After moving to Hyderabad, Gupta's first step was to conduct thorough, doortodoor market research. Dr his stint as the suppiy chain manager, he had observed that, despite a plethora of privatelabel brands 1 electrical goods and home appliances industry, many ofthese brands remained anonymous to end-users. H noticed a parallel state of affairs in the regionai aircooler market, primarily because of the vast geograpl distance between the manufacturer and retailers; while the manufacturers were largely concentrated in around Hyderabad, the retailers were spread out across the state. Gupta learned that many products and i were not reaching retailers due to the huge bargaining power of distributors in the value chain. Gupta decided to take up the role of an intermediary to bridge the gap between manufacturers and retails establish a client base for his business, he travelled across 23 districts of Andhra Pradesh. His business rnc required him to buy home appliances from manufacturers and sell them to the retailers spread across Ar Pradesh. His business acumen, honesty, and unusual negotiation skills aided him in securing at least one | retailer from each of these districts. He was always upfront with his clients and believed that a longterm, he: relationship with suppliers was the key to making it big in the world of business. On the assurance of the retailers, Gupta imiiin the form of equity to begin his businessto business trading concern, which he registered under the name Harsh Eiectricals on April 1, 2008. Initially, t entity dealt with supplying retailers with electrical goods and home appliances, such as air cooiers, fans, hand grinders. Subsequently, the product portfolio was expanded to include a range of quaiityappr( electric home appliances, ceiling fans, tahie fans, wall fans, electric geysers, room coolers, and exhaust far THE RISE AND FALL OF TRADE Harsh Electricais 'performance for the tinanciai year {FY} 2008 09 was exceptional . Its sales reached almost $4 million and posttax profit toutftEIdJUD . The return was overwhelming on an equity investment $300,000 .The splendid financials prompted Gupta to start expanding his business to the neighbouring states of Maharashtra and Karnataka in FY 2009 10. The hard work paid off, and Harsh Electricals became one of the major suppliers of electrical goods to many retailers of Andhra il'radesl~ Maharashtra ,and Karnataka .The growth story continued in FY 2010' 1'l as the firm exhibited overwhelming financial performance .However ,the celebratory period was short |ived as the financia performance declined in FY 2011 -i2 and FY 2012 -13 {see Exhibit '1). The decline in the net profit margin was attributed to increases in marketing and servicing costs duri those years . In fact,consumers who had purchased Gupta's air coolers and other home appliances i voiced many grievances to the retailers regarding the products .Harsh Electricals had experienced a sur in post sales repairs and replacement costs due to the inferior quality of products supplied by some of manufacturers .The inadvertent inclusion of substandard products in the product mix had shaken Ha Electricals 'reputation and posed a serious challenge to the firm's current core competencies .Further ,owi to the tremendous competitive pressures in the market ,after expanding into the neighbouring states ,l- Electricals needed to increase its marketing and promotional expenses to sustain its competitive advanta amid the rising number of competitors {see Exhibit 1). The plunge in profits and cash flow compelled Gupta to review the market in an effort to identify aspec of market priority and product structure so that he could revive the firm's required core competencies Based on market mapping ,Gupta found that the quality of products demanded and expected by reta was far from the quality supplied by manufacturers in the aircooler market .The divergence of produn excellence created much discontent toward afew manufacturers .Many customers even questioned the I i i = INR = Indian mpee ;a|| currency amounts are in 3 unless otherwise specied :US $1 = 39.94 on April 1, 2008 . This document is authorized for use only in GREUET Claire's LICI -M'i 4341 -Cost Acmurrting 81 Management Control at EDHEC - Business School from Jan 2020 to Jul 2020