AAYAM DURABLES LTD.

SCENARIO 3

Submitted By:
Sahil Kshetrapal(231126)
Sarang Gupta(231132)
Shakti Nagpal(231138)
Shilajit Das Gupto(231144)
Shubhangi Jain(231150)
Sree Mukesh(231156)
Ujjwal Srivastava(231168)
Snehashish Chowdhary(231174)
Rajwant Singh(231180)

Part -1
Aayam

Durables Limited, is a public company, in consumer durable sector.

The company offers 3 types of products a. Flat Panel Display
b. Refrigerator
c. Washing Machine
.In 2014, ADL had a loss of 5% which was equal to about 46 crores. The revenue in 2014 was Rs 842
crore which was growth by -4.7% over previous year and so the overall performance of the company
drowned in the said year.
.All the three products, which were accountable for revenue and profits, were not able to perform.
.The blame for the products failure was put on the R&D team as they were not concerned for introduction
of a new product.
Region wise Revenue Growth
. North = 4%
. South = 9%
. East = +4%
. West = 6%

Profits and Revenues Growth

FPD section

Revenue 4%

Profit 9%
Refrigerator section

Revenue 3%

Profit 3%

Problems and Solutions VP(S&M)

He felt that the main reason behind failure of the product was that they had not launched any new
products since 2012 whereas the competitor launched new product every 6-7 months. As a result
the interest of channel partners and customers was dwindling. So, he felt that the overhead cost
should be reduced.
VP(R&D)They thought that due to lack of investment in newer technologies, the engineers were just busy
in quality testing matters. But, VP(SC) wanted more investments in software's and warehouses.

CFO
He

was of the opinion that schemes of 20% given to network were on the higher side.
Less manpower productivity is due to improper manpower deployment in smaller but
potential markets.
More investments in accounting systems.
VP(HR) felt that CFO already had far too many persons with him.

CEO
He

observed that ADL was top heavy and over manned.

He wanted manpower to be provided in positions which would help in revenue generation.
He was worried about pending annual salary increase of the employees.

Part - 2
Division of Products

Price of T.V. >> Price of Washing Machine & Refrigerator.

Also, in terms of loss in percent,
T.V.>Washing Machine>Refrigerator
So, we will invest more on T.V so as to minimize the maximum loss caused by it and also we support it by
the fact that it has more competition.

Focus

on R&D of FPD

As the revenue of washing machine is constant so we will not be able to achieve the target of 860 crores.
So, we should invest in T.V. which would help us in achieving the target as it has more revenue(350) when
compared to Washing Machine having constant revenue(91). Also, with the help of cost cutting method it
would be very helpful to achieve the target.

 Focus

on R&D of Refrigerator

As the revenue of washing machine is constant so we will not be able to achieve the target of 860 crores.
So, we should invest in Refrigerator which would help us in achieving the target as it has more revenue
(401) when compared to Washing Machine(91) having constant revenue. Also, with the help of cost cutting
method it would be very helpful to achieve the target.

Focus on S & M of FPD & Washing Machine

If we have to get revenue of Rs 50,000 then we would have to either sell 1 television of 50,000 or 5
Washing Machine, each equal to Rs 10,000. But, as we know that the television gives us more revenue and
has more loss and we need to minimize the loss so we would prefer selling television. As, innovations are
also present in television and also the cost of keeping television instead of Washing Machine will be less.
So, this doesnt mean that we can overlook Washing Machine. So, to make a constant revenue of washing
machine we would also sell one Washing Machine.

Regional Revenue Turnover

Year

North
(in Cr.)

South
(in Cr.)

East
(in Cr.)

West
(in Cr.)

Total
(in Cr.)

2012

230

225

105

240

800

2013

240

252

130

260

882

2014

231

230

135

245

841

Change in Revenue from 2013-2014= -4.7%

South region= -9%, West region= -6%, East region= 3.8%, North region= -3.75%

Reason for this All the three products grew negatively in 2014, in top line, and made losses.
All these three products which were accountable for revenue and profits were not able to perform.
Both top and bottom lines were shrinking.

Cost under Consideration

2012
2013
2015
(in %) 2014

Man Power Cost

(in %)

16.3

17.3

21.5

22

Kit Cost (in %)

58.7

59.7

56

56

S & M Cost (in %)

19

20

20

20

Other Expenses
(in %)

Assumption: No change in percentage due to inflation

The manpower cost is increased from 21.5% to 22%.
This means to prune from non-productive areas and add in areas where it was
required for long term sustenance and growth.
The manpower cost shall be kept as reserve to be invested in product innovation
and marketing and Software systems and warehousing.

Cost under Consideration (in

2013
2014
Crores) 2012

2015

Manpower Cost (in

Cr)

130.4

152.58

181

189.2

Kit Cost (in Cr)

469.6

526.55

470.96

481.6

S & M Cost (in Cr)

152

176.4

168.2

172

70.56

67.28

68.8

Other Expenses (in 56

Cr)

Total Cost in 2015 is 911.6 Crores

There is a loss of 7% in Revenue which totals to 918.87 ( 58.87 + 860 ) Crores for YEAR
2015
Total Cost for Year 2015 totals to 911.6 Crores
That means we can use (918.87 911.6) = 7.27 Crores for R & D.

Merge VP R & D electronics and VP R & D appliances

To reduce salary expenses
Make Single Branch Manager and rest categories under him
No need to make separate heads for washing machine and refrigerator
In south merge branches of Kerala with Tamil Nadu and A.P with Karnataka.
In Band 2 no of employees in R&D of Appliances is 31 which is more than necessary and needs to be reduced.
In Band 3 in customer services in region is 19 which should be reduced to 13.

Conclusion
This 7.27 Crores can be used in:

Pending annual salary hike

Hire more people for R & D
Hire more people for S & M
Do more R & D

THANK YOU