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Business Dilemma: KCPL's Future

Kanpur Confectionaries Private Limited (KCPL) must decide whether to accept an offer from A-One Confectioneries to become its contract manufacturing unit. KCPL faces low efficiency, loss of market share, and high costs. Continuing independently risks bankruptcy while shutting down would protect its legacy but not be profitable. Accepting the initial three-year contract would improve operations and expertise while maintaining legacy and viability, though staffing and financial challenges must be addressed. After three years, KCPL can reevaluate its position.

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77 views2 pages

Business Dilemma: KCPL's Future

Kanpur Confectionaries Private Limited (KCPL) must decide whether to accept an offer from A-One Confectioneries to become its contract manufacturing unit. KCPL faces low efficiency, loss of market share, and high costs. Continuing independently risks bankruptcy while shutting down would protect its legacy but not be profitable. Accepting the initial three-year contract would improve operations and expertise while maintaining legacy and viability, though staffing and financial challenges must be addressed. After three years, KCPL can reevaluate its position.

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Education Email
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© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
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Kanpur Confectionaries Private Limited:

A Case Study

Problem Statement/ Primary Problem


Should KCPL accept the offer from A-One confectioneries private limited to be its contract
manufacturing unit?

Secondary Problems
1. Low efficiency of operations at KCPL – Absenteeism and irregular production
2. Loss of market share and profitability to unorganized sector and other competitors.
3. Lack of economies of scale leading to higher production costs.
4. Pearson’s “Good health” biscuits which have an international brand image are not selling
well.

Criteria
1. KCPL needs to be profitable to sustain in the market
2. KCPL’s legacy must be protected for the future generations.

Options
1. Continue to produce MKG brand biscuits and reject APL’s offer.
2. Accept APL’s offer and make the requisite changes to their operations to become more
efficient. After the three-year contract period, the company can re-examine their situation
and decide on the way forward (continue with APL or become independent again).
 Implications: Possible cost of restructuring and refurbishing the infrastructure
3. Shut down the business to protect the legacy of KCPL and MKG and avoid any conflict of
interest.

Analysis
1. What has been company’s performance since you took charge in 1982? How does it
compare with KCPL’s performance when your father was in charge?
 Refer exhibit 1: The company under Mr Mohan Kumar Gupta (father) had a profitability
of 10% in 1980-81. Under Mr Alok Kumar Gupta, this declined to 8.3% in 1983-84 and is
currently at 25% loss.

2. What does the proposal of APL mean to you and your family members? Why?
 Financial POV: Accepting the proposal of APL is financially apt as it would keep the
venture viable. (Ref exhibit 2)
 Legacy POV: Becoming a CMU could tarnish the 42-year-old image built by KCPL and
could further deteriorate the business for MKG brand as KCPL would essentially be
helping a competitor gain major market share in the northern region. At the same time,
KCPL is more than one brand. Its legacy should not have to depend on just one brand
and the propagation of it.
3. What will you do? Why?

C1: Profitability of KCPL C2: Legacy of KCPL to be protected


X X
(It is not financially viable (Continual losses could
O1: Continue MKG+ for KCPL to scale up to eventually lead to bankruptcy
reject APL APL’s level) and loss of image)
O2: Accept APL’s
offer for the  
contract period of
three years
X 
(Business won’t be (Shutting down while still
O3: Shut down profitable, but the family being an independent
can gain from the potential venture would protect the
sale of assets of the image of MKG)
business)

Based on the analysis, accepting APL’s offer for the initial contract period meets our required
criteria. The collaboration would help KCPL work on improving their production methods and bring
in technical expertise. After the contract period ends, the company can re evaluate their position,
financially and otherwise and decide on further course of action.

4. What challenges you see in going ahead with your decision? 

The implications of accepting APL’s offer are as follows:


1. The staff working at KCPL may be adversely affected due to change in policy and
mechanization.
2. The Gupta family may lose their absolute independence in making business decisions.
3. The company may face difficulties in financing for updating/changing their machinery
and processes to meet APL’s requirement.

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