Written Analysis of Communication (MHR4CCOB01)

Submitted To: Prof. Harismita Trivedi

Individual Assignment – 03

Title: Kanpur Confectioneries Private Limited (A)

Submitted on: 15/11/2021

Submitted By:

Avinash Anand

MBA HRM

218005
Executive Summary:

Mohan Kumar founded Kanpur Confectionaries Private Limited (KCPL) in Jaipur, Rajasthan, in

1945. KCPL began as a supplier of sugar candy before expanding into a manufacturing

operation. To cut costs, it relocated to Kanpur in 1954. In 1970, KCPL began producing glucose

biscuits under the same brand name, MKG, as a means of diversification and excess investment.

However, it suffered a loss as a result of fierce rivalry and poor resource management. They

received a contract manufacturing deal from APL, the national leader, in 1987. After weighing

all of its possibilities, KCPL determined that the APL offer was the most promising in terms of

surviving competition, earning profit, and resource management.

No. of Words – 111 words

Situational Analysis:

Mohan Kumar founded Kanpur Confectionaries Private Limited (KCPL) in Jaipur, Rajasthan, in

1945 to market sugar candies under the MKG brand." He began as a distributor of candies made

by others, and as his experience grew, he established a production unit. Because of increased

competition, KCPL was unable to compete on price with other manufacturers and opted to

relocate production to another state. He became the first entrepreneur in Uttar Pradesh when he

opened a candy factory in Kanpur in 1954. He was a promoter "MKG' was promoted as a top

brand in vernacular media and on billboards at crossroads. With the support of the dealer

network he developed, KCPL had become a leader in the confectionery sector in the states of

Uttar Pradesh, Bihar, and Madhya Pradesh by 1970. To invest their spare cash and diversify,

KCPL began creating glucose biscuits under the same brand name, MKG, in the same year.

"MKG biscuits were noted for their high quality, crispness, and low cost. The company was

lucrative, but output was limited due to a lack of raw materials. In the year 11982, he passed over

his business to Alok Kumar, his eldest son, and shared the tasks between the other two. (See

exhibit 2.) Mohan Kumar has always aspired to have his brand be the most well-known and

ethical in the country.

In 1973-74, KCPL ranked second in the market with monthly sales of 110 tons (see exhibit3),

and in 1980-81, it increased its capacity to 240 tons/month. KCPL made substantial profits in the

years after that. The average monthly production of MKG biscuits was 120 tons in 1986-87. The

main issue in operations was worker absenteeism, which resulted in irregular production (2 to 6

tons/day). Families in metropolitan areas used to prefer API, as did middle-class families in

urban and rural locations. KCPL sold 360 tons to small and medium-sized canteens in 1986-87,

out of a total demand of 2408) tons/month. Between 1975 and 1980 however, competition
increased with the establishment of 70 disorganized units and 8 organized units. KCPL was

unable to compete with this new competition since most of the newly established unorganized

units engaged in unethical tactics such as tax evasion, allowing them to offer their products at

lower prices than KCPL. It didn't cater to a big national scale, which would have allowed it to

cut expenses significantly, nor did it have a luxury image, which would have allowed it to

command a higher price. As a result of the underutilization of capacity and the reduction in sales,

they suffered a loss. Due to declining economic margins, they liquidated their candy business in

1985.

KCPL began working for Pearson Health Drinks Limited (Pearson) in 1985 as a way to put their

excess capacity to good use and learn quality management skills. Pearson outsourced its new

Good Health Biscuits product to KCPL, but the market reaction was not positive.

APL offered them the opportunity to be their contract manufacturers in 1987 in order to

supplement their (APL) supply. The dilemma is whether to accept or reject the proposal in order

to solve the resource management challenge.

Problem Statement:

The problem is the management of resources.

Objectives:

Short-term objectives

 Human resource management 

 Stay on top of the competition.

 Making a profit.

Long-term objectives

 To emerge as a national player in next seven years.

Options:

 Accept the APL offer

 Assign prizes and punishments to employees based on their production.

 Reposition the company's brand.

 Adopt new manufacturing techniques.

Evaluation of options:

Option 1:

Pros:

 APL's conversion rate of Rs. 1.50 per kilograms covers labor, overheads, and

depreciation, ensuring a guaranteed return on investment. As a result, business risks are

reduced.

 An opportunity to learn about the manufacturing process of India's most popular biscuit

brand.

 KCPL will have access to APL's secret ingredients, and APL will handle distribution,

branding, and marketing. As a result, KCPL will be able to save money.

Cons:

 They would be bound by the contract to obey the APL's directions for a period of three

years. As a result, KCPL is unable to make decisions in accordance with its wishes.

 Dilution of their own "MKG" brand

Option 2:

Pros:

 Employees would be driven to perform harder in order to receive additional perks in

addition to their income or compensation, as well as to avoid penalty.

  In the organization, a healthy competitive environment would be fostered. Workers

would be motivated to offer their all, say 100 percent, in this environment.

 It may help to reduce the number of absentees because most individuals desire more than

just a paycheck; it might be recognition, presents, promotions, and so on.

Cons:

 Excessive use of punitive measures can produce a slowdown in the work process as a

result of worker dissatisfaction.

 Employees who are performing well may become demotivated to achieve their best if

they are not adequately recognized.

Option 3:

Pros:

 By segmenting the market, KCPL will be able to determine their price accordingly. They

can charge less from customers with lower incomes while charging more from those with

higher incomes by enhancing quality and changing packaging.

 A new marketing plan would compel competitors to adapt their marketing strategies as

well. They may make a mistake during this process, such as selecting the incorrect

segment, and their market share may be KCPL.

Cons:

 An incorrect re-positioning could exacerbate the problem.

  Market research, advertising and other costs will be substantial.

Option 4:

Pros: 

 Capacity utilization can be increased by automating all procedures.

 There will be less labor necessary.

 Both the cost and time of production can be decreased.

Cons:

 Purchasing the machines would necessitate a large sum of money.

 The machines will require skilled workers to operate.

Decision

KCPL should accept APL’s offer (Option1).

Although their brand MKG would be diluted and they will be unable to make decisions on their

own, accepting APL's offer will allow them to learn about the national leader's production

methods. Not only that, but APL is also giving them access to their proprietary substances.

After the contract expires, KCPL can negotiate with APL's authorized suppliers to supply raw

materials to it. For one ton of raw material, the overall cost difference between APL and KCPL

is:
(Refer exhibit 5)

Cost of KCPL raw material - Cost of raw material of APL

= [(750/15) 500+ (150/15) 520+ (200/100)-1200)-(700/50) 490+ (140/15) 490+ (190/100) 1150]

- 15100-13711.67

= Rs. 1388.33

They can also learn from APL that the key to a successful firm is its people, as evidenced by the

exhibit in the case, which shows that APL pays Rs. 30 more per day in salaries than KCPL,

which could be one of the reasons for APL's better productivity.

Action Plan:

 Work with APL to agree on a contract start date and conversion fees.

 Accept the terms of the contract.

 Gain an understanding of how APL manages their operations and human resources.

 Once the contract is completed, begin implementing the processes in full force.

 After implementing new processes, devise a new plan to drive smaller competitors out of

the market, and then seize the APL market share to become the national leader.
Contingency Plan:

Identify the causes of absenteeism and unhappiness among employees, and try to motivate them

by offering prizes and recognition for improved performance. In the same way that APL pays

better compensation to its staff, KCPL should do the same.

No. of words: 1260 words

Exhibits:

Exhibit 1: Evaluation of options.

Option 1 Option 2 Option 3 Option 4

Objective 1 ✓ ✓

Objective 2 ✓ ✓ ✓ ✓

Objective 3 ✓ ✓ ✓

Objective 4 ✓ ✓ ✓ ✓

Objective 5 ✓ ✓ ✓ ✓

Exhibit 2: Mohan Kumar Family.

Member Education Department

Alok Kumar Commerce graduate Finance

Vivek Kumar Mechanical Engineer HRM and Manufacturing

Sanjay Kumar Arts Marketing, Logistics and

Administration

Other three sons of Mohan Kumar started their own trading concerns in metal parts and

containers
Exhibit 3: KCPL and its competitors

Players Ranking Existence Production Capacity Plant Location

(in tones/per (in tones/per

month) month)

KCPL 2 Regional 110 120 in 1973 - Kanpur, Uttar

74; Pradesh

240 in 1980 -

81

Prince Biscuits 1 Regional 130 150 Agra, Uttar

Pradesh

International 3 National 100 800 Mumbai,

Biscuits Ltd. Maharashtra

A-One 1 National 900 in 1973-74; Chennai, Tamil

Confectionerie 1200 in 1986- Nadu

s Limited 87
Exhibit 4: Offers by Pearson and APL

Arrangement with Pearson:

 Promised an off take of 100 to 125 tons per month.

 Conversion rate of Rs. 3 per kilogram after reimbursing fully the cost of materials.

 Allowed KCPL to run its existing line of business.

 Initial order from was for 50 tons per month between May 1986 and March 1987.

 No technical guidance.

 Appointed officers for quality inspection before dispatch.

Offer of APL:

 Initial order of 70 tons of glucose biscuits per month.

 Offered to supply the pre-printed packaging material with APL name.

 Would inspect the production process and recommend the changes in processes and

equipments if needed.

 All changes had to be carried out by KCPL on its own expenditure. . Would post two

quality officers and enable KCPI, to adhere with quality procedures.

 Would supply the APL secret ingredient.

 Would be required to buy the ingredients from one of the authorized supplier of APL.

 Conversion rate of Rs. 15 per kilogram to cover the expenses on labor, over heads, and

depreciation.

 Initial contract was to be 3 years

 Would be required to send daily production and raw material consumption report to APL
Exhibit 5: Expenses of KCPL

Item Cost Quantity Monthly Yearly

required per Expenditures Expenditures

month

Maida Rs. 500 per bag (750/50) 120 = 1800*500=Rs. Rs. 1,08,00,000

of 50 kg. 1800 bags 9,00,000

Vanaspathi Rs. 520 per tin of (150/15)*120 = 1200*520 = Rs. Rs. 74,88,000

15 kg. Rs. 1200 per 6,24,0000

Tins

Sugar Rs. 1200 per bag (200/100)*120 = 240*1200 = Rs. Rs. 34.56,000

of 100 kg. 240 bags 2,88,000

Preservatives Rs. 1000 per ton NA Rs. 1,20,000 Rs. 14,40,000

and packaging

Casual Labor Rs. 300 per ton NA Rs. 36,000 Rs. 4,32,000

Permanent Rs. 2.75 lakhs NA Rs. 2.75 lakhs Rs. 33,00,000

Salary Bill per month

Interest

Interest Rs. 10,000 per NA Rs. 10,000 Rs. 1,20,000

 month

Other fixed Rs. 60,000 NA Rs.60,000 Rs. 7,20,000

commitments

Total Rs. 2,77,56,000

Sales in 1986-87 = 120*18,100*12 = Rs. 2, 60, 64,000

Loss = Rs. 16, 92,000