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TRANSCRIPT
PREFACE
It is a pleasure to keep this report in front of you. Project report is vitally
important for M.B.A students because it develops the feelings among the
students about industrial environment and business to develop the
practical base. Theoretical knowledge is true only when we apply the same
in the practical.
In the final year M.B.A there is a subject named ‘Management Research
Project’. Under the said curriculum a student has to do a detail analysis of
a particular company. At the same time we must know that what are the
Strengths and weakness of the company by analyzing overall
organizational structure and its operations. And simultaneously analyze the
opportunities and threats for the industry to support company analysis.
In order to establish co-relation between the theoretical studies and
practical training, it was suggested that some company should be analyzed
and accordingly we had done the analysis on “Choice Laboratories Ltd”.
2
ACKNOWLEDGEMENT
It is well known that practical knowledge is the pre-requisite for the
developing of business sense.
For Our project we received lot of help from gentlemen who will remain in
our memory for long life. Their advice, co-operation and guidance
encouraged us to perform better.
To show our deep sense of gratitude the word thanks is not enough but we
would like to say thanks to them to express our gratitude in words.
We heartily express our deep sense of gratitude to Mr. Jaya ashish Sethi,
the faculty member, NSVKMS MBA College, for not only giving us
knowledge on the subject but also for constant guidance, co-operation and
motivation in preparation of report. Without which it was very difficult for us
to reach at this stage.
We also convey our thanks to Mr. Vikram Bhatt (Sr. Manager –Imports &
Exports) and Mr. Apurva (Assistant Manager Import & Export), and all
staff members of ”Choice Laboratories Ltd.” Who gave their full support
and wide co-operation during our training Schedules.
Date: __________Place: ___________
3
EXECUTIVE SUMMERY
As a part and partial fulfillment of “Management Research Project” of MBA
programme we have selected “Choice Laboratories Ltd.” for general
understanding of the company’s organizational structure and its
operations. However in particular our emphasis was on to find out the
strengths and weakness of the company.
We have analyzed all the departments of the company and their
operations. This includes the specialties and strategies adopted and
implemented by different departments.
We presented a brief introduction of the FMCG industry along with a
description of the important players and key success factors. We have also
analyzed the opportunities and threats of the industry to support our
analysis of the company.
Date : ___________
Place: ___________
Keyur DarjiKeyur Darji
Nirav MehtaNirav Mehta
Pankaj PrajapatiPankaj Prajapati
4
INDEX
1. RESEARCH OBJECTIVE 07
2. MACRO ANALYSIS 08
(A) Introduction of FMCG Industry 09(B) Industry Segments 11(C) Key Players In the Industry 13(D) Current Scenario 15(E) Key Success Factors 18(F) OT Analysis 20
3. MICRO ANALYSIS 23
(A) General Information 24
1) Company Profile 252) Vision 253) Infrastructure 264) Technology Transfer 275) Head Office & Factor Address 286) Sales & Corporate Office 28
(B) History & Development 29(C) Organization Chart 31(D) Marketing Department 32
1) Introduction 332) Structure 333) Marketing Mix 344) Choice Marketing Strategy 55
(E) Production Department 56
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1) Structure 572) Major Products Manufactured 573) Manufacturing Process 594) Supplier of Choice 615) Inventory Management 62
(F) Finance Department 681) Introduction 692) Financial Statement 723) Trend Analysis 754) Common Size Statement 785) Ratio Analysis 80
(G) HRM Department 841) Introduction 852) HR Planning 853) Recruitment 864) Selection 875) Training & Development 886) Motivation 89
(H) Export Department 931) Introduction 942) Import / Export Documents 973) Principle Documents 984) Export Department of Choice 1115) Export Marketing Mix 1136) Competition at Export Front 1157) Export Benefit 117
(I) SW Analysis 1184. Recommendation 1225. Conclusion 123
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6. Bibliography 124
RESEARCH OBJECTIVES
Research objectives include the objective of research of the researcher
before starting any research. The researcher should determine the
objective or the goal of the research for the smooth functioning of study.
Predetermine objectives should be of such that researcher fulfils in the
certain period of time at minimum cost.
Following are the research objectives, which we have developed…
To understand the structure of the company.
To study the various departments of the company with their
strategies and policies.
To identify the strengths and weakness of the company.
To know about the general information of the industry with its key
success factor, currant scenario and opportunities & threats in brief.
7
INTRODUCTION OF FMCG INDUSTRY
The fast moving consumer goods (FMCG) industry has been moving slow
of late. Due to saturation of demand in urban areas and due to its difficulty
in expanding to rural markets. The industry, historically branded as
defensive sector, has found itself vulnerable to economic slowdown. One
of the largest direct and indirect employment providers, the sector has
strong backward linkages to spur growth of other industries, and in turn,
the company.
The Fast Moving Consumer Goods (FMCG) sector is the fourth largest
sector in the economy with a total market size in excess of Rs. 60,000
crores. This industry essentially comprises Consumer Non Durable (CND)
products and caters to the everyday need of the population.
Product Characteristics:Product belongs to the FMCG segment generally have their following
characteristics.
They are used at least once a month
They are used directly by the end-consumer
They are non-durable
They are sold in packaged form
They are branded
The industry is so diverse to include soaps, detergents, oral care, personal
care, culinary products, and consumer staples. Oral care includes
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toothpaste, tooth powder, toothbrush, mouthwash etc. while personal care
includes shampoos, hair oil and cosmetics.
The industry is marked by high ad spend. Brand building, brand extensions
and quite a low capital to sales ratio on account of outsourcing and very
low investment in fixed assets.
10
INDUSTRY SEGMENTS
The main segments of the FMCG sector are:
Personal Care:Oral care; hair care; skin care; personal wash(soaps); cosmetics and
toiletries; deodorants; perfumes; paper products(tissues, diapers,
sanitary); shoe care.
Major companies active in this segment include Hindustan Lever;
Godraj Soaps, Colgate-Palmolive, Marico, Dabur and Procter &
Gamble.
Household Care:Fabric wash (laundry soaps and synthetic detergents); household
cleaners (dish/utensil cleaners, floor cleaners, toilet cleaners, air
fresheners, insecticides and mosquito repellants, metal polish and
furniture polish).
Branded and Packaged Food and Beverages:Health beverages; soft drinks; staples/cereals; bakery products
( biscuits, bread, cakes); snack food; chocolates; ice-cream; tea;
coffee; processed fruits; vegetables and meat; dairy products;
bottled water; branded flour; branded rice; branded sugar; juices etc.
Major companies active in this segment include Hindustan Lever,
Nestle, Cadbury and Dabur.
11
Spirits and Tobacco Major companies active in this segment include
ITC, Godfrey Philips, UB and shaw Wallace.
An exact product-wise sales break up for each of the items is
difficult. Domestic FMCG industry lacks a clear definition and scope
and there are attempts to widen its scope.
12
KEY PLAYERS IN THE INDUSTRYThere is a strong MNC presence in the Indian FMCG market and out of the
top 10 FMCG companies; four are multinationals while two others have
significant MNC shareholdings. Unlike several other sectors where
multinationals have entered after 1991, MNCs have been active in India for
a long time. The top five listed FMCG companies on the basis of their
sales turnover in the last financial year (2004) are:
Company Name Sales(‘04) Profit After Tax(’04)
Hindustan Lever Ltd. 10978.31 1073.73
I.T.C Ltd. 7971.94 792.44
Nirma Ltd. 1717.88 234.1
Nestle India Ltd. 1546.43 98.47
Britannia Industries Ltd. 1169.84 51.02
Colgate-Palmolive(India)
Ltd.
1123.53 51.79
Godfrey Phillip India Ltd. 1082.63 42.1
Dabur India Ltd. 1046.28 77.67
Smithkline Beecham
Consumer Healthcare Ltd.
743.38 97.61
Godrej Soaps Ltd. 714.74 61.89
Marico Industries Ltd. 649.05 35.73
Cadbury India Ltd. 511.08 36.7
Procter & Gamble Hygiene
& Health Care Ltd.
492.85 75.03
Reckitt & Colman of India
Ltd.
435.33 31.47
ISPL Industries Ltd. 21.57 0.04
(Source: Capitaline Plus)
13
Among the major companies, Hindustan Lever has a strong presence in
the food. Personal care and household are (detergents) sectors: ITC is the
market leader in cigarettes; Nirma has a strong presence in the detergent
market; Nestle and Britania are active in the food sector Colgate has a
strong presence in the oral care segment.
14
CURRENT SCENARIO
The FMCG sector is said to be a defensive sector in stock markets, but
prolonged recession and poor agricultural output has affected even this
sector. The competition is hectic and margins can be protected only
through volumes, as the industry is highly price sensitive.
With urban markets saturated, the industry majors are trying their level
best in grabbing the rural market share. But poor agricultural growth in the
past two years is proving to be a speed breaker in the Industry’s growth.
The industry faced stagnation and down side growth in many segments in
last two to three years in soaps and detergent segment, while market for
personal wash fell by 9.3%, fabric wash market fell by 2%, while dish
segment recorded a spectacular 13.2% growth.
FMCG sales grew at their lowest ever pace of 4.90% last fiscal. Compared
with 8.50% in 2002 it was the third straight year when FMCG majors
posted single-digit growth in sales.
In oral and skincare segment, market for shampoos recorded a
spectacular 10.6% growth while tooth paste and skin care segments grew
by 2.4% and 4.4% respectively in 2004. During the above period, Talcum
Powder market witnessed a down side growth of 0.6%
However the growth rate of these companies for the twelve months ended
Nov 04 showed mixed trends. While HLL, Colgate, Dabur, Reckitt,
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Becinser and SmithKline Beechm recorded negative growth of 4.2%, 3.4%,
1.9%,1.7% and 0.2% respectively,
The personal product portfolio continues to be under pressure. The volume
degrowth story continues to get even worse for toothpaste- degrowth for
May was 9%. The once high growth area of shampoos grew by 2%.
Colgate remains as insipid show with volume degrowth across the three
major categories – 4% in toothpaste, 16% in tooth powder and 23% in
tooth brushes. In the worst of times. Colgate is still outperforming its peers
in tooth pastes – degrowth across the three major categories was 5% in
tooth pastes and 11% in tooth powder. Palmolive Natural’s a brand that
was doing exceeding well, degrew by 18% in May.
Nistle’s milk portfolio is also feeling the pressure of the overall slowdown
weaning foods (cerelac) showed a degrowth of 4% milk foods (Lactogen)
showed flat growth; while powder showed a growth of 24%. Coffee showed
degrowth of 4% as did chocolate (-4%). Noodles showed a growth of 21%.
As industry is highly price elastic, even a small fall in prices could lead to
spurt in volumes. This also attracts large number of smaller players, who
operate on a low cost structure and hence provide tough competition to the
larger players. This leads to down trading, where in the consumer shifts
from high priced to low price brands.
However, the premium segments are not price sensitive and hence, down
trading are not quite prevalent in these segments.
16
The industry is also affected by spurious/ counterfeit products of leading
domestic and international brands, especially in urban areas. The
estimated loss on account of counterfeit and pass-off products (Products
named similar to existing well known brands) is RS 25 billion to FMCG
companies and RS 9 billion to government.
The fastest growth is expected is packaged foods, which are likely to
witness a spectacular 20-25% growth. The penetration levels are quite low
in this segment, offering enormous scope for growth, but the segment is
highly price sensitive.
17
KEY SUCCESS FACTORS
An industry’s key success factors are those things that most affect industry
members ability to prosper, competencies, competitive capabilities and
business outcomes that spell the difference between profit and loss and
ultimately, between competitive success or failure.
In FMCG industry also it’s important and they are following in nature….
Technology Related KSFs:
Product innovation capabilityHere, product innovation capability is quite important due to product
is attracting youth who are belongs to the Gen-X and they are prefer
always innovative products.
Technical capabilityTechnical capability is represent how company is technological up-
graded and its capacity of production. FMCG industry is the industry
which includes the food products. So its technology should be good
for food production.
Manufacturing related KSFs: Low cost production
Due to heavy competition low cost provider will be market leader
and in Indian industry most of the consumers are price sensitive so,
low cost producer will be the market leader in the FMCG industry.
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Low cost plant locationHaving in nature perishable products the plant location is also
important and it will reduce cost of transportation.
Distribution related KSFs
A strong network of wholesaler distributors/ dealers: in ice-cream
industry strong network of wholesaler of distributors and dealers is
also important and companies which having the exclusive outlet they
are success in this industry.
Short delivery time is also important because product is perishable
in nature and it damage is incurred high cost for industry.
Marketing related KSFs:
Breadth of product line is important in FMCG industry. As many as
large products range the consumers have more choice to select the
products. Like HLL which has the highest product line in this
industry.
Advertising plays a crucial role in FMCG products. Most of the
products selected by the consumers are due to effect of the
advertisement.
Brand building is another important factor, which affects the
purchasing behavior of the consumers. So the biggest companies
more concentrate on brand building like HLL and P&G.
19
OT ANALYSIS
There are various opportunities and threats for the FMCG industry.
OPPORTUNITIES
Large domestic market: India is second largest populated country in
the world. So its providing a large domestic market for the FMCG
producers.
Improvement in agricultural output would lead to a spurt in demand
for FMCG products fro rural population, which constitutes about 70%
of the country’s population.
Increase in the consumer’s disposable income, which creates
opportunities for the demand of FMCG.
Extensive advertisements, product innovations and brand
extensions are also like to increase demand of these goods.
The huge and growing middle class population opportunity for this
industry.
Increase consumerism and urbanization is the way to grow for the
companies.
Health and hygiene awareness leading to preference for packaging
foods are also the demand drivers.
Young are profile of the country, with about 47% below 20 years and
35% below 14 years ensures growth in this industry.
Increased media reach and changing attitudes and aspirations of the
people also ensure growing demand for FMCG products for the
long-term.
20
Increasing literacy levels and urbanization have made people time
conscious leading to they giving preference for ready-to-eat
packaged food, ready mix concentrates etc.
As in India there are cheaper labor availability and high technical
persons. So there is great potential for the FMCG companies to
export their products.
12 % growth rate in oral care industry in rural india. India has 68 %
people located in rural area so there is big and growing rural market,
so there is good potential opportunities in near future.
People are more conscious about the product so that there is also one
opportunity.
Less availability of traditional tools ( neem, coal and salt) in urban
area.
Less social acceptance of this traditional tools in urban area.
Social up ward mobility in rural area.
Increasing media reach in rural area for advertising and marketing.
Improving infrastructure facilities in rural areas for distribution.
Very low per capita consumption of such product, but can be
increased by consumer awareness, advertising etc.
Frequency of use can increase in upper segment (twice in day).
21
THREATS
The high customs duty will protect the domestic sector from external
competition. But once this protection is removed/ reduced, the threat
of global competition looms large.
Many new product introductions and brand may fail in the
competition market due to inappropriate marketing, wrong
positioning of brand and also due to sheer competition.
If the industrial recession continues, and if agricultural growth remain
illusive, many leading players will see a sharp de-growth in their key
markets.
Down trading will affect industry leaders and may accentuate
proliferation of the industry with small players.
MNCs also targeting the rural and lower segment so tough
competition is in near future.
Government may put tooth paste out of SSI list.
Brand battles may results in price war and small players may wipe.
Threat is from substitute traditional product, because customers are
well aware about the product in rural area.
22
COMPANY PROFILE
Incorporated in 1982.
Four separate manufacturing facilities as under:
o 2 for toothpaste
o for powders such as talc, detergent etc
o 1 for liquids such as shampoo, petroleum jelly etc
ISO 9001-2000 certified manufacturing facilities.
Exporting to over 25 countries.
Contract manufacturing as well as supplying private labels.
In house laboratory certified by FDA, India.
EXPORT HOUSE recognition by Government of India
Backward integration for in house printing and manufacturing of
packing and packaging materials like individual cartons, master
cartons, shippers etc
VISION
To be recognized as a leading player in the global personal hygiene
market.
To be a strategic supply partner to leading super markets, chain
stores, importers, distributors and private labels.
25
INFRASTRUCTURE
In order to facilitate translation of customer needs into performance
company have:
An in house Art Department capable of addressing all your
designing and artwork needs.
An in house laboratory employing dynamically monitored &
modulated quality checks, which are globally bench marked
including microbiological testing. The laboratory is approved by the
Food & Drug Control of India. It is manned by a team of 5 qualified
chemists.
A state of the art pilot plant enables us to take trial batches for new
formulation prior to undertaking full scale production.
A logistics department experienced in handling air, sea as well as land transport.
With its rich experience in supplying private labels to across 25 countries, Choice offers:
Customized packing and packaging solutions
Response driven customer focused orientation
Experience of producing 40 private labels for different customers
across the globe
All quality certificates, product specification, formulation etc. can be
provided for processing Local Health Ministry clearance to
customers
For specific requirements of Communities across the globe
26
TECHNOLOGY TRANSFER
In line with Choice's global vision, Choice has recently transferred
technology for manufacturing toothpaste to Lagos, Nigeria. The highlights
are:
In house designed state of art plant capable of producing 300 MT
toothpaste per month.
Complete turnkey services from visualizing, planning, detailing,
procurement, erection and commissioning.
Ably supported by Choice Technical Staff on site.
Plant commissioned in a record time of 6 months from start to finish.
Commercial production already started.
In its efforts to extend its reach globally, Choice is always looking for
committed partners with whom we can share our knowledge & experience,
for mutual growth & benefit.
100% Export Oriented Unit
A dedicated manufacturing facility with status of 100% Export Oriented
Unit.
Manufacturing of Baby Talcum Powder, Medicated Baby & Body Powder,
Shampoo, Petroleum Jelly, Air Freshener Gel, Baby Oil, Deodorant Gel,
Hand Liquid Soap, Hand Sanitizer
27
HEAD OFFICE & FACTORY
Address:999, State Highway,
Unjha - 384170,
North Gujarat, INDIA
Phone: +91 2767 252696 / 252250 / 253819
Fax: +91 2767 252384
Email : [email protected]
Web: www.choicelab.com
SALES & CORPORATE OFFICE
Address:204/205 Suyojan Building,Nr Hotel President,Off C.G. Road,Ahmedabad - 380 009.Gujarat, INDIA
Phone: +91 79 2644 4660Fax: +91 79 2644 8857Email: [email protected]
28
HISTORY AND DEVELOPMENT
In year 1982 shree Ashvinbhai J. Pate, a man from Unjha and 8 other
partners started a business of producing consumer cosmetic products and
it proved to be a great beginning of Choice Laboratories. Only 2-3 players
were there at the time of establishment of company and in north Gujarat
there was good potential market that time. Keeping this in mind promoters
decided to set up a firm viz. Choice Laboratories.
Within a span of 13 years the production was started with a couple of
products only, but later sprung in to long line of products: toothpaste with
floride, calcium and gel, toothbrushes, talc and prickly heat powders,
Shampoos, shaving creams and few more once to join choice products
soon. At the initial stage of the company, financial help was taken from
bank and financial institutions.
In the initial years company concentrate on Gujarat only. But slowly and
gradually it crossed the state boundaries and has spread over the neighbor
states; Rajasthan, Panjab, Hariyana, Himachal Pradesh, U.P, Bihar,
Bangal, Maharastra and Andra Pradesh. Not only this much but choice has
been able to export its goods to Dubai, Musket, Oman, UAE, Bangladesh,
African countries and Russia. Choice has made a hat trick of winning
exports awards constantly for 3 years 1991-92-93. form the Govt. of
Gujarat.
29
Business Partners:
The business area commenced by 9 partners named are as follows….
Patel Ashwinbhai J.
Pate Gunvantbhai
Patel Bhagubhai S.
Patel Manojbhai V.
Patel Laxmiben R.
Desai Savitaben H.
Patel Indumatiben A.
Patel Ramilaben
Patel Laxmiben J.
There are only two persons who are operating this firm right now. This
splitting took place around 1993. the existing partners are:
Ashvinbhai J. Patel
Gunvantbhai Patel
30
ORGANIZATION CHART
Mg. PARTNER (A) Mg. PARTNER (B)Production purchase (Imports) Sales & Purchase (Domestic)Sales (Exports), Finance, P&A and Advertising
31
Export & Import
Manager
PA to Mg.
Partner
Chief chemist
Production
Marketing manager Domestic
Supervisor and lab chemist
Security Guards
(02)
Assistant Manager
Chief Account
ant
Maintenance
Engineer
Export Manager
Head of Store and excise
Work Force
Area Sales Manager
Sales Officer
Export Executive
Accountants
Assistant
Assistant(2)
Introduction
The marketing department was located at the registered office at Unjha.
The managing partners and few office staff was hired to take over the
charge of all marketing related aspect of the firm. In 1990, they made
separate marketing division, hired an adverting agency and marketing
consultant to look after promotional and distribution aspects of the firm. In
1996, the firm has established their marketing office at Ahmedabad for to
exploit location benefit.
Company has appointed area sales managers, area sales executives,
sales officer, and sales representatives to look after the marketing
functions. Company is also selling its products in other foreign countries.
Structure of Marketing Department
Managing Partners
Marketing Manager
Assistant Manager
Area Sales Manager
Area Sales Executive
Sales Officer
Sales Representatives
33
There are four area sales managers, eight area sales executives, twelve
sales officers and thirty-five sales representatives. There is formal way of
communication in the firm, but informal communication is also welcomed in
the case of critical matter or sharing any important information.
Marketing Mix of Choice
(A) Products
The following are the products manufactured by choice laboratories.
Tooth Paste
Tooth Powder
Gel Tooth Paste
Tooth Brush
Talcum Powder
Shaving Cream
Shampoo
Prickly Heat Powder
Detergent Powder
34
Product Range
Products Size (in Gms)
Standard packs(in dozens)
1. Choice Tooth Paste 50 24100 12150 10200 6
2.Choice Tooth Powder 50 24100 12200 6
3.Choice Gel(Red &Blue) 50 24100 12150 8
4.Choice Premium Talc 100 6200 3400 2
5.Choice Shampoo 100 3200 2
6.Choice Shaving Cream 70 1230 14
7.Choice Prickly Heat Powder 200 38.Tooth Brush Choice Angular Choice Super soft Choice Junior Choice Scientific Choice Classic & Deluxe9.Choice Detergent Powder
35
Target Market & Market Segmentation
Choice has segmented and targeted consumer market on the basis of
following variables.
(1) Geographic Segmentation ( National And International )
It has mainly targeted rural and semi-urban market in India. The market
is also segmented on basis of national and international level
(2) Demographic Segmentation
Choice has targeted its products towards socio economic class B and C
as variable considering family life cycle.
(3) Psychographic Segmentation
People who want higher quality at competitive price.
Positioning of Choice
Positioning is the act of destining the company offering and image to
occupy a distinctive place in the target market’s mind. Choice
toothpaste is positioned as follows.
The ‘choice’ is the means of freshness, sparkling white teeth and
healthy gums. Choice provides confidences to customer by saying
“your right choice’
36
For choice toothpaste, company has adopted benefit-positioning
strategy, as it convey message as a means of freshness, sparkling
white teeth and healthy gums. Users positioning strategy is used for
toothpowder, as is convey message for new generation people. Choice
toothbrushes, shampoo, talcum powder and prickly heat powder are
positioned on the basis of Benefit positioning strategy, as they are
highlighting benefits of the products.
Branding, Packaging & labeling
Choice laboratory is promoting its all products under brand name of
“Choice”. For branding decision company has followed Blanket family names strategy, because company has promoted its entire product under
the family name “choice”. E.g. Choice toothpaste, Choice toothpowder,
Choice Shampoo etc.
Packing
Two types of tubes are used for paste:
(1) Lemi Tube
(2) Aluminum Tube
On the recycle polyethylene type they cover outer of corrugated box.
This small unit covered in polyethylene bags in fixed size of 12 units.
Hard small boxes are used for export purpose in which units are to be
packed.
37
Labeling
Labeling to product is done at choice laboratories. The label contains
the necessary details like company’s name, address, date and year of
manufacturing, trademark batch number and M.R.P etc.
(B) Price
Choice laboratories consider the following factors in deciding pricing
policy.
(1) Raw material cost.
(2) Price of packing material
(3) Excise duty & other tariff levied by Govt.
(4) Sales & Distribution cost.
(5) Transportation cost.
(6) Competitors prices.
(7) Expected margin.
Choice has adopted penetration price policy. Choice prices it product
significantly lower than the marketer leader’s prices. Follows leader’s
prices in setting prices for their product. Company sets their price below
the prices of Colgate & Pepsodent.
Company has uniform pricing for all it’s distributor’s. it delivers goods
for exports on F.O.B(Free On Board) and C.I.F(Cost ,Insurance,
Freight)
38
The company fives 12-16 % margin to their retailers, 8-10 % to
distribution and 4% to super stockiest or C&F agent on the bases of
M.R.P in case of scheme offered by company the retailers get 4-5%
more.
The following table shows prices charged by choice laboratories for its
different types of toothpaste.
39
(C) Sales & Distribution Policy
1. Sales Force Management
a) size and structure of sales force
Company’s marketing office is located at Ahmedabad and Marketing
manager is responsible person to look after the marketing
department. One assistant manager is also to help the marketing
manager in his clerical works. Marketing manager study all reports
and provides necessary information to sales force.
Company has appointed area sales manager for each state viz.
1. Harayana & Himachal pradesh
2. Utter Pradesh
3. Rajasthan & Maharastra
4. Gujarat
5. Andhra Pradesh
6. Panjab
Area sales manager’s responsibility is to look after the activities of
company’s sales in different stats, so territory responsibility is
allotted to area sales managers.
For to look after the marketing activity at district level, company has
appointed area sales executives, who look after the marketing
activities in two to three districts.
41
A sales officer is appointed in charge of the working of the
company’s own depot. Sales representatives are appointed to inform
retailers about brand and to include them for to buy. The other task
is creating brand good. Area sales executives, sales officer and
sales representatives are selected from local areas, because
company thinks that they would be well aware about the
geographical network of the area. And it will be also easy to
understand their local language.
B) Compensation plan to sales force:The compensation plans to sales force of the company is as
follows:
Basic Salary + Dearness Allowance + Traveling Allowance +
House Rent Allowance + PF.
Company has also covered state insurance scheme
Criteria consider by company for determining salary and other
benefits –
1. Performance
2. Experience
3. Ability
4. Regularity in work
5. Good behavior at work
6. Less absenteeism
42
C) Sales meetingCompany arranges quarterly meeting for marketing staff, and a
monthly at regional level. It requires then some times they
arrange unstructured meeting. The main objectives of the
meetings are as follows.
A new product launch
Sales performance evaluation
New promotional campaign
New promotional scheme
Sharing views and information regulatory market and
competitors.
Determining selling targets.
D) Sales expensesCompany has classified all sales force expenses in two
categories.
Allowable
Unallowable
Allowable expenses are reimbursed to full extent when it is
presented with bills along with monthly settlement. Company gives
straight forward T.A and D.A on the salary. Company follows fixed
account system for recording the sales expenses.
E) Controlling sales effortCompany assigns fixed territory to each sales person, so that
better control can be achieved and conflict can be avoided and
the person can work properly. This is helped in performance
evaluation of sales force, controlling sales expenses and better
43
coverage of market. Sales person are appointed on the basis of
past sales figures, geographical establishment and number of
retailers in territory.
2. Distribution policies
Company has a marketing network all over India in the states like
Gujarat, Rajasthan, Panjab, Hariyana, Jammu & Kashmir, H.P and
U.P.
Goods is distributed either through super stockiest, C&F agents or
Company’s own depot to the state wise or district wise distributor or
stockiest to retailers and finally it reach to the customers. The
distribution channel of company can be represented as follows.
DISTRIBUTION CHENNEL
Company Manufacturer
Super stockiest / C&F agents / Company depots
Stockiest / Distributors (state or district wise)
Retailers
Consumers
44
A) Factors considered by for selection of stockiest or distributor
1. Reputation and image
2. Location
3. Staff space and other facilities to support the business.
4. Capacity to generic business
5. Co-cooperativeness
6. Experience in the business
7. Solvency and capacity to release payment in time.
8. Future growth and potential
9. Willingness to agree with the terms and conditions as led
by the company.
Generally company selects those distributors who do not hold
distributorship for any competitor’s brand.
B) Duties and responsibilities of channel members.Company has assigned following duties and responsibilities to
its channel member to perform:
1. To push company’s products and generate sales
2. Provide regular information about market i.e. customers,
competitors, etc.
3. Storage and easy flow of goods to customers
4. Regular payment
5. Ordering well in time
6. Title of goods
45
C) Margins to channel members.Following is the specified margin on the basis of retail price for
each channel member for the company for retailer.
For retailers: 10% to 14% it may reach up to 14 to 20%
during schemes offer by the company.
For stockiest/ Distributor – it is up to 7%
For super stockiest & C&F agent it is up to 4%.
Company considers that it is higher then the average
practice in the industry.
D) Techniques to motivate channel member.1. By offering discount and various schemes
2. By giving higher percentage margin
3. By offering longer credit period
4. By way of giving them exclusive territory rights.
5. By holding meetings
6. By supporting volume building by way of sales force
7. By interpersonal, written or oral communication with them
E) Evaluation of channel memberNo formal procedure is there for company to evaluate channel
members but following are the criteria which are to be
considered at the time of evaluation of channel members.
1. Sales volume or profit generated by them
2. Flexibility of channel members
3. Regularity of payment
4. Credit / Payment terms
5. Control other subsequent members in the chain
46
F) Controlling cost of distributionFollowing techniques are considered by the company to
minimize the cost of distribution.
Use of most economical transportations
Effective and error less documents.
By dispatching full truck load together
By trying to provide handling damage by placing
warehousing at crucial places.
3. Logistic Management
An order received is to be executed and dispatched to the respective
party. The process requires movement of physical flow of goods
from the point of production to the point of consumption. Logistic
management takes care to manage this physical flow of goods, the
logistic management is composed of several activities like order
processing, inventory management, packaging, transportation and
warehousing.
a) Order processing procedure / systemThe stimulus to the logistic process is the customer order or
requirement. This comes direct from the customer or it could be
in the form of sales order or manufacturing based on the sales
estimates of the future demand.
47
At choice the information needs of the order processing system
are…..
What is required product, specification, quantity,
packaging, special features, if any.
Delivery when required, to whom to ship, destination, mode
of shipment, any special carrier to be used.
Price to be charged whether on CIF destination basis (cost
+ insurance + freight) or on FOB ( Pre on board at the
particular point), discount and taxes at be charge.
Documentation needed ex. Inspection report, excise gate
pass, shipping document in the case of export.
Mode of payment against the letter of credit, documents
through bank, advance payment, credits.
The inputs required in this system are the product, the handling
facilities, the container and career the product has to be packed,
marked and certified for shipment. If the product is shipped as
small then no container is required. However the product will then
have to be transported to the point of dispatch. The career may
be tempo, truck, ship, rail or aircraft. The container may be of
various sizes including small, medium or big once.
b) Procedure related to packaging, inventory management, warehousing and transportation of goods.
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Packaging:The following practices are observed at choice laboratories.
The packaging is done in the way to facilitate the
identification of container during the shipment of delivery.
The size of pack is selected to facilitate the handling as
well as to utilize the space effectively. To restrict
transportation and storage cost to minimum.
It is made to give the filling complete ness and quality.
It is design to with stand the shock and jerks during the
transportation and handling and to absorb the weathering
effect during the prolonged storage so as to maintain
standard quality.
Inventory Management:As sales and distribution is mostly concerned with the outbound
logistic, it is appropriate to manage the inventory to the extent of
requirement or ordering by the distributors and stockiest.
At choice, inventory level for all running products is managed by
following equation.
Order Point = {(Lead Time) * (Normal rate of Issue or Selling
during the lead time)} + {Safety Stock}
Where the order point is the level of inventory to be maintain.
The lead time takes into account the time required to reach the
consignment to the destination and normal rate of issue is the
average number of units of particular product sold to the
consignee within a specified lead time.
49
Transportation SystemCare is required during transportation and handling so that the
consignment not get damage. Generally containers are marked
“↑” to indicate the direction of placing the container during loading
in the career for transportation or during placing on plats for
storage.
Choice tries to control cost of transportation without
compromising the safety of product during transportation by
implementing several ways like …
By selecting most economical transportation
By dispatching full truck load together
By effective and error less documentation
By way of consolidation of orders so that a full load can be sent.
By combining the shipment with others in the area and utilizing the
service of various transportation agencies.
(C) Promotional Policy:
a) Advertising:Advertising present the most pursuing possible selling
message to the right prospect for the product or the service at
the lowest possible cost.
b) Advertising mediaCompany has selected the following advertising media for its
products.
Local news paper
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Wall printing
Posters
Bill boards
Painting on buses
Broachers and folders for exporters
Sponsorship of local events
Internet
Magazines
c) Advertising objective of companyThe company has set following advertising objectives
Building brand image
Increasing awareness of customers
Encourage the customer to buy the company’s
product
Providing information about new products
introduced
Helping sales personals
d) Advertising budgetThere are no fixed criteria for setting advertising budget but
generally company spends around 4 to 5% of total sales on
advertising. Navneet is the advertising agency for choice
which looks after the development of advertisement campaign.
e) Target audienceThe target audience is whole family either rural, urban, Indian
or foreign.
f) Advertising message
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The main message of choice is “Global Choice for complete
personal care”.
For white tooth paste…
For sparking white teeth and healthy
gums
It fight cavities and freshens the breath.
For Gel tooth paste…
“Tajgi ka Tarana”
It is real choice for pleasing freshness
and new tastes.
To capture the new generation with new
taste and new color, they show young
boy and girl using the tooth paste.
Some other messages provided by Choice….
A choice tooth paste: “A Smile of
Confidence”
Choice tooth powder: “A new generation
Choice”
g) Sales promotionThe following schemes were introduced by choice to increase
the sales.
Price packs or price cuts
Free gifts like a tooth brush with 200gm tooth paste
A free match box with choice gel tooth paste
20% extra on 100 gm choice tooth paste.
Free sashes of choice shampoo on tooth paste.
52
Retailer or distributors are offered discounts or price offs on
the MRP.
Quality discount on bulk purchase.
Participate in trade shows and fares with the special price
offering.
Arranging free dental check up camp in villages to promote
the product.
h) Direct marketingChoice has very rich export base in its total sales which is
about 80%. Direct marketing is one of major tool of capturing
big bias in overseas. They also have done job works for
foreign companies. For the export order they follow direct
marketing strategy and negotiate from the head office. They
have used face to face contact with catalogs and also the
telemarketing. To cope with the latest advancement they put
their own website in 1997. The managing partner takes keen
interest in export negotiation.
i) Marketing information systemChoice has developed internal record system and marketing
information system.
a) Internal Record System:Company has designed the following system for
keeping the records for sales and orders and it
continuously informs the head office about the
updated market and sales related information.
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Order form
Monthly performance report
Monthly activity report
Dealer network management
Tour program
Monthly expense statement
Monthly sales representative performance statement
Monthly stockiest performance report
Monthly performance appraisal of SR or SO
Daily sales report
b) Marketing Information SystemIt is a set of procedures and sources used by managers
to obtain the everyday information about pertinent
development in marketing environment. Marketing
manager often carry the MIS by reading books, news
papers, trade publications, talking to customers,
suppliers, distributors and other outsiders with
interacting the internal company personal.
For getting information about new development in
marketing environment choice motivates and trains its
sales force to spot and report new development. The
company also motivates the distributors, retailers and
super stockiest to pass the important intelligent.
54
CHOICE MARKETING STRATEGY
Choice offers equal quality of products as that of MNC competitors
at far low prices.
Choice has wide product range leaving no gaps as specially in case
of its oral care product line.
Choice has reasonable advertisement frequency in local areas.
Choice tries to woe the customers by way of giving frequent sales
promotion schemes.
Choice offers a dynamic culture to its sales force and focuses on
relationship marketing by way of its field force.
Its also works out regular trade promotions to motivate the retailers
and maintain their spirit as well as the interest in the product.
Choice has precisely targeted rural and semi urban customers and
maintains its product on the retailers shelves by way of its extensive
distributions.
Being as a personal care product manufacturer choice is always
busy in fighting out cut throat competition from other brands. For this
two kill the competitors choice uses some special strategies like
By finding gaps and trying to position scientifically itself within
these gaps.
By giving more % margin to retailers
By using new an extensive promotional programme.
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Structure:
Managing partner
Chief chemist
Supervisor & lab chemist
Labors
Major products manufactured
1.Tooth Past
2.Gel Tooth Paste
3.Tooth Powder
4.Talcum Powder
5.Prickly Heat Powder
6.Shampoo
7.Shaving Cream
8.Tooth Brush
9.Detergent Powder
10. Choice beauty Soap
11. Pure choice coconut oil
12. Choice boro Premium cream
It is observed that, first four products are carried out in manufacturing dept
of choice laboratories itself and the remaining is purchased from other
manufacturers.
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Raw Materials And Manufacturing Process
Tooth paste manufacturing, filling and packing departments in the
company are to required standards of mechanism, automation and
hygiene
Quality controlled mixing system uses homogeneous, tanks and other
equipment to provide appropriate standards.
To complement company’s manufacturing capacity the packaging
department is equally competent to handle packaging of the products in
various sizes of cartons, boxes and containers.
Raw Material Required For The Company’s Major Product Tooth Paste1. Calcium Carbonate
2. Dicalcium Phosphate Dehydrate
3. Glycerin
Formula For Preparation Of Tooth Paste
R/M required Wt .PercentageCMC (thickeners) 02%
Water 20-30%
Glycerin 20%
Perfume Oil 2-2.5%
Moisturizing Agent 1-3%
Preserving Agent 05%
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Formula For Preparation Of Tooth Powder
Dicalcium Phosphate Dehydrate 79%
Calcium Carbonate 20%
SLS 01%
Flavor & Sweetener 01%
Formula For Preparation Of Talcum Powder
Talc 79%
Magnesium Carbonate 15%
Boric Acid 03%
Magnesium Stearate 02%
Perfume 01%
Manufacturing Process Of Tooth Paste
The basic raw materials for the production are described in their weight
percentage as above.
The process is start by drawing the raw materials in to the processing
vassal by means of vacuum. the suction studs are located in such a way to
ensure that the dry, powdery components are immediately moisturized on
entering the vessel.
The finished toothpaste is pumped out of the central outlet stud of the
vessel by means of a feed pump and conveyed in to intermediary storage
tanks.
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As an additional safety precaution, a basket screen is fitted between the
pump and pipe line.
The toothpaste is pumped in to two storage tanks below the processing
plant from where it is later pumped in to the feed hopper of the filling
machine, which is manually operated and fills automatically.
The capping machine also operates semi-automatically. The packaging
and cartooning of the tubes are done by hand.
Purchasing of Raw Material
Purchase activity is managed by the managing partners on the basis of
information given by chief chemist as per requirement of raw material.
There is no any separate division of purchase in the choice laboratories.
The objective of the company in the purchasing activity is to give prior
important to the quality factor of raw material. The second important aspect
is to be given to the cost of raw material. In this procedure quotation is
collected from the vendor and finally price is compared with the other
vendors and then finally the decision ha been made by taking in to
consideration of all aspect of credit term with the supplier.
To develop and maintain good relationship with vendors is the primary
police of the company.
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Main Suppliers Of Choice LaboratoryName Product Godrej Glycerin
U.P line Chemical Pvt. Ltd. Calcium Carbonate
H.Reynold Germany Flavoring Compound
Alfried & Wilson Co. Ltd Sodium Laurel Sulfate
Quist International USA Flavoring compound
FMC Corporation USA Gum Carraginum
Credit term with supplierDomestic supplier: 30-45 days
Foreign supplier: 45-60 days
Some times payment term depend upon situation of buyer toward
suppliers also. And some suppliers also take advance in down payment if
the item is of monopolistic type.
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Lead Time
Indian supply of raw material: 5 days
Foreign supply of raw material: 15-20 days
Inventory Management
Inventory management considered as the important aspect of production
management and it is considered as working capital.
The key issue inventory management is to how much the buffer stock
should be kept in order to prevent to stock out condition and in
contradictory how much in limit the inventory is to be kept to prevent the
inventory carrying cost.
These two questions are very much important and organization has to give
important to both aspects.
In the choice laboratory, inventory decision was taken based on past
performance of requirement of raw material. They are going to kept a week
stock in advance and when the buffer stock goes beyond the mark the
chemist inform the managing department about the requirement of the raw
material.
Company’s major sales come from export the demand for product is cyclic
in nature, so they produce the product as per the requirement and manage
the inventory accordingly.
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Manufacturing Of Fluoride Tooth Paste
Flow chart for batch size: 1000 kgs:
Check High Speed Mixer For Cleaning
Add:R.M No 1506.12+R.M.No2905.90(Total Wt.300 Kg)
Start High Speed Mixer
Add: R/M No.1301.10 (10 Kg)+2975.10 (1.5 Kg)+22916.00 (2.0 Kg)+2876.00 (7.6 Kg)
Mixing for 5 minute
Add water 1659 KGS
Add: R/M No 2839.00 (8.0 kg)
Heat Above Mixture
Jelly Liquide Formation
Transfer Jelly Liquid To Low Speed Mixer By Vacuum Force
Start Low Speed Mixer
Add: R/M No 3402.90 (25 Kg)+3302.10 (10 Kg)
Mixing For 30 Minutes
Add: R/M No 3402.90 (25 Kg)+3302.10 (10 Kg )
Create Vacuum And Start Mixer
Sample-Testing
63
General Production Flow Chart Order
Production Planning : Mg Partner And Chief Chemist
Production Planning Register And Stock Of Finished Products Register
Check From Store Raw Material, Packaging Material (In Stock Monthly Stock Statement Of Raw Material)
Production
OK Paste (Regular/Gel/Fluoride) NOT OKTooth Powder
Talcum Powder
NOT OK Final Inspecting OK
Packaging Process
Storage Re Inspection & Testing
Dispatch NOT OK
Reject
Quality Manual
The scope of certification for ISO 9002 is for the manufacturing and
marketing of paste, tooth powder, talcum powder and shaving cream,
shampoo and the marketing prickly heat powder.
64
Choice has adopted quality control not as a mere slogan but as a principle
for flourishing survival in the international market. To maintain the worth for
coveted ISO 9002, company quality control staff remains constantly
vigilant to check and maintain time and again the product’s standards.
Quality is a mater for their customers to keep trust in them.
Quality Policy
the quality policy is developed by the management and staff of choice
laboratories ltd. is committed to increase its market share by
manufacturing product of international quality standards., consistently
which is achieved by
Studying the trends and customer needs.
Continually improving upon the quality system
Manufacturing a cost effective product. It is the aim of every
individual to contribute towards achieving the objective set by the
management each year.
Store ManagementThe functions performed by store department in choice laboratories are
1. Receiving And Inspection
2. Issues
3. Stock Records
4. Stock Accounting
5. Store Arrangement
6 .Stock Tacking
65
Receiving And Inspectionreceiving and inspection function perform at the time before the raw
material is unloaded from the supplier‘s truck. First of all the raw material
quality is checked in the laboratory .if it is found ok then only the raw
material is allowed to unloaded from the truck.
Then it is kept in to the store room.
Differently further record of total stock is transfer to purchase department.
Issue
issuing criteria is perform by chief chemist he note the raw material with it
code number how much it used in the production process and how much is
left in the stock which is further passes it down to managing partner.
Stock Records
The purpose of record keeping is to facilitate material control by bringing
information on actual stock position, consumption rates, and order to
supply position up to along with proper pricing and evaluation of the usage
and of balance of stock.
Store Accountings
This information system is necessary in order to
1. No and show the value of stock in balance sheet.
2. Help in production cost control.
66
For production cost Control Company consider standard price while for
balance sheet purpose company calculate either market price or the cost
price which ever is lower.
Store Arrangement
Proper arrangement and documentation of the storage space and storage
facility are helpful in getting material for production on time as requisitioned
from the store. The store is so arranged that different types of materials
can be stored in distinct areas.
Store Taking
This is essential in order to verify the stock record with the actual count in
choice this process is carried out in month and calculate volume and value
wise material utilized in month.
67
1. Introduction
Financial function or activity is that managerial activity which is
concerned with the planning and controlling of the firm’s financial
resources. In choice laboratories financial function is done by financial
department in a proper way. We cover all the information about the
financial matter in this section of the project. It shows health and
soundness of the organization regarding financial matters. It also
provide helpful to the various stakeholders.
To manage the foreign currency and foreign exchange the main activity
of financial department of choice laboratories. The various function or
activities done by firm are as under:
1. To manage the international finance
2. Investment or long-term DECISION
3. Financing and capital decision
4. Dividend and profit allocation decision
5. Liquidity decision
The choice laboratories give much important to its current and capital
account of international financing flow because its 80% products are
sale in foreign countries.
The finance function also serves the purpose of control and
performance evaluation tool, now days it is not limiting it scope to only
recording the data but it also provide some decision on the past data. It
69
provides future prediction regarding some financial method, which is
very helpful in decision making for manager.
As it is SSI sector, the fund raise from SID, SIC & GSFC. They provide
soft loan to help such small-scale unit. The choice laboratories now a
days use its retained earnings funds, which is available through its
current account of foreign trade. Government also protects the interest
loan. It makes the SSI units competitive in the business environment.
Some basic formula & strategy financial function or matters are as
follows:
1. They use forward market rate and future currency tools to get
protection from exchange rate changes.
2. Analyze the foreign exchange market.
3. Company use currency swap & interest rate swap for foreign
financial transaction.
4. Financial department try to hedging or reduce the foreign
exchange risk by using the financial management tools.
5. They use pay back period and net present value method for
capital investment budgeting.
6. For pricing decision, they apply marginal costing and follow
competitive move.
70
7. They provide minimum 60 days credit and average collection
period is 78 days.
8. For debt raising Criteria Company used marginal interest
coverage ratio.
9. For the international buyer company or firm provide minimum 90
days credit.
10. For financial budgeting they utilize past trend and historical data.
11. In monthly meeting with company’s C.A. they discuss cash flow
and other sensitive issues.
71
2. FINANCIAL STATEMENT
2.1 Balance sheets
Particulars 31/03/01 31/03/02 31/03/03 31/03/04Capital & liabilityCapital a/c 3884787 8680303 928250 8340605Reserve &surplus 496479 496489 642477 688575
Secured loans 246351972934890
53405078
0 33688000
Unsecured loans 155237332049966
22851399
0 27077500Secured deposits 992490 1383248 1285470 1190970
Total 244721683232828
34743466
1 34762630Current liabilities & provisionsSundry creditors for goods 21079891
25315045 3708061 2785554
Sundry creditors for expenses 2464030 4467601 7085485 4960504Dealers current a/c 277518 567040 682804 601102Other liability 650729 1978598 2585760 2115470
Total 700028549273660
61212066
2 105748280AssetsFixed assets 3835515 3230683 4578570 4460110Investment 15125 15125 12525 17460Current assets & provisions
Inventories 285884443510135
33913981
2 37241827
Sundry debtors 235891332734841
81955814
0 38057003Cash & bank 1230757 966815 1410685 185770Branch balance 3470445 5304444 4940570 5870540
Loan & advances 92734552067976
6 2156950 19285570
Total 70028549273660
61212066
2 105748280
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Balance sheet is the most significant financial statement. It indicates that
the financial condition or the state of affairs of a business of “choice
laboratories” at a particular time. Here we see that the financial condition of
the choice, during the last four years. The year 2004 is not as compare to
its nearly previous year 2003. The firm is partnership concern. There are
two partners right now who invest their capital in the venture and run the
business with their knowledge. The firm is going to be public Ltd. In near
future. They are waiting for suitable time. They have satisfied the entire
requirement needed to be a public limited company.
2.2 Profit & Loss Account Of Choice Laboratories
PERTICULARS 2001 2002 2003 2004INCOMESales 68706518 100381711 150402638 97395527Other income 2927955 11359506 11735889 7754419Increase/decrease of stock 4109944 -735088 -3258164 1013300TOTAL INCOME 75744417 111006129 158880361 106663246ExpensesCogs 57595176 71219391 100425211 67071141Manu. Expenses 1957208 3135078 4540800 2828709Excise & custom duties 3750763 5922620 7924924 5036489Office & admin. Exp. 1388703 2528989 2719650 2570584Sales & dist. Exp. 10457365 19168428 30377925 20749110Depreciation 779286 749347 799238 786536TOTAL EXPENDITURE 74966980 109849886 157250019 105988570Profit Transfer to Capital Account 717437 1156243 1630342 674676
As the company has very good export market they get the tax rebate from
the government. The company has more then 70% of sale in international
73
market. The company has low profit margin. From the above P&L we can
say that the profit of the company is attributed from the other income. The
other income includes the sale of DEPB license in open market. The core
competency of the company is its low cost of manufacturing management.
74
2.3 Fund flow statement of choice laboratories.
SOURCES OF FUND 2002 2003 2004Increase in capital 4797273 602201Increase in reserves & surplus 145988 46098Increase in secured loans 4713707 4701876Increase in unsecured loan 4975929 8014328Increase in security deposits 390758Decrease in fixed assets 514832 118460Decrease in investment 3000Decrease in W.C. 2676046TOTAL SOURCES OF FUND 15392469 13467393 2840604USES OF FUNDSDecrease in capital 941899Decrease in reserve & surplusDecrease in security deposits 97778 94500Decrease in fixed assets 12580004Increase in investment 4935Increase in W.C. 15392469 12111611Decrease in secured loans 362780Decrease in unsecured loans 1436490TOTAL USES OF FUNDS 15392469 13467393 2840604
The statement how the money comes and goes in the choice during the
last three years. They got good debt financing during initial for the year
2000-01, which utilizes for asset purchasing and for working capital
financing increase working capital provide signals for cash crunches but
last year they decrease the working capital needs.
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3. Trend analysis
3.1 Trend analysis of profit and loss account
PERTICULARS 2001 2002 2003 2004INCOMESales 100 146 219 142Other income 100 388 401 265Increase/decrease of stock 100 -18 -79 25TOTAL INCOME 100 147 210 141ExpensesCogs 100 138 195 130Manu. Expenses 100 160 232 145Excise & custom duties 100 158 211 134Office & admin. Exp. 100 182 196 185Sales & dist. Exp. 100 181 285 196Financial exp 100 141 205 130Depreciation 100 96 103 101TOTAL EXPENDITURE 100 147 210 141PROFIT TRANSFER TO CAPITAL A/C. 100 87 149 210
The trend analysis of the P&L account indicated the direction of change.
Here we study the company’s sales and net income in light of main
following the factor the growth of the business.
In above trend analysis statement of P&L account. We see that the
company’s sale increase up to year 2003, but decrease in year 2004. The
main reason for ups and down in sales trend and other income. It is all due
to the export orders. In year 2003, the company get big order from America
so the sales of the company highly ups as compare to other years. The
price of the company product, the price of the choice company affected by
the competition in the market, govt. policy for export etc.
Here the statement show that the net income of the company increase
year by year even decrease the company’s sales in particular year 2004.
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we find that due to decrease in company’s cost of production and sales
and distribution expenses particularly in year 2004 as compare to past
year.
Here we also see the financial charges of the company increase due to
increase in short term debt by the company. The company pay the short
term loan so the financial charges of the firm decreases in year 2004 as
compare to last year.
3.2 Trend Analysis Of Balance Sheet
Particulars 2001 2002 2003 2004Capital & liabilityCapital a/c 100 224 239 215Reserve &surplus 100 100 129 139Secured loans 100 119 138 137Unsecured loans 100 132 184 174Secured deposits 100 190 130 120Current liabilities & provisionsSundry creditors for goods 100 120 176 128Sundry creditors for expenses 100 181 288 201Dealers current a/c 100 204 246 216Other liability 100 304 397 325total 100 132 173 151AssetsFixed assets 100 81 119 116investment 100 100 83 115Current assets & provisionsInventories 100 123 137 130Sundry debtors 100 116 210 161Cash & bank 100 79 114 66Brach balance 100 153 142 169Loan & advances 100 223 233 208Total 100 132 173 151
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The balance sheet trend analysis have shown (which increased from 100
to 151) some items larger increase and some have shown smaller
increase. Here we see that the current assets and current liabilities have
moved together. The total assets of the company has grown faster then
new worth which according to us imply the firm greater reliance on the
outsiders money particularly for the year 2003.
The trend analysis clearly shows that the capital investment from the
partner side some what increase in last two years but in year 2004 it
decrease. The company also invest its profit in two business. It is good
side. The company also collected good amount of the debt from different
sources. They knowing or unknowingly grab the opportunity of “Trade on
Equity”.
The trend of the company’s fixed assets increase year by year, particularly
it decrease in year 2004. The trend of the company’s fixed asset increase
some what high particularly in year 2003 because during that year
company purchase a new plant and machinery for the modernization and
expansion of the firm. The above statement shows the company’s sundry
debtors the main reason for increase the debtors of the company are
1. Company provides more credit to the debtor for increase sales.
2. Company also gets credit from its creditors also in required.
3. Due to the company’s sales in export terms etc.
Particularly in year 2004, the company’s credit is reduced because the
company’s actual total sale is also decreased. Overall all we find that the
company’s overall growth is average level and not in highly satisfactory
level.
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4. Common Size Statement Analysis
4.1 common size statement for profit and loss account for period
PERTICULARS 2001 2002 2003 2004INCOMESales 0.907 0.9042 0.9466 0.9178Other income 0.0386 0.1023 0.0738 0.0837
Increase/decrease of stock 0.0544-
0.0065 0.0204 0.0095TOTAL INCOME % 100 100 100 100EXPENSESCogs 0.6811 0.6415 0.6320 0.6288Manu. Expenses 0.0263 0.0258 0.0285 0.0265Excise & custom duties 0.0495 0.0536 0.0499 0.0472Office & admin. Exp. 0.0183 0.0227 0.0245 0.0241Sales & dist. Exp. 0.138 0.1726 0.1912 0.1045Financial exp. 0.0665 0.0642 0.0659 0.0651DepreciationTOTAL EXPENDITURE 0.9907 0.9906 0.9907 0.9937PROFIT TRANSFER TO CAPITAL A/C. 0.0103 0.0104 0.0103 0.0063
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4.2 Common Size Statement For Balance Sheet As On Date…
Particulars 2001 2002 2003 2004Capital & liabilityCapital a/c 5.55 9.36 7.65 7.89Reserve &surplus 0.71 0.54 0.53 0.65Secured loans 35.19 31.65 28.76 31.86Unsecured loans 22.18 22.1 23.52 25.6Total 34.95 34.85 39.12 32.87Current liabilities & provisionsSundry creditors for goods 30.11 27.3 30.59 25.61Sundry creditors for expenses 3.52 4.82 5.84 4.69Dealers current a/c 0.4 0.61 0.56 0.57Other liability 0.92 2.12 2.13 2Total 100 100 100 100AssetsFixed assets 5.48 3.58 3.78 4.2Investment 0.02 0.02 0.01 0.01Current assets & provisions 94.5 96.4 96.21 95.77Inventories 40.84 37.85 32.29 35.23Sundry debtors 33.7 29.5 40.89 35.99Cash & bank 1.76 1.04 1.16 0.77Branch balance 4.06 5.71 4.08 5.55Loan & advances 13.24 22.3 17.79 18.23Total 100 100 100 100
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5. Ratio Analysis
Ratio 2001 2002 2003 2004Current ratio 2.7 2.76 2.46 2.91Acid test ratio 1.53 1.68 1.63 1.84Debt equity ratio 9.39 5.58 6.43 6.86Debt ratio 0.58 0.55 0.53 0.58Interest coverage ratio 1.08 1.2 1.31 1.01Inventory turnover ratio 2.4 3.15 4.05 2.56Average call period(days) 152 116 90 142Total assets turnover ratio 1.08 1.2 1.31 1.01Gross profit margin (%) 29.29 33 33.93 34.46Net profit margin (%) 1.03 1.04 1.03 0.063Return on fixed assets 20.26 34.35 34.7 23.91Return on total assets 1.08 1.2 1.24 1.01
5.1 Current Ratio:
The company increase year expect in year 2003. During the last 21 year.
As rule current ratio of 2:1 is considered more satisfactory. Here we see
that the company’s current ratio is more than 2:1 during the last 4 year. So
the company has the ability to discharge liabilities by generally cash from
current assets. But due to higher investment in current asset the company
refers decreased.
5.2 Acid test Ratio:
The quick asset ratio also shows that the company has regular balance
liabilities of quick assets. Generally the quick asset ratio 1 to1 is
considered to represent a satisfactory current financial condition. If we see
the quick ratio of the choice laboratories it has quite good solution in case
of liability. The main reason of the company goods in current assets is the
company’s bank cash, debtor balance is quite higher than it’s current
liability.
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5.3 Debt-Equity Ratio:
The company enjoy high debt-equity ratio. Generally the company’s debt-
equity ratio increased during the last 4 year, expect in year 2002. it is
clears that from the debt-equity ratio that choice laboratories lenders have
contributes quite higher fund than owners. Due to the high level of debt
introduces inflecting in the firm’s performance. A high debt company is
able to borrow funds on very restrictive terms & condition. And this is risky
also for the creditors also.
5.4 interest coverage ratio:
The interest coverage ratio shows the number of times the interest charges
are covered by funds that are ordinarily available for their payment. The
debt-equity stated high in a firm, so due to high debt-equity Ratio Company
may fail to meet interest obligation. The choice laboratories suffer from
very low interest coverage ratio. And it has to face difficulties in payment of
interest to its creditors, the main reason for it company has wide proportion
of debt in their capital mix. It should be obvious that a high level of debt is
a problem for a company only if its future cash flows are certain.
5.5 Inventory turn-over ratio:
Here in company wide fluctuation in the inventory turn-over ratio. The
company’s turn-over ratio is very less in current year as compare to past
year. One of the considerable reasons for that the overall sale of the
company less. The inventory turnover ration indicates the efficiency of the
company. The above fluctuations of firms indicate that in a company
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inventory management function not perform in a proper number, so the
company’s overall efficiency reduce.
5.6 Average collection period (days):
The collection period choice Laboratories is very fluctuate. As compare to
last year company provide more credit to their customer. The company’s
collection period is high means the quality of debtor is not good. And due
to more collection period company may face the problem of liquidity. Here
company’s collection period may due to economic condition i.e. recession
in the company’s export country and other is company’s latity in managing
its debt.
5.7 Total asset turnover ratio:
This ratio shows the firm ability in generating sales from all financial
resources committed to total assets. The choice Laboratories total asset
turnover ratio for the year 2004 is lowest as compare to last four year. The
current year company’s T.A.T.O is 1.01 times implies that firm generates
sales of 1.01 from one rupee investment in fixed and current assets
together. The company’s working capital is good but company not utilizes
its fixed assets up to the requirement.
5.8 Gross profit ratio:
The gross profit ratio of the choice Laboratories is good. This indicates that
the firm able to produce at relatively lower cost. Yet the overall sales of the
firm decrease the gross profit of the firm increase, the reason for it the
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lesser the cost of the production particularly decrease manufacturing
expense and excise and custom duty in higher proportion.
5.9 Net profit margin:
The net profit margin of the firm less in year 2004, as compare to last four
years; even the gross profit of the firms higher the net profit margin is
reduce because of the current year sales of the company reduce but
company’s administration and sales & distribution cost is not reduce. The
reason is that company’s product price fall in but its operating cost not
reduces.
5.10 Reaction on total asset:
This ratio indicates that what company actually get return its total assets or
investment. Here we see that the company, ROTA ratio is reducing during
last three years, and it lowest during last four years. The reason for
reducing the company ROTA that the company manage its current assets
in proper manner, but the company not utilize its fixed assets at a medium
level. Due to reducing the ROTA ratio company’s net profitability also
decrease.
Though even they compete very dynamic international market it is good if it
is more than 2% of sales. The current asset is very high in the total asset
proportion. The fixed assets utilize is good except in year 2004 but overall
is very low as the proportion of current assets is very high.
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Introduction:
Human Resource Management is a management function that helps
manages recruit, select, train, and develops members for organizations.
HRM is concern with the people’s dimension in organizations. HRM is
concern with the people’s dimension in management. Since every
organization is made up of people, acquiring their services, developing
their skills, motivating them to higher level of performance and ensuring
that they continue to maintain their commitment to the organization are
essential to achieve organizational objectives. Thus, HRM refers to a set of
programs, functions and activities design and carried out in order to
maximize both employees as well as organizational effectiveness.
All major activities in the working life of a worker from the time of his/ her
entry into an organization until he or she leaves - come under the purview
of HRM. The activities included in HRM are – HR planning, job analysis
and design, recruitment and selection, orientation and placement, training
and development, employee and executives’ remuneration, motivation and
communication relations and the like.
HR Planning:
Human resource planning is understood as the process of forecasting an
organization’s future demand for and supply of, the right type of people in
right number. In Choice company has no HR department. Major activities
of human resource department are managed by managing partner
Gunavantbhai patel.
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In choice it managing partner get information about the need of additional
employees from other departments then they make search and got
detailed information about the recruitment of man power. Management
provides information about additional force. When the managing partner
found need for additional person then the recruitment procedure starts.
Recruitment
The management of ‘choice’ is aware to the fact that good recruitment and
selection is essential for the good and committed employee. It is helpful to
reduce its employees from two sources: i.e.
1. Internal sources:When ever the company found need of an additional
employee in middle –level management then company recruit
from within the organization by way of transfer & promotion.
2. External recruitment:Company recruits workers and sometimes middle-level staff
from external sources also. Company has adopted the
following two methods to recruit people.
a. Advertisement:
Company gives advertisement in local news papers to recruit
office staff and sales persons as per their recruitment. The
philosophy of the company is to recruit sales person from local
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territory, because they will be quite familiar with geographical
network.
b. Direct recruitment:
In case of unskilled direct labor recruitment procedure is
followed. Company recruits the labor from near by village
through agent. Sometimes company recruit workers came with
influence and references.
Sometimes unskilled labor personnel recruitment, managing
partners recruit directly. So, as choice is small scale
partnership firm, they follow simple 7 centralize selection
systems.
Selection procedure:
The following procedure is followed by choice laboratories for selection
office staff and sales persons:
Application blank: The company gives advertisement according to their requirement
and then after company gathers the application. Unqualified
jobseekers are eliminated at this stage.
Interview:The second stage company follow is interview. Unstructured
interview method is follow by company means questions are made
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up during the interview. There is only one interview selection of a
person. Here, the main interview panel is of managing partners,
marketing manager, regional dealer and the related head share with
them.
Selection decision:On the basis of interview final selection of candidate is done by the
company. The final decision is made by the pool of individuals who
pass interviews and reference check if any.
Job offer:The final step followed by company is job offer and contract of
employment with selected candidates.
Introduction:
Introduction process the processes of introducing new employee in the
organization is issued the appoint letter and asked to join organization.
Company follows the introduction process by providing information about
working condition, rules and regulations of the company etc. the new
employee is also introduces with his follow employees and colleges. The
main purpose of the induction is to make employee feel free and easily
adjust with the new environment.
Training & development:
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Successful candidate’s places on the jobs need training to perform their
duties effectively training & development constitute an on going process in
any organization. Workers must be trained to operate machines, reduce
scrap and avoid accident. The company follows on the job and off the job
training methods.
On the job:
In sales department when a person is selected as sales person or
office staff first sends him to other sales person or officer. This
person got trainees of 15 days under his guidance. During this
period senior person teach them. Regarding system of company,
policies and develop his/her skill which makes him fit for the
organization. After this training period he will send to his assigned
territory.
Unskilled labors are also trained on the job to improve skills in
operating machines and avoid accident.
Off the job training:
Company follows three days extensive training sales person every
year. Company also sends its office staff for attending seminar in
Ahmedabad organized by Ahmedabad management association.
The number of employee is small so there is no full flay-training
program in the company.
Work motivation:
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Human being has mind. He comes on job with its ideas, desires, thinking
and its social life. He is in office for only ten hour while he is at home for
more than that hour. He has some need, want and responsibility which can
fulfill by money. For the better result, the companies have to motives their
employee.
‘Choice’ used special increment and special bonus as a tool of motivation.
It is for the sales force. They set targets and performance above it gets
regard in kind. It motivates the sales to achieve higher targets.
The company also provided some other non-monitory motivation like
relative freedom on the job, good human relation and help in solving family
problems.
There is one or two get to gatherings arranged by the company. It
increases the relation between staff and develops interpersonal
relationship.
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Performance appraisal system:
After spending huge on the training the company wants know that how
much the training is effective and what is the impact of it on the trainee. It
is general practice by company to take performance appraisal time to time.
As ‘Choice’ period evaluation and review of actions and achievement
taken. If any changes needed than mid course correction applied. In the
choice there is clear communication chain. There is a fixed structure of
authority and responsibility. There is 180 degree evaluation followed by the
company.
In sales, the sales person provides a minimum target. On the base of
achievement of this target, there performance is evaluated. They also
evaluate sales person on their past target achievement. They compare
with last year sales target on the same territory and increase growth rate of
it. There is a simple and easy to understand evaluation policy by ‘choice’.
There is no award for higher performance but it helps in the promotion
policy.
Employee benefits & services:
The company takes good care of employee by providing other benefits
like:
Uniform: Company provides uniform to shop workers.
Soap & washing facilities
Canteen:
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Company provides tea or coffee to all employees two times during
one shift. In case of overtime company also provides breakfast. The
shop floor workers get a packet of ‘Tiger’ biscuits once a day.
Employees are provided all products of company at subsidiary rate
in limited quantity.
Company is also provisions for holidays, vacation, sick leave and
personal leave. Company gives holiday on Sunday to their
employee.
Medical payment and reimbursement facilities are also provided to
the employees.
Insurance facilities also provided to the employees.
Bonus:
Company gives 18% bonus on gross salary during festivals like
Diwali.
Loan:
Company also gives loan gives for housing, marriage purposes to its
employee.
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Introduction:
M/S Choice Laboratories, Unjha has been established and started during
1982 with only few products like ‘Tooth Paste’, Tooth Powder’, Talcum
Powder’ and Tooth Brush’. Choice has started to export toothpaste from
march-1998 to Russia and Russian Government register ‘Choice’ brand for
Russian market.
Choice has exported 600 full containers to Russia, Bangladesh and U.A.E.
between 1998 to 1991. Choice has got constantly three export awards
from the Gujarat Government. Choice has also exported in different
countries such as U.A.E., France, U.K., African countries and receiving
continually good response for Choice brands in U.S.A. Choice has
specially developed different kind of tooth paste such as “BAKING SODA
TARTER CONTROAL, MINITY FRESH AND GEL” for U.S.A. market.
Choice Laboratory is the first cosmetic manufacturing company who has
been approved as ISO 9002 for Quality products and certain Quality
System procedures. Choice has got the recognition as a REGISTERED
EXPORT HOUSE from the Indian Government since 01/04/1999.
With the increasing demand from international as well as domestic market,
company is coming with the new project with installed manufacturing
capacity of 6000 M/ tones per year for toothpaste.
Company is targeting the Rs. 100 Crores sales during next four years time
period.
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Standardized and allied Preshipment Export Documents.
On an average, about 25 commercial and regulatory documents are
associated with the preshipment stage of as export transaction in our
country. These following 16 commercial documents:
COMMERCIAL DOCUMENTS
1. Performa invoice
2. Commercial Invoice Packing list
3. Shipping Instruction
4. Intimation For Inspection
5. Certificate of Inspection/Quality Control
6. Insurance Declaration.
7. Certificate of insurance
8. Shipping Order
9. Mate Receipt
10. Bill of Lading/combined transport document
11. Application for certificate of Origin
12. Certificate of Origin
13. Bill of Exchange
14. Shipment Advice
15. Letter to the Bank for Collection/ negotiation of documents.
The commercial documents are those which, by custom by trade, are
required for effecting physical transfer of goods and their ‘title’ from the
exporter to the importer and the realization to export sale proceeds. Out
of the 16 commercial documents related to export trade, exporters are
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required to send as many as 7 documents to the importer abroad.
These documents, generally referred to as ‘Principle Exports
Documents’, include commercial invoice, packing list, bill of leading,
Combined Transport Documents, Certificate of inspection/ Quality
Control(where required), insurance. Certificate / Policy (in case of CIF
export sales contract) certificate of Origin, bill of exchange and
shipment advice. The other 8 documents, known as ‘Auxiliary
Documents’ include Performa invoice, intimation for inspection,
Shipping Instructions, Insurance Declaration, Shipping Order, Mate’s
Receipt, Application for certificate of origin and letter of the bank for
collection / Negotiation of documents. These plays a supportive role in
the export documentation system is as much.
These are required for the preparation and procurement of the principal
export documents.
Thus, out of the 16 commercial documents in the export documentation
framework, as many as 14 have been standardized and aligned to one
another. Only two of these documents namely. Shipping order and bill
of exchange. Could not be brought within the fold of the aligned
documentation system because of their very different data elements
and having very little common among other commercial documents.
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IMPORT EXPORT DOCUMENTATION
International trade also means trading relationship between the citizens of
two independent sovereign states. International trade is state regulated
everywhere, even US Govt. regulates the export operation of domestic
firms and insist on documentation of information and control purpose. In
India several documents are prescribed to issuer compliance of export
trade control foreign exchange regulation, quality control and pre shipment
inspection central excise etc.
Kind of documents.
These documents can be narrowly classified into the following four
categories.
1. Documentation as per requirement of contracta. Commercial invoice.
b. Packing List
c. Insurance certificate policy
d. Bill of exchange
e. Shipment advice
f. Certificate of origin
g. Inspection of certificate
h. Transportation documents
i. Bill of Landing
j. Airway bill
k. Combined transport document.
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2. Documentation as per requirement of govt. of India.a. Export license if necessary
b. ARE1 Form
c. Pre shipment inspection certificate
d. Export declaration form – GR/EP/PP/SD form
e. Shipping bill
3. Documentation as per requirement of the importing countrya. Customs invoice
b. GSP certificate of origin
4. Document required for claiming export assistancea. Application form
b. Shipping bill duty authenticated by Customs
c. Commercial invoice attested by bank
d. Bank certificate
e. Statement of export certified by the negotiating bank
f. Registration cum membership form of concerned export
promotion council.
g. Another way to looking at the document s to classify them as
principle and auxiliary documents.
Principal Documents
Commercial invoice
Packing List
Marine insurance policy
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Bill of exchange
Letter of credit
Bill of Leading
Airway bill
Combined transport documents
GR./EP/PP/ SDF forms
Export inspection certificate
ARE1
Shipping bill
Certificate of origin
Shipment advice
Auxiliary Documents
These documents may be required for the preparation of procurements
of some of the principle documents of for arranging some of
preliminaries in effecting shipments of goods such as giving shipping
construction, marine cover shipping space, procurement of bill of
landing etc.
Documents normally required are: Shipping instruction form
Application for export inspection agency
Shipping order
Mate receipt
Dock challan
Principal Export Documents
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Manager concerned with export business should be well acquainted
with all the documents which are needed from time these documents
are briefly explained below:
Commercial invoice:
It is basic document which gives full details of the contents of the
shipment and serve as seller bill of goods and, therefore sets out the
terms of sales. An exporter is required to prepare these complete
documents which must fully identify the overseas shipments and
serve a basic for the preparation of all other documents which in
greater of lesser detail reproduce information from it.
Normally apart from the special requirement of the importer, form of
invoice will be similar to that used for domestic business. There is no
standard from and it is left to exporter to change its own design.
Always consuming that it will be convenient for use by foreign
parties in fact the exporter should strictly follow the requirements of
foreign law widely and are revised from time to time, it is important
for an exporter to keep him fully informed about such changes
government regulation of the importing countries. He fully informed
about such changes government regulation of the importing
countries. He fully informed about such changes governments
regulation of the Importing countries.
According to the uniform customs and practices for credit…
1. Unless otherwise specified in the credit, commercials invoice must
be made out in the name of applicants for the credit.
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2. Unless otherwise specified in the credit. Banks may refuse
commercial invoices issued for amounts in excess of the amount
permitted by the credit.
3. The description of good in commercial invoice must correspond with
the description of good in credit.
The following check list of the items making up a commercial invoice
should be kept in view. Tough not all items are require for every
transaction:
Name and the address of the supplier
Invoice number and date
Buyer’s and seller’s order number
Name and the address of the overseas customers.
Name of the vessel and sailing date
Insurance reference
Customs and consular declaration
Shipping marks and number of packages
Quantities and description if commodities
Net weight and gross weight as well as measurements in merit
units.
Specification of packing
Unit price and total value.
Terms of sale (for, c.i.f., F.A.S)
Any additional charge, which should be itemized such as packing
cartage consular etc.
Bill of lading number
Import license number and date
Latter of credit number and date
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Performa InvoiceIt is preliminary, provisional, temporary invoice for an additional
anticipated shipment, which might or not take place. Such invoice
serve- certain useful functions in that the overseas buyer us then in a
position to deal with certain requirement before placing the order e.g.
obtaining an import license. Secondary, Performa invoice, if made out
can be supplied to the bank when a letter of credit (L.C) is to be
established by the overseas buyers with the instruction that the L.C. be
opened in accordance with the invoice.
Package List Exporters are required to prepare an accurate packing list showing.
Item by item. The contents of the packages or cases so as to enable
the receiver of the shipment to carry out a check. The packing list
should given a description of the goods, number and marks on the
packages, quantity per package, Net and gross weight, measurement,
etc. properly, these packing lists ensure movement of goods and avoid
unnecessary unpacking. There is no particular form to be used but for
purpose of guidance a specimen copy may be seen.
Marine insurance policy / CertificateA marine insurance policy / Certificate is a document associated with
transit of good in trade, where by the insurer undertakes indemnify the
assured against damage for loss of goods due to risks/hazards in
transit, to the extent and in the manner mentioned in this document. In
a CIF contract of sale, the seller has to take the requisite insurance
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cover to protect his own as well as the buyer’s interests in case of
damage or loss of goods. The insurance of policy/ certificate must be
such as to satisfy the condition of the letter of credit/ sale contract, and
must cover all risks specified there in, or which are considered to be
normally associated with trade in a particular product.
Bill of exchangeAn exporter can send a bill of exchanges for the value of the invoice of
goods for export through the banking system for payment by an
overseas buyer on presentation. A bill of exchange is legally defined as”
an unconditional order in writing, addressed by one persons to another,
signed by the person giving it, requiring the person to which it is
addressed to pay on demand or at fixed of determinable future time a
some certain in money, up to the order of, a specified person, or to
bearer.
Letter of CreditA letter of credit is written undertaking by the bank, the issuing the
bank, to the seller, the beneficiary, in accordance which the instructions
of the buyer, the applicant, to effect payment up to a prescribed
amount, within a prescribed time period against prescribed document,
provided these are correct and in order that conform with the instruction
of the applicant. They are usually two banks involved in a documentary
credit operation:
1. The insuring banks of the buyer
2. The advising banks, is usually bank in the sellers country
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Types of Letter of credit
A.) Revocable & irrevocable letter of creditA revocable letter of credit is rather are now a days because it
means that the terms of the credit can be canceled or
amended by an overseas buyer without prior notice to the
exporter. Most letter of credit are irrevocable which means that
once buyers conditions in the letter have been agreed by an
exporter, they constitute a definite undertaking by the buyer’s
bank ban can not be revoked without exporters agreement.
B.) Confirmed and Unconfirmed letter of creditConfirmed letter of credit caries the confirmation added at the
request of the issuing bank. Binds the confirming banker to
negotiate the drafts drawn credit provided the terms and
condition there are fulfilled.
C.) Without resource and with resourceA without resource to drawer letter of credit is one under which
the negotiating bank can not have a resources against the
exporters if the draft is subsequently not taken up a
reimbursed by issuing bank provided, of course, the
negotiation is with out resources.
D.) Sight & Nuisance
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Documentary credit may provide for payment at sight or for
acceptance of nuisance bill of exchange by either issuing bank
in a buyer’s country or correspondence bank in exporters
country.
E.) TransferableTransferable letter of credit is one which can be transferred by
the beneficiary named them favor of another part. A credit can
be transferred only it is expressly designed as transferable by
issuing bank.
The following information is required to checking for the sellers after
the documentary credit opening.
Does the documentary credit correspond with the contract, especially
in connection with the following points….
1. Amount unit price
2. Period of validity / time limit for shipment
3. Terms of delivery
4. Description & origin of the merchandise
Is the documentary credit revocable, irrevocable? / Confirmed,
Unconfirmed.
Is it transferable, if necessary?
If unconfirmed or confirmed by a bank, how do you assess the
i. Credit risk
ii. Condition in buying country
iii. Mailing risk
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Are the name & the addresses of the applicants and the beneficiary
correct?
Is the documentary credit subject to the LCC’s currently valid
uniform customs and practice for documentary practice?
Is there sufficient time available to complete which can not be
made?
Are documents stipulated which are contradictory to the terms of
delivery?
Can the required number of specified documents be furnished?
Can the shipment deadline be met?
Are the terms regarding the place where the goods are to be taken in
to the possession and the point of departure and arrival feasible?
Are part shipment and transshipment prohibited country to the terms
of contract?
Can the prescribed marks and modes of transportation be provided?
Can the documents be presented in the desire from by the days
specified in the credit? Are you familiar with the expression of time
utilized in credit?
Are we absolutely certain about the way the draft should be made
out?
Can the description of the goods in the invoice to be taken word
from the documentary credit?
Can the terms of insurance be fulfilled?
Are the risks to be covered accurately described in the trading?
Is the insurance coverage also sufficient to meet your requirements?
Clarity whether a quality or a certificate is required?
Combined Transport Document / Multi Modal Transport Document
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The bill of lading, which constitutes the most important document in
global trade, is hazed on an international convention and fulfills
three crucial functions.
It serves as receipt for the goods handed over to carrier.
It is also a document of the title to ownership of the goods and
contract of carriage with terms and conditions printed to the back.
It helps not only in the physical transport of goods but also in the
ownership from the exporter to the buyer in the foreign country.
However, it covers only the sea lag of the journey. For the customs
cleared containerized cargo from ICD of CFS located at inland
points, a combined transport B/L is issued covering the inland
transport as well as journey through sea. With the enactment of multi
modal transport act, the operators instead of combined transport
document usually a shipping company has to separately enter in to
an agreement for the movements of the containers to the gateway
port. This requirement is document for multi modal movement with
terms and condition stipulated in accordance with the MTD law.
GR/EP/PP FORMS
A GR form is required because every exporter has to declare a full
export value of goods exported in a prescribed for. There are such
declaration forms which are prescribed.
The GR from or SDF form is used for exporter to export to all
countries except where we export takes place by post.
For export by parcel post, other than on value payable on ‘Cash On
Delivery’ (COD) basis, the Post Parcel (PP) form is used.
For export by Parcel Post, on Value Payable by Post (VPP) or ‘Cash
On Delivery’ (COD) basis, the VPP or COD form is used.
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EXPORT INSPECTION CERTIFICATE
An export consignment is also subject to pre shipment inspection under
the ‘Export Quality Control Inspection Act’ of 1963 for prescribed
commodities.
For this an application is to be made to Export Inspection Agency (EIA)
and that authority issues Export Inspection Certificate (EIC). There are
some cases where compulsory Pre shipment Inspection Certificate is not
required i.e. Export Houses, Trading Houses, 100% EOU, EPZ units; it
is not required also in the case when the importer states in the firm letter
that EIC is not required. Under in Process Quality Control (IPQC)
schemes, some units are authorized to issue such certificate on their
own. Here the inspection is carried out from time to time and not on
consignment basis by EIA.
SHIPPING BILL
The shipping bill is a document which contains all the details regarding
the goods to be exported, quantity of goods, value of goods, supplier of
goods, buyer of goods, port of destination, freight service agency etc.
and this serves the purpose for bill of entry when the consignment lends
in to the port of destination.
SHIPMENT ADVICE
The exporter sends a shipment advice to a foreign importer. The date of
the shipment the name of the vessel, the expected time of arrival and the
port of destination are mentioned in the shipment advice, so the foreign
importer can make arrangements for talking delivery together with the
shipment advice, followings are also sent.
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AUXILIARY DOCUMENTS
(A) Shipment Instruction
If the export consignment is sent to a part by rail, there will a railway
receipt, if by road; there will be a lorry-way receipt.
For example, the goods may be sent to the port by factory office where
the factory office prepares a dispatch advice and sends it to export
forwarding department with following…
The railway/ lorry receipt
AR 4 A form
GP form
A copy of delivery note
Export Inspection Certificate
On receiving their export forwarding debt will applied to an insurance
company. For insurance policy and cover then debt will prepare a
shipping instruction with detailed instruction on shipments and vessels
to the forwarding agent will be accompanied by various other document
including AR form, customer invoice, LC etc. in multiple copies.
(B) Application for export inspection agency
On the basis of these documents for forwarding agents accept the
delivery of export consignments from the railway station or the road
transportation as the case may be, store them into ware houses and apply
for custom clearance along with 5 copies of relevant shipping bills and
documents that have been received from export department of company.
The custom authorities or examiners check the documents endorses on
duplicate of shipping bill and give inspection to the dock authority for
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physical examination of goods and returns the goods to the forwarding
agents.
(C) Shipping Order
These documents are in turn transferred to the shade superintendents of
the port and a carting order is to be obtained which will permit the cargo
to be brought to the transit shade for an examination by the dock
appraisal along with several documents, dock appraisal stamps a “Late
Export” endorsement on the duplicate of the shipping bill. These
documents are handed over to the custom officer who supervise loading
by the agent. The custom officer stamps a late ship endorsement of the
duplicate copy of the shipping bill and hand shit cover to the agent of
the shipping company. This represents custom authorization for the
cargo to be loaded on to the vessels.
(D) Mate Receipt
Once the cargo is loaded the ship issues a mate’s receipts to the shade
superintendent after paying the port charges the forwarding agent can
take the delivery of the mate’s receipts. This is presented to the custom
officer who makes the certificate of shipments endowments on all
copies of the shipping bill and the original and duplicate copy of the AR
4 a form.
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Export Department of Choice Laboratories
In the mid 80s one local exporter who was busy in exporting tooth paste
gave a full consignment of tooth paste manufacturing to Choice
Laboratories. And then it has sensed the business opportunity in the
export market, the incentive offered by the government and rising
demand for Indian product in USSR and starting slowly but staidly
export to various countries on its own. With passage of time as company
acquired the competency an expertise dealing with export transaction it
has started export in a big way which contribute round about 80% of
total revenue.
It has to his credit three consecutive best exporter of the year award in
1993-94-95. Recently the firm has acquired an office for the purpose of
handling documentation of export at Ahmedabad to overcome delays
and infrastructure bottle necks that it has to face while managing export
transaction from the head office at Unjha.
1. Target countries for Export
Choice Laboratory is exporting its products in the following main
countries…
UAE France
UK Oman
Bangladesh South Africa
USA Singapur
Malesiya Saudi Arebia
Shri Lanka Nepal
Russian Countries Australia
Newsy Land Indonesia
Latin America African Countries
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Company regularly exports to more then 40 countries.
2. Export Sale for last four years.
Export is continuously increasing rapidly three years export data are as
follows……..
Years FOB values
01/04/2001 – 31/03/2002 RS. 11,88,01,548
01/04/2002 – 31/03/2003 RS. 17,02,43,541
01/04/2003 – 31/03/2004 RS. 21,03,49,820
* This information is taken from the certificate of Chartered Account / Cost and Works
Accountant given by the Export Manager Choice Laboratories Ltd.
At present around 80% of firms total revenue comes from export
operation main product exported is tooth paste. Gel tooth paste has
demanded only on the European and other developed countries. While
the only one country where the firm export tooth powder is Bangladesh.
The highest contribution per country in export sale goes to Russia
where the firm has also registered its premium brand Choice and
volume of export sales generated by this country accounts to be about
60% of firm’s total export.
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EXPORT MARKETING MIX
[1] Product Policy:
As far as products are concern the company has the different
manufacturing formula for the export products and composition of
flavor component in the tooth paste is formulated to match with
the individual countries tests as well as habits. For US the firm
uses mild flavor components while for Bangladesh it has the
Phudina flavor and for South Africa and Russia it uses Cinnamon
and meant as flavor.
Even the pack size, consistency of paste, language, packaging,
labeling, quality standards, regarding bacterial count in the tooth
paste are different for different countries. The firm has different
brand in different countries according to the importers
requirements. Its portfolio includes
Spear mint
Imingo
Choice
Dent Aback
Smile 32
Platinum
Pearl
Right Choice
Pearl Choice
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[2] Product Price:
Choice has only one simple policy regarding the pricing exports
consignments, it charges on the basis of marginal costing basis
by keeping mind the BEP of the order received. It charges on the
basis of FOB of CIF has negotiated and agreed upon at the time
of entering the contract.
[3] Product Place:
The firm has same level of distribution network as that of
domestic where it has its own brands as well as marketing
infrastructure. Here Choice deliver the products to the importers
who may have an agreement to market the company’s product in
foreign countries and hand over product to stockiest followed by
retail outlets or supermarkets.
[4] Product Promotion:
As far as communication is concern the firm uses material printed
in local language and promote its own brands by way of adopting
its message and media strategy to match with country specific
requirement.
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COMPETITION AT EXPORT FRONT
At the export front the competition is not among individual firms
but among the countries. The main competitor for the company is
being Indian company is china. China has its advantage due to
its government policy and economy of scale and better
technology. As far as individual competitors are concerns here
MNCs do not compete as they have their own brands in the
importing countries. So the competition spring among other small
local manufacturers but due to criticality of flavor compound if
ones contracted the importer will usually stick to one exporter.
HINDRANCE IN EXPORTING AND PROCEDURE TO BE FOLLOWED.
The main problem and the hindrance in exporting the goods are
bureaucratic delays, holidays and cumbersome documentation.
To export one consignment the firm has to deal with round about
64 documents in multiple copies. Due to poor infrastructure it has
to suffer from delays. In delivering the consignment and time
gaps wasted in correcting the minor non compliance due to rigid
bureaucracy may sometimes results into serious consequences
like void of contract.
A) Export Documentation
Choice has well experienced man power deal with cumbersome
export documentation and all technical commercial transaction.
The firm has to fill around 64 documents compromising of
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principal and auxiliary documents, documents which are crucial
for transaction and application for the duty free advance
licensing, contact of agreement deal between two parties, LC.
Invoice certificate, leading bill, DEEC by RBI, Packing list,
Railway receipt etc. are some more cumbersome documents but
which are also essential an important part of export transaction.
B) Export Financing:
Choice manages its exports finance by way of bank loans and in
the case of exporters as the bank give 100% limit for MPBF the
firm has no problem in managing its export finance.
As far as managing financial risk is concern the firm usually takes
advantage of ECGC and while transecting with underdeveloped
countries its enters into contact with the importers to carry over
the transaction using LC. With regards to the risk in exchange
rate fluctuations being an exporter from India the firm is always at
advantage because of constant devaluation in currency. In the
time of extensive ups and downs of the exchange rates, the firms
entered into forward cover transaction to minimize the exporter to
the risk.
C) Future Plans for export:
The export department of the company was in development stage
till now but it has already entered into the take off stage and the
firm is aggressively pursuing for export. The firm has plans to
penetrate its product in deep in hard currency areas. And all
intension to consolidate its situation in USSR. The firm also
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thrives to expand its product range from exports and it aiming to
expand its product portfolio with the detergents, cosmetics, and
personal care products which are its core competencies.
EXPORT BENEFITS RECEIVED BY CHOICE
Income tax exemption benefits
Sale tax benefit
Duty free advance license.
Central excise duty exemption
Special import license
Duty free replenishment certificate
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STRENGTHS
80 % of sales revenue earn through export.
Company has wide variety of product mix.
Company has already exported mode than 138 different
branches own and others.
Largest exporter of customize product in oral care industry in
India.
Company has good brand awareness in rural areas.
Company provide qualitative product at comparative price.
Company has its marketing department in different state so
company can get benefit in central excise tax.
Company has good distribution network in north India.
Good brand image in international market.
Company has good corporate image for job work in
international market. sent consignment in America in last year.
Marketing office located at Ahmedabad to capture the location
benefit.
Tax benefit, as export is very high.
Low depreciation cost.
Working capital position of the firm is good.
Location benefit.
Cheap labor availability in daily bases.
Water is florid in this regions, it is good for tooth paste.
Good quality maintains- overlays rejection of consignment
from export.
No rejection of total batch production up till now.
In house facility for quality check.
Low manufacturing cost-efficient utilization of resources.
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Good flexible plant layout for different type of product mixes.
Local sales person is selected, on the advantage is knowledge
can utilized.
Good labor management relationship.
No major dispute up till no-any strike in history.
ISO 9000 organization.
MP has good command over production knowledge.
Company has smooth dealing procedure for export.
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WEAKNESSES
They are not conducting marketing research activity.
No scientific research procedure.
Company often faces frequent stock out condition of finished
good as well as raw material.
No growth in domestic market share-low domestic share.
No national level advertisement-low advertisement budget.
Low brand awareness nationally.
High sales force turn over.
Very thin margin-low net profit.
Company highly depends on borrowed fund.
No scientific inventory management.
Small equity based by promoter.
High marketing distributed cost.
No scientific performance appraisal system.
No professional HR division.
Company always follows the leader in pricing polices.
No unique selling proposition for product.
No targeted niche segments-mass marketing.
Present staff has very low education profile.
No objective incentive policies.
Very poor image and awareness in urban area.
Family branding.
No professional approach and management.
Centralize decision making procedure for all area.
Closely held family concern.
No separate purchase department.
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Traditional plant and machinery.
RECOMMENDATIONS
Choice should design its own marketing research system. It
should hire people to carry out systematic market research
and survey in the following areas.
They need to strengthen relation with vendor and follow JIT
method for inventory and production.
They have to develop strict standard for quality control in
quantifiable terms because major part of their revenue is from
export.
Sanitation should be kept clean and hygienic.
To know consumers taste, preference and their consumption
and buying patterns in rural and semi urban market before
launching new products in the market.
Retailer and distributors survey from time to time know
competitors tricks as well as their satisfaction level.
Choice should target the unexplored and impenetrate east
India market so as to preempt the competition in these regions
and established its brand equity as pioneer in the market.
The company should adopt the scientific way to allocate and
manage the resources for advertisement and sales promotion
so as to gain optimum results.
The firm should design an objective performance evaluation
system for its channel members so as to keep a check on their
efforts and shall thrive to achieve the higher visibility.
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CONCLUSION
After visiting the “Choice Laboratories Ltd.” and analyzing its different
departments we conclude that management of any organization is really a
crucial task. company has to deal with many circumstances which require
high involvement in decision making and strategic planning.
In the “Choice Laboratories Ltd” we have seen that the management is
conscious about all the aspects of the better organizational performance
and they are continuously trying to improve it. But still there are some
weak areas in which they should make some improvements. How ever it
has good top management personnel for all the departments who carry out
their responsibilities in well manner. “Choice” has also good export
orientations which is one of its strongest competitive advantages.
The only thing that they have to keep in mind is that as the demand for the
export is increasing they have to maintain their reputation by maintaining
the quality of the services and customer relationship also. While at the
domestic level they can have the advantage of good brand name but for
that they have to develop marketing and distribution strategy at the
domestic level.
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BIBLIOGRAPHY
BOOK:Strategic Management
(Thompson and Strickland – Strategic Management: concept and cases, 13 th
Edition, New Delhi, Tata Mcgraw Hill Publishing Co. Ltd. 2004)
WEB SITE: http://www.choicelab.com http://strategis.ic.gc.ca/epic/internet/inimr-ri.nsf/en/gr-
71612e.html http://www.indiainfoline.com/fmcg/orca.html http://chalomumbai.equitymaster.com/detail.asp http://www.ciionline.org/sectors/58/default.asp?Page=Industry
%20Characteristics.htm
SOFTWARE: Capitaline Plus
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