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    KCPL Case

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    Akshada Vinchurkar
    KCPL was a biscuit manufacturing company founded in 1945 that was facing financial struggles in the late 1980s due to increased competition and high costs of production. In 1987, APL, a major competitor, offered for KCPL to become one of its contract manufacturing units. This would involve APL providing packaging, quality control oversight, and requiring KCPL to source ingredients from APL suppliers. While this could increase production capacity and utilize surplus capacity, it would mean losing independence. Alternatively, KCPL could reject the offer and focus on improving production efficiency to decrease costs and increase profits through optimal use of existing capacity without compromising family values.

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    KCPL Case

    Uploaded by

    Akshada Vinchurkar
    240 views4 pages
    KCPL was a biscuit manufacturing company founded in 1945 that was facing financial struggles in the late 1980s due to increased competition and high costs of production. In 1987, APL, a major competitor, offered for KCPL to become one of its contract manufacturing units. This would involve APL providing packaging, quality control oversight, and requiring KCPL to source ingredients from APL suppliers. While this could increase production capacity and utilize surplus capacity, it would mean losing independence. Alternatively, KCPL could reject the offer and focus on improving production efficiency to decrease costs and increase profits through optimal use of existing capacity without compromising family values.

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    KCPL was a biscuit manufacturing company founded in 1945 that was facing financial struggles in the late 1980s due to increased competition and high costs of production. In 1987, APL, a major competitor, offered for KCPL to become one of its contract manufacturing units. This would involve APL providing packaging, quality control oversight, and requiring KCPL to source ingredients from APL suppliers. While this could increase production capacity and utilize surplus capacity, it would mean losing independence. Alternatively, KCPL could reject the offer and focus on improving production efficiency to decrease costs and increase profits through optimal use of existing capacity without compromising family values.

    Copyright:

    © All Rights Reserved
    Download as DOCX, PDF, TXT or read online from Scribd
    Download as docx, pdf, or txt
    240 views4 pages

    KCPL Case

    Uploaded by

    Akshada Vinchurkar
    KCPL was a biscuit manufacturing company founded in 1945 that was facing financial struggles in the late 1980s due to increased competition and high costs of production. In 1987, APL, a major competitor, offered for KCPL to become one of its contract manufacturing units. This would involve APL providing packaging, quality control oversight, and requiring KCPL to source ingredients from APL suppliers. While this could increase production capacity and utilize surplus capacity, it would mean losing independence. Alternatively, KCPL could reject the offer and focus on improving production efficiency to decrease costs and increase profits through optimal use of existing capacity without compromising family values.

    Copyright:

    © All Rights Reserved
    Download as DOCX, PDF, TXT or read online from Scribd
    Download as docx, pdf, or txt
    of 4

    1.

    Describe about the company KCPL including: Technology and Operation in 1987,
    Induction of Family Members, Brand MKG, Competition, and KCPL's
    Performance?

    Kanpur Confectionaries Private Limited (KCPL), founded by Mohan Kumar Gupta, is a


    biscuit manufacturing company that started in 1945 in Jaipur. Mohan Kumar was a keen
    learner as earlier he used to work in a candy unit and then started his own business with
    the dealership of candies under the brand name 'MKG' at the age of 28 years. 
    After gaining some experience and insight into the market, he set up his production unit
    in Jaipur in 1946. As competition in the sector increased, net profit margins fell. KCPL
    could not compete on costs as its costs were higher than those of its competitors. Mohan
    shifted his candy-making unit to Kanpur where he can manufacture candies at a little low
    cost and target new market. He invested in advertisement smartly, in vernacular
    newspapers and hoardings. Also with a good dealership network in Bihar and MP, he
    was able to make KCPL the market leader in his region. 
    Mohan Kumar was a visionary too as he could see growth in biscuits demand 15% p.a.
    and attractive margins this product has. Also, sugar was the common raw material for
    both candies and biscuits. So he decided to invest his surplus from the candy business to
    enter into biscuit's business. The business grew fast but limited raw materials didn't allow
    it to flourish. But still, they managed to be the number 2 players in the biscuit market in
    the northern region with an extended range of cream, salt, and Marie biscuits. Prince
    Biscuits was the market leader with 130 MT sales followed by KCPL with 110 MT sales
    followed by International Biscuits with 100 MT sales. In the year 1980-81, their turnover
    was INR 20 million (growth of 15% compared to last year) and in the year 1983-84, it
    was INR 30 million. The installed production capacity was 240 tonnes per month and
    their average monthly production was 120 MT. 
    Biscuit making involved the preparation of dough by mixing flour, sugar, sugar syrup,
    vegetable oil, and certain preservative chemicals in a given proportion; molding the
    dough into various shapes and sizes; and baking the pieces to get ready-to-eat biscuits. It
    was the proportion of ingredients used in making its biscuit dough that enabled a
    company to develop a secret formula. Qualities of the material were checked in the
    laboratory for impurities. Biscuits were manually packed in a packet of 100gms. The
    production was dependent on both casual and permanent workers, while the salary for
    permanent workers was INR 2.75 lakh per year, and wages for casual labor was INR 50
    per day. Due to high absenteeism, the production varied from 2 MT per day to 6 MT per
    day. 
    In due course, the top management of KCPL was also changed. In 1982, Mohan Kumar,
    who had six sons, handed over the leadership of KCPL to his eldest son, Alok Kumar,
    who has a degree in commerce. Alok looked after the finance and liaison functions,
    Vivek, his second son, joined the company in 1965 after graduating with a degree in
    mechanical engineering, was in charge of human resource management and
    manufacturing and Sanjay the youngest was responsible for marketing, logistics, and
    administration. Mohan's other three sons had their own trading business. The decision
    making was done in a meeting held on fifth oof every month for business operations and
    performance. The management principles followed by the family were: 
    Respect the laws of the land.
    Do not exploit labor.
    Run the business on ethical lines.
    Treat the consumer as the king.
    Do not evade taxes.
    "MKG" was a popular brand in the northern region and the main consumers were
    middle-class families in urban and semi-urban areas. In 1986-87. Talking about the
    competition, initially, only 2 players, APL and International Biscuits Limited dominated
    the industry. There were several units in the unorganized sector by 1980. Seeing a
    growing competition, KCPL was in dilemma between 2 types of players- those who
    competed on price and those who competed on scale and image. By1986-87 the sales
    declined and KCPL incurred loss and eventually, family members decided to shut down
    the candy line in 1985. 

    2. What do you understand by the arrangement with Pearson


    KCPL joined hands with Pearson and jointly launched "Good health" biscuits. These
    biscuits were seen as a high priced product without any value-added benefits and
    customers preferred A-one biscuits for which the price was lesser as well. This indicated
    that this collaboration was not a success. 

    3. Explain the offer of APL and the proposal

    On September 8, 1987, APL came up with an offer of expanding its supplying capacity
    by contracting manufacturing units (CMU). The offer had various main points:
     APL Offered to supply the pre-printed packaging material carrying APL's name. 
     Inspection of KCPL's production processes and recommendation changes in
    processes and equipment.
     APL would post two quality control officers at KCPL's plant to facilitate KCPL's
    adherence to quality procedures. 
     The initial contract was to be for 3 years. 
     APL will supply its secret ingredient but KCPL would be required to buy the
    other ingredients such as sugar, flour, and vegetable oil from one of the APL's
    authorized suppliers.
    The proposal had both advantages and disadvantages with needed to be analyzed. 
    4. Suggest the various options available to KCPL and provide both merits and demerits of
    each option

    Option 1 
    KCPL can accept the offer from APL and become its Contract manufacturing unit. 

    Advantages: 
    Contract Capacity of manufacturing can be increased if KCPL meets expectations of
    quality and production.
    KCPL can improve and evolve the production procedure with technical help that is been
    provided by APL.
    KCPL can avoid marketing, brand building, and distribution expenses and minimizing
    business risks.
    It would also help KCPL to utilize the surplus capacity.

    Disadvantages:
    KCPL will lose its independence and cannot take their own decisions.
    KCPL might not be able to concentrate on strengthening the MKG brand build over the
    years, as the family name was dependent on the success of the biscuit line.
    The family image will be destroyed.

    Option 2:
    KCPL can reject the offer and continue with production of MKG and Good health
    biscuits for Pearson

    Advantages:
    Pearson can increase the production from 50 to 100 MT which will eventually increase
    the profit margin.

    Disadvantages:
    Since Pearson biscuit is not doing well in the market so the probability to increase
    production is less.
    MKG is also running in loss

    Option 3:
    Increase production by decreasing the absenteeism and optimum use of installed
    capacity.
     
    Advantages:
    If workers work efficiently it will increase the productivity leading to the company will
    run in profits by decreasing the cost per tonne in production

    Disadvantages:

    Labors may ask for higher wages and the company has to become strict which may break
    the family principle of no exploitation of labor. 
    5. You are Alok Kumar Gupta - What decision will you take and why
    As it said a company is known by its workforce who can do wonders for an organization
    even with limited resources. Optimum utilization of the increased capacity can lead to a
    full potential which will bring down the cost per unit. This option can recover losses and
    is controlled by the company. Also, KCPL should focus on mass consumers, here the
    profits and risks are low. KCPL needs to make good relations with the institutes and take
    them into confidence that they will provide good quality at a lower price while keeping
    profit margin less initially as the production increases. Gradually the cost per unit will be
    down increasing the profit margin. There's a huge scope of increasing the market share
    here. 

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