Business Communication & Analysis (2022-23)

FTMBA TRIM III

Assignment 1

Marks: 15

Read the case and write a decision report with reference to the assignment question
below

On April 9, 2010, Mr D M Patel, Senior Manager, Gujarat Fisheries Central Co-operative

Association Limited (GFCCA) was reflecting on the mobile fish-selling vans project that
he was in charge of. He had GFCCA’s annual accounts for 2009-2010 with him, but did
not have specific details on the financial performance of the three mobile vans. He
sensed there was a problem; the vans did not seem to be doing too well. He had been
very enthusiastic when the project was introduced in 1995, but over the years, it had
become an activity that showed a deficit every year. The annual review meeting of the
Governing Body was due in a month’s time and he had to present a plan for the mobile
fish-selling vans project.

BACKGROUND

GFCCA was the apex body of the fishermen cooperatives in the Indian state of Gujarat.
It was established in 1956 as a state government promoted and administered body. The
state government held 92 percent of the shares and the fishermen’s cooperatives and
individuals held the rest. It was headquartered at Ahmedabad, the commercial capital
of Gujarat. GFCCA had a Governing Body of 16 members, 10 of whom were nominated
by the government; the other six were elected from the fisheries cooperatives. As of
2009-10, GFCCA had 283cooperatives and 2938 individuals as members. The Chairman
was a senior member of the administrative services of the state government.

SELLING FISH THROUGH MOBILE VANS

In 1995 the Governing Body had decided that retail presence in Ahmedabad, was
necessary so that people could get fresh fish at their doorsteps. Selling fish through
mobile vans was a very small part of the activities of GFCCA (Exhibit 1). The major
activity, accounting for nearly 98 percent of the revenues, was selling high-speed diesel
to owners of fishing boats. The other activities were fish-seed production, nylon fishing
net manufacture and construction of fibre- reinforced plastic (FRP) fishing boats.
Structurally, GFCCA was organized around these activities. Thus, there was a Diesel
Sales Unit with a Senior Manager and 17 pump in-charges. Another Senior Manager
was in charge of the Boat Building Yard and Engine Sales Department.

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The Nylon Net Plant was headed by a Senior Manager. Mr D M Patel was in charge of
Freshwater Fisheries. Managers handled various other activities. The employees could be
transferred across departments if any particular department had no need for personnel.

The mobile van revenues were included under the ‘Freshwater Fisheries’ head in the
accounts (Exhibit 1). Eighty percent of the sales of INR 56 lakh were from the three
vans; a small shop in the state capital, Gandhinagar, accounted for the rest. The overall
deficit on sales of INR 56 lakh was INR 11 lakh in 2009-10. In contrast, the shop that
GFCCA had been running since 1975 in the national capital, New Delhi, and which
bought fish from the local market and sold it through its retail outlet and to a 5-star
hotel, had revenues of INR 220 lakh, and a surplus of INR 10.21 lakh. The situation had
been similar in 2008-09 and the Governing Body had felt that this was an acceptable
return. The Association as a whole was profitable, with profit before tax in 2009-10 of
INR 217 lakh (Exhibit 2), but the Governing Body’s expectation was that each project
that was not a welfare activity directed at the fishermen, should generate a surplus. It
was not averse to making losses on activities that directly benefited the fishermen. For
instance, GFCCA had served as guarantor for the loans given to fishermen by the
World Bank for the purchase of 132 fishing vessels in 1981. Many fishermen defaulted
and GFCCA had to pay out a huge sum as one-time settlement of the bad loans.

Mr D M Patel also knew that the mobile van activity was important for GFCCA, since it
constituted GFCCA’s only local retail activity and increased the visibility of GFCCA.
There was a lot of symbolic significance attached to this activity, and the Governing
Body wanted to take the activity to other cities in the state. However, the deficit which
had become an annual feature was worrying the Governing Body.

GFCCA operated three mobile vans in the city of Ahmedabad. Vans 1 and 3 were
allotted to two localities each. Each van visited one locality on Tuesdays, Thursdays and
Saturdays and the other on Wednesdays, Fridays and Sundays. (Monday was a
holiday.) Van 2 was stationed in one locality all six days of the week. Thus, five
localities were covered in total. The vans were stationed at fixed spots from 8 a.m. to 7
p.m., with a four-hour break during the middle of the day.

GFCCA was known to be a pioneer in fishing at dam sites in Gujarat, which the
government used to give it on annual leases. GFCCA engaged fishermen from two
eastern Indian states to stay and fish at the dams during the season. GFCCA had to pay
royalty of two rupees per kilogram of fish caught to the Gujarat Government in return
for exclusive rights to fish at dam sites. This activity ran smoothly till 2004 when the
government started to auction the fishing rights at the dam sites. Private contractors
entered the scene. GFCCA could not compete with the contractors who were willing to
pay large sums. For instance, fishing rights for one site, for which GFCCA had to pay
only about INR 20,000 before 2004, were auctioned for INR 50 lakh in 2010. This shift in
policy in 2004 affected the mobile van project also. The cost of the fish went up as
GFCCA had to turn to sourcing its supplies from local suppliers. The high margins of

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more than 100 percent that were possible when GFCCA had a captive supply from its
dams went down sharply after 2004. As of 2010, GFCCA estimated the demand and
placed orders accordingly; demand was high on Saturdays and Sundays. Purchases
from the open market often posed difficulties. GFCCA had to take what was on offer;
the traders often complained about the 10 days that it took for the payment to be settled
and about the payment-by-cheque-only policy of GFCCA.

DAILY ROUTINE

The drivers arrived in the mornings at the storage depot of GFCCA which was located
in the heart of the city. A Cutter and a Supervisor joined each driver. The Cutter was
responsible for cutting and cleaning the fish according to the customer demands. The
Supervisor collected the money, maintained the accounts, and deposited the money the
following day at the bank. The three worked as a team, and since the driver was also
present at the site with no other work, he chipped in with customer relations. Mr. Patel
noted that the driver, unlike the supervisor, was not considered office staff, and so was
not given financial responsibilities. Most of the drivers were capable of handling cash
transactions, and with some incentive could be asked to do “office work.” However,
Mr. Patel added, this needed more thought since the employees’ union might object to
any such move.

The storage centre had provisions for ice to keep the fish fresh. The fish was stored in
insulated boxes packed with ice. A 200-litre box could hold 100 kg of fish for two days.
The fish arrived at the storage centre on alternate days. Each van spent on average INR
6000 per month on ice. According to Mr. P. M. Doshi (Supervisor, Van 2), the ice
reduced the wastage of fish.

PRICING

The retail price of fish depended on the wholesale prices in Ahmedabad city. Generally,
selling prices of fish were fixed, and GFCCA, in accordance with a policy introduced
after 2004, added a mark-up of INR 35 per kg of river fish and INR 48 per kg of marine
fish, regardless of the cost at which the fish had been bought. If the wholesale prices
decreased drastically in some seasons, GFCCA passed on the benefit to the customer.
The prices of the fish depended on the species. (Exhibit 3 presents the average daily
sales.) Mr. Doshi noted that customers kept careful track of the prices. Sometimes, when
there was a shortage in the GFCCA van they bought fish from the competitors by
paying a premium of INR 10 per kg. At other times, they refused to spend more. For the
higher value items, Mr. Doshi felt, customers would not mind paying up to INR 10
more per kg.

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COSTS

Mr D M Patel quickly collected some relevant information and observed the following.
In 2009-10, the monthly salary of an inspector was INR 20,043; a driver was paid INR
15,936 and a cutter INR 11,727. On average, each van ran 3,000 km a month, and the
total payments made by GFCCA for diesel and maintenance was INR 32,400, out of
which INR 9,000 was accounted for by maintenance. GFCCA policy allowed wastage of
2.5 percent of the total quantity purchased, and the wastage register showed that the
wastage was to the extent of INR 250 per day per van. Miscellaneous expenses
accounted for INR 3000 per month per van. Though the Gandhinagar shop did not
incur costs on diesel and maintenance, the costs (including manpower and
establishment) were similar to the costs incurred by a van.

MARKET AND COMPETITION

In Ahmedabad, the traditional fixed-site fish markets were located at three places, two
of them in the old parts of the city and one on the outskirts. In all, there were 35 traders
who operated at these places. The price of the fish depended on the species and the size,
with certain marine species being highly priced and fish weighing more than two kilos
commanding a premium. Though a city of about 5 million, Ahmedabad was
predominantly a vegetarian city and in many parts of the city, local people did not
allow GFCCA to park its vans. The five localities where the vans operated had
concentrations of people from outside the state who did not seem to mind the presence
of the vans. Both Mr Patel and Mr Doshi noted that finding a new location was
becoming increasingly difficult.

The mobile vans faced competition mainly from fish and meat vans that usually sold
their products very close to where GFCCA vans were parked. These vans operated
without licenses. They seemed to follow GFCCA and appeared on the scene soon after
GFCCA had fixed the points of sale. They sold fish as well as substitutes like mutton
and chicken. According to Section 377 of the Bombay Provincial Municipal Corporation
Act, 1949 no person could sell or expose for sale any animal without a license from the
authorities, but these vans seemed to ignore the law. They had also not been pulled up
by the authorities for the violations. The prices the competitors charged were not fixed,
and fluctuated with the demand. Whenever there was a shortage in the GFCCA vans,
the competitors’ price went up by at least INR10 per kg. Some of the competitors were
former employees of GFCCA. For instance, one person, a retired employee, used the
name ‘Gujarat Fisheries’ on his van and parked himself next to the GFCCA van in one
location. He had been the president of the GFCCA Employees’ Union for more than 15
years prior to his retirement. Many of the employees who operated the vans were
members of the same union. This person was known to extract information from these
employees about GFCCA’s plans.

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CONCERNS

As Mr D M Patel reviewed the functioning of the mobile vans, he was not sure of what
to tell the Governing Body. Should he recommend the continuation of the mobile van fish-
selling project, and if he did think that it was worthwhile to continue, what corrections
should he make? He was aware that GFCCA was considering the setting up of a modern
fish market if a proposal for a central government subsidy of 60 percent on an estimated
cost of INR 3 crores were to come through. GFCCA had 10276 m2 of land at a central
location. The proposal envisaged construction of 40 shops, each with an area of 3.77m x
5.24m, in a two-storeyed building. The complex was planned to be centrally air-
conditioned and facilities like a modern garbage disposal system, garbage chute for
each shop, air curtain/ HVAC (heating-ventilation-air conditioning) system, and
storage facilities, were being incorporated. In addition, two restaurants were planned,
so that the complex could be seen as a “fish mall.” However, finding the 40 percent of
the project cost that GFCCA had to put in was very difficult and did not look possible in
the near future. Also, the local leaders of the area where the land was situated had
begun to agitate against the proposal. The local fish traders were also opposed to the
move.

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EXHIBIT 1
GFCCA, Sales & Other Revenue (INR Lakh)

2008- 2009- % (2009-10)

09 10
Diesel 20,985 18,007 97.48
Delhi branch 244 220 1.19
Marine engine spare parts 43 21 0.11
Boat building yard 11 8 0.04
Freshwater fisheries 48 56 0.30
Seed production branch- Valod 42 63 0.34
Nylon Net Plant – Ahmedabad 75 41 0.22
Fisheries requisites – 49 26 0.14
Ahmedabad
Head office (other revenue) 21 31 0.17
Total 21,517 18,473

Source: GFCCA

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EXHIBIT 2
GFCCA: Extracts from Profit & Loss Statements (INR
Lakh)

Particulars 2008-09 2009-10

Sales income 21,473 18,414
Other income 43 59
Total income 21,516 18,473
Gross profit 591 569
PBDIT 259 232
Interest 8 7
Depreciation 8 8
Profit Before Tax 243 217

Source: GFCCA

EXHIBIT 3
Daily Average Sales of Mobile Vans (2009-10)

Mobile Van-1 30 to 40 kg
Mobile Van-2 65 to 75 kg
Mobile Van-3 30 to 40 kg

Notes: GFCCA did not have records of sales by type of fish sold, but 55 percent of the total
purchases were marine fish and 45 percent river fish. The wastage was similar in both
kinds of fish. The Gandhinagar shop sold 35 kg of fish per day, with revenues and wastage
similar to those of Van 1.

Source: GFCCA.

Assignment Question:

The annual review meeting of the Governing Body was due in a month’s time and D M
Patel had to present a plan for the mobile fish-selling vans project. He decided to do a
thorough analysis of the whole situation and present his recommendation to the
Governing Body.

Write a detailed decision report using the BCA structure in about 1000-1200 words
starting with Situation Analysis and ending with Recommendation.

Only word doc files should be uploaded.

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