Production department
Certificate
PREFACE
It is a pleasure to keep this report in front of you. Project report is vitally important for M.B.A students because it develops the feelings among the students about industrial environment and business to develop the practical base. Theoretical knowledge is true only when we apply the same in the practical.
In the final year M.B.A there is a subject named ‘Management Research Project’. Under the said curriculum a student has to do a detail analysis of a particular company. At the same time we must know that what are the Strengths and weakness of the company by analyzing overall organizational structure and its operations. And simultaneously analyze the opportunities and threats for the industry to support company analysis.
In order to establish co-relation between the theoretical studies and practical training, it was suggested that some company should be analyzed and accordingly we had done the analysis on “Choice Laboratories Ltd”.
ACKNOWLEDGEMENT
It is well known that practical knowledge is the pre-requisite for the developing of business sense.
For Our project we received lot of help from gentlemen who will remain in our memory for long life. Their advice, co-operation and guidance encouraged us to perform better.
To show our deep sense of gratitude the word thanks is not enough but we would like to say thanks to them to express our gratitude in words.
We heartily express our deep sense of gratitude to Mr. Jaya ashish Sethi, the faculty member, NSVKMS MBA College, for not only giving us knowledge on the subject but also for constant guidance, co-operation and motivation in preparation of report. Without which it was very difficult for us to reach at this stage.
We also convey our thanks to Mr. Vikram Bhatt (Sr. Manager –Imports & Exports) and Mr. Apurva (Assistant Manager Import & Export), and all staff members of ”Choice Laboratories Ltd.” Who gave their full support and wide co-operation during our training Schedules.
Date: __________
Place: ___________
EXECUTIVE SUMMERY
As a part and partial fulfillment of “Management Research Project” of MBA programme we have selected “Choice Laboratories Ltd.” for general understanding of the company’s organizational structure and its operations. However in particular our emphasis was on to find out the strengths and weakness of the company.
We have analyzed all the departments of the company and their operations. This includes the specialties and strategies adopted and implemented by different departments.
We presented a brief introduction of the FMCG industry along with a description of the important players and key success factors. We have also analyzed the opportunities and threats of the industry to support our analysis of the company.
Date : ___________
Place: ___________
Keyur Darji
Nirav Mehta
Pankaj Prajapati
INDEX
1. RESEARCH OBJECTIVE 07
2. MACRO ANALYSIS 08
(A) Introduction of FMCG Industry 09
B) Industry Segments 11
C) Key Players In the Industry 13
D) Current Scenario 15
E) Key Success Factors 18
F) OT Analysis 20
3. MICRO ANALYSIS 23
(A) General Information 24
1) Company Profile 25
2) Vision 25
3) Infrastructure 26
4) Technology Transfer 27
5) Head Office & Factor Address 28
6) Sales & Corporate Office 28
B) History & Development 29
C) Organization Chart 31
D) Marketing Department 32
1) Introduction 33
2) Structure 33
3) Marketing Mix 34
4) Choice Marketing Strategy 55
E) Production Department 56
1) Structure 57
2) Major Products Manufactured 57
3) Manufacturing Process 59
4) Supplier of Choice 61
5) Inventory Management 62
F) Finance Department 68
1) Introduction 69
2) Financial Statement 72
3) Trend Analysis 75
4) Common Size Statement 78
5) Ratio Analysis 80
G) HRM Department 84
1) Introduction 85
2) HR Planning 85
3) Recruitment 86
4) Selection 87
5) Training & Development 88
6) Motivation 89
H) Export Department 93
1) Introduction 94
2) Import / Export Documents 97
3) Principle Documents 98
4) Export Department of Choice 111
5) Export Marketing Mix 113
6) Competition at Export Front 115
7) Export Benefit 117
I) SW Analysis 118
4. Recommendation 122
5. Conclusion 123
6. Bibliography 124
RESEARCH OBJECTIVES
Research objectives include the objective of research of the researcher before starting any research. The researcher should determine the objective or the goal of the research for the smooth functioning of study. Predetermine objectives should be of such that researcher fulfils in the certain period of time at minimum cost.
Following are the research objectives, which we have developed…
❖ To understand the structure of the company.
❖ To study the various departments of the company with their strategies and policies.
❖ To identify the strengths and weakness of the company.
❖ To know about the general information of the industry with its key success factor, currant scenario and opportunities & threats in brief.
MACRO ANALYSIS
INTRODUCTION OF FMCG INDUSTRY
The fast moving consumer goods (FMCG) industry has been moving slow of late. Due to saturation of demand in urban areas and due to its difficulty in expanding to rural markets. The industry, historically branded as defensive sector, has found itself vulnerable to economic slowdown. One of the largest direct and indirect employment providers, the sector has strong backward linkages to spur growth of other industries, and in turn, the company.
The Fast Moving Consumer Goods (FMCG) sector is the fourth largest sector in the economy with a total market size in excess of Rs. 60,000 crores. This industry essentially comprises Consumer Non Durable (CND) products and caters to the everyday need of the population.
Product Characteristics:
Product belongs to the FMCG segment generally have their following characteristics.
• They are used at least once a month
• They are used directly by the end-consumer
• They are non-durable
• They are sold in packaged form
• They are branded
The industry is so diverse to include soaps, detergents, oral care, personal care, culinary products, and consumer staples. Oral care includes toothpaste, tooth powder, toothbrush, mouthwash etc. while personal care includes shampoos, hair oil and cosmetics.
The industry is marked by high ad spend. Brand building, brand extensions and quite a low capital to sales ratio on account of outsourcing and very low investment in fixed assets.
INDUSTRY SEGMENTS
The main segments of the FMCG sector are:
❖ Personal Care:
Oral care; hair care; skin care; personal wash(soaps); cosmetics and toiletries; deodorants; perfumes; paper products(tissues, diapers, sanitary); shoe care.
Major companies active in this segment include Hindustan Lever; Godraj Soaps, Colgate-Palmolive, Marico, Dabur and Procter & Gamble.
❖ Household Care:
Fabric wash (laundry soaps and synthetic detergents); household cleaners (dish/utensil cleaners, floor cleaners, toilet cleaners, air fresheners, insecticides and mosquito repellants, metal polish and furniture polish).
❖ Branded and Packaged Food and Beverages:
Health beverages; soft drinks; staples/cereals; bakery products ( biscuits, bread, cakes); snack food; chocolates; ice-cream; tea; coffee; processed fruits; vegetables and meat; dairy products; bottled water; branded flour; branded rice; branded sugar; juices etc.
Major companies active in this segment include Hindustan Lever, Nestle, Cadbury and Dabur.
Spirits and Tobacco Major companies active in this segment include ITC, Godfrey Philips, UB and shaw Wallace.
An exact product-wise sales break up for each of the items is difficult. Domestic FMCG industry lacks a clear definition and scope and there are attempts to widen its scope.
KEY PLAYERS IN THE INDUSTRY
There is a strong MNC presence in the Indian FMCG market and out of the top 10 FMCG companies; four are multinationals while two others have significant MNC shareholdings. Unlike several other sectors where multinationals have entered after 1991, MNCs have been active in India for a long time. The top five listed FMCG companies on the basis of their sales turnover in the last financial year (2004) are:
|Company Name |Sales(‘04) |Profit After Tax(’04) |
|Hindustan Lever Ltd. |10978.31 |1073.73 |
|I.T.C Ltd. |7971.94 |792.44 |
|Nirma Ltd. |1717.88 |234.1 |
|Nestle India Ltd. |1546.43 |98.47 |
|Britannia Industries Ltd. |1169.84 |51.02 |
|Colgate-Palmolive(India) Ltd. |1123.53 |51.79 |
|Godfrey Phillip India Ltd. |1082.63 |42.1 |
|Dabur India Ltd. |1046.28 |77.67 |
|Smithkline Beecham Consumer Healthcare Ltd. |743.38 |97.61 |
|Godrej Soaps Ltd. |714.74 |61.89 |
|Marico Industries Ltd. |649.05 |35.73 |
|Cadbury India Ltd. |511.08 |36.7 |
|Procter & Gamble Hygiene & Health Care Ltd. |492.85 |75.03 |
|Reckitt & Colman of India Ltd. |435.33 |31.47 |
|ISPL Industries Ltd. |21.57 |0.04 |
(Source: Capitaline Plus)
Among the major companies, Hindustan Lever has a strong presence in the food. Personal care and household are (detergents) sectors: ITC is the market leader in cigarettes; Nirma has a strong presence in the detergent market; Nestle and Britania are active in the food sector Colgate has a strong presence in the oral care segment.
CURRENT SCENARIO
The FMCG sector is said to be a defensive sector in stock markets, but prolonged recession and poor agricultural output has affected even this sector. The competition is hectic and margins can be protected only through volumes, as the industry is highly price sensitive.
With urban markets saturated, the industry majors are trying their level best in grabbing the rural market share. But poor agricultural growth in the past two years is proving to be a speed breaker in the Industry’s growth.
The industry faced stagnation and down side growth in many segments in last two to three years in soaps and detergent segment, while market for personal wash fell by 9.3%, fabric wash market fell by 2%, while dish segment recorded a spectacular 13.2% growth.
FMCG sales grew at their lowest ever pace of 4.90% last fiscal. Compared with 8.50% in 2002 it was the third straight year when FMCG majors posted single-digit growth in sales.
In oral and skincare segment, market for shampoos recorded a spectacular 10.6% growth while tooth paste and skin care segments grew by 2.4% and 4.4% respectively in 2004. During the above period, Talcum Powder market witnessed a down side growth of 0.6%
However the growth rate of these companies for the twelve months ended Nov 04 showed mixed trends. While HLL, Colgate, Dabur, Reckitt, Becinser and SmithKline Beechm recorded negative growth of 4.2%, 3.4%, 1.9%,1.7% and 0.2% respectively,
The personal product portfolio continues to be under pressure. The volume degrowth story continues to get even worse for toothpaste- degrowth for May was 9%. The once high growth area of shampoos grew by 2%.
Colgate remains as insipid show with volume degrowth across the three major categories – 4% in toothpaste, 16% in tooth powder and 23% in tooth brushes. In the worst of times. Colgate is still outperforming its peers in tooth pastes – degrowth across the three major categories was 5% in tooth pastes and 11% in tooth powder. Palmolive Natural’s a brand that was doing exceeding well, degrew by 18% in May.
Nistle’s milk portfolio is also feeling the pressure of the overall slowdown weaning foods (cerelac) showed a degrowth of 4% milk foods (Lactogen) showed flat growth; while powder showed a growth of 24%. Coffee showed degrowth of 4% as did chocolate (-4%). Noodles showed a growth of 21%.
As industry is highly price elastic, even a small fall in prices could lead to spurt in volumes. This also attracts large number of smaller players, who operate on a low cost structure and hence provide tough competition to the larger players. This leads to down trading, where in the consumer shifts from high priced to low price brands.
However, the premium segments are not price sensitive and hence, down trading are not quite prevalent in these segments.
The industry is also affected by spurious/ counterfeit products of leading domestic and international brands, especially in urban areas. The estimated loss on account of counterfeit and pass-off products (Products named similar to existing well known brands) is RS 25 billion to FMCG companies and RS 9 billion to government.
The fastest growth is expected is packaged foods, which are likely to witness a spectacular 20-25% growth. The penetration levels are quite low in this segment, offering enormous scope for growth, but the segment is highly price sensitive.
KEY SUCCESS FACTORS
An industry’s key success factors are those things that most affect industry members ability to prosper, competencies, competitive capabilities and business outcomes that spell the difference between profit and loss and ultimately, between competitive success or failure.
In FMCG industry also it’s important and they are following in nature….
Technology Related KSFs:
❖ Product innovation capability
Here, product innovation capability is quite important due to product is attracting youth who are belongs to the Gen-X and they are prefer always innovative products.
❖ Technical capability
Technical capability is represent how company is technological up-graded and its capacity of production. FMCG industry is the industry which includes the food products. So its technology should be good for food production.
Manufacturing related KSFs:
❖ Low cost production
Due to heavy competition low cost provider will be market leader and in Indian industry most of the consumers are price sensitive so, low cost producer will be the market leader in the FMCG industry.
❖ Low cost plant location
Having in nature perishable products the plant location is also important and it will reduce cost of transportation.
Distribution related KSFs
❖ A strong network of wholesaler distributors/ dealers: in ice-cream industry strong network of wholesaler of distributors and dealers is also important and companies which having the exclusive outlet they are success in this industry.
❖ Short delivery time is also important because product is perishable in nature and it damage is incurred high cost for industry.
Marketing related KSFs:
❖ Breadth of product line is important in FMCG industry. As many as large products range the consumers have more choice to select the products. Like HLL which has the highest product line in this industry.
❖ Advertising plays a crucial role in FMCG products. Most of the products selected by the consumers are due to effect of the advertisement.
❖ Brand building is another important factor, which affects the purchasing behavior of the consumers. So the biggest companies more concentrate on brand building like HLL and P&G.
OT ANALYSIS
There are various opportunities and threats for the FMCG industry.
OPPORTUNITIES
❖ Large domestic market: India is second largest populated country in the world. So its providing a large domestic market for the FMCG producers.
❖ Improvement in agricultural output would lead to a spurt in demand for FMCG products fro rural population, which constitutes about 70% of the country’s population.
❖ Increase in the consumer’s disposable income, which creates opportunities for the demand of FMCG.
❖ Extensive advertisements, product innovations and brand extensions are also like to increase demand of these goods.
❖ The huge and growing middle class population opportunity for this industry.
❖ Increase consumerism and urbanization is the way to grow for the companies.
❖ Health and hygiene awareness leading to preference for packaging foods are also the demand drivers.
❖ Young are profile of the country, with about 47% below 20 years and 35% below 14 years ensures growth in this industry.
❖ Increased media reach and changing attitudes and aspirations of the people also ensure growing demand for FMCG products for the long-term.
❖ Increasing literacy levels and urbanization have made people time conscious leading to they giving preference for ready-to-eat packaged food, ready mix concentrates etc.
❖ As in India there are cheaper labor availability and high technical persons. So there is great potential for the FMCG companies to export their products.
❖ 12 % growth rate in oral care industry in rural india. India has 68 % people located in rural area so there is big and growing rural market, so there is good potential opportunities in near future.
❖ People are more conscious about the product so that there is also one opportunity.
❖ Less availability of traditional tools ( neem, coal and salt) in urban area.
❖ Less social acceptance of this traditional tools in urban area.
❖ Social up ward mobility in rural area.
❖ Increasing media reach in rural area for advertising and marketing.
❖ Improving infrastructure facilities in rural areas for distribution.
❖ Very low per capita consumption of such product, but can be increased by consumer awareness, advertising etc.
❖ Frequency of use can increase in upper segment (twice in day).
THREATS
❖ The high customs duty will protect the domestic sector from external competition. But once this protection is removed/ reduced, the threat of global competition looms large.
❖ Many new product introductions and brand may fail in the competition market due to inappropriate marketing, wrong positioning of brand and also due to sheer competition.
❖ If the industrial recession continues, and if agricultural growth remain illusive, many leading players will see a sharp de-growth in their key markets.
❖ Down trading will affect industry leaders and may accentuate proliferation of the industry with small players.
❖ MNCs also targeting the rural and lower segment so tough competition is in near future.
❖ Government may put tooth paste out of SSI list.
❖ Brand battles may results in price war and small players may wipe.
❖ Threat is from substitute traditional product, because customers are well aware about the product in rural area.
MICRO ANALYSIS
GENERAL INFORMATION
COMPANY PROFILE
❖ Incorporated in 1982.
❖ Four separate manufacturing facilities as under:
o 2 for toothpaste
o for powders such as talc, detergent etc
o 1 for liquids such as shampoo, petroleum jelly etc
❖ ISO 9001-2000 certified manufacturing facilities.
❖ Exporting to over 25 countries.
❖ Contract manufacturing as well as supplying private labels.
❖ In house laboratory certified by FDA, India.
❖ EXPORT HOUSE recognition by Government of India
❖ Backward integration for in house printing and manufacturing of packing and packaging materials like individual cartons, master cartons, shippers etc
VISION
❖ To be recognized as a leading player in the global personal hygiene market.
❖ To be a strategic supply partner to leading super markets, chain stores, importers, distributors and private labels.
INFRASTRUCTURE
In order to facilitate translation of customer needs into performance company have:
❖ An in house Art Department capable of addressing all your designing and artwork needs.
❖ An in house laboratory employing dynamically monitored & modulated quality checks, which are globally bench marked including microbiological testing. The laboratory is approved by the Food & Drug Control of India. It is manned by a team of 5 qualified chemists.
❖ A state of the art pilot plant enables us to take trial batches for new formulation prior to undertaking full scale production.
❖ A logistics department experienced in handling air, sea as well as land transport.
With its rich experience in supplying private labels to across 25 countries, Choice offers:
❖ Customized packing and packaging solutions
❖ Response driven customer focused orientation
❖ Experience of producing 40 private labels for different customers across the globe
❖ All quality certificates, product specification, formulation etc. can be provided for processing Local Health Ministry clearance to customers
❖ For specific requirements of Communities across the globe
TECHNOLOGY TRANSFER
In line with Choice's global vision, Choice has recently transferred technology for manufacturing toothpaste to Lagos, Nigeria. The highlights are:
❖ In house designed state of art plant capable of producing 300 MT toothpaste per month.
❖ Complete turnkey services from visualizing, planning, detailing, procurement, erection and commissioning.
❖ Ably supported by Choice Technical Staff on site.
❖ Plant commissioned in a record time of 6 months from start to finish. Commercial production already started.
In its efforts to extend its reach globally, Choice is always looking for committed partners with whom we can share our knowledge & experience, for mutual growth & benefit.
100% Export Oriented Unit
A dedicated manufacturing facility with status of 100% Export Oriented Unit.
Manufacturing of Baby Talcum Powder, Medicated Baby & Body Powder, Shampoo, Petroleum Jelly, Air Freshener Gel, Baby Oil, Deodorant Gel, Hand Liquid Soap, Hand Sanitizer
HEAD OFFICE & FACTORY
Address:
999, State Highway,
Unjha - 384170,
North Gujarat, INDIA
Phone: +91 2767 252696 / 252250 / 253819
Fax: +91 2767 252384
Email : choicead1@sancharnet.in
Web:
SALES & CORPORATE OFFICE
Address:
204/205 Suyojan Building,
Nr Hotel President,
Off C.G. Road,
Ahmedabad - 380 009.
Gujarat, INDIA
Phone: +91 79 2644 4660
Fax: +91 79 2644 8857
Email: sumit@
HISTORY AND DEVELOPMENT
In year 1982 shree Ashvinbhai J. Pate, a man from Unjha and 8 other partners started a business of producing consumer cosmetic products and it proved to be a great beginning of Choice Laboratories. Only 2-3 players were there at the time of establishment of company and in north Gujarat there was good potential market that time. Keeping this in mind promoters decided to set up a firm viz. Choice Laboratories.
Within a span of 13 years the production was started with a couple of products only, but later sprung in to long line of products: toothpaste with floride, calcium and gel, toothbrushes, talc and prickly heat powders, Shampoos, shaving creams and few more once to join choice products soon. At the initial stage of the company, financial help was taken from bank and financial institutions.
In the initial years company concentrate on Gujarat only. But slowly and gradually it crossed the state boundaries and has spread over the neighbor states; Rajasthan, Panjab, Hariyana, Himachal Pradesh, U.P, Bihar, Bangal, Maharastra and Andra Pradesh. Not only this much but choice has been able to export its goods to Dubai, Musket, Oman, UAE, Bangladesh, African countries and Russia. Choice has made a hat trick of winning exports awards constantly for 3 years 1991-92-93. form the Govt. of Gujarat.
Business Partners:
The business area commenced by 9 partners named are as follows….
Patel Ashwinbhai J.
Pate Gunvantbhai
Patel Bhagubhai S.
Patel Manojbhai V.
Patel Laxmiben R.
Desai Savitaben H.
Patel Indumatiben A.
Patel Ramilaben
Patel Laxmiben J.
There are only two persons who are operating this firm right now. This splitting took place around 1993. the existing partners are:
Ashvinbhai J. Patel
Gunvantbhai Patel
ORGANIZATION CHART
Mg. PARTNER (A) Mg. PARTNER (B)
Production purchase (Imports) Sales & Purchase (Domestic)
Sales (Exports), Finance,
P&A and Advertising
MARKETING DEPARTMENT
Introduction
The marketing department was located at the registered office at Unjha. The managing partners and few office staff was hired to take over the charge of all marketing related aspect of the firm. In 1990, they made separate marketing division, hired an adverting agency and marketing consultant to look after promotional and distribution aspects of the firm. In 1996, the firm has established their marketing office at Ahmedabad for to exploit location benefit.
Company has appointed area sales managers, area sales executives, sales officer, and sales representatives to look after the marketing functions. Company is also selling its products in other foreign countries.
Structure of Marketing Department
Managing Partners
Marketing Manager
Assistant Manager
Area Sales Manager
Area Sales Executive
Sales Officer
Sales Representatives
There are four area sales managers, eight area sales executives, twelve sales officers and thirty-five sales representatives. There is formal way of communication in the firm, but informal communication is also welcomed in the case of critical matter or sharing any important information.
Marketing Mix of Choice
(A) Products
The following are the products manufactured by choice laboratories.
❖ Tooth Paste
❖ Tooth Powder
❖ Gel Tooth Paste
❖ Tooth Brush
❖ Talcum Powder
❖ Shaving Cream
❖ Shampoo
❖ Prickly Heat Powder
❖ Detergent Powder
Product Range
|Products |Size (in Gms) |Standard packs(in dozens) |
|1. Choice Tooth Paste |50 |24 |
| |100 |12 |
| |150 |10 |
| |200 |6 |
|2.Choice Tooth Powder |50 |24 |
| |100 |12 |
| |200 |6 |
|3.Choice Gel(Red &Blue) |50 |24 |
| |100 |12 |
| |150 |8 |
|4.Choice Premium Talc |100 |6 |
| |200 |3 |
| |400 |2 |
|5.Choice Shampoo |100 |3 |
| |200 |2 |
|6.Choice Shaving Cream |70 |12 |
| |30 |14 |
|7.Choice Prickly Heat Powder |200 |3 |
|8.Tooth Brush | | |
| Choice Angular | | |
| Choice Super soft | | |
| Choice Junior | | |
| Choice Scientific | | |
| Choice Classic & Deluxe | | |
|9.Choice Detergent Powder | | |
Target Market & Market Segmentation
Choice has segmented and targeted consumer market on the basis of following variables.
1) Geographic Segmentation ( National And International )
It has mainly targeted rural and semi-urban market in India. The market is also segmented on basis of national and international level
2) Demographic Segmentation
Choice has targeted its products towards socio economic class B and C as variable considering family life cycle.
3) Psychographic Segmentation
People who want higher quality at competitive price.
Positioning of Choice
Positioning is the act of destining the company offering and image to occupy a distinctive place in the target market’s mind. Choice toothpaste is positioned as follows.
The ‘choice’ is the means of freshness, sparkling white teeth and healthy gums. Choice provides confidences to customer by saying “your right choice’
For choice toothpaste, company has adopted benefit-positioning strategy, as it convey message as a means of freshness, sparkling white teeth and healthy gums. Users positioning strategy is used for toothpowder, as is convey message for new generation people. Choice toothbrushes, shampoo, talcum powder and prickly heat powder are positioned on the basis of Benefit positioning strategy, as they are highlighting benefits of the products.
Branding, Packaging & labeling
Choice laboratory is promoting its all products under brand name of “Choice”. For branding decision company has followed Blanket family names strategy, because company has promoted its entire product under the family name “choice”. E.g. Choice toothpaste, Choice toothpowder, Choice Shampoo etc.
Packing
Two types of tubes are used for paste:
1) Lemi Tube
2) Aluminum Tube
On the recycle polyethylene type they cover outer of corrugated box. This small unit covered in polyethylene bags in fixed size of 12 units. Hard small boxes are used for export purpose in which units are to be packed.
Labeling
Labeling to product is done at choice laboratories. The label contains the necessary details like company’s name, address, date and year of manufacturing, trademark batch number and M.R.P etc.
(B) Price
Choice laboratories consider the following factors in deciding pricing policy.
1) Raw material cost.
2) Price of packing material
3) Excise duty & other tariff levied by Govt.
4) Sales & Distribution cost.
5) Transportation cost.
6) Competitors prices.
7) Expected margin.
Choice has adopted penetration price policy. Choice prices it product significantly lower than the marketer leader’s prices. Follows leader’s prices in setting prices for their product. Company sets their price below the prices of Colgate & Pepsodent.
Company has uniform pricing for all it’s distributor’s. it delivers goods for exports on F.O.B(Free On Board) and C.I.F(Cost ,Insurance, Freight)
The company fives 12-16 % margin to their retailers, 8-10 % to distribution and 4% to super stockiest or C&F agent on the bases of M.R.P in case of scheme offered by company the retailers get 4-5% more.
The following table shows prices charged by choice laboratories for its different types of toothpaste.
Price List
(C) Sales & Distribution Policy
1. Sales Force Management
a) size and structure of sales force
Company’s marketing office is located at Ahmedabad and Marketing manager is responsible person to look after the marketing department. One assistant manager is also to help the marketing manager in his clerical works. Marketing manager study all reports and provides necessary information to sales force.
Company has appointed area sales manager for each state viz.
1. Harayana & Himachal pradesh
2. Utter Pradesh
3. Rajasthan & Maharastra
4. Gujarat
5. Andhra Pradesh
6. Panjab
Area sales manager’s responsibility is to look after the activities of company’s sales in different stats, so territory responsibility is allotted to area sales managers.
For to look after the marketing activity at district level, company has appointed area sales executives, who look after the marketing activities in two to three districts.
A sales officer is appointed in charge of the working of the company’s own depot. Sales representatives are appointed to inform retailers about brand and to include them for to buy. The other task is creating brand good. Area sales executives, sales officer and sales representatives are selected from local areas, because company thinks that they would be well aware about the geographical network of the area. And it will be also easy to understand their local language.
B) Compensation plan to sales force:
The compensation plans to sales force of the company is as follows:
Basic Salary + Dearness Allowance + Traveling Allowance + House Rent Allowance + PF.
Company has also covered state insurance scheme
Criteria consider by company for determining salary and other benefits –
1. Performance
2. Experience
3. Ability
4. Regularity in work
5. Good behavior at work
6. Less absenteeism
C) Sales meeting
Company arranges quarterly meeting for marketing staff, and a monthly at regional level. It requires then some times they arrange unstructured meeting. The main objectives of the meetings are as follows.
• A new product launch
• Sales performance evaluation
• New promotional campaign
• New promotional scheme
• Sharing views and information regulatory market and competitors.
• Determining selling targets.
D) Sales expenses
Company has classified all sales force expenses in two categories.
❖ Allowable
❖ Unallowable
❖ Allowable expenses are reimbursed to full extent when it is presented with bills along with monthly settlement. Company gives straight forward T.A and D.A on the salary. Company follows fixed account system for recording the sales expenses.
E) Controlling sales effort
Company assigns fixed territory to each sales person, so that better control can be achieved and conflict can be avoided and the person can work properly. This is helped in performance evaluation of sales force, controlling sales expenses and better coverage of market. Sales person are appointed on the basis of past sales figures, geographical establishment and number of retailers in territory.
2. Distribution policies
Company has a marketing network all over India in the states like Gujarat, Rajasthan, Panjab, Hariyana, Jammu & Kashmir, H.P and U.P.
Goods is distributed either through super stockiest, C&F agents or Company’s own depot to the state wise or district wise distributor or stockiest to retailers and finally it reach to the customers. The distribution channel of company can be represented as follows.
DISTRIBUTION CHENNEL
Company Manufacturer
Super stockiest / C&F agents / Company depots
Stockiest / Distributors (state or district wise)
Retailers
Consumers
A) Factors considered by for selection of stockiest or distributor
1. Reputation and image
2. Location
3. Staff space and other facilities to support the business.
4. Capacity to generic business
5. Co-cooperativeness
6. Experience in the business
7. Solvency and capacity to release payment in time.
8. Future growth and potential
9. Willingness to agree with the terms and conditions as led by the company.
Generally company selects those distributors who do not hold distributorship for any competitor’s brand.
B) Duties and responsibilities of channel members.
Company has assigned following duties and responsibilities to its channel member to perform:
1. To push company’s products and generate sales
2. Provide regular information about market i.e. customers, competitors, etc.
3. Storage and easy flow of goods to customers
4. Regular payment
5. Ordering well in time
6. Title of goods
C) Margins to channel members.
Following is the specified margin on the basis of retail price for each channel member for the company for retailer.
❖ For retailers: 10% to 14% it may reach up to 14 to 20% during schemes offer by the company.
❖ For stockiest/ Distributor – it is up to 7%
❖ For super stockiest & C&F agent it is up to 4%.
❖ Company considers that it is higher then the average practice in the industry.
D) Techniques to motivate channel member.
1. By offering discount and various schemes
2. By giving higher percentage margin
3. By offering longer credit period
4. By way of giving them exclusive territory rights.
5. By holding meetings
6. By supporting volume building by way of sales force
7. By interpersonal, written or oral communication with them
E) Evaluation of channel member
No formal procedure is there for company to evaluate channel members but following are the criteria which are to be considered at the time of evaluation of channel members.
1. Sales volume or profit generated by them
2. Flexibility of channel members
3. Regularity of payment
4. Credit / Payment terms
5. Control other subsequent members in the chain
F) Controlling cost of distribution
Following techniques are considered by the company to minimize the cost of distribution.
❖ Use of most economical transportations
❖ Effective and error less documents.
❖ By dispatching full truck load together
❖ By trying to provide handling damage by placing warehousing at crucial places.
3. Logistic Management
An order received is to be executed and dispatched to the respective party. The process requires movement of physical flow of goods from the point of production to the point of consumption. Logistic management takes care to manage this physical flow of goods, the logistic management is composed of several activities like order processing, inventory management, packaging, transportation and warehousing.
a) Order processing procedure / system
The stimulus to the logistic process is the customer order or requirement. This comes direct from the customer or it could be in the form of sales order or manufacturing based on the sales estimates of the future demand.
At choice the information needs of the order processing system are…..
❖ What is required product, specification, quantity, packaging, special features, if any.
❖ Delivery when required, to whom to ship, destination, mode of shipment, any special carrier to be used.
❖ Price to be charged whether on CIF destination basis (cost + insurance + freight) or on FOB ( Pre on board at the particular point), discount and taxes at be charge.
❖ Documentation needed ex. Inspection report, excise gate pass, shipping document in the case of export.
❖ Mode of payment against the letter of credit, documents through bank, advance payment, credits.
The inputs required in this system are the product, the handling facilities, the container and career the product has to be packed, marked and certified for shipment. If the product is shipped as small then no container is required. However the product will then have to be transported to the point of dispatch. The career may be tempo, truck, ship, rail or aircraft. The container may be of various sizes including small, medium or big once.
b) Procedure related to packaging, inventory management, warehousing and transportation of goods.
Packaging:
The following practices are observed at choice laboratories.
❖ The packaging is done in the way to facilitate the identification of container during the shipment of delivery.
❖ The size of pack is selected to facilitate the handling as well as to utilize the space effectively. To restrict transportation and storage cost to minimum.
❖ It is made to give the filling complete ness and quality.
❖ It is design to with stand the shock and jerks during the transportation and handling and to absorb the weathering effect during the prolonged storage so as to maintain standard quality.
Inventory Management:
As sales and distribution is mostly concerned with the outbound logistic, it is appropriate to manage the inventory to the extent of requirement or ordering by the distributors and stockiest.
At choice, inventory level for all running products is managed by following equation.
Order Point = {(Lead Time) * (Normal rate of Issue or Selling during the lead time)} + {Safety Stock}
Where the order point is the level of inventory to be maintain.
The lead time takes into account the time required to reach the consignment to the destination and normal rate of issue is the average number of units of particular product sold to the consignee within a specified lead time.
Transportation System
Care is required during transportation and handling so that the consignment not get damage. Generally containers are marked “↑” to indicate the direction of placing the container during loading in the career for transportation or during placing on plats for storage.
Choice tries to control cost of transportation without compromising the safety of product during transportation by implementing several ways like …
❖ By selecting most economical transportation
❖ By dispatching full truck load together
❖ By effective and error less documentation
❖ By way of consolidation of orders so that a full load can be sent.
❖ By combining the shipment with others in the area and utilizing the service of various transportation agencies.
(C) Promotional Policy:
a) Advertising:
Advertising present the most pursuing possible selling message to the right prospect for the product or the service at the lowest possible cost.
b) Advertising media
Company has selected the following advertising media for its products.
▪ Local news paper
▪ Wall printing
▪ Posters
▪ Bill boards
▪ Painting on buses
▪ Broachers and folders for exporters
▪ Sponsorship of local events
▪ Internet
▪ Magazines
c) Advertising objective of company
The company has set following advertising objectives
▪ Building brand image
▪ Increasing awareness of customers
▪ Encourage the customer to buy the company’s product
▪ Providing information about new products introduced
▪ Helping sales personals
d) Advertising budget
There are no fixed criteria for setting advertising budget but generally company spends around 4 to 5% of total sales on advertising. Navneet is the advertising agency for choice which looks after the development of advertisement campaign.
e) Target audience
The target audience is whole family either rural, urban, Indian or foreign.
f) Advertising message
The main message of choice is “Global Choice for complete personal care”.
For white tooth paste…
← For sparking white teeth and healthy gums
← It fight cavities and freshens the breath.
For Gel tooth paste…
← “Tajgi ka Tarana”
← It is real choice for pleasing freshness and new tastes.
← To capture the new generation with new taste and new color, they show young boy and girl using the tooth paste.
Some other messages provided by Choice….
← A choice tooth paste: “A Smile of Confidence”
← Choice tooth powder: “A new generation Choice”
g) Sales promotion
The following schemes were introduced by choice to increase the sales.
❖ Price packs or price cuts
❖ Free gifts like a tooth brush with 200gm tooth paste
❖ A free match box with choice gel tooth paste
❖ 20% extra on 100 gm choice tooth paste.
❖ Free sashes of choice shampoo on tooth paste.
❖ Retailer or distributors are offered discounts or price offs on the MRP.
❖ Quality discount on bulk purchase.
❖ Participate in trade shows and fares with the special price offering.
❖ Arranging free dental check up camp in villages to promote the product.
h) Direct marketing
Choice has very rich export base in its total sales which is about 80%. Direct marketing is one of major tool of capturing big bias in overseas. They also have done job works for foreign companies. For the export order they follow direct marketing strategy and negotiate from the head office. They have used face to face contact with catalogs and also the telemarketing. To cope with the latest advancement they put their own website in 1997. The managing partner takes keen interest in export negotiation.
i) Marketing information system
Choice has developed internal record system and marketing information system.
a) Internal Record System:
Company has designed the following system for keeping the records for sales and orders and it continuously informs the head office about the updated market and sales related information.
❖ Order form
❖ Monthly performance report
❖ Monthly activity report
❖ Dealer network management
❖ Tour program
❖ Monthly expense statement
❖ Monthly sales representative performance statement
❖ Monthly stockiest performance report
❖ Monthly performance appraisal of SR or SO
❖ Daily sales report
b) Marketing Information System
It is a set of procedures and sources used by managers to obtain the everyday information about pertinent development in marketing environment. Marketing manager often carry the MIS by reading books, news papers, trade publications, talking to customers, suppliers, distributors and other outsiders with interacting the internal company personal.
For getting information about new development in marketing environment choice motivates and trains its sales force to spot and report new development. The company also motivates the distributors, retailers and super stockiest to pass the important intelligent.
CHOICE MARKETING STRATEGY
❖ Choice offers equal quality of products as that of MNC competitors at far low prices.
❖ Choice has wide product range leaving no gaps as specially in case of its oral care product line.
❖ Choice has reasonable advertisement frequency in local areas.
❖ Choice tries to woe the customers by way of giving frequent sales promotion schemes.
❖ Choice offers a dynamic culture to its sales force and focuses on relationship marketing by way of its field force.
❖ Its also works out regular trade promotions to motivate the retailers and maintain their spirit as well as the interest in the product.
❖ Choice has precisely targeted rural and semi urban customers and maintains its product on the retailers shelves by way of its extensive distributions.
❖ Being as a personal care product manufacturer choice is always busy in fighting out cut throat competition from other brands. For this two kill the competitors choice uses some special strategies like
▪ By finding gaps and trying to position scientifically itself within these gaps.
▪ By giving more % margin to retailers
▪ By using new an extensive promotional programme.
PRODUCTION DEPARTMENT
Structure:
Managing partner
Chief chemist
Supervisor & lab chemist
Labors
Major products manufactured
1.Tooth Past
2.Gel Tooth Paste
3.Tooth Powder
4.Talcum Powder
5.Prickly Heat Powder
6.Shampoo
7.Shaving Cream
8.Tooth Brush
9.Detergent Powder
10. Choice beauty Soap
11. Pure choice coconut oil
12. Choice boro Premium cream
It is observed that, first four products are carried out in manufacturing dept of choice laboratories itself and the remaining is purchased from other manufacturers.
Raw Materials And Manufacturing Process
Tooth paste manufacturing, filling and packing departments in the company are to required standards of mechanism, automation and hygiene
Quality controlled mixing system uses homogeneous, tanks and other equipment to provide appropriate standards.
To complement company’s manufacturing capacity the packaging department is equally competent to handle packaging of the products in various sizes of cartons, boxes and containers.
Raw Material Required For The Company’s Major Product Tooth Paste
1. Calcium Carbonate
2. Dicalcium Phosphate Dehydrate
3. Glycerin
Formula For Preparation Of Tooth Paste
R/M required Wt .Percentage
CMC (thickeners) 02%
Water 20-30%
Glycerin 20%
Perfume Oil 2-2.5%
Moisturizing Agent 1-3%
Preserving Agent 05%
Formula For Preparation Of Tooth Powder
Dicalcium Phosphate Dehydrate 79%
Calcium Carbonate 20%
SLS 01%
Flavor & Sweetener 01%
Formula For Preparation Of Talcum Powder
Talc 79%
Magnesium Carbonate 15%
Boric Acid 03%
Magnesium Stearate 02%
Perfume 01%
Manufacturing Process Of Tooth Paste
The basic raw materials for the production are described in their weight percentage as above.
The process is start by drawing the raw materials in to the processing vassal by means of vacuum. the suction studs are located in such a way to ensure that the dry, powdery components are immediately moisturized on entering the vessel.
The finished toothpaste is pumped out of the central outlet stud of the vessel by means of a feed pump and conveyed in to intermediary storage tanks.
As an additional safety precaution, a basket screen is fitted between the pump and pipe line.
The toothpaste is pumped in to two storage tanks below the processing plant from where it is later pumped in to the feed hopper of the filling machine, which is manually operated and fills automatically.
The capping machine also operates semi-automatically. The packaging and cartooning of the tubes are done by hand.
Purchasing of Raw Material
Purchase activity is managed by the managing partners on the basis of information given by chief chemist as per requirement of raw material. There is no any separate division of purchase in the choice laboratories.
The objective of the company in the purchasing activity is to give prior important to the quality factor of raw material. The second important aspect is to be given to the cost of raw material. In this procedure quotation is collected from the vendor and finally price is compared with the other vendors and then finally the decision ha been made by taking in to consideration of all aspect of credit term with the supplier.
To develop and maintain good relationship with vendors is the primary police of the company.
Main Suppliers Of Choice Laboratory
Name Product
Godrej Glycerin
U.P line Chemical Pvt. Ltd. Calcium Carbonate
H.Reynold Germany Flavoring Compound
Alfried & Wilson Co. Ltd Sodium Laurel Sulfate
Quist International USA Flavoring compound
FMC Corporation USA Gum Carraginum
Credit term with supplier
Domestic supplier: 30-45 days
Foreign supplier: 45-60 days
Some times payment term depend upon situation of buyer toward suppliers also. And some suppliers also take advance in down payment if the item is of monopolistic type.
Lead Time
Indian supply of raw material: 5 days
Foreign supply of raw material: 15-20 days
Inventory Management
Inventory management considered as the important aspect of production management and it is considered as working capital.
The key issue inventory management is to how much the buffer stock should be kept in order to prevent to stock out condition and in contradictory how much in limit the inventory is to be kept to prevent the inventory carrying cost.
These two questions are very much important and organization has to give important to both aspects.
In the choice laboratory, inventory decision was taken based on past performance of requirement of raw material. They are going to kept a week stock in advance and when the buffer stock goes beyond the mark the chemist inform the managing department about the requirement of the raw material.
Company’s major sales come from export the demand for product is cyclic in nature, so they produce the product as per the requirement and manage the inventory accordingly.
Manufacturing Of Fluoride Tooth Paste
Flow chart for batch size: 1000 kgs:
Check High Speed Mixer For Cleaning
Add:R.M No 1506.12+R.M.No2905.90(Total Wt.300 Kg)
Start High Speed Mixer
Add: R/M No.1301.10 (10 Kg)+2975.10 (1.5 Kg)+22916.00 (2.0 Kg)+2876.00 (7.6 Kg)
Mixing for 5 minute
Add water 1659 KGS
Add: R/M No 2839.00 (8.0 kg)
Heat Above Mixture
Jelly Liquide Formation
Transfer Jelly Liquid To Low Speed Mixer By Vacuum Force
Start Low Speed Mixer
Add: R/M No 3402.90 (25 Kg)+3302.10 (10 Kg)
Mixing For 30 Minutes
Add: R/M No 3402.90 (25 Kg)+3302.10 (10 Kg )
Create Vacuum And Start Mixer
Sample-Testing
General Production Flow Chart
Order
Production Planning : Mg Partner And Chief Chemist
Production Planning Register And Stock Of Finished Products Register
Check From Store Raw Material, Packaging Material (In Stock Monthly Stock Statement Of Raw Material)
Production
OK Paste (Regular/Gel/Fluoride) NOT OK
Tooth Powder
Talcum Powder
NOT OK Final Inspecting OK
Packaging Process
Storage Re Inspection & Testing
Dispatch NOT OK
Reject
Quality Manual
The scope of certification for ISO 9002 is for the manufacturing and marketing of paste, tooth powder, talcum powder and shaving cream, shampoo and the marketing prickly heat powder.
Choice has adopted quality control not as a mere slogan but as a principle for flourishing survival in the international market. To maintain the worth for coveted ISO 9002, company quality control staff remains constantly vigilant to check and maintain time and again the product’s standards.
Quality is a mater for their customers to keep trust in them.
Quality Policy
the quality policy is developed by the management and staff of choice laboratories ltd. is committed to increase its market share by manufacturing product of international quality standards., consistently which is achieved by
• Studying the trends and customer needs.
• Continually improving upon the quality system
• Manufacturing a cost effective product. It is the aim of every individual to contribute towards achieving the objective set by the management each year.
Store Management
The functions performed by store department in choice laboratories are
1. Receiving And Inspection
2. Issues
3. Stock Records
4. Stock Accounting
5. Store Arrangement
6 .Stock Tacking
Receiving And Inspection
receiving and inspection function perform at the time before the raw material is unloaded from the supplier‘s truck. First of all the raw material quality is checked in the laboratory .if it is found ok then only the raw material is allowed to unloaded from the truck.
Then it is kept in to the store room.
Differently further record of total stock is transfer to purchase department.
Issue
issuing criteria is perform by chief chemist he note the raw material with it code number how much it used in the production process and how much is left in the stock which is further passes it down to managing partner.
Stock Records
The purpose of record keeping is to facilitate material control by bringing information on actual stock position, consumption rates, and order to supply position up to along with proper pricing and evaluation of the usage and of balance of stock.
Store Accountings
This information system is necessary in order to
1. No and show the value of stock in balance sheet.
2. Help in production cost control.
For production cost Control Company consider standard price while for balance sheet purpose company calculate either market price or the cost price which ever is lower.
Store Arrangement
Proper arrangement and documentation of the storage space and storage facility are helpful in getting material for production on time as requisitioned from the store. The store is so arranged that different types of materials can be stored in distinct areas.
Store Taking
This is essential in order to verify the stock record with the actual count in choice this process is carried out in month and calculate volume and value wise material utilized in month.
FINANCE DEPARTMENT
1. Introduction
Financial function or activity is that managerial activity which is concerned with the planning and controlling of the firm’s financial resources. In choice laboratories financial function is done by financial department in a proper way. We cover all the information about the financial matter in this section of the project. It shows health and soundness of the organization regarding financial matters. It also provide helpful to the various stakeholders.
To manage the foreign currency and foreign exchange the main activity of financial department of choice laboratories. The various function or activities done by firm are as under:
1. To manage the international finance
2. Investment or long-term DECISION
3. Financing and capital decision
4. Dividend and profit allocation decision
5. Liquidity decision
The choice laboratories give much important to its current and capital account of international financing flow because its 80% products are sale in foreign countries.
The finance function also serves the purpose of control and performance evaluation tool, now days it is not limiting it scope to only recording the data but it also provide some decision on the past data. It provides future prediction regarding some financial method, which is very helpful in decision making for manager.
As it is SSI sector, the fund raise from SID, SIC & GSFC. They provide soft loan to help such small-scale unit. The choice laboratories now a days use its retained earnings funds, which is available through its current account of foreign trade. Government also protects the interest loan. It makes the SSI units competitive in the business environment.
Some basic formula & strategy financial function or matters are as follows:
1. They use forward market rate and future currency tools to get protection from exchange rate changes.
2. Analyze the foreign exchange market.
3. Company use currency swap & interest rate swap for foreign financial transaction.
4. Financial department try to hedging or reduce the foreign exchange risk by using the financial management tools.
5. They use pay back period and net present value method for capital investment budgeting.
6. For pricing decision, they apply marginal costing and follow competitive move.
7. They provide minimum 60 days credit and average collection period is 78 days.
8. For debt raising Criteria Company used marginal interest coverage ratio.
9. For the international buyer company or firm provide minimum 90 days credit.
10. For financial budgeting they utilize past trend and historical data.
11. In monthly meeting with company’s C.A. they discuss cash flow and other sensitive issues.
2. FINANCIAL STATEMENT
1. Balance sheets
|Particulars |31/03/01 |31/03/02 |31/03/03 |31/03/04 |
|Capital & liability | | | | |
|Capital a/c |3884787 |8680303 |928250 |8340605 |
|Reserve &surplus |496479 |496489 |642477 |688575 |
|Secured loans |24635197 |29348905 |34050780 |33688000 |
|Unsecured loans |15523733 |20499662 |28513990 |27077500 |
|Secured deposits |992490 |1383248 |1285470 |1190970 |
|Total |24472168 |32328283 |47434661 |34762630 |
|Current liabilities & provisions | | | | |
|Sundry creditors for goods |21079891 |25315045 |3708061 |2785554 |
|Sundry creditors for expenses |2464030 |4467601 |7085485 |4960504 |
|Dealers current a/c |277518 |567040 |682804 |601102 |
|Other liability |650729 |1978598 |2585760 |2115470 |
|Total |70002854 |92736606 |12120662 |105748280 |
|Assets | | | | |
|Fixed assets |3835515 |3230683 |4578570 |4460110 |
|Investment |15125 |15125 |12525 |17460 |
|Current assets & provisions | | | | |
|Inventories |28588444 |35101353 |39139812 |37241827 |
|Sundry debtors |23589133 |27348418 |19558140 |38057003 |
|Cash & bank |1230757 |966815 |1410685 |185770 |
|Branch balance |3470445 |5304444 |4940570 |5870540 |
|Loan & advances |9273455 |20679766 |2156950 |19285570 |
|Total |7002854 |92736606 |12120662 |105748280 |
Balance sheet is the most significant financial statement. It indicates that the financial condition or the state of affairs of a business of “choice laboratories” at a particular time. Here we see that the financial condition of the choice, during the last four years. The year 2004 is not as compare to its nearly previous year 2003. The firm is partnership concern. There are two partners right now who invest their capital in the venture and run the business with their knowledge. The firm is going to be public Ltd. In near future. They are waiting for suitable time. They have satisfied the entire requirement needed to be a public limited company.
2. Profit & Loss Account Of Choice Laboratories
|PERTICULARS |2001 |2002 |2003 |2004 |
|INCOME | | | | |
|Sales |68706518 |100381711 |150402638 |97395527 |
|Other income |2927955 |11359506 |11735889 |7754419 |
|Increase/decrease of stock |4109944 |-735088 |-3258164 |1013300 |
|TOTAL INCOME |75744417 |111006129 |158880361 |106663246 |
|Expenses | | | | |
|Cogs |57595176 |71219391 |100425211 |67071141 |
|Manu. Expenses |1957208 |3135078 |4540800 |2828709 |
|Excise & custom duties |3750763 |5922620 |7924924 |5036489 |
|Office & admin. Exp. |1388703 |2528989 |2719650 |2570584 |
|Sales & dist. Exp. |10457365 |19168428 |30377925 |20749110 |
|Depreciation |779286 |749347 |799238 |786536 |
|TOTAL EXPENDITURE |74966980 |109849886 |157250019 |105988570 |
|Profit Transfer to Capital Account |717437 |1156243 |1630342 |674676 |
As the company has very good export market they get the tax rebate from the government. The company has more then 70% of sale in international market. The company has low profit margin. From the above P&L we can say that the profit of the company is attributed from the other income. The other income includes the sale of DEPB license in open market. The core competency of the company is its low cost of manufacturing management.
3. Fund flow statement of choice laboratories.
|SOURCES OF FUND |2002 |2003 |2004 |
|Increase in capital |4797273 |602201 | |
|Increase in reserves & surplus | |145988 |46098 |
|Increase in secured loans |4713707 |4701876 | |
|Increase in unsecured loan |4975929 |8014328 | |
|Increase in security deposits |390758 | | |
|Decrease in fixed assets |514832 | |118460 |
|Decrease in investment | |3000 | |
|Decrease in W.C. | | |2676046 |
|TOTAL SOURCES OF FUND |15392469 |13467393 |2840604 |
|USES OF FUNDS | | | |
|Decrease in capital | | |941899 |
|Decrease in reserve & surplus | | | |
|Decrease in security deposits | |97778 |94500 |
|Decrease in fixed assets | |12580004 | |
|Increase in investment | | |4935 |
|Increase in W.C. |15392469 |12111611 | |
|Decrease in secured loans | | |362780 |
|Decrease in unsecured loans | | |1436490 |
|TOTAL USES OF FUNDS |15392469 |13467393 |2840604 |
The statement how the money comes and goes in the choice during the last three years. They got good debt financing during initial for the year 2000-01, which utilizes for asset purchasing and for working capital financing increase working capital provide signals for cash crunches but last year they decrease the working capital needs.
3. Trend analysis
1. Trend analysis of profit and loss account
|PERTICULARS |2001 |2002 |2003 |2004 |
|INCOME | | | | |
|Sales |100 |146 |219 |142 |
|Other income |100 |388 |401 |265 |
|Increase/decrease of stock |100 |-18 |-79 |25 |
|TOTAL INCOME |100 |147 |210 |141 |
|Expenses | | | | |
|Cogs |100 |138 |195 |130 |
|Manu. Expenses |100 |160 |232 |145 |
|Excise & custom duties |100 |158 |211 |134 |
|Office & admin. Exp. |100 |182 |196 |185 |
|Sales & dist. Exp. |100 |181 |285 |196 |
|Financial exp |100 |141 |205 |130 |
|Depreciation |100 |96 |103 |101 |
|TOTAL EXPENDITURE |100 |147 |210 |141 |
|PROFIT TRANSFER TO CAPITAL A/C. |100 |87 |149 |210 |
The trend analysis of the P&L account indicated the direction of change. Here we study the company’s sales and net income in light of main following the factor the growth of the business.
In above trend analysis statement of P&L account. We see that the company’s sale increase up to year 2003, but decrease in year 2004. The main reason for ups and down in sales trend and other income. It is all due to the export orders. In year 2003, the company get big order from America so the sales of the company highly ups as compare to other years. The price of the company product, the price of the choice company affected by the competition in the market, govt. policy for export etc.
Here the statement show that the net income of the company increase year by year even decrease the company’s sales in particular year 2004. we find that due to decrease in company’s cost of production and sales and distribution expenses particularly in year 2004 as compare to past year.
Here we also see the financial charges of the company increase due to increase in short term debt by the company. The company pay the short term loan so the financial charges of the firm decreases in year 2004 as compare to last year.
3.2 Trend Analysis Of Balance Sheet
|Particulars |2001 |2002 |2003 |2004 |
|Capital & liability | | | | |
|Capital a/c |100 |224 |239 |215 |
|Reserve &surplus |100 |100 |129 |139 |
|Secured loans |100 |119 |138 |137 |
|Unsecured loans |100 |132 |184 |174 |
|Secured deposits |100 |190 |130 |120 |
|Current liabilities & provisions | | | | |
|Sundry creditors for goods |100 |120 |176 |128 |
|Sundry creditors for expenses |100 |181 |288 |201 |
|Dealers current a/c |100 |204 |246 |216 |
|Other liability |100 |304 |397 |325 |
|total |100 |132 |173 |151 |
|Assets | | | | |
|Fixed assets |100 |81 |119 |116 |
|investment |100 |100 |83 |115 |
|Current assets & provisions | | | | |
|Inventories |100 |123 |137 |130 |
|Sundry debtors |100 |116 |210 |161 |
|Cash & bank |100 |79 |114 |66 |
|Brach balance |100 |153 |142 |169 |
|Loan & advances |100 |223 |233 |208 |
|Total |100 |132 |173 |151 |
The balance sheet trend analysis have shown (which increased from 100 to 151) some items larger increase and some have shown smaller increase. Here we see that the current assets and current liabilities have moved together. The total assets of the company has grown faster then new worth which according to us imply the firm greater reliance on the outsiders money particularly for the year 2003.
The trend analysis clearly shows that the capital investment from the partner side some what increase in last two years but in year 2004 it decrease. The company also invest its profit in two business. It is good side. The company also collected good amount of the debt from different sources. They knowing or unknowingly grab the opportunity of “Trade on Equity”.
The trend of the company’s fixed assets increase year by year, particularly it decrease in year 2004. The trend of the company’s fixed asset increase some what high particularly in year 2003 because during that year company purchase a new plant and machinery for the modernization and expansion of the firm. The above statement shows the company’s sundry debtors the main reason for increase the debtors of the company are
1. Company provides more credit to the debtor for increase sales.
2. Company also gets credit from its creditors also in required.
3. Due to the company’s sales in export terms etc.
Particularly in year 2004, the company’s credit is reduced because the company’s actual total sale is also decreased. Overall all we find that the company’s overall growth is average level and not in highly satisfactory level.
4. Common Size Statement Analysis
1. common size statement for profit and loss account for period
|PERTICULARS |2001 |2002 |2003 |2004 |
|INCOME | | | | |
|Sales |0.907 |0.9042 |0.9466 |0.9178 |
|Other income |0.0386 |0.1023 |0.0738 |0.0837 |
|Increase/decrease of stock |0.0544 |-0.0065 |0.0204 |0.0095 |
|TOTAL INCOME % |100 |100 |100 |100 |
|EXPENSES | | | | |
|Cogs |0.6811 |0.6415 |0.6320 |0.6288 |
|Manu. Expenses |0.0263 |0.0258 |0.0285 |0.0265 |
|Excise & custom duties |0.0495 |0.0536 |0.0499 |0.0472 |
|Office & admin. Exp. |0.0183 |0.0227 |0.0245 |0.0241 |
|Sales & dist. Exp. |0.138 |0.1726 |0.1912 |0.1045 |
|Financial exp. |0.0665 |0.0642 |0.0659 |0.0651 |
|Depreciation | | | | |
|TOTAL EXPENDITURE |0.9907 |0.9906 |0.9907 |0.9937 |
|PROFIT TRANSFER TO CAPITAL A/C. |0.0103 |0.0104 |0.0103 |0.0063 |
2. Common Size Statement For Balance Sheet As On Date…
|Particulars |2001 |2002 |2003 |2004 |
|Capital & liability | | | | |
|Capital a/c |5.55 |9.36 |7.65 |7.89 |
|Reserve &surplus |0.71 |0.54 |0.53 |0.65 |
|Secured loans |35.19 |31.65 |28.76 |31.86 |
|Unsecured loans |22.18 |22.1 |23.52 |25.6 |
|Total |34.95 |34.85 |39.12 |32.87 |
|Current liabilities & provisions | | | | |
|Sundry creditors for goods |30.11 |27.3 |30.59 |25.61 |
|Sundry creditors for expenses |3.52 |4.82 |5.84 |4.69 |
|Dealers current a/c |0.4 |0.61 |0.56 |0.57 |
|Other liability |0.92 |2.12 |2.13 |2 |
|Total |100 |100 |100 |100 |
|Assets | | | | |
|Fixed assets |5.48 |3.58 |3.78 |4.2 |
|Investment |0.02 |0.02 |0.01 |0.01 |
|Current assets & provisions |94.5 |96.4 |96.21 |95.77 |
|Inventories |40.84 |37.85 |32.29 |35.23 |
|Sundry debtors |33.7 |29.5 |40.89 |35.99 |
|Cash & bank |1.76 |1.04 |1.16 |0.77 |
|Branch balance |4.06 |5.71 |4.08 |5.55 |
|Loan & advances |13.24 |22.3 |17.79 |18.23 |
|Total |100 |100 |100 |100 |
5. Ratio Analysis
|Ratio |2001 |2002 |2003 |2004 |
|Current ratio |2.7 |2.76 |2.46 |2.91 |
|Acid test ratio |1.53 |1.68 |1.63 |1.84 |
|Debt equity ratio |9.39 |5.58 |6.43 |6.86 |
|Debt ratio |0.58 |0.55 |0.53 |0.58 |
|Interest coverage ratio |1.08 |1.2 |1.31 |1.01 |
|Inventory turnover ratio |2.4 |3.15 |4.05 |2.56 |
|Average call period(days) |152 |116 |90 |142 |
|Total assets turnover ratio |1.08 |1.2 |1.31 |1.01 |
|Gross profit margin (%) |29.29 |33 |33.93 |34.46 |
|Net profit margin (%) |1.03 |1.04 |1.03 |0.063 |
|Return on fixed assets |20.26 |34.35 |34.7 |23.91 |
|Return on total assets |1.08 |1.2 |1.24 |1.01 |
1. Current Ratio:
The company increase year expect in year 2003. During the last 21 year. As rule current ratio of 2:1 is considered more satisfactory. Here we see that the company’s current ratio is more than 2:1 during the last 4 year. So the company has the ability to discharge liabilities by generally cash from current assets. But due to higher investment in current asset the company refers decreased.
2. Acid test Ratio:
The quick asset ratio also shows that the company has regular balance liabilities of quick assets. Generally the quick asset ratio 1 to1 is considered to represent a satisfactory current financial condition. If we see the quick ratio of the choice laboratories it has quite good solution in case of liability. The main reason of the company goods in current assets is the company’s bank cash, debtor balance is quite higher than it’s current liability.
5.3 Debt-Equity Ratio:
The company enjoy high debt-equity ratio. Generally the company’s debt-equity ratio increased during the last 4 year, expect in year 2002. it is clears that from the debt-equity ratio that choice laboratories lenders have contributes quite higher fund than owners. Due to the high level of debt introduces inflecting in the firm’s performance. A high debt company is able to borrow funds on very restrictive terms & condition. And this is risky also for the creditors also.
5.4 interest coverage ratio:
The interest coverage ratio shows the number of times the interest charges are covered by funds that are ordinarily available for their payment. The debt-equity stated high in a firm, so due to high debt-equity Ratio Company may fail to meet interest obligation. The choice laboratories suffer from very low interest coverage ratio. And it has to face difficulties in payment of interest to its creditors, the main reason for it company has wide proportion of debt in their capital mix. It should be obvious that a high level of debt is a problem for a company only if its future cash flows are certain.
5.5 Inventory turn-over ratio:
Here in company wide fluctuation in the inventory turn-over ratio. The company’s turn-over ratio is very less in current year as compare to past year. One of the considerable reasons for that the overall sale of the company less. The inventory turnover ration indicates the efficiency of the company. The above fluctuations of firms indicate that in a company inventory management function not perform in a proper number, so the company’s overall efficiency reduce.
5.6 Average collection period (days):
The collection period choice Laboratories is very fluctuate. As compare to last year company provide more credit to their customer. The company’s collection period is high means the quality of debtor is not good. And due to more collection period company may face the problem of liquidity. Here company’s collection period may due to economic condition i.e. recession in the company’s export country and other is company’s latity in managing its debt.
5.7 Total asset turnover ratio:
This ratio shows the firm ability in generating sales from all financial resources committed to total assets. The choice Laboratories total asset turnover ratio for the year 2004 is lowest as compare to last four year. The current year company’s T.A.T.O is 1.01 times implies that firm generates sales of 1.01 from one rupee investment in fixed and current assets together. The company’s working capital is good but company not utilizes its fixed assets up to the requirement.
5.8 Gross profit ratio:
The gross profit ratio of the choice Laboratories is good. This indicates that the firm able to produce at relatively lower cost. Yet the overall sales of the firm decrease the gross profit of the firm increase, the reason for it the lesser the cost of the production particularly decrease manufacturing expense and excise and custom duty in higher proportion.
5.9 Net profit margin:
The net profit margin of the firm less in year 2004, as compare to last four years; even the gross profit of the firms higher the net profit margin is reduce because of the current year sales of the company reduce but company’s administration and sales & distribution cost is not reduce. The reason is that company’s product price fall in but its operating cost not reduces.
5.10 Reaction on total asset:
This ratio indicates that what company actually get return its total assets or investment. Here we see that the company, ROTA ratio is reducing during last three years, and it lowest during last four years. The reason for reducing the company ROTA that the company manage its current assets in proper manner, but the company not utilize its fixed assets at a medium level. Due to reducing the ROTA ratio company’s net profitability also decrease.
Though even they compete very dynamic international market it is good if it is more than 2% of sales. The current asset is very high in the total asset proportion. The fixed assets utilize is good except in year 2004 but overall is very low as the proportion of current assets is very high.
HRM DEPARTMENT
Introduction:
Human Resource Management is a management function that helps manages recruit, select, train, and develops members for organizations. HRM is concern with the people’s dimension in organizations. HRM is concern with the people’s dimension in management. Since every organization is made up of people, acquiring their services, developing their skills, motivating them to higher level of performance and ensuring that they continue to maintain their commitment to the organization are essential to achieve organizational objectives. Thus, HRM refers to a set of programs, functions and activities design and carried out in order to maximize both employees as well as organizational effectiveness.
All major activities in the working life of a worker from the time of his/ her entry into an organization until he or she leaves - come under the purview of HRM. The activities included in HRM are – HR planning, job analysis and design, recruitment and selection, orientation and placement, training and development, employee and executives’ remuneration, motivation and communication relations and the like.
HR Planning:
Human resource planning is understood as the process of forecasting an organization’s future demand for and supply of, the right type of people in right number. In Choice company has no HR department. Major activities of human resource department are managed by managing partner Gunavantbhai patel.
In choice it managing partner get information about the need of additional employees from other departments then they make search and got detailed information about the recruitment of man power. Management provides information about additional force. When the managing partner found need for additional person then the recruitment procedure starts.
Recruitment
The management of ‘choice’ is aware to the fact that good recruitment and selection is essential for the good and committed employee. It is helpful to reduce its employees from two sources: i.e.
1. Internal sources:
When ever the company found need of an additional employee in middle –level management then company recruit from within the organization by way of transfer & promotion.
2. External recruitment:
Company recruits workers and sometimes middle-level staff from external sources also. Company has adopted the following two methods to recruit people.
a. Advertisement:
Company gives advertisement in local news papers to recruit office staff and sales persons as per their recruitment. The philosophy of the company is to recruit sales person from local territory, because they will be quite familiar with geographical network.
b. Direct recruitment:
In case of unskilled direct labor recruitment procedure is followed. Company recruits the labor from near by village through agent. Sometimes company recruit workers came with influence and references.
Sometimes unskilled labor personnel recruitment, managing partners recruit directly. So, as choice is small scale partnership firm, they follow simple 7 centralize selection systems.
Selection procedure:
The following procedure is followed by choice laboratories for selection office staff and sales persons:
Application blank:
The company gives advertisement according to their requirement and then after company gathers the application. Unqualified jobseekers are eliminated at this stage.
Interview:
The second stage company follow is interview. Unstructured interview method is follow by company means questions are made up during the interview. There is only one interview selection of a person. Here, the main interview panel is of managing partners, marketing manager, regional dealer and the related head share with them.
Selection decision:
On the basis of interview final selection of candidate is done by the company. The final decision is made by the pool of individuals who pass interviews and reference check if any.
Job offer:
The final step followed by company is job offer and contract of employment with selected candidates.
Introduction:
Introduction process the processes of introducing new employee in the organization is issued the appoint letter and asked to join organization.
Company follows the introduction process by providing information about working condition, rules and regulations of the company etc. the new employee is also introduces with his follow employees and colleges. The main purpose of the induction is to make employee feel free and easily adjust with the new environment.
Training & development:
Successful candidate’s places on the jobs need training to perform their duties effectively training & development constitute an on going process in any organization. Workers must be trained to operate machines, reduce scrap and avoid accident. The company follows on the job and off the job training methods.
On the job:
In sales department when a person is selected as sales person or office staff first sends him to other sales person or officer. This person got trainees of 15 days under his guidance. During this period senior person teach them. Regarding system of company, policies and develop his/her skill which makes him fit for the organization. After this training period he will send to his assigned territory.
Unskilled labors are also trained on the job to improve skills in operating machines and avoid accident.
Off the job training:
Company follows three days extensive training sales person every year. Company also sends its office staff for attending seminar in Ahmedabad organized by Ahmedabad management association. The number of employee is small so there is no full flay-training program in the company.
Work motivation:
Human being has mind. He comes on job with its ideas, desires, thinking and its social life. He is in office for only ten hour while he is at home for more than that hour. He has some need, want and responsibility which can fulfill by money. For the better result, the companies have to motives their employee.
‘Choice’ used special increment and special bonus as a tool of motivation. It is for the sales force. They set targets and performance above it gets regard in kind. It motivates the sales to achieve higher targets.
The company also provided some other non-monitory motivation like relative freedom on the job, good human relation and help in solving family problems.
There is one or two get to gatherings arranged by the company. It increases the relation between staff and develops interpersonal relationship.
Performance appraisal system:
After spending huge on the training the company wants know that how much the training is effective and what is the impact of it on the trainee. It is general practice by company to take performance appraisal time to time.
As ‘Choice’ period evaluation and review of actions and achievement taken. If any changes needed than mid course correction applied. In the choice there is clear communication chain. There is a fixed structure of authority and responsibility. There is 180 degree evaluation followed by the company.
In sales, the sales person provides a minimum target. On the base of achievement of this target, there performance is evaluated. They also evaluate sales person on their past target achievement. They compare with last year sales target on the same territory and increase growth rate of it. There is a simple and easy to understand evaluation policy by ‘choice’. There is no award for higher performance but it helps in the promotion policy.
Employee benefits & services:
The company takes good care of employee by providing other benefits like:
• Uniform: Company provides uniform to shop workers.
• Soap & washing facilities
• Canteen:
Company provides tea or coffee to all employees two times during one shift. In case of overtime company also provides breakfast. The shop floor workers get a packet of ‘Tiger’ biscuits once a day.
Employees are provided all products of company at subsidiary rate in limited quantity.
Company is also provisions for holidays, vacation, sick leave and personal leave. Company gives holiday on Sunday to their employee.
• Medical payment and reimbursement facilities are also provided to the employees.
• Insurance facilities also provided to the employees.
• Bonus:
Company gives 18% bonus on gross salary during festivals like Diwali.
• Loan:
Company also gives loan gives for housing, marriage purposes to its employee.
EXPORT DEPARTMENT
Introduction:
M/S Choice Laboratories, Unjha has been established and started during 1982 with only few products like ‘Tooth Paste’, Tooth Powder’, Talcum Powder’ and Tooth Brush’. Choice has started to export toothpaste from march-1998 to Russia and Russian Government register ‘Choice’ brand for Russian market.
Choice has exported 600 full containers to Russia, Bangladesh and U.A.E. between 1998 to 1991. Choice has got constantly three export awards from the Gujarat Government. Choice has also exported in different countries such as U.A.E., France, U.K., African countries and receiving continually good response for Choice brands in U.S.A. Choice has specially developed different kind of tooth paste such as “BAKING SODA TARTER CONTROAL, MINITY FRESH AND GEL” for U.S.A. market.
Choice Laboratory is the first cosmetic manufacturing company who has been approved as ISO 9002 for Quality products and certain Quality System procedures. Choice has got the recognition as a REGISTERED EXPORT HOUSE from the Indian Government since 01/04/1999.
With the increasing demand from international as well as domestic market, company is coming with the new project with installed manufacturing capacity of 6000 M/ tones per year for toothpaste.
Company is targeting the Rs. 100 Crores sales during next four years time period.
Standardized and allied Preshipment Export Documents.
On an average, about 25 commercial and regulatory documents are associated with the preshipment stage of as export transaction in our country. These following 16 commercial documents:
COMMERCIAL DOCUMENTS
1. Performa invoice
2. Commercial Invoice Packing list
3. Shipping Instruction
4. Intimation For Inspection
5. Certificate of Inspection/Quality Control
6. Insurance Declaration.
7. Certificate of insurance
8. Shipping Order
9. Mate Receipt
10. Bill of Lading/combined transport document
11. Application for certificate of Origin
12. Certificate of Origin
13. Bill of Exchange
14. Shipment Advice
15. Letter to the Bank for Collection/ negotiation of documents.
The commercial documents are those which, by custom by trade, are required for effecting physical transfer of goods and their ‘title’ from the exporter to the importer and the realization to export sale proceeds. Out of the 16 commercial documents related to export trade, exporters are required to send as many as 7 documents to the importer abroad. These documents, generally referred to as ‘Principle Exports Documents’, include commercial invoice, packing list, bill of leading, Combined Transport Documents, Certificate of inspection/ Quality Control(where required), insurance. Certificate / Policy (in case of CIF export sales contract) certificate of Origin, bill of exchange and shipment advice. The other 8 documents, known as ‘Auxiliary Documents’ include Performa invoice, intimation for inspection, Shipping Instructions, Insurance Declaration, Shipping Order, Mate’s Receipt, Application for certificate of origin and letter of the bank for collection / Negotiation of documents. These plays a supportive role in the export documentation system is as much.
These are required for the preparation and procurement of the principal export documents.
Thus, out of the 16 commercial documents in the export documentation framework, as many as 14 have been standardized and aligned to one another. Only two of these documents namely. Shipping order and bill of exchange. Could not be brought within the fold of the aligned documentation system because of their very different data elements and having very little common among other commercial documents.
IMPORT EXPORT DOCUMENTATION
International trade also means trading relationship between the citizens of two independent sovereign states. International trade is state regulated everywhere, even US Govt. regulates the export operation of domestic firms and insist on documentation of information and control purpose. In India several documents are prescribed to issuer compliance of export trade control foreign exchange regulation, quality control and pre shipment inspection central excise etc.
Kind of documents.
These documents can be narrowly classified into the following four categories.
1. Documentation as per requirement of contract
a. Commercial invoice.
b. Packing List
c. Insurance certificate policy
d. Bill of exchange
e. Shipment advice
f. Certificate of origin
g. Inspection of certificate
h. Transportation documents
i. Bill of Landing
j. Airway bill
k. Combined transport document.
2. Documentation as per requirement of govt. of India.
a. Export license if necessary
b. ARE1 Form
c. Pre shipment inspection certificate
d. Export declaration form – GR/EP/PP/SD form
e. Shipping bill
3. Documentation as per requirement of the importing country
a. Customs invoice
b. GSP certificate of origin
4. Document required for claiming export assistance
a. Application form
b. Shipping bill duty authenticated by Customs
c. Commercial invoice attested by bank
d. Bank certificate
e. Statement of export certified by the negotiating bank
f. Registration cum membership form of concerned export promotion council.
g. Another way to looking at the document s to classify them as principle and auxiliary documents.
Principal Documents
• Commercial invoice
• Packing List
• Marine insurance policy
• Bill of exchange
• Letter of credit
• Bill of Leading
• Airway bill
• Combined transport documents
• GR./EP/PP/ SDF forms
• Export inspection certificate
• ARE1
• Shipping bill
• Certificate of origin
• Shipment advice
Auxiliary Documents
These documents may be required for the preparation of procurements of some of the principle documents of for arranging some of preliminaries in effecting shipments of goods such as giving shipping construction, marine cover shipping space, procurement of bill of landing etc.
Documents normally required are:
❖ Shipping instruction form
❖ Application for export inspection agency
❖ Shipping order
❖ Mate receipt
❖ Dock challan
❖ Principal Export Documents
Manager concerned with export business should be well acquainted with all the documents which are needed from time these documents are briefly explained below:
Commercial invoice:
It is basic document which gives full details of the contents of the shipment and serve as seller bill of goods and, therefore sets out the terms of sales. An exporter is required to prepare these complete documents which must fully identify the overseas shipments and serve a basic for the preparation of all other documents which in greater of lesser detail reproduce information from it.
Normally apart from the special requirement of the importer, form of invoice will be similar to that used for domestic business. There is no standard from and it is left to exporter to change its own design. Always consuming that it will be convenient for use by foreign parties in fact the exporter should strictly follow the requirements of foreign law widely and are revised from time to time, it is important for an exporter to keep him fully informed about such changes government regulation of the importing countries. He fully informed about such changes government regulation of the importing countries. He fully informed about such changes governments regulation of the Importing countries.
According to the uniform customs and practices for credit…
1. Unless otherwise specified in the credit, commercials invoice must be made out in the name of applicants for the credit.
2. Unless otherwise specified in the credit. Banks may refuse commercial invoices issued for amounts in excess of the amount permitted by the credit.
3. The description of good in commercial invoice must correspond with the description of good in credit.
The following check list of the items making up a commercial invoice should be kept in view. Tough not all items are require for every transaction:
❖ Name and the address of the supplier
❖ Invoice number and date
❖ Buyer’s and seller’s order number
❖ Name and the address of the overseas customers.
❖ Name of the vessel and sailing date
❖ Insurance reference
❖ Customs and consular declaration
❖ Shipping marks and number of packages
❖ Quantities and description if commodities
❖ Net weight and gross weight as well as measurements in merit units.
❖ Specification of packing
❖ Unit price and total value.
❖ Terms of sale (for, c.i.f., F.A.S)
❖ Any additional charge, which should be itemized such as packing cartage consular etc.
❖ Bill of lading number
❖ Import license number and date
❖ Latter of credit number and date
Performa Invoice
It is preliminary, provisional, temporary invoice for an additional anticipated shipment, which might or not take place. Such invoice serve- certain useful functions in that the overseas buyer us then in a position to deal with certain requirement before placing the order e.g. obtaining an import license. Secondary, Performa invoice, if made out can be supplied to the bank when a letter of credit (L.C) is to be established by the overseas buyers with the instruction that the L.C. be opened in accordance with the invoice.
Package List
Exporters are required to prepare an accurate packing list showing. Item by item. The contents of the packages or cases so as to enable the receiver of the shipment to carry out a check. The packing list should given a description of the goods, number and marks on the packages, quantity per package, Net and gross weight, measurement, etc. properly, these packing lists ensure movement of goods and avoid unnecessary unpacking. There is no particular form to be used but for purpose of guidance a specimen copy may be seen.
Marine insurance policy / Certificate
A marine insurance policy / Certificate is a document associated with transit of good in trade, where by the insurer undertakes indemnify the assured against damage for loss of goods due to risks/hazards in transit, to the extent and in the manner mentioned in this document. In a CIF contract of sale, the seller has to take the requisite insurance cover to protect his own as well as the buyer’s interests in case of damage or loss of goods. The insurance of policy/ certificate must be such as to satisfy the condition of the letter of credit/ sale contract, and must cover all risks specified there in, or which are considered to be normally associated with trade in a particular product.
Bill of exchange
An exporter can send a bill of exchanges for the value of the invoice of goods for export through the banking system for payment by an overseas buyer on presentation. A bill of exchange is legally defined as” an unconditional order in writing, addressed by one persons to another, signed by the person giving it, requiring the person to which it is addressed to pay on demand or at fixed of determinable future time a some certain in money, up to the order of, a specified person, or to bearer.
Letter of Credit
A letter of credit is written undertaking by the bank, the issuing the bank, to the seller, the beneficiary, in accordance which the instructions of the buyer, the applicant, to effect payment up to a prescribed amount, within a prescribed time period against prescribed document, provided these are correct and in order that conform with the instruction of the applicant. They are usually two banks involved in a documentary credit operation:
1. The insuring banks of the buyer
2. The advising banks, is usually bank in the sellers country
Types of Letter of credit
A. Revocable & irrevocable letter of credit
A revocable letter of credit is rather are now a days because it means that the terms of the credit can be canceled or amended by an overseas buyer without prior notice to the exporter. Most letter of credit are irrevocable which means that once buyers conditions in the letter have been agreed by an exporter, they constitute a definite undertaking by the buyer’s bank ban can not be revoked without exporters agreement.
B. Confirmed and Unconfirmed letter of credit
Confirmed letter of credit caries the confirmation added at the request of the issuing bank. Binds the confirming banker to negotiate the drafts drawn credit provided the terms and condition there are fulfilled.
C. Without resource and with resource
A without resource to drawer letter of credit is one under which the negotiating bank can not have a resources against the exporters if the draft is subsequently not taken up a reimbursed by issuing bank provided, of course, the negotiation is with out resources.
D. Sight & Nuisance
Documentary credit may provide for payment at sight or for acceptance of nuisance bill of exchange by either issuing bank in a buyer’s country or correspondence bank in exporters country.
E. Transferable
Transferable letter of credit is one which can be transferred by the beneficiary named them favor of another part. A credit can be transferred only it is expressly designed as transferable by issuing bank.
The following information is required to checking for the sellers after the documentary credit opening.
❖ Does the documentary credit correspond with the contract, especially in connection with the following points….
1. Amount unit price
2. Period of validity / time limit for shipment
3. Terms of delivery
4. Description & origin of the merchandise
❖ Is the documentary credit revocable, irrevocable? / Confirmed, Unconfirmed.
❖ Is it transferable, if necessary?
❖ If unconfirmed or confirmed by a bank, how do you assess the
i. Credit risk
ii. Condition in buying country
iii. Mailing risk
❖ Are the name & the addresses of the applicants and the beneficiary correct?
❖ Is the documentary credit subject to the LCC’s currently valid uniform customs and practice for documentary practice?
❖ Is there sufficient time available to complete which can not be made?
❖ Are documents stipulated which are contradictory to the terms of delivery?
❖ Can the required number of specified documents be furnished?
❖ Can the shipment deadline be met?
❖ Are the terms regarding the place where the goods are to be taken in to the possession and the point of departure and arrival feasible?
❖ Are part shipment and transshipment prohibited country to the terms of contract?
❖ Can the prescribed marks and modes of transportation be provided?
❖ Can the documents be presented in the desire from by the days specified in the credit? Are you familiar with the expression of time utilized in credit?
❖ Are we absolutely certain about the way the draft should be made out?
❖ Can the description of the goods in the invoice to be taken word from the documentary credit?
❖ Can the terms of insurance be fulfilled?
❖ Are the risks to be covered accurately described in the trading?
❖ Is the insurance coverage also sufficient to meet your requirements?
❖ Clarity whether a quality or a certificate is required?
❖ Combined Transport Document / Multi Modal Transport Document
❖ The bill of lading, which constitutes the most important document in global trade, is hazed on an international convention and fulfills three crucial functions.
❖ It serves as receipt for the goods handed over to carrier.
❖ It is also a document of the title to ownership of the goods and contract of carriage with terms and conditions printed to the back.
❖ It helps not only in the physical transport of goods but also in the ownership from the exporter to the buyer in the foreign country.
❖ However, it covers only the sea lag of the journey. For the customs cleared containerized cargo from ICD of CFS located at inland points, a combined transport B/L is issued covering the inland transport as well as journey through sea. With the enactment of multi modal transport act, the operators instead of combined transport document usually a shipping company has to separately enter in to an agreement for the movements of the containers to the gateway port. This requirement is document for multi modal movement with terms and condition stipulated in accordance with the MTD law.
GR/EP/PP FORMS
❖ A GR form is required because every exporter has to declare a full export value of goods exported in a prescribed for. There are such declaration forms which are prescribed.
❖ The GR from or SDF form is used for exporter to export to all countries except where we export takes place by post.
❖ For export by parcel post, other than on value payable on ‘Cash On Delivery’ (COD) basis, the Post Parcel (PP) form is used.
❖ For export by Parcel Post, on Value Payable by Post (VPP) or ‘Cash On Delivery’ (COD) basis, the VPP or COD form is used.
EXPORT INSPECTION CERTIFICATE
An export consignment is also subject to pre shipment inspection under the ‘Export Quality Control Inspection Act’ of 1963 for prescribed commodities.
For this an application is to be made to Export Inspection Agency (EIA) and that authority issues Export Inspection Certificate (EIC). There are some cases where compulsory Pre shipment Inspection Certificate is not required i.e. Export Houses, Trading Houses, 100% EOU, EPZ units; it is not required also in the case when the importer states in the firm letter that EIC is not required. Under in Process Quality Control (IPQC) schemes, some units are authorized to issue such certificate on their own. Here the inspection is carried out from time to time and not on consignment basis by EIA.
SHIPPING BILL
The shipping bill is a document which contains all the details regarding the goods to be exported, quantity of goods, value of goods, supplier of goods, buyer of goods, port of destination, freight service agency etc. and this serves the purpose for bill of entry when the consignment lends in to the port of destination.
SHIPMENT ADVICE
The exporter sends a shipment advice to a foreign importer. The date of the shipment the name of the vessel, the expected time of arrival and the port of destination are mentioned in the shipment advice, so the foreign importer can make arrangements for talking delivery together with the shipment advice, followings are also sent.
AUXILIARY DOCUMENTS
(A) Shipment Instruction
If the export consignment is sent to a part by rail, there will a railway receipt, if by road; there will be a lorry-way receipt.
For example, the goods may be sent to the port by factory office where the factory office prepares a dispatch advice and sends it to export forwarding department with following…
❖ The railway/ lorry receipt
❖ AR 4 A form
❖ GP form
❖ A copy of delivery note
❖ Export Inspection Certificate
On receiving their export forwarding debt will applied to an insurance company. For insurance policy and cover then debt will prepare a shipping instruction with detailed instruction on shipments and vessels to the forwarding agent will be accompanied by various other document including AR form, customer invoice, LC etc. in multiple copies.
(B) Application for export inspection agency
On the basis of these documents for forwarding agents accept the delivery of export consignments from the railway station or the road transportation as the case may be, store them into ware houses and apply for custom clearance along with 5 copies of relevant shipping bills and documents that have been received from export department of company. The custom authorities or examiners check the documents endorses on duplicate of shipping bill and give inspection to the dock authority for physical examination of goods and returns the goods to the forwarding agents.
(C) Shipping Order
These documents are in turn transferred to the shade superintendents of the port and a carting order is to be obtained which will permit the cargo to be brought to the transit shade for an examination by the dock appraisal along with several documents, dock appraisal stamps a “Late Export” endorsement on the duplicate of the shipping bill. These documents are handed over to the custom officer who supervise loading by the agent. The custom officer stamps a late ship endorsement of the duplicate copy of the shipping bill and hand shit cover to the agent of the shipping company. This represents custom authorization for the cargo to be loaded on to the vessels.
(D) Mate Receipt
Once the cargo is loaded the ship issues a mate’s receipts to the shade superintendent after paying the port charges the forwarding agent can take the delivery of the mate’s receipts. This is presented to the custom officer who makes the certificate of shipments endowments on all copies of the shipping bill and the original and duplicate copy of the AR 4 a form.
Export Department of Choice Laboratories
In the mid 80s one local exporter who was busy in exporting tooth paste gave a full consignment of tooth paste manufacturing to Choice Laboratories. And then it has sensed the business opportunity in the export market, the incentive offered by the government and rising demand for Indian product in USSR and starting slowly but staidly export to various countries on its own. With passage of time as company acquired the competency an expertise dealing with export transaction it has started export in a big way which contribute round about 80% of total revenue.
It has to his credit three consecutive best exporter of the year award in 1993-94-95. Recently the firm has acquired an office for the purpose of handling documentation of export at Ahmedabad to overcome delays and infrastructure bottle necks that it has to face while managing export transaction from the head office at Unjha.
1. Target countries for Export
Choice Laboratory is exporting its products in the following main countries…
( UAE ( France
( UK ( Oman
( Bangladesh ( South Africa
( USA ( Singapur
( Malesiya ( Saudi Arebia
( Shri Lanka ( Nepal
( Russian Countries ( Australia
( Newsy Land ( Indonesia
( Latin America ( African Countries
Company regularly exports to more then 40 countries.
2. Export Sale for last four years.
Export is continuously increasing rapidly three years export data are as follows……..
|Years | FOB values |
|01/04/2001 – 31/03/2002 |RS. 11,88,01,548 |
|01/04/2002 – 31/03/2003 |RS. 17,02,43,541 |
|01/04/2003 – 31/03/2004 |RS. 21,03,49,820 |
* This information is taken from the certificate of Chartered Account / Cost and Works Accountant given by the Export Manager Choice Laboratories Ltd.
At present around 80% of firms total revenue comes from export operation main product exported is tooth paste. Gel tooth paste has demanded only on the European and other developed countries. While the only one country where the firm export tooth powder is Bangladesh. The highest contribution per country in export sale goes to Russia where the firm has also registered its premium brand Choice and volume of export sales generated by this country accounts to be about 60% of firm’s total export.
EXPORT MARKETING MIX
[1] Product Policy:
As far as products are concern the company has the different manufacturing formula for the export products and composition of flavor component in the tooth paste is formulated to match with the individual countries tests as well as habits. For US the firm uses mild flavor components while for Bangladesh it has the Phudina flavor and for South Africa and Russia it uses Cinnamon and meant as flavor.
Even the pack size, consistency of paste, language, packaging, labeling, quality standards, regarding bacterial count in the tooth paste are different for different countries. The firm has different brand in different countries according to the importers requirements. Its portfolio includes
❖ Spear mint
❖ Imingo
❖ Choice
❖ Dent Aback
❖ Smile 32
❖ Platinum
❖ Pearl
❖ Right Choice
❖ Pearl Choice
[2] Product Price:
Choice has only one simple policy regarding the pricing exports consignments, it charges on the basis of marginal costing basis by keeping mind the BEP of the order received. It charges on the basis of FOB of CIF has negotiated and agreed upon at the time of entering the contract.
[3] Product Place:
The firm has same level of distribution network as that of domestic where it has its own brands as well as marketing infrastructure. Here Choice deliver the products to the importers who may have an agreement to market the company’s product in foreign countries and hand over product to stockiest followed by retail outlets or supermarkets.
[4] Product Promotion:
As far as communication is concern the firm uses material printed in local language and promote its own brands by way of adopting its message and media strategy to match with country specific requirement.
COMPETITION AT EXPORT FRONT
At the export front the competition is not among individual firms but among the countries. The main competitor for the company is being Indian company is china. China has its advantage due to its government policy and economy of scale and better technology. As far as individual competitors are concerns here MNCs do not compete as they have their own brands in the importing countries. So the competition spring among other small local manufacturers but due to criticality of flavor compound if ones contracted the importer will usually stick to one exporter.
HINDRANCE IN EXPORTING AND PROCEDURE TO BE FOLLOWED.
The main problem and the hindrance in exporting the goods are bureaucratic delays, holidays and cumbersome documentation. To export one consignment the firm has to deal with round about 64 documents in multiple copies. Due to poor infrastructure it has to suffer from delays. In delivering the consignment and time gaps wasted in correcting the minor non compliance due to rigid bureaucracy may sometimes results into serious consequences like void of contract.
A) Export Documentation
Choice has well experienced man power deal with cumbersome export documentation and all technical commercial transaction. The firm has to fill around 64 documents compromising of principal and auxiliary documents, documents which are crucial for transaction and application for the duty free advance licensing, contact of agreement deal between two parties, LC. Invoice certificate, leading bill, DEEC by RBI, Packing list, Railway receipt etc. are some more cumbersome documents but which are also essential an important part of export transaction.
B) Export Financing:
Choice manages its exports finance by way of bank loans and in the case of exporters as the bank give 100% limit for MPBF the firm has no problem in managing its export finance.
As far as managing financial risk is concern the firm usually takes advantage of ECGC and while transecting with underdeveloped countries its enters into contact with the importers to carry over the transaction using LC. With regards to the risk in exchange rate fluctuations being an exporter from India the firm is always at advantage because of constant devaluation in currency. In the time of extensive ups and downs of the exchange rates, the firms entered into forward cover transaction to minimize the exporter to the risk.
C) Future Plans for export:
The export department of the company was in development stage till now but it has already entered into the take off stage and the firm is aggressively pursuing for export. The firm has plans to penetrate its product in deep in hard currency areas. And all intension to consolidate its situation in USSR. The firm also thrives to expand its product range from exports and it aiming to expand its product portfolio with the detergents, cosmetics, and personal care products which are its core competencies.
EXPORT BENEFITS RECEIVED BY CHOICE
❖ Income tax exemption benefits
❖ Sale tax benefit
❖ Duty free advance license.
❖ Central excise duty exemption
❖ Special import license
❖ Duty free replenishment certificate
SW ANALYSIS
STRENGTHS
❖ 80 % of sales revenue earn through export.
❖ Company has wide variety of product mix.
❖ Company has already exported mode than 138 different branches own and others.
❖ Largest exporter of customize product in oral care industry in India.
❖ Company has good brand awareness in rural areas.
❖ Company provide qualitative product at comparative price.
❖ Company has its marketing department in different state so company can get benefit in central excise tax.
❖ Company has good distribution network in north India.
❖ Good brand image in international market.
❖ Company has good corporate image for job work in international market. sent consignment in America in last year.
❖ Marketing office located at Ahmedabad to capture the location benefit.
❖ Tax benefit, as export is very high.
❖ Low depreciation cost.
❖ Working capital position of the firm is good.
❖ Location benefit.
❖ Cheap labor availability in daily bases.
❖ Water is florid in this regions, it is good for tooth paste.
❖ Good quality maintains- overlays rejection of consignment from export.
❖ No rejection of total batch production up till now.
❖ In house facility for quality check.
❖ Low manufacturing cost-efficient utilization of resources.
❖ Good flexible plant layout for different type of product mixes.
❖ Local sales person is selected, on the advantage is knowledge can utilized.
❖ Good labor management relationship.
❖ No major dispute up till no-any strike in history.
❖ ISO 9000 organization.
❖ MP has good command over production knowledge.
❖ Company has smooth dealing procedure for export.
WEAKNESSES
❖ They are not conducting marketing research activity.
❖ No scientific research procedure.
❖ Company often faces frequent stock out condition of finished good as well as raw material.
❖ No growth in domestic market share-low domestic share.
❖ No national level advertisement-low advertisement budget.
❖ Low brand awareness nationally.
❖ High sales force turn over.
❖ Very thin margin-low net profit.
❖ Company highly depends on borrowed fund.
❖ No scientific inventory management.
❖ Small equity based by promoter.
❖ High marketing distributed cost.
❖ No scientific performance appraisal system.
❖ No professional HR division.
❖ Company always follows the leader in pricing polices.
❖ No unique selling proposition for product.
❖ No targeted niche segments-mass marketing.
❖ Present staff has very low education profile.
❖ No objective incentive policies.
❖ Very poor image and awareness in urban area.
❖ Family branding.
❖ No professional approach and management.
❖ Centralize decision making procedure for all area.
❖ Closely held family concern.
❖ No separate purchase department.
❖ Traditional plant and machinery.
RECOMMENDATIONS
❖ Choice should design its own marketing research system. It should hire people to carry out systematic market research and survey in the following areas.
❖ They need to strengthen relation with vendor and follow JIT method for inventory and production.
❖ They have to develop strict standard for quality control in quantifiable terms because major part of their revenue is from export.
❖ Sanitation should be kept clean and hygienic.
❖ To know consumers taste, preference and their consumption and buying patterns in rural and semi urban market before launching new products in the market.
❖ Retailer and distributors survey from time to time know competitors tricks as well as their satisfaction level.
❖ Choice should target the unexplored and impenetrate east India market so as to preempt the competition in these regions and established its brand equity as pioneer in the market.
❖ The company should adopt the scientific way to allocate and manage the resources for advertisement and sales promotion so as to gain optimum results.
❖ The firm should design an objective performance evaluation system for its channel members so as to keep a check on their efforts and shall thrive to achieve the higher visibility.
CONCLUSION
After visiting the “Choice Laboratories Ltd.” and analyzing its different departments we conclude that management of any organization is really a crucial task. company has to deal with many circumstances which require high involvement in decision making and strategic planning.
In the “Choice Laboratories Ltd” we have seen that the management is conscious about all the aspects of the better organizational performance and they are continuously trying to improve it. But still there are some weak areas in which they should make some improvements. How ever it has good top management personnel for all the departments who carry out their responsibilities in well manner. “Choice” has also good export orientations which is one of its strongest competitive advantages.
The only thing that they have to keep in mind is that as the demand for the export is increasing they have to maintain their reputation by maintaining the quality of the services and customer relationship also. While at the domestic level they can have the advantage of good brand name but for that they have to develop marketing and distribution strategy at the domestic level.
BIBLIOGRAPHY
BOOK:
Strategic Management
(Thompson and Strickland – Strategic Management: concept and cases, 13th Edition, New Delhi, Tata Mcgraw Hill Publishing Co. Ltd. 2004)
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Head of Store and excise
Assistant
Area Sales Manager
Sales Officer
Work Force
Security Guards (02)
Maintenance
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Chief Accountant
Marketing manager Domestic
Chief chemist Production
PA to Mg. Partner
Export & Import Manager
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Export Manager
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