Star Engineering Company Ltd.CASE Study

Presented byT Farzana

Vikram BaligaPritom Roy

Siddhartha Deshmukh

Case FactsStar engineering company limited manufactured 5

products.The company encountered problem deciding how to

allocate the funds to various productsThe company had limited financial resources so it was

important to allocate the funds in a balanced manner.

Product A : Transformer Coils

Product B : Cable Jointing Kits

Product C: Electric point Machines

Product D: Steel Forgings

Product E: Switch Mode Power Supply (SMPS)

Product portfolioProduct A: Transformer coils, sold to telecom

exchanges. Market of transformer coil was growing at a rate of 25% p.a

The coil was well accepted by the customers in terms of quality and they had market share of 20%

In order to increase production capacity additional investment 2 cr was required

Product B: Cable jointing kits which was used in telecom industries

Market of cable jointing kits was growing at a rate of 15%Market share of company had come down from 100 to 20%

because it was getting substituted by fiber optic cable and suitable jointing kits

Product C: Electric point machines used by railways for changing the tracks electrically

Market share of this product was 40% For expansion investment of 2.5cr required

Product D: Steel forgings required by diverse industries

Market of steel forgings was growing at 8 to 10%To make replacements in equipments it required

investment of at least 1.5crProduct E: Switch mode power supply (smps)Market of this product growing at the rate of 20%Market share of company was 6%To increase the production capacity they required 5cr

Total requirements of fund for all products was 11cr. The management could arrange only 5cr

POLITICAL Congress government was in the centre

P.V. Narasimha Rao was the prime minister of India

The nation was shaken by a series of bomb blasts in mumbai

ECONOMICEconomic growth in the world remained slow-moving in

1993Economy had consolidated itself in the initial years of

eighth five year planPrimary focus of eighth five year plan was human

developmentGDP was 4%Rate of inflation was between 7-8%

SOCIAL

Telecom industry was slowly growing in India giving rise to need for more transformer coils.

Indian Railways was also increasing its operations and hence demand for electric point machines was also high.

With the increase in manufacturing industries in India post liberalization demand for steel forgings was also increasing.

TechnologicalInfrastructure and technological changes had started

post liberalization.Manufacturing sector had grown 8-10% for last

few years.

SWOTStrength :

•product A was well accepted by the customers in terms of quality and it was considered as the market leader.

•Product ‘B’- Contributing to the expansion and diversification projects of the company.

•Product ‘C’(electric point machines)- Demand for the product is growing 7 to 8 percent . Also its market share are 40% highest among the competitors.

Weakness :

Product B : Jointing kits were getting slowly substituted by fibre optic cables and suitable jointing kits.

•Product ‘B’-Problems faced of substitution and competition.

•Product’D’- despite of giving the best management that unit was not growing.Problem was poor quality and high rejection rate.

Opportunities :

Product ‘A’ was having total market for the transformer coils was growing at an average rate of 25 percent per annum.

Product ‘B’ -Telecom industry growing at the rate of 15 percent per annum.

Product ‘E’ having a good potential to become a market leader.Because of lesser competition

Threats :

Because of unavailability of substitution in the Department of Telecommunication, Due to growing competition market share of company had come down from 100 percent.

Product ‘D’- Management issue.

QuestionIf you were Anant Kumar what would be your

recommendations to the CMD of the company?

Market Share Analysis

Product A - Transformer Coils -20% (Market Leader)

Product B – Cable jointing kits – 20 % (Market Leader)

Product C – Electric Point Machines – 40 % (Market Leader)

Product D - Steel Forgings - 5%

Product E - Switch Mode Power Supply (SMPS) - 6%

Industry Growth RateProduct A -Transformer Coils - Growing @ 25%Product B – Cable Jointing Kits – Substituted by Fiber

Optic Cables. Product C - Electric Point Machines - Demand Growth

@ 7% to 8%Product D - Steel Forgings – Domestic market 8% to

10% Product E - Switch Mode Power Supply (SMPS) -

@20% per annum

Product C and Product A Product E and Product D

Product B Product B

Product D

Product B

Product A and C

Product E

2 Factors that are affecting the demand of the product strategy:

PRODUCTS Investment Required

Product Life cycle

Transformer Coils 2 Crore -

Cable Jointing Kits, Jelly Filled Cables

- Decline

Electric point Machines

2.50 Crore Growth

Steel Forgings 1.50 Crore Growth

Switch Mode Power Supply (SMPS)

5 Crore Introduction

RecommendationsOption 1 – Go for investment in Product A and

Product DTotal investment – 2 cr + 1.5 cr = 4 crReasons – For Product A market growth rate was 25

percent per annum

For Product D domestic market was growing at 8 – 10 percent but tremendous demand in international market

RecommendationsOption 2 - Go for investment in Product ETotal investment – 5 cr

Reasons – For Product E market growth rate was 20 percent per annum

Good Potential of becoming a market leader.