Sanjay Gupta did his PGDM in 2012 from NMIMS, Mumbai and is a

Regional Manager for Western Reg

ion posted at Ahmedabad with a FMCG

Company Marico Ltd. which produces and markets various consumables

right from healthy foods to hair oil. As a regional manager, he is assigned

the task of sales projections of Parachute coconut hair oil brand of Marico i

n

the entire western region for 2019

-

20 much before its commencement to the

top management to help them plan entire supply chain and production of

2

consumables, manpower planning, mobilising finance and preparing

marketing plans and strategies.

The credit

rating given by CRISIL to Marico in general and its Parachute

coconut hair oil brand has been excellent which states that this brand has a

market share of 59% and its operating margins over the past five years have

been ranging between 17

-

19%. Besides, it

commands pricing power.

The year 2018

-

19 was the first year of Sanjay Gupta as Regional Manager

Western Region as well as holding the responsibility of achieving the annual

targets of sales by products. He joined the western regional manager position

midw

ay through 2017

-

18 and hence did not do the forecasting of sales for

the year as sales targets were already set by his predecessor.

While sitting in his Ahmedabad office in the month of January 2019, Sanjay

is thinking about the sales projections he has t

o arrive at of various products

of Marico in Western region. In his earlier role as manager in Mumbai

office, he was reporting to Head Marketing and was mainly responsible to

collate the actual sales figures from various distribution centers, E

-

commerce co

mpanies and third

-

party sales agencies.

Demand projection was completely new task for him which required sound

knowledge of economics in general and theory of demand and demand

forecasting and estimation in particular. Luckily, he had preserved notes of

managerial economics taught by his Professor. While referring to his notes,

he found out that his Professor of Managerial Economics had defined

Managerial Economics as ACETDS TOOE. What a simple way of defining

Managerial economics with an acronym which i

s so easy to remember.

He started mulling over the acronym and jotting down notes as to identify

economic concepts and theories and tools of decision science to be used to

arrive at the decision problem. Obviously, identifying the economic

concepts/theori

es and tools of decision science itself will not be sufficient to

arrive at the decision problem. He required data on various relevant and

feasible variables for a specific period and put them into a structured way

and run some technique of demand forecast

ing thorough various methods

3

depending upon the trends of sales over the past years; arrive at the

projection and subsequently examine the validity and accuracy of the

forecast value through some statistical tools. Whether the forecast value

based on secon

dary data on some specific variables and using some

statistical techniques will be sufficient to rely upon or he should also use

some other methods of demand forecasting.

Ajay posed this question to himself and did try out other methods also under

the con

straints such as time and budget he had at his disposal and arrived at

the estimated forecast value. Subsequently, he sent a presentation on the

basis and process of demand estimation and forecasting to the Mumbai head

office and after some clarifications

sought by the Head office from Ajay, the

demand projection both in terms of volume and revenue became the part of

further planning of production involving cost, pricing, revenue, profit etc.

The Chairman's observations

Harsh Mariwala, the Chairman of Mar

ico observed that the company has

reported net profit growth of 7.2 percent year

-

on

-

year at Rs 183.2 crore for

the quarter ended March 2018, backed by double digit revenue growth. He

further observed that Parachute and Saffola witnessed a volume decline of

5

percent and 1 percent, respectively. However, Value Added Hair Oils

portfolio clocked 11 percent YoY volume growth. Therefore, he emphasized

the need to take measures to see that both the volume and revenue growth of

parachute and Saffola grows in the y

ear 2019

-

20 and asked the production

and marketing division to chalk out a business plan for both the products in

general and parachute coconut hair oil in particular in western region in the

backdrop of demand projections, value as well as volume, the man

agement

has already approved.

The Business Plan and Strategy:

Putting their heads together Subsequent upon Chairman's observation, a

team comprising of Mr. Saugata Gupta, the MD and the production,

marketing and finance heads with their team came into ac

tion to chalk out

the strategy. They deliberated upon the following points.

-

4

Should prices of different sizes of packs right from 45ml to 1

-

liter pet jar of

Parachute hair oil be increased or not.

-

If price is not to be increased what kind of non

-

price

factors it should

consider to take on its rivals like Godrej, HUL, ITC etc. so that the desired

growth in the volume of Parachute hair oil leading to achieve the demand

forecast both value wise and volume wise is achieved?

-

The total spent on advertisin

g and promotions (selling costs) by the

company was Rs 659 crore in 2018

-

19 and generally the company increases

the selling costs by 10% every year. Should it cut down the selling costs

somewhere else and increase it on the promotion of Parachute?

-

What o

ther cost components should be cut and the savings from the cuts

should be diverted to drive the sales volume of parachute up?

-

Can some product innovations be brought about?

-

Can the production technology be changed by keeping the labour constant

and

capital (machine and technology) variable?

Production Planning

Having arrived at the demand projections both in terms of volume and sales

turnover, the Production Manager looking after the production of Parachute

brand coconut hair oil was asked to prepa

re a business plan together with the

Head Marketing based for the year 2019

-

20 incorporating various

components of operating expenses, pricing of different sizes of packs right

from 45ml to 1

-

liter pet jar, discounts, net profit, break

-

even point both in

t

erms of volume and sales revenue, Internal rate of return and optimum level

of labour input to be employed while achieving least cost combination and

optimum level of output and various marketing strategies