star engineering

7/29/2019 Star engineering

1/15


2/15

How to allocate funds to variousproducts?

Limited financial resources Need to allocate funds in a balanced

manner to keep up with growth

Five product groups

Total requirement = Rs.11 crore

Total available funds = Rs. 5 crore


3/15

Customers Manufacturers of equipments

used in telecom exchanges.

Market Share 20% (market leader)

MarketGrowth Rate

25% pa

Problems Increase in production

capacity to keep pace with

the growth and to maintain

leadership,

Investment

Required

2 crore


4/15

Customers Telecom Industry for Jelly-filled

Cables

Market Share 20% (market leader)Market

Growth Rate

15% pa

Problems Jelly-filled cables and jointing

kits are getting slowly

substituted by fibre-optic

cables and different type of

jointing kits.


5/15

Customers Railways for changing tracks

electrically

Market Share 40% (market leader)Market

Growth Rate

7-8% pa

Problems Expansion of operations to

international markets

Investment

Required

2.5 crore


6/15

Customers Diverse industries.

Market Share 5%

Market GrowthRate

8-10% pa, high demand ininternational markets

Problems Sick Unit Poor quality & high rejection rates

Previous investment of 3 crores &

management efforts went futile

Further investment in equipmentsneeded to improve quality & get ISO

9000 certification

Investment

Required

1.5 crore


7/15

Customers Electronic industries.

Market Share 6%

MarketGrowth Rate

20% pa

Problems Inability in meeting production

capacity due to financialconstraints

Investment

Required

5 crore


8/15

STARS

PRODUCT A

QUESTIONMARK

PRODUCT E

CASH COWS

PRODUCT B

PROCUCT C

DOGS

PRODUCT D

MARKET

GROWTH

RATE

Relative Market Share


9/15

PRODUCTS Requirement Product Life cycle Allocation

A - Transformer

Coils

2 Crore Growth 1.5

B - Cable JointingKits, Jelly FilledCables

- Decline -

C - Electric pointMachines

2.50 Crore Maturity 1

D - Steel Forgings 1.50 Crore Maturity 0

E - Switch ModePower Supply(SMPS)

5 Crore Growth 2.5


10/15

It is in the STAR category as it has a highmarket growth rate (25%) and a high

market share (20%). So it is in the growthphase of product life cycle.

To maintain the growth of the starproduct, the company must investmoney to improve its growth andmaintain leadership & also to increasethe production capacity.


11/15

It is a CASH COW as it generates hugerevenues for the company.

But it is in a decline phase because newsubstitutes like fiber optic cables areeating up its market share.

So we will milk the product and generate

as much revenues as we can and notinvest any money.

Also, the case doesnt mention anybudget allocation for product B.


12/15

It is also a CASH COW and it is in itsmaturity phase.

Again, our focus will be to invest less andgenerate maximum revenues.

The product has opportunity to grow in

export markets so the allocated fund willhelp it to cater to its overseas demand.


13/15

Product D is the weak link of thecompany.

It is in the DOG category and hasreached its maturity phase.

Already much money and effort has

been invested in this product with noresult and continued losses.

So the best option will be to divest theproduct.


14/15

It is a recently launched product with ahigh market growth rate and hugedemand.

It has the potential to become marketleader.

Our objective will be to move this productfrom the current QUESTION MARK categoryto star category in the future.

So we will allocate the highest amount tothis product.


15/15

THANKING YOU

star engineering

Documents