Professional Documents
Culture Documents
Was the decision to close down the weaving unit justified? Justify your position.
Yes, the decision of closing down the weaving unit is justified because:
•Huge capital investment: Required to set up the spinning unit in comparison to weaving and
processing unit implicates lesser competition on field
•Raw material requirement of yarn supply for the 92% fabric weaved by power looms
implicates a larger market potential for business expansion
Availability of specialized personnel for the selection of the perfect variety of cotton as raw
material procurement gave the company a competitive edge
Oudated technology: Weaving unit offered no promises of giving any return on the future
-High frequency production cycle: Cost of production of weaving unit was high owing to the
high labor costs of weaving
Spinning did not require any investment in pollution control, hence it was profitable
Was the decision for the merger with Arvind Mills justified? Justify your position.
Yes, the decision for the merger with Arvind Mills was justified as:
● High Liability: Many of the financial institutions were feeling insecure about their
returns and hence were pressurizing Asoka for bailout. This merger helped in paying off
these creditors
● Cost to other firms experience in turnaround of a company. They have helped in
turnaround of another sick company Laxmi Cotton Mills
● Arvind Mills was a profit making company and could benefit Asoka Mills with its deep
pockets
● Its past relation with the company made it the most viable option
However, there are losses too such as the sale of Artex to Arvind mills. But looking at the
the fact that this merger provided way more benefits than to losses this deal is justified.
Action plan