Certificate

1

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

MACRO ANALYSIS

8

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.

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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.

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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.

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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)

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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.

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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.

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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.

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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.

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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.

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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).

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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.

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MICRO ANALYSIS

23

GENERAL INFORMATION

24

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.

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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

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HEAD OFFICE & FACTORY

Address:999, State Highway,

Unjha - 384170,

North Gujarat, INDIA

Phone: +91 2767 252696 / 252250 / 253819

Fax: +91 2767 252384

Email : choicead1@sancharnet.in

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: sumit@choicelab.com

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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.

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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

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ORGANIZATION CHART

Mg. PARTNER (A) Mg. PARTNER (B)Production purchase (Imports) Sales & Purchase (Domestic)Sales (Exports), Finance, P&A and Advertising

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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)

MARKETING DEPARTMENT

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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

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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

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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’

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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)

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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

Price List

40

(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.

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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

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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.

48

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

50

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

51

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.

53

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.

55

PRODUCTION DEPARTMENT

56

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%

58

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.

59

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.

60

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.

62

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

FINANCE DEPARTMENT

68

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

72

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.

75

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.

76

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

77

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.

78

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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HRM DEPARTMENT

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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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EXPORT DEPARTMENT

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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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SW ANALYSIS

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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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