Case Analysis (Group-7): Raj Vardhan Enterprises (RVE)

Registration ID 001/1 016/1 017/1 020/1 Name Abhinav Sharma Birma Ram Chandan Gupta Ekansh Kumar Email abhinav.sharma10@email.iimranchi.ac.in birma.ram10@email.iimranchi.ac.in chandan10@email.iimranchi.ac.in ekansh.kumar10@email.iimranchi.ac.in Contact No. 9199395249 7250239925 9162543021 9570058169

The Origin of Crisis The crisis, which showed up as the sudden decline in sales in the year 1979, has its roots in the corporate strategy. While all the founding members had a vision for the firm and themselves, these visions were not collated to reflect together as the vision of their business RVE. The talents and capabilities of the promoters were underutilized by restricting to just two lines of business. The operations cycle was quite rudimentary in terms of forecasting and control. This created uncertainty in cash flows and unwanted pressure on the working capital of the firm. Moreover, there was no other business that would come to rescue in these uncertainties, hedging the overall risk. Although Mehta Sales Corporation (MSC) has highly supportive in making a credit worthy image of RVE and it even backs up RVE during minor downturns, RVE was not able to stabilize itself on its own. The initial success is a clear reflection of their resources and capabilities. However, a long term strategy has to rely on stabilizing the profits along with consistent growth. Most importantly, the relationship with MSC got strained, which in turn de-motivated the directors, because the relevance of the relationship was not very clear to everyone. While Pranav, who was also the Managing Director of MSC, was very clear about how the image and credibility of MSC can be utilized for the benefit of RVE, this was not clearly communicated. This lack of information flow was also evident when marketing information was restricted within MSC, Dhiren kept the glove operations knowledge to himself and Milind did not reveal much about the calcium carbonate business to everyone. For a business which held merely 6.6 % of market share, a collective thinking of strategy is a must and thus in turn its highly crucial to have proper channel for corporate communication within the firm. Handling the Crisis Given the current scenario, the immediate steps needed to handle the crisis would be around a clear vision, diversification and ERP. The partners need to assemble, discuss and decide on a vision of the firm to guide the long term strategy. They need to be clear about each others expectations, relevance of

Case Analysis (Group-7): Raj Vardhan Enterprises (RVE)

Registration ID 001/1 016/1 017/1 020/1 Name Abhinav Sharma Birma Ram Chandan Gupta Ekansh Kumar Email abhinav.sharma10@email.iimranchi.ac.in birma.ram10@email.iimranchi.ac.in chandan10@email.iimranchi.ac.in ekansh.kumar10@email.iimranchi.ac.in Contact No. 9199395249 7250239925 9162543021 9570058169

the tie-ups and their potential. Based on these a clear demarcation needs to be drawn limiting the mutual interference. They need to realize their potential and ability to manage a more diverse business setup and move into new avenues which are in turn related to their present lines of business. As suggested in the case by the consultant, a backward integration can be a great opportunity for diversification. However, a less related line would hedge the risk better. Lastly, they need to develop an internal system for Enterprise Resource Planning. Although, we do not expect computerization in 1979, a manual system for planning and control can be internally developed. This system would essentially be built around storing the information in easily retrievable manner and utilization of statistical tools for forecasting, alarming and control. This can be the first step in setting up the corporate communication channels too, since this information will be accessible to all the authorized people. A more elaborate system can then be put in place. These systems will help in reducing the average collection period and improve the liquidity. Utility of SWOPT Analysis Such an analysis is really useful to analyze and resolve the problem scenario. It clearly defines the objectives and helps in analyzing the existing strategies based on problems and weaknesses. It aids in scanning the environment and developing new/revised strategies based on the strengths and opportunities. Moreover, the threats are preconsidered, so contingencies can be readied in time. The consultant in this case has chosen the right tool for doing an objective analysis.

Generalizations Although, every business has its own intricacies, there are certain generalizations we can make about the partnership / subsidiary companies based on the experiences of RVE. In case of such businesses, one must clarify in the very beginning the standards, dependencies and expectations. Since, new offshoots promoted by someone who is already associated with another business and bound to a lot of interference, such practices should be discouraged from the very beginning. If the new business is similar to the existing one in some respect or is using the image of the established business, the impact should be very clear and efforts should be made to create a separate identity of the new business.