptions behind the components of the plan.Same was not utilized as the focus was not there earlier .

A joint venture can give Cool King this strength. Cool king can capture a bigger market share with the help of a joint venture.This is the area of strength for Cool King . These synergies can be utilized for the new division. We will evaluate the basic reasons for going with a joint venture. These days Product life cycles are shortened due to technology development . 8 . Distribution & Service Network:. Market Positioning & Branding: .Technology leadership is must to become a market leader in consumer durables.Any Indian consumer opts for a foreign brand when it comes to appliances. The reason behind is the concept about the quality & Technology. Collaboration with a good brand can bring in lots of benefits.Apart from this you should have financial strengths to support the expansion plans.Technology obsolescence is a bigger threat for any consumer durable industry . It has separate division for after sales service. Product Technology:.

Financials are not so sound to attract money through IPO or right issue. We will see some of the Key ratios to evaluate the existing position.Cool Kings financial are really good to attract any joint venture . We will evaluate the Joint venture requirement with respect to Porter’s 5 forces model. Threat of New entrants .Solar Air Conditioners:. Funding:.Medium Supplier Power – Medium Competitive rivalry – High Customer Power – High 9 .Most of the Indian homes don’t go for AC’s because of the power consumption .Anybody who can provide a solution to run AC on solar can reap the market . This will be a USP for Cool king to sell the product in rural areas.

Threat of Substitutes .13 64.54 Net return on operating income 4.81 106.1 85. Financial Statement 00-01 Operational Results In Crs Total income 509.04 Sahreholder's Funds 99-00 In Crs 480.62% Dividend 11.04 Borrowings 57.83% 10.94 25.48 5.24% 1. 5.27 3.77 98-99 In Crs 480.72 110.1 97.57 Gross return on operating income.77 64.11 Paid Up capital 20.85 16.18 Retain earning profit 11.75 85.75 97.82 Profit before tax 25.12 3.77% 1.72 Shareholders funds 110.04 105.05 10 .22 Reserves 89.03 Profit after tax 23.67 124.04 99.32 Reserves 89.38% 9.Medium All the above reasons are in favor of going for a joint venture.25 27.67 124.2 5.16 3.95 113.94 18.93 27.96 23.35 Net Fixed assets & Investment 94.02% Tax 2.24 4.

Shareholders will give the approval for the company’s expansion plans as the dividend policy of the company is good.33% Financial Analysis:Cool king has an ideal capital structure which enhances its goodwill in the market which will increase trust for the investors.24% 4. as the company has sufficient internal resource to fund the medium scale expansion plan.0 2.90% 5.39% 5. This is the right time for expansion. which is around 6% as given in the Case . Capex Requirement Facility Expansion Barnding & Advertisment Estabilising distribustion Network Manpower Deployment & other expenses Miscellaneous Total Rs In Crs 50.08% 21.38% 51.34% 16.0 The total capital requirement is Rs 65 crores out of which 40 Crs can be arranged through internal reserves and remaining 25 crs can be funded through joint venture.28% 13.62% 52.12% 22.Financial Parameters Return on Assets Return on Equity Gross profit ratio Net profit ratio Debt equity Ratio 25. It’s not advisable to go for borrowings which will disturb its structure. Gross profit & Net profit ratio are in line with the industry rates.04% 3.0 5.01% 21.The profitability can come only with the increased volume of business.77% 3.02% 4. 11 .83% 60.0 5.5 65.5 2.

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