BUSINESS MANAGEMENT

HIGHER LEVEL

INTERNAL ASSESSMENT

RESEARCH PROPOSAL

To: The Management, Saraf Carpet and Textiles. LLP

RESEARCH QUESTION: Should Saraf Carpet and Textile open up a new

outlet in Delhi to increase profits and profitability?

Personal code: jhx926

Session: May 2021

Word count: 499

1
 Research proposal

Research question:

Should Saraf Carpet and Textile open up a new outlet in Delhi to increase profits and

profitability?

Rational of the study:

Saraf Carpet and Textile (SCT) is located in Jaipur Rajasthan as LLP1. SCT is a manufacturer,

retailer and exporter of handmade Carpets, Textile, etc2 mainly dealing with foreign clients3.

Despite great success over the years, SCT is now facing stagnant profit margin and sales

reduction due to high competition4. Hence, SCT is planning to invest in opening up an outlet

in Delhi with the expectation that it will generate more sales since it will increase their reach

to a higher percent of tourist and locals5. However, it comes with high cost of investment but

it might benefit them with higher profits margins and revenue.6 Hence, the research is being

conducted to conclude whether SCT should open a new outlet to obtain more profitability.

Area of syllabus:7

· 1.6 Growth and Evolution

· 1.7 Organisational planning tools

· 3.5 Profitability and ratio analysis

· 4.4 Market research

1
"Welcome to Saraf Carpet & Textiles." ..::Saraaf Carpets::.. Web. 11 March 2020.
<http://www.sarafcarpets.in/>.
2
Appendix 1a: interview with Mr. Dinesh Agarwal, Director, Question 1
3
Appendix 1a: interview with Mr. Dinesh Agarwal, Director, Question 1
4
Appendix 1b: interview with Mr. Dilip Agarwal, Finance Director, Question 1
5
Appendix 1a: interview with Mr. Dinesh Agarwal, Director, Question 2
6
Appendix 1a: interview with Mr. Dinesh Agarwal, Director, Question 5
7
HOANG, PAUL. BUSINESS MANAGEMENT 4TH EDITION. 4th ed. Place of Publication Not Identified: IBID,
2018. Print.
2
Possible sources of information:

Primary Research

● Interview with the Director of SCT Mr. Dinesh Agarwal to obtain the business goals

and aims to understand expansion strategy.

● Interview with the Finance Director Mr. Dilip Agarwal to obtain financial

information needed for expansion like internal or external methods.

● Questionnaire for customers to get a better understanding of customer preferences

and demand for the product.

Secondary research

● A review of competitor’s website will be done to understand the opportunity and

competition level in carpet and textile industry in Delhi.

● A detailed study of government statistics for checking the requirements of opening

up a new outlet in Delhi.

Individuals and organisations:

● Director of SCT-MR. Dinesh Agarwal8

● Finance Director of SCT-MR. Dilip Agarwal9

● Customers of SCT.

Methods used to analyse the data:

● Ansoff Matrix- to analyse growth and risk of the strategy SCT is planning to adopt.

● Profitability ratio– to compare and understand the change in profitability in the

existing and the new proposed option.

● Lewin’s Force Field Analysis- to analyse effects of driving and restraining forces

on the decision of opening a in outlet in Delhi.

8
Appendix 1a: interview with Mr. Dinesh Agarwal, Director
9
Appendix 1b: interview with Mr. Dilip Agarwal, Finance Director
3
 Anticipated Problem Possible Solution
The directors might not be able to give time scheduling will be made in advance
for the interview.

Changes might take place in the carpet and adjustment will be made accordingly.
textile market during research.

Customer might not be willing to fill up the Brief questionnaire will be shared through
questionnaire mail for better flexibility and to neglect
incomplete results.

4
Action plan:

Month Feb March April May June July Aug Sep

Date 13 29 15 31 14 29 17 30 12 31 13 29 11 30 15 29

IA Introduction

Finalisation of topic
and organisation.

Research proposal

Interview with the

director and finance
director.

Questionnaire with
customers

Performing secondary
research

Evaluation of collected
data

Writing of First draft

Submission of first
draft

Editing after feedback

Final submission

Legend Normal job Critical job

5
 BUSINESS MANAGEMENT

HIGHER LEVEL

INTERNAL ASSESSMENT

MAIN REPORT

To: The Management, Saraf Carpet and Textiles. LLP

RESEARCH QUESTION: Should Saraf Carpet and Textile open up a new

outlet in Delhi to increase profits and profitability?

Personal code: jhx926

Session: May 2021
Word Count
Executive Summary: 199
Main Essay: 1943
6
 ACKNOWLEDGEMENT:

I would like to express my special thanks of gratitude to Saraf Carpet and Textiles who

punctually provided me with information and constant help and support in conducting this

research.

My heartiest gratitude to Mr. Dinesh Agarwal for letting me perform this investigation on his

business, appreciative of his time and cooperation throughout the process of investigation.

Additionally, I’m thankful to Mr. Dilip Agarwal, the finance director, for providing me with

unbiased insights of the organisation also for updating me with the plans and strategies for

expansion.

Lastly, I would like to acknowledge my supervisor and my school for providing me with such

a platform where I could conduct this investigation. Regards to my supervisor for guiding me

throughout the research and constant support and feedback on the same.

7
Contents
EXECUTIVE SUMMARY ..........................................................................................................................9
INTRODUCTION ......................................................................................................................................10
RESEARCH METHODOLOGY ..............................................................................................................12

RESERACH FINDINGS AND ANALYSIS .............................................................................................13

FIGURE 1: SWOT ANALYSIS ..................................................................................................................... 13

ANALYSIS AND DISCUSSION ...............................................................................................................14

FIGURE 2: ANSOFF MATRIX FOR GROWTH STRATEGY ...................................................................... 14

FIGURE 3: PROFITABILITY RATIO- For the year 2018-2019 (JAIPUR OUTLET) ................................ 16
FIGURE 4: FORECASTED RATIOS WITH AND WITHOUT OPENING THE OUTLET .......................... 16

FIGURE 5: LEWIN’S FORCE FIELD ANALYSIS FOR OPENING A NEW OUTLET IN DELHI ............. 18

CONCLUSION ...........................................................................................................................................20

APPENDICES .............................................................................................................................................21

Mr Dinesh Agarwal (Director)..................................................................................................................... 21

Mr. Dilip Agarwal (Finance Director) ........................................................................................................ 23

8
 EXECUTIVE SUMMARY

Saraf Carpet And Textile LLP operating in Jaipur, Rajasthan, aspires to open a new retail and

manufacturing store in Delhi to improve profitability. However, they might face financial

problems while expanding also SCT lacks experience in expansion hence, the study is aimed

towards the research question: -

“Should Saraf Carpet and Textile open up a new outlet in Delhi to increase profits and

profitability?”

To collect quantitative and qualitative data primary research was conducted where Director

and the Finance director were interviewed. Also customers, questionnaires were conducted.

Additionally, secondary research was led to understand the trend in the industry and methods

of finance.

Various tools were analysed to support the research. Firstly, Ansoff matrix to examine which

growth strategy is most feasible for SCT. Secondly, Profitability ratios were calculated to

comprehend whether the store should be opened by comparing data of with and without

opening up the store. Lastly, Lewin’s Force Field analysis was led to identify the driving and

restraining forces for the research question.

The study concluded that SCT should open a new outlet which will enhance their profitability

and profits but, they should consider consumer choices and industry trend in Delhi prior to

making the decision.

(199 words)

9
 INTRODUCTION

Saraf Carpet and Textiles LLP was established in 1985 by Mr. Dinesh Agarwal. 10 It presently

operates from a single outlet in Jaipur, Rajasthan11; as a manufacturer, retailer and exporter for

handmade Carpets, Textiles, etc12 and specialises in handmade silk carpets.13 Their quality of

work has been high; since they have well-motivated artists working from generations.14 To

enjoy an artistic and royal sense of feeling customers from around the world buy carpets form

SCT,15 making foreign clients their main customer base.16

However, SCT is now facing stagnant and low-profit margins and sales reduction due to

increasing competition and changes in the taste and preference of customers17. Customers are

now choosing Italian marble and other materials to decorate over carpets and textiles18. Further

the carpets tend to have a high maintenance cost in comparison to others19. Hence, SCT is

considering to expand in Delhi for more sales and higher profits.

Expansion in Delhi20 is being considered due to its proximity to Jaipur. Additionally, Delhi is

considered a great shopping hub and is a culture rich city with amazing historical locations and

a blooming art culture,21 locals and other domestic and international tourist tend to enjoy

buying artistic and historic culture-oriented items like textiles and carpets from Delhi.22

Furthermore, this also increases opportunity for SCT to reach more foreign tourist as in

10
Welcome to Saraf Carpet & Textiles." ..::Saraaf Carpets::.. Web. 12 July 2020. <http://www.sarafcarpets.in/>.
11
Appendix 1a: interview with Mr. Dinesh Agarwal, Director, Question 5
12
Appendix 1a: interview with Mr. Dinesh Agarwal, Director, Question 1
13
Appendix 1a: interview with Mr. Dinesh Agarwal, Director, Question 7
14
Appendix 1a: interview with Mr. Dinesh Agarwal, Director, Question 7
15
Appendix 1b: interview with Mr. Dilip Agarwal, Finance Director, Question 2
16
Appendix 1a: interview with Mr. Dinesh Agarwal, Director, Question 1
17
Appendix 1a: interview with Mr. Dinesh Agarwal, Director, Question 2
18
Appendix 1b: interview with Mr. Dilip Agarwal, Finance Director, Question 1
19
Appendix 1b: interview with Mr. Dilip Agarwal, Finance Director, Question 5
20
Appendix 1a: interview with Mr. Dinesh Agarwal, Director, Question 5
21
Appendix 1a: interview with Mr. Dinesh Agarwal, Director, Question 6
22
Appendix 1a: interview with Mr. Dinesh Agarwal, Director, Question 6
10
comparison to Jaipur.23 Since Delhi is the first location in the golden triangle24 foreign tourist

incline to spend a good proportion of their travel budget in Delhi moreover, they also tend to

have a lengthy stay in comparison to other cities25, increasing the chances for higher sales.

However, opening another outlet will be very expensive with fewer returns initially due to low

awareness with after effects of COVID – 19 impacting on the tourism industry26. Hence, to get

better understanding of the situation the research question formulated for this study is:

Should Saraf Carpet and Textile open up a new outlet in Delhi to increase profits and

profitability?

23
Appendix 1a: interview with Mr. Dinesh Agarwal, Director, Question 5
24
"The Complete Guide To: India's Golden Triangle." The Independent. Independent Digital News and Media,
19 Apr. 2017. Web. 14 July 2020. <https://www.independent.co.uk/travel/asia/the-complete-guide-to-
indias-golden-triangle-434773.html>.
25
Appendix 1a: interview with Mr. Dinesh Agarwal, Director, Question 5
26
Appendix 1a: interview with Mr. Dinesh Agarwal, Director, Question 5
11
 RESEARCH METHODOLOGY
Primary Research

An interview with the Director was conducted to get the insight of the business. This was

helpful to obtain more authenticated data. I also interviewed the Finance Director to gain

knowledge about the firm's financial statement, possible sources of finance considered by the

business and cost of expansion. However, they could have been biased in answering the

questions to preserve company image. Hence, similar questions were asked to both of the

directors to validate the data. Moreover, the interview was conducted for about 2-3 time for

better verification.

Additionally, an online questionnaire was carried out with respondents chosen through

convenience sampling to aid in understanding the customer preferences. Near around 35

questionnaires were sent to the current customer base and 50 to potential customers. However,

the rate of response was relatively low which resulted in limited data from analysis which also

impacted the reliability of data.

Secondary Research

To obtain data from competitors in Delhi a research was done on their website to understand

their marketing strategies and the product portfolio. Furthermore, government statistics were

referred to regarding requirements for opening a new outlet in Delhi. Lastly, SCT’s financial

data was referred to for conducting quantitative analysis .

12
 RESERACH FINDINGS AND ANALYSIS
FIGURE 1: SWOT ANALYSIS

Strength Weakness

● Strong knowledge of customer ● Sales reduction31

preferences27
● Highly motivated workforce28
● Famous for exporting and supplying
hand crafted silk carpets.29
● Wide range of product portfolio30
● high cost of production-silk32
● high maintenance cost of stock and
supplies.33
● no specific advertising strategies
usually depend upon word-of-mouth
promotion. 34

Opportunities Threats

● chances of development in ● Change in taste and preferences

technology - better productivity35 (Italian marble)37
● relatively blooming art culture in ● employing new skilled labour will be
Delhi supporting art ands historic costly.38
culture of carpets and textiles36 ● due to covid-19 sales might be
affected39

27
Appendix 1a: interview with Mr. Dinesh Agarwal, Director, Question 1
28
Appendix 1a: interview with Mr. Dinesh Agarwal, Director, Question 7
29
SARAF CARPET & TEXTILES PVT.LTD in Jaipur, Rajasthan, India - Company Profile "SARAF CARPET
& TEXTILES PVT.LTD In Jaipur, Rajasthan, India - Company Profile". Tradeindia.Com, 2020,
https://www.tradeindia.com/Seller-292317-SARAF-CARPET-TEXTILES-PVT-LTD/. Accessed 2 Aug 2020.
30
SARAF CARPET & TEXTILES PVT.LTD in Jaipur, Rajasthan, India - Company Profile "SARAF CARPET
& TEXTILES PVT.LTD In Jaipur, Rajasthan, India - Company Profile". Tradeindia.Com, 2020,
https://www.tradeindia.com/Seller-292317-SARAF-CARPET-TEXTILES-PVT-LTD/. Accessed 2 Aug 2020.
31
Appendix 1b: interview with Mr. Dilip Agarwal, Finance Director, Question 1
32
Appendix 1b: interview with Mr. Dilip Agarwal, Finance Director, Question 1
33
Appendix 1b: interview with Mr. Dilip Agarwal, Finance Director, Question 1
34
Appendix 1b: interview with Mr. Dilip Agarwal, Finance Director, Question 2
35
Appendix 1a: interview with Mr. Dinesh Agarwal, Director, Question 7
36
Appendix 1a: interview with Mr. Dinesh Agarwal, Director, Question 6
37
Appendix 1a: interview with Mr. Dinesh Agarwal, Director, Question 2
38
Appendix 1a: interview with Mr. Dinesh Agarwal, Director, Question 7
39
Appendix 1b: interview with Mr. Dilip Agarwal, Finance Director, Question 3
13
 ANALYSIS AND DISCUSSION

ANSOFF MATRIX

Ansoff Matrix is a strategic planning which helps in analysing the plan for growth strategies

this can assist SCT in taking suitable decisions; decreasing the level of risk while ensuring

sufficient growth.

FIGURE 2: ANSOFF MATRIX FOR GROWTH STRATEGY40

Market Penetration: Since SCT has been in the same market from 20-25 years.41 Market

penetration might not be a usefully strategy to satisfy SCT’s objective of increasing

profitability. As they are already low on profit margins42 using alternative pricing methods to

increase sales might harm their profitability leaving them unsatisfied.

40
Ansoff Matrix. Web. <https://images.app.goo.gl/TNS77M3brVqHju7Y8>.
41
Appendix 1a: interview with Mr. Dinesh Agarwal, Director, Question 1
42
Appendix 1a: interview with Mr. Dinesh Agarwal, Director, Question 2
14
Diversification: looking at present situation of covid-1943 diversifying in a completely new

market with a new product will be highly risky and expensive; since, research and development

of a product and understanding market preference accordingly are extremely costly. Moreover,

SCT isn’t interested in experimenting44 and they are also facing issues in increasing profit

margins.45 Hence, it might not satisfy their objective.

Product development: might not help SCT since they already have a wide range of product

portfolio.46 Moreover, introducing a new product will be costly as it requires a lot of research

and investment. Also it will be challenging for employees since they are not experienced in

making the new product, they might require training for the same increasing the expenses.

Hence, this might not be effective in increasing SCT’s profitability.

Market development: can be a suitable strategy for SCT to increase its profitability. As it can

open a new outlet in a new market with existing wide product portfolio47 ; therefore, these

products will be sold to a new set of customers (domestic and international tourist customers).48

As the product is known to SCT, so if they focus only on understanding market needs, they can

mitigate the risk of expansion. Also, as the firm is familiar with the demand and product being

marketed, it is easier to grow in a market rather diversifying or producing new products.

43
Appendix 1b: interview with Mr. Dilip Agarwal, Finance Director, Question 3
44
Appendix 1a: interview with Mr. Dinesh Agarwal, Director, Question 5
45
Appendix 1a: interview with Mr. Dinesh Agarwal, Director, Question 2
46
SARAF CARPET & TEXTILES PVT.LTD in Jaipur, Rajasthan, India - Company Profile "SARAF CARPET
& TEXTILES PVT.LTD In Jaipur, Rajasthan, India - Company Profile". Tradeindia.Com, 2020,
https://www.tradeindia.com/Seller-292317-SARAF-CARPET-TEXTILES-PVT-LTD/. Accessed 2 Aug 2020.
47
SARAF CARPET & TEXTILES PVT.LTD in Jaipur, Rajasthan, India - Company Profile "SARAF CARPET
& TEXTILES PVT.LTD In Jaipur, Rajasthan, India - Company Profile". Tradeindia.Com, 2020,
https://www.tradeindia.com/Seller-292317-SARAF-CARPET-TEXTILES-PVT-LTD/. Accessed 2 Aug 2020.
48
Appendix 1a: interview with Mr. Dinesh Agarwal, Director, Question 2
15
PROFITABILITY RATIO

To predict future performances of SCT analysis of quantitative data was done. However, these

predicted ratios are dependent upon the information given by the Finance Director so the

accuracy of the calculation is based on data provided. However, while calculating the

investment cost, the most expensive location rent was considered but if the company prefers to

change the location; cost will change accordingly resulting in change in ratios.49

The ratios for last two years were only considered as the Finance director stated that the

profitability has not been increasing in the last few years and sales growth too has been

minimal.50

FIGURE 3: PROFITABILITY RATIO- For the year 2018-2019 (JAIPUR OUTLET) 51

2018 2019
Sales 11,40,56,495.4 13,70,12,684
GP (Gross profit) 3,07,57,202.31 3,61,21,709.52
GPM (Gross profit margin) 26.96% 26.36%
Expenses 1,63,80,016 2,60,27,360
NP (Net profit) 1,43,77,185.82 1,00,94,349.82
NPM (Net profit margin) 12.60% 7.30%

FIGURE 4: FORECASTED RATIOS WITH AND WITHOUT OPENING THE OUTLET

2018 2019 2020 2021 2022 2023

Forecasted value without opening the new outlet (for present outlet)
GPM 26.96% 26.36% 23.46% 26.00% 26.00% 26.69%
NPM 12.61% 7.37% 6.72% 7.79% 8.94% 9.18%
Forecasted value after opening the new outlet (combined with present outlet)
GPM - - - 28.96% 30.40% 34.20%
NPM - - - 7.70% 12.00% 14.50%

49
Appendix 2: questionnaire for customers, Question 7
50
Appendix 1b: interview with Mr. Dilip Agarwal, Finance Director, Question 4
51
Appendix 3: Profitability ratio (provided by Finance Director Mr. Dilip Agarwal)

16
The projected values above suggest that after opening another outlet, SCT will have a dual

benefit as their profits and profitability both tend to increase. After opening the outlet GPM is

expected to increase from 28.96% to 34.20% by the 3rd year (2023) as SCT will be able to sell

its products to domestic and foreign tourists on a higher scale than the present outlet since the

spending pattern52 and blooming art culture53 which will support the product portfolio better.

The profits also show an expected increase from INR 72400000 to INR 10815750054 for the

same time period. Further, the analysis shows that for the existing outlet, the GPM is likely to

decrease from 26.96% to 26.69% from 2018 to 2023.

A deeper analysis reveals that expanding the business will increase expenses like expansion

cost55 of SCT so the ratios might fall in the first year when compared to the existing business.

However, once the outlet is opened the NPM will increase gradually as the expenses tend to

decrease and the revenue of the firm increases with increasing sales. Hence, it is likely to earn

higher margins combined as there is a better opportunity of increasing sales once established.

Thus, resulting in the projected NPM to increase from 7.70% to 14.50% by 2023, in combined

profits of both the outlets together (existing and proposed).

Moreover, for the existing business, while the profits are rising significantly, the profitability

is showing a marginal increase. Henceforth, the forecasted ratios suggest that with the opening

of a new outlet in Delhi SCT’s objective of increasing profitability will be to some extent in

the long run.

52
Appendix 1b: interview with Mr. Dilip Agarwal, Finance Director, Question 2
53
Appendix 1a: interview with Mr. Dinesh Agarwal, Director, Question 6
54
Appendix 4: Profitability ratio (Assumed data and calculations)
55
Appendix 1b: interview with Mr. Dilip Agarwal, Finance Director, Question 2
17
LEWIN’S FORCE FIELD ANALYSIS

This tool aids in evaluating and analysing data qualitatively helping SCT in deciding whether

they should be considering the option of expansion in regards to subjective pros and cons.

Hence it might affect the decision of the business in future.

FIGURE 5: LEWIN’S FORCE FIELD ANALYSIS FOR OPENING A NEW OUTLET IN

DELHI

DRIVING FORCES RESTRAINING FORCES

Increase customer base (4) High cost of opening a new store (4)

Wide range of products (3) High competition in Delhi (3)

Quality products (3) Liquidity issues (3)

Increase in profitability (4) Uncertainty due to the pandemic (3)

TOTAL = 14 TOTAL = 13

Delhi being a culture rich, historic art hub56 with a better spending pattern,57 opportunities for

SCT increases in terms of increasing their customer base, resulting in higher profitability;

When considering a combining of profit from both outlets, SCT’s objective will be satisfied.

Hence, these were mentioned in band 4 of driving forces. Furthermore, SCT’s wide product

56
Appendix 1a: interview with Mr. Dinesh Agarwal, Director, Question 6
57
Appendix 1b: interview with Mr. Dilip Agarwal, Finance Director, Question 2
18
portfolio58 and its speciality in handmade silk carpets59 will assist it with a better edge over the

competitors. Additionally its USP of Quality products60 will help SCT with positive word of

mouth promotion and to fight competition in Delhi. So, these were ranked in band (3). With a

total of 14 points of driving forces.

However, opening a new outlet will require high investment61 for machinery, infrastructure etc.

As SCT is already running low on profit62 it might have to arrange varied sources of finance.

Hence a (4). Moreover, Delhi market is highly competitive63 and so SCT might need to promote

to survive the competition. This might lead to additional liquidity issues. Furthermore, due to

the pandemic there is uncertainty in future. Hence these points of restraining forces were scored

3. With a total of 13.

This concludes that SCT can plan to expand since the driving forces are outgoing, restraining

forces by 1 point. Hence, SCT can consider the option of opening a new retail outlet in Delhi.

However, the findings must be carefully viewed as any inaccuracy in allocating rating might

lead the firm to face problems in future if it opens a new store.

58
SARAF CARPET & TEXTILES PVT.LTD in Jaipur, Rajasthan, India - Company Profile "SARAF CARPET
& TEXTILES PVT.LTD In Jaipur, Rajasthan, India - Company Profile". Tradeindia.Com, 2020,
https://www.tradeindia.com/Seller-292317-SARAF-CARPET-TEXTILES-PVT-LTD/. Accessed 7 Aug 2020
59
Appendix 1a: interview with Mr. Dinesh Agarwal, Director, Question 7
60
Appendix 1a: interview with Mr. Dinesh Agarwal, Director, Question 7
61
Appendix 1b: interview with Mr. Dilip Agarwal, Finance Director, Question 2
62
Appendix 1a: interview with Mr. Dinesh Agarwal, Director, Question 2
63
Appendix 1a: interview with Mr. Dinesh Agarwal, Director, Question 5
19
 CONCLUSION

Should Saraf Carpet and Textile open up a new retail store in Delhi to increase profits

and profitability?

Through Ansoff matrix it was analysed that market development will be a fit strategy for SCT

where opening a new retail and manufacturing store in Delhi as it is a medium risk strategy.

With the help of the profitability ratios, it was analysed that with combining of profit from both

outlets SCT will be able to increase its profitability(GPM and NPM) by almost double in 3rd or

4th years. Lastly the results of Lewin’s Force Field analysis suggest that driving forces for

opening up a new retail and manufacturing store is more than restraining forces.

RECOMMENDATIONS
● To complete SCT’s objectives they should consider opening up a new retail store in

Delhi as it can increase their profitability.

● Saraf Carpet And Textile should conduct further research on possible promotion

methods for the new store, since the market in Delhi is highly competitive, they will be

needed to spread more brand awareness.

● SCT should also carry out more market research in order to finalise a good location for

the store where they can get high visibility and footfall.

LIMITATIONS AND AREA OF FURTHER STUDY

● Rapid changes in the environment due to COVID-19 may affect the acquires of the

financial analysis therefore conservative estimated data was taken for financial forecast.

● The customers are global and international in nature but the responses were collected

only from the Delhi locals which might introduce bias in the analysis affecting the

analysis.

20
 APPENDICES
Appendix 1a: Interview
Mr Dinesh Agarwal (Director)
1.Greeting’s sir, since you have been one of the most successful firms in the carpet and
textile industry in India. Could you please tell me something about SCT?

Saraf carpet and textile has been in the market for the past 20 years. Since our inception in
1996.we here at SCT manufacture our own handmade carpets which is the traditional way of
making them here in Jaipur. Back in the years my father (Mr. Navratan Lal Agarwal) who is a
handicraft and jewellery dealer wanted to diversify into a new business line and so forth he
gave me the idea of working in the carpet industry and so SCT was established in 1985. Our
clientele is from all over the world since we mainly sell/retail carpets and textiles to foreign
tourists. Lastly, we also export carpets and textiles worldwide 24/7 through our website which
assist the buyers to select and order their preferences.

2. Being one of the top sellers in this industry what were the challenges you faced, how
did you overcome them.

Ans. Talking about the challenges we faced manufacturing problems when we were setting up
the business. And we also had problems with the local government and the employees as they
had some sort of a trade union so we had to deal with them. It took us about 5-6 years to pick
up the speed. The challenges faced against the local government were regarding the exports for
setting up rules and regulation and say getting raw materials from Kashmir and getting various
different necessities for production, it was very hard because back in that time there were no
such facilities like the present. Also, since the business did not reach its boom until 6-7 years
we faced financial problems as well.

Talking about the present we are facing problems with profit margins and sales reduction as
seen in today's generation and time there are changes in taste and preference of the customer
as they are choosing other materials like Italian marble to furnish their homes, etc. and so we
are planning to diversify in a new market to expand our reach to domestic and foreign clients.

3.What are the long-term goals that SCT has, how do you aim to achieve them or have
you met the goals.

Ans. We still haven’t achieved our goals and we are looking forward to it. In order to achieve
them we are thinking of expanding our outlets into a new city. Maybe Delhi, Agra or Udaipur.

4. Sir, how are you planning to expand the business?

ans. By opening a new retail store in any of the three cities mentioned before. But the decision
might be on halt since the pandemic has affected the whole market, we might not be able to
expand within this year. However, we do have a large customer base and we are able to
maintain the brand loyalty and brand awareness hence if continued we can promote the
upcoming retail store in that specific city.

21
5. If possible, could you please tell me a little more about your expansion plan.

Ans. Sure, at present we are situated in Jaipur, Rajasthan and we are only planning to expand
in some other tourist famous city. As said, we were considering these locations to expand in,
first being Udaipur as it is renowned for its beautiful location and is also known as city of lakes
hence many hotels and companies are moving in there and they might require carpets to give a
royal look as it is one of the royal cities. Which might also help us in getting some good orders.
2nd being Agra to Jaipur, Delhi, Agra is considered as a golden triangle which is visited the
most by tourists might help us in getting more sales and profits. Lastly Delhi, as Delhi is the
first location in golden triangle foreign tourist tend to have an extended stay in Delhi than other
cities due to its historic monuments and tourist spots; additionally, Delhi being the capital of
the country mostly tourists first get off in Delhi due to it having the most international flight
communication. tourist they tend to start their tour from Delhi. Hence this can help us in getting
more customers as we can diversify in domestic and foreign tourist market expanding our
customer base which might result in rise in sales and profits in the firm. Hence, we will be
EXPANDING IN DELHI ONLY. However, competition in Delhi is likely high in carpet
industry in addition to external effects like covid-19 we might have to postpone the plan for
expansion by one year as it has affected the tourism industry on a greater scale.

Q6. Sir, I would really like to know why have you choose Delhi specifically.

Ans. I can say this for sure that Delhi has become the capital and main well know shopping
hub of India moreover the increasing tourism due to its great historic architecture and culture
has brough in artistic interest within the locals and domestic tourists there. Which has increased
the number of supporters and buyers for artistic work like carpets and textiles. Also since Delhi
is the first location in the golden triangle and as SCT has their wide customer base as tourist
traveling in group which have a tight budget usually tend to spend more in their first destination
which is Delhi and so I have analysed that it might be a great opportunity to increase our
Profitability in Delhi as a retail and manufacturing store.

7. How do you aim to compete with your competitors in the new market? What are the
USP’s you are planning to introduce or how do they differentiate you from others in the
industry?

Our speciality and USP comes from our artists. We make our own handmade silk carpets and
other products. Today we have over 500 staff working and living with us. They have their own
premises to stay in the campus. Most of them are working here from generations to generations
and this is the 3 generation of artists hence highly motivated. However, we might face some
rd

internal issues with transfer or employing new labour sine it will be expensive. Moreover, since
our complete production is manual and so we lack a little here since the production process is
time consuming however we are expecting some innovation and development of technology in
coming future through which we can maintain the feel of handmade production and increase
the productivity rate.

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Appendix 1b: Interview

Mr. Dilip Agarwal (Finance Director)

1. Good afternoon sir, if possible, could please you tell me about the financial issues faced
by SCT.

Saraf carpet and textile is a limited liability partnership and so in the beginning of the
business we had various sources of finance. However, we are facing sales reduction due to
change in taste and preferences of customers as they are now choosing other materials like
Italian marble over carpets. Even the maintenance cost of these products is high which is
one of the factors in reducing sales and for SCT to maintain. With shortage in raw material
and high prices of natural protein fibres like silk increases the cost of production. Moreover,
with increase in taxation the firm is facing issues in coping up with. But still, we are hoping
for betterment in coming future.

2. What is the cost of expansion and how do you plan to cover it.

We are still considering all factors and calculating the expansion of for now I can say
approx. 5-6 cores. And to cover the cost we export are carpets to clients all over the world
as in them to give a royal touch to their homes. With high cost of exports, we tend to charge
high prices from customers, however most of them are willing to buy these due to quality
product but at times we do loose some sales due to high prices. After opening a retail store
in Delhi, we assume we will be able to cover the cost in very less time as the spending
pattern is quite high than Jaipur. But we are still not considering to invest in promotions
rather we choose word of mouth promotion as off now. We are also aware of the fact that
to get a location in prime area opening up a retail and manufacturing store there will be
quite expensive however we will be able to cover the cost as per the calculations.

3. To what extent do you think external effects like covid-19 can influence the expansion
and financial statement of SCT?

At present I can’t say much but what I think is that the buying capacity of consumers will
decrease since every other business is facing problem and sales in every sector has decreased
so what I think is that the sales for SCT might continue decreasing. Nothing can be said as of
now people tend to save in such times and so with same expenses there are less sales. We have
very loyal and motivates workers since generations and so we might cut a little on salary but
we are not preferring to dismiss them at any cost. Fixed cost in the business remains the same
however due to sales reduction we are facing loss in profits.

4. Could you please tell me the profitability ratio of Saraf carpet and textiles.

As of now our gross profits margins have been stagnant and net profits margins have been
falling since the sales growth has been minimal and it might continue in future. Due to the fall
in profitability in past few years we are aspiring to open a new outlet in Delhi. If the ratios and
data is needed for further study please let me know I will be able to provide you with them.
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5. Are there any changes you have noticed in profits recently?

Definitely there have been changes in profits due to covid and increasing competition since
people prefer other materials over carpet as said before they are costly and needs high
maintenance people tend to buy machinery made carpets as they are less costly since the cost
of labour production is less than handmade carpets

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Appendix 2: questionnaire for customers

1. Do you prefer carpets?

o Yes
o No

2. Have you ever heard about Saraf Carpet and Textiles (SCT)?
o Yes
o No
o Maybe

3. How did you get to know about SCT?

o Friend
o Advert
o Media
o Other

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4. Are you interested in buying from SCT?
o Yes
o No

5.How do you prefer to buy carpet and textiles?

o Online
o In person

6. How much money will you be interested in paying for them?

o 5000-10,000
o 10,000-15,000
o 15,000-20,000
26
 o 20,000 above

7. Which location in Delhi will prefer to shop from?

o Lajpat Nagar
o Jung Pura Extension
o Connaught Place
o Select City Walk
o Nizamuddin East

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Appendix 3: Profitability ratio (provided by finance director Mr. Dilip
Agarwal)

28
 Appendix 4: Profitability ratio (Assumed data and calculations)
2018 2019 2020 2021 2022 2023

Forecasted value without opening the new outlet (for present outlet)

actual data estimated data

Sales 114056495.4 137012684 161674967.1 154628702.7 171637860 173888637.5

GP 30757202.31 36121709.52 37927795 40203463 44625844 46410877

GPM 26.96% 26.36% 23.46% 26.00% 26.00% 26.69%

Expenses 16380016 26027360 27068454.09 28151192.25 29277239.9 30448329.54

NP 14377186 10094350 10859341 12052270 15348604 15962548

NPM 12.61% 7.37% 6.72% 7.79% 8.94% 9.18%

Forecasted value after opening the new outlet (combined with present outlet)

estimated data

Sales - - - 250000000 275000000 316250000

GP - - - 72400000 83600000 108157500

GPM - - - 28.96% 30.40% 34.20%

Expenses - - - 53150000 50600000 62301250

NP - - - 19250000 33000000 45856250

NPM - - - 7.70% 12.00% 14.50%

29