Kanpur Confectioneries Private Limited

Situation Analysis: Kanpur Confectioneries Private Limited established in 1945, is a biscuit manufacturing company. Started as a candy manufacturing company, emerged as a leader in northern region by 1970. Started manufacturing biscuits in 1970, grew well. But due to growing competition and operational problems there sales declined and in 1985 candy manufacturing was stopped and they incurred loss in biscuits as well. In 1986 they signed an agreement with Pearson Health Drinks Limited to manufacture there health biscuits to utilize there excess capacity. But the new product was not received well in the market. Now in 1987 they have received a proposal from A-One Confectioneries Limited (the national leader in biscuit industry) to become contract manufacturers and help APL reduce their manufacturing costs. Now Alok Kumar, Chairman of KCPL is in dilemma to accept the proposal or not. Because doing this will end there control and independence and also will dilute their own brand ‘MKG’ biscuits, which has been built by two generations over the years. On the other hand, it will help them recover some of their loss, utilize their overcapacity and by becoming CMU for APL’s biscuits they will learn their practices of quality control, minimum wastage.  

Problem Definition: To decide whether they should accept the proposal of APL to become one of its contract manufacturers.

Options:

1. To accept APL’s proposal to utilize the overcapacity, cover losses.
2. To reject the proposal and work on their own brand MKG, work on shortcomings and come with a strategy to beat the competition and grow the sales.    

Criteria for evaluation-

1. To make profit.
2. To improve sales of their biscuit brand MKG.
3. To have control and independence on their manufacturing unit.
4. To follow management principles laid down by the family.

Evaluation-

1. If they accept APL’s proposal

Relative profit of 84,000 per month achieved and overcapacity is utilised.

      They will learn new technical skills and new methods from APL.

      They might lose control and independence on the plant operations.

      There is a possibility of MKG brand getting even weaker.

1. If they don’t accept the proposal

      They can concentrate on strengthening the brand MKG.

      Overcapacity is still not utilised until sales increases.

      Complete freedom on taking decisions regarding operation practices.

Recommendation-

Based on evaluation, option 1 that is they should accept APL’s proposal looks best. Not only they will cover some of the losses, but in long run it will be helpful for the company as they will learn new techniques and learn about minimising their wastage and using resources efficiently to reduce manufacturing costs. They should keep working on their brand MKG biscuits and work to improve its sales also.