Send your attendance before 9:30 am & Answer sheet as a SINGLE PDF before 12:30 pm to mbafad10c@gmail.com FA4I0C INSTITUTE OF MANAGEMENT STUDIES DEVI AHILYA VISHWAVIDYALAYA, INDORE June = 2021 istration) 2 Yr. Semester 1V Book Online Examination Decision Making Skill Time: 3 Hours Max. Marks: 60 Note: 1, Attempt any 2 questions from Section A each question carries 10 marks. Section B is compulsory carries 40 marks, 2. Word limits for all the questions is 400. Write specific, precise answers. 3 A mail writing “received” to the specified mail id is to be sent to specified mail id before 9:30 am. 4. The complete scanned answer sheet as a single pdf file with name specified in the instructions before 12.30 pm to the specified mail id. i.e. 68410_DMS Section A QI Decision Making Skill is essential at every level of management, organizations future growth depend on decisions. Discuss. Q2 How SWOTIC contribute while taking decision for financial crises and new ventures? Discuss each component of SWOTIC considering future growth and new projects, Q3 “Report writing has well defined steps and sequence.” do you agree with the statement? Discuss. i Discuss the various types of cases with their solving process. Section BSTANDARD ALUMINIUM EITTINGS COMPANY Tn Jatwary 2011, Mr, Rohit Jain was busy preparing the pro forma statements and cash fore, for his newly promoted business-the Standard Aluminium Fittings Company (SAFC), + SAFC would be engaged in the distribution of a basic full-line of hardware, aluminium fitting Pipe fctings, and sanitary fittings used mainly in construction works. The business woul: Primarily with the wholesale distributors’ market which was estimated to be about 80 P SxS zn she remaining sales would be local sales as a retail business, Jain was already in fabrication business since the year 2001 and had been selling aluminium fittings on a limite Sais to local customers. The increasing sales level of aluminium tings, bout Rs. 10 crove 2010, encouraged him to find out the potential market for aluminiune fittings. As a resule,h- decided to start his own aluminium itings company, ROHIT’S PREVIOUS VENTURE In college, Rohit Jain studied engineering and after that he did part-time Post-graduate diplom: 3 business management. While attending the management course, he worked for the Sharma Steel and Supply Company. After his graduation, with the help of his father, he started Jain Metals Company (JMC) in 2001. During the first two years, the company incurred heavy losses. This performance did nor discourage Jain. Looking at the potential of che business, Rohit continued in the business. Because of persistent hard work and skilled managemenc, by che end of che year 2010, Jain had achieved an annual sales level of neasly Rs. 10 crore. The company has also made profits and its net worth was around RS, 3.40 crore. Total asers se ths time exceeded Rs. 8 crore. MARKET POTENTIAL AND COMPETITION it Jai Jocal market for aluminium fittings, pipe ftingmand a, ® require the estimation of demand for aluminkim ew ar Understanding all che limitations of demand estimation, he referred 10 a repore - a local marketing consultancy firm, which had estimated the wholesale tandenmeeaian markets to be about Rs, 400 crovein the year 2007, The report also mentioned tharaluniefrcings pipe ficings, and sanitary fittings were generally 14 to 16 per cencof hardware sales. On this basis he calculated the sak les of aluminium fittings to be about Rs. 60 crore in 2007. Rohit also found chat the market for fittings has been aca at 6 t07 eae per annum. Using a compound sales growth-rate, he estimated the potential alurhinium fitvings market for 2011 to be about Rs. 70 crore. This figure was for the sales of wholesale aluminium fictings originating within local markers. Rohit encountered one difficulty in estimating the total demand for the fittings originating the local markets. The above estimates were true only in part. A more difficult figure to estimare was wholesale purchases of aluminium and other fittings by local wholesalers from several wholesale distributors outside the local areas. After consulting his friends who had Snowledge about this business, Jain estimated that this would add another Rs.70 crore to the estimated market size. Considering both the local demand and purchases from outside, a total firangs market of over Rs. 140 crore was thus estimated. While estimating this demand, Jain believed that this was a conservative estimate of the demand. He was sure that the total demand would easily be larger, as no one really had sufficient information to know all che potential ‘customers and current users. Afr estimating the demand for fittings, Rohit examined how much of the fittings marker demand SAFC can secure. Regarding the competitive advantage of the Standard Aluminium Firsings, he observed that SAFC would be the first wholesale distributor to specialize in fittings in that area. Rohit felt that this would give an extraordinary amount of competitive advantage to the company. He believed that his being a specialized wholesale company, the large user- companies may prefer to buy from him. He can advertise that he will provide regular supply and service. Rohit estimated that during the initial phase of the business, he would not be able to manufacture the full range of fittings. He also observed one difficulty in going for the manufacturing ofall rypes of fittings. The already established standard quality brands of frtings would make it difficult for Rohit to go in for full line of production. Therefore, he decided that the standard quality fittings for inventory would be purchased initially from Prakash Steel ‘Company, a prominent supplier in the local marker. PROJECTIONS Jain thoughe that the estimate of sales was crucial as the projection of a number of items would depend upon it. He estimated monthly sales for the full year beginning March 1, 2011. The estimates which he developed were based on the most expected assumptions and, therefore, reflected the normal circumstances of the business, However, he was concerned about the possibility of anything adverse happening in the industry. The key factors causing such adverse Situation could be a decline in the level of construction activity or shortage of raw material. Therefore, he developed a pessimistic estimate of sales based on the minimum he would be able to sell under the most adverse circumstances, But at the same time, he could not rule out theibility of demand going up significantly. Assuming the most favourable factors operatin, ; Polite, he also elena a optimistic projection of sales (see Exhibit I). ‘The expected margins on purchased fittings were estimated to be 35 per cent of the sel price. Jain estimated that it would be possible to get margins as high as 45 per cent un favourable circumstances, and 25 per cent under adverse circumstances. Jain decided to p; his suppliers in the month of purchase so as to get the best terms possible. Rohit thought thar the next step in the financial projection was to estimate expenses. | therefore, considered the following expenses in detail: * For wages and salaries, he planned chat five full-time machine operators, one full-in storekeeper and one order-booking clerk would be needed. Extra part-time help expected to be necessary from June to September. At an optimistic sales level, ch year’s estimate was Rs. 2.92 crore, while at a pessimistic level it was Rs. 2.20 c: ‘Wages would be paid in the same month in all cases. Employees welfare expenses an. employer's contribution to provident fund were estimated at 15 per cent of total w:: bill. This amount would generally be incurred one month later than the wages on whic! they were based. Jain expected to devote some time to SAFC to get it started separate company, The management and supervision work would both be performed i the first year by Rohit, in conjunction with his regular work in JMC. For these service. he would charge SAFC, a commission of one per cent of sales, which he would cor, on the books as payable ro JMC, requiring no cash outlay by SAFC in the first year of operation. + He will have to spend on freight-in and freight-oue, Freight was estimated at 2per cent on purchases and 1.5 per cent on sales, To guard against risk of ire, theft, etc, he decided to insure his stock of goods. Insurance costs wete projected at Rs. 4 lakh in March snd Rs. 2 lakh in September. * Rent of Rs. 60,000 per month would be paid one month later. This expense would remain fixed irrespective of any posible fluctuations in ales, Expendivure on stores spares on ‘other supplies was estimated at Rs. 80,000 paid in the first month, and Rs. 40,000 ec month thereafter, atthe expected level. At che optimistic level, it would belassamed <, be 50 per cent more, and at the pessimistic level 50 per cent less. * Transportation and other conveyance charges would be Rs. 30,000 per’month under normal situation, double that amount would be incurred at an optimistic level, and alr that amount for pessimistic scenario. 3 * Expenses for telephone, electricity, etc, were estimated at Rs. 20,000 per month at expected and pessimistic sales levels, and Rs, 40,000 per month at the optimistic level Miscellaneous items of expense were hard to estimate, but Jain put down Rs, 60,000 forthe firse month and Rs. 20,000 per monch thereafter aeall levels. Advertising consist of a brochure at a cost of Rs. 6 lakh in March 2011 and Rs. 4 lakh, fran ‘update in February 2000.Fequirements, He expects that the average rate of interest on borrowing will be 15 per cent pe annum and will be payable quarterly DISCUSSION QUESTIONS 1. Identify the variables posing uncertainty and the possible range which they may assu Justify your reasoning. 2. Construct cash flow and expected and these help yor m pro-forma statements under three scenarios viz. optimisti Pessimistic. What inferences do you draw from these scenarios? How doe 1s in developing key strategies to handle the uncertainty in business?STANDARD ALUMINIUM FITTINGS LIMITED Sales Estimates at three Levels (Rupees in lakh) Year and Month Expected Optimistic Pessimistic 2011 March 80 160 40 April 120 200 40 May 200 300 80 June 240 360 80 July 280 400 120 August 280 400 160 September 240 320 160 October 200 320 160 November 200 280 120 December 160 240 120 2012 January 160 240 80 February 200 280 80 Total 2360 3500 1240Exhibit II STANDARD ALUMINIUM FITTINGS LIMITED Desired Inventory (Rupees in lakhs) Aluminium handles p Heavy cur-size ' P20 Fancy full size 3:52 Gate hook Light kunda 4:78 Cut size-kunda 1.49 Heavy kunda 1.00 Door handle Aluminium jalli 2.73 Round in CP 1.04 Square jalli 0.63 Aluminium tower bolt Towel stand 0.48 Plain bend 0.41 Fluted 0.41 Door stoppers 1.43 Aluminium knobs Button 1.89 Flower 1.89 Sholay 1.89 Aluminium hinges Hinges 3.09 Aluminium safety 1.47 Heavy window stay 0.35 Total 44.00