2. Summary
The case is about the Kanpur Confectionaries Private Limited (KCPL) a family
business located in Kanpur, UP and started by Mohan Kumar Gupta in 1945, now
the company is looked after three of his son.
A-One Confectionaries Private Limited (APL) was the one of the leading National
player in the confectionery industry.
KCPL received proposal from APL, the national leader in the biscuit industry, for the
supply of 70 tonnes per month.
APL had desired to expand its supply to the market by subcontracting orders to
other manufacturers to retain full control over the quality and production processes
of biscuits produced for them.
The advantages to KPCL were getting assured return on its investment and access
to APL's manufacturing expertise.
The disadvantages to KPCL were in the possible loss of independence in decision
making, dilution of ‘MKG, ’company’s own brand, , and family prestige.
3. The Dilemma
The dilemma faced by the KCPL is to accept the
proposal of the APL or not.
Effect on the profit of KCPL after signing of deal
with APL.
The process improvement and the technical
expertise APL will bring with it.
Family image and long term goal of KCPL to
become national player
4. Timeline
1945
KPCL Started by Mohan Kumar Gupta in Jaipur , under the brand name
of MKG
1946 Set up a production unit in Jaipur
1950
Set up 30 units in the unorganised sector of Rajasthan to sell variety of
candies
1954
Set up a candy manufacturing unit in Kanpur and became the first
entrepreneur to set up a candy making unit.
1970
Emerged as a leader in the candy industry and entered into the glucose
biscuits under the MKG brand
1974
Reached the number two position in the market with monthly sale of
110 Tonne
1980 Doubled its capacity from 120 tonnes to 240 tonnes per month
1982 Mohan kumar handed over the business to Alok kumar
1983 Between 1973 to 1987 its sales decreased .
1985 Discontinued candy business .
1986 Signed the agreement with Pearson to manufacture health biscuits.
1987 Offer from APL
5. Technology & Operations Of KCPL
Biscuit making involved ingredients Maida, Sugar, Vanaspati and
certain preservatives in proportion.
Qualities of material was checked in laboratory for impurities.
Biscuits were manually packed in packets of 100 grams.
Dependent on both casual and permanent workers.
Salary for permanent were 2.75 lakh/month and wage for casual
labour Rs.50/day.
Absenteeism were high.
Production varies from 2 tonnes/day to 6tonnes/day.
6. GE Model of KPCL
Strong
MediumHighLow
Average Weak
A
G
FED
CB
H I
Business Strength
IndustryAttractiveness
7. Transition from C to B Strong
Medium
HighLow
Average Weak
A
G
FED
CB
H I
Business Strength
IndustryAttrctiveness
Initially Mohan kumar Gupta launched his business with
dealership of candies produced by other.
In 1946 he set up thirty production units in the
unorganised sector in Rajasthan to sell different candies.
KPCL could not compete price as its candies were not considered by the market to
be different from others and faced a financial crisis.
In 1954 KPCL shifted its business to Kanpur , uttarpradesh and became the first
entrepreneur to set up a candy-making unit in that state.
He appointed three sales representatives to cover the entire state, establish
dealership, and promote `MKG' as a leading brand.
He advertised ‘MKG’ in vernacular newspapers and on hoardings located at
crossroads.
By 1970 he had emerged as a leader in candy business his region.
8. Transition from B to A Strong
Medium
HighLow
Average Weak
A
G
FED
CB
H I
Business Strength
IndustryAttrctiveness
At this stage KPCL has adopted different strategies to
promote its product into the market by adding values to
the Brand MKG.
At this stage KPCL also tried their best to meet the
demand of the market and succeeded in that.
KPCL appointed three sales representatives to cover the
entire state, establish dealership, and promote `MKG' as
a leading brand.
He advertised ‘MKG’ in vernacular newspapers and on
hoardings located at crossroads.
By 1970 he had emerged as a leader in candy business his
region.
9. Transition from A to D Strong
Medium
HighLow
Average Weak
A
G
FED
CB
H I
Business Strength
IndustryAttrctiveness
In this phase KPCL has to maintain the brand value.
KCPL have to implement research and development
program for expansion of the business and use higher
technology to decrease their operational cost.
So KCPL had invested its surplus cash to diversify its
business into the manufacturing of glucose biscuits and
selling them under the same brand.
In 1970 KCPL started manufacturing glucose biscuits as an extension to candy
business.
KCPL business in glucose biscuits was profitable and it also started adding value to
the product by extended its range and offered cream, salt, and Marie biscuits
under the `MKG' brand.
In 1973-74, KCPL reached the number two position in the market with a monthly
sale of 110 tonnes
In 1980-81 KCPL doubled its capacity from 120 tonnes per month to 240 tonnes per
month. The same year their turnover in biscuits’ business was `2 crores, an
increase of 15 per cent over 1979-80.
10. Transition from D to E Strong
Medium
HighLow
Average Weak
A
G
FED
CB
H I
Business Strength
IndustryAttrctiveness
In this stage KPCL has huge competition from the
organised and unorganised sector of biscuit
manufacturers in that region.
Owing to increased competition from both organized
and unorganized players the margins declined. The
business become unattractive and uncompetitive.
The candy business was also on the decline.
The operational cost was increasing due to raising cost of labour and material.
The production was to decreasing due to absenteeism which was 50 per cent. This
had led to uneven production.
In 1986-87 the average monthly production of ‘MKG’ biscuits was only 120 tonnes ,
even though their capacity was 240 tonnes per month.
In 1986 KCPL singed contract with Pearson to hold its business in the market and
utilize its surplus capacity in producing health biscuits for Pearson.
Pearson agreed to allow KCPL to run its existing line of business.
11. The Critical Decision Strong
Medium
HighLow
Average Weak
A
G
FED
CB
H I
Business Strength
IndustryAttrctiveness
Now the KCPL is in the position where the business
strength is average and the industry attractiveness is
medium.
As it is couldn’t lower its operational cost and couldn’t
increase it production units ,its business is becoming
unattractive and uncompetitive.
To regain its business in the market it has to make use of the surplus capacity or
has to invest more money into the business.
In the that process A-one international came up with the proposal of contract
manufacturing units (CMU) for manufacturing the biscuits by KCPL for APL.
KCPL has to take decision so that its company doesn’t go into F or H phase where
they need to harvest or divest .
12. Options available to KCPL Strong
Medium
HighLow
Average Weak
A
G
FED
CB
H I
Business Strength
IndustryAttrctiveness
Option:1
KCPL can accept the offer from APL and become its
Contract manufacturing unit (CMU).
Option :2
KCPL can reject the offer and continue with production of MKG and GOOD
HEALTH for PEARSON.
Option :3
Increase the production by decreasing the absenteeism and optimum use of
installed capacity.
13. Advantages and disadvantages of option :1
Advantages:
Contract capacity of manufacturing can be increased if KCPL meet
expectation of quality and production.
KCPL can improve and evolve the production procedure with technical help
that is been provided by APL.
KCPL can avoiding marketing, brand building and distribution expenses, and
minimizing the business risks.
It would also help KCPL to utilize the surplus capacity.
Disadvantages:
KCPL will lose its independence in and cannot take their own decisions.
KCPL might not be able to concentrate on strengthening the ‘MKG’ brand
built over the years ,as the family name was dependent on the success of the
biscuit line.
Family image and long term goal of Mohan Kumar Gupta that KCPL to become
national player will be destroyed.
14. Advantages and Disadvantages of option :2
Advantages:
Pearson can increase the production from 50 tonnes to 100 tonnes which will
eventually increase the profit margin.
Disadvantages:
Since PEARSON biscuit is not doing good in market as APL biscuits have
already captured the market so probability to increase the production is less.
MKG is also running in loss.
15. Advantages and Disadvantages of option :3
Advantages:
If worker work efficiently it will definitely increase the productivity eventually
the company will run in profits by decreasing the cost per tonne in production.
Disadvantages:
Labours may ask for higher wages and the company has to become strict which
may break the family principle of no exploitation of labour.
16. Action Plan
KCPL accept the proposal of APL.
Continue contract with PEARSON Group.
Working for both company KCPL could also improve its own
production line Brand image of MKG by their secret ingredients and
technical up gradation.
17. Contingency Plan
KCPL has to make good relation with institutions and also with the
premier institutions to supply biscuits and take them into
confidence that they will provide high quality of product and
including different variants .
KCPL should manufacture premier quality of biscuits and regain the
brand value of MKG and keeping profit margin minimum initially and
as the customer will increase and eventually the production will
increase and ultimately the cost per unit of product will decrease by
increasing the profit margin.
