Case Summary
About ABC Corporation
· Multi-diversified company with presence in
§ Capital industries product
§ Consumer durables
§ Service industries
· Strategy adopted – High specialization & differentiation for its products
· Reputation – Customers perceive it as provider of highly reliable quality products & are willing to pay premium
· All businesses have equal contribution to company’s profit
· All business unit compete with the other two
Printing Division of ABC Corporation – Vishala Printers
· Specializes in publishing scientific journals, annual reports & business catalogues
· Spends 10% of annual sales in –
§ Employee skill development
§ Purchase of latest hardware & software
· About CEO of Vishala Printers – Mr. Vipul Mehta; Age -38 years; co-founder of ABC. He is an engineer & MBA from qualification, with work experience of over 3 years before starting ABC
· Growth & Profitability – Market to book ratio > 5 for the past 3 years
Major Customer of Vishala Printers– CIMC (Central India Manufacturing Corporation)
· A Public Sector Undertaking
· Contributes 20% of Vishala’s annual turnover
· Regularly publishes performance reports, catalogues, brochures, periodicals & field survey reports – some of them goes to PM office
· Current Scenario
§ Small players in printing are pressing CIMC to allow them take Vishala’s quality printing job (which has high margin)
§ Some F/A (Finance & Accounts) people from CIMC visited Vishala to negotiate above, which Vishala politely turned down
Decision Problem faced by Mr. Mehta
· New policy of CIMC stores department – Lowest quotation in tender will be awarded contract on yearly basis on the same fixed price
· Mr. Mehta’s View – It is a trick to eliminate his organizations from future contracts
· Vishala printer charges 40-50 % high prices because of additional Fixed & variable cost.
The margins, as per them, is only 15-18% on the quoted price
· With yearly contract, Director of CIMC can’t use his discretionary power to award orders to Vishala printers due to such high value of single contract
· The quality offered by Vishala printer in terms of value addition can’t be quantified for justifying their higher rates, though top management of CIMC accepts Vishala as best quality service providers
· Top management also acknowledges the problems they faced before Vishala printer came into picture
o Earlier printers always delayed the printing
o Final product had many mistakes
o Mathematical equations, subscripts etc. were never done properly
o Aesthetic appeal was poor (Low quality ink & paper & poorly trained manpower)
· Vishala, on other hand sits with them to understand the detail of the job before commencing it. Even the errors in original typed manuscript are corrected at Vishala, as confirmed by the management.
What is happening now?
Mr. Mehta is going to meet his managers in the next 1 hour, at 10 AM to discuss this situation. They are supposed to submit their bid BY 2 PM to CIMC. All the quotations will then be opened at 3 PM to decide, who will get the contract
Guidelines for Case Analysis
1) As a strategic manager for the firm, what will you do or suggest to the Chief Executive to face the situation(s) you have envisaged?
Answer:
2) Given the nature of the competition, VP’s overall business strategy, & the fact that much business is lost because of the values it holds, should(n’t) the firm change its norms of ethical practices? Will the current values be sustainable in the long-run?
Answer:
No comments:
Post a Comment