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By-
Rohan Sachdeva 231118
Kirti Ramesh. Obhan 231076
Kshitij Sethi 231088
Rahul Sharma 231112
Rohit Malhotra 231082
Jayant Adlakha 231070
Pranav Gupta 231100
Himanshu Trivedi 231064
Naveen Kumar Suman 231094
Pulkit Sehra 231106
AAYAM DURABLES LTD
Scenario II
Introduction
Aayam Durables is a public company which deals in consumer durable selling•Flat panel display (LED/LCD)•Refrigerators &•Washing Machine
The company is facing tough time due to shortage of funds to invest in product innovation and marketing.
Expecte
d Growth
• Expected Growth Rate in 2015 is 15%.
Net Revenue
• Net revenue for the company is targeted to increase from 842cr. (2014) to 900cr. (2015).
Losses
• Losses have to be reduced from 5.5% to 2.5%.
Manpower
Cost
• Manpower cost has to be reduced from 21.5% i.e Rs. 181.03 cr to 19.5% i.e Rs. 164.19 cr. Thus a total saving of 16.84 cr.
Company
• ADL saw a loss in all three products and an overall loss of 46 cr.
Scenario II
• It was felt that the industry will grow in 2015 by 15% over 2014. As penetration level in the industry was low in India and there might be global stagnation in economy.
• In the circumstances, it was felt that revenue growth for ADL was important. The strategic objective of ADL was to achieve a revenue of Rs 900 crores in 2015 & reduce the loss from -5.5% (2014) to -2.5% 2015). To achieve this objective, it was decided to reduce manpower cost from 21.5% to 19.5% (of 2014 revenue level).
Solution
• Attrition of employees
• Layoff due to underperformance
• Reduction in hiring
• Reduction in the % of salary increase
• Increased manpower in R & D Department
• Increased manpower in sales Department
Reduction due to AttritionManpower cost reduction due to attrition Band 4 :
10% of 12 = 1 (approx)
1* 1.2= Rs 1.2 cr
Band 3
10% of 83 = 8 (approx)
8* 0.75 = Rs 6 cr
Band 2
15% of 158 = 23 (approx)
23*0.35 = Rs 8.05 cr
Band 1
25% of 327 = 81 (approx)
81* 0.15= Rs 12.15 cr
Total Cost Reduction is Rs 27.7 crores
HR Department
Firing of 1 General Affairs HR – Band 3 Band 3 has average CTC of 0.75 Crore.
Cost Saving = 1 * 0.75 = 0.75appendix 7
Firing of 1 Regional HR – Band 3appendix 7
Band 3 has average CTC of 0.75 Crore.
Cost Saving = 1 * 0.75 = 0.75
Total Cost Saving = 0.75 + 0.75 = 1.5 cr
Finance Department
Firing of 2 Corporate CFO – Band 3Band 3 has average CTC of 0.75 Crore
Cost Saving = 2 * 0.75 = 1.5
Firing of 3 Corporate CFO – Band 2Band 2 has average CTC of 0.35 Crore
Cost Saving = 3 * 0.35 = 1.05
Total Cost Saving = 1.5 + 1.05 = 2.55 Cr
R & D ElectronicsFiring of 3 persons – band 2
Band 2 has average CTC of 0.35 Crore
Cost Saving = 3 * 0.35 = 1.05 crore
Supply ChainFiring of 1 person – Band 3
Band 3 has average CTC of 0.75 Crore
1 person – Band 2
Band 2 has average CTC of 0.35 Crore
Total Cost Saving = 0.75 + 0.35 = 1.1 Crore
Marketing Department
Firing of 1 person – Band 3
Band 3 has average CTC of 0.75 Cr.
Total Cost Saving = 1 * 0.75 = 0.75 Crores
Thus the total saving due to manpower reduction (crores) = 1.5 (HR) + 2.55 (Finance) +1.05 (R n D) + 1.1 (Sales) + 0.75 (Marketing) = 6.95 Crores
Attrition Recruitments
The recruitment schedule is as follows:
Total cost incurred = Rs 11crores
Bands\Dept.
Customer Service
R & D Corp- HR
S & M CTC (in cr)
Band 4 - - - - -
Band 3 1 - 1 - 1.5
Band 2 2 4 1 3 3.5
Band 1 15 10 - 15 6
Calculations
Total amount invested in the company in 2014
= Revenue - Profit
= 842 - (-46) = 888 (Appendix 8)
Expected amount to be invested in 2015
= Expected Revenue + provision for loss + Increment in salary
= 900 + 2.5% of expected revenue+ 24.39 cr
= Rs 946.89 cr
Therefore extra fund for investment for year 2015
= 946.89 – 888
= Rs 58.89 cr
Continued…
Total funds after cost reduction in manpower (Attrition + employee lay off – recruitment)
= 27.7 + 6.95 – 11
= Rs 23.6 crore
So extra funds that the company needs in order to meet expenses :
= 58.89 -23.6 = Rs 35.29 crores