Rationale
East Asia Trading is a firm based in Mumbai, which exports fruits and vegetable to the Middle East. It is operated by the ABC system of inventory control. It is one of the dominant players in the market. Part of the Raw Vegetables and fruits usually gets wasted due to Fluctuating demand in the Middle East market. Hence, they are considering to invest in Food processing facilities so that the Vegetables and fruits, otherwise wasted can be used efficiently to develop a new business of processed food by adding value to it.
Anticipated limitations and reasons
S.NO | ANTICIPATED LIMITATIONS | REASONS |
---|
1. | Availability of Owner despite many appointments | Touring and busy schedule |
2. | Interviews with Indian Managers | Provided a very basic information structure only |
3. | Getting final accounts | confidential |
4. | Interviewing the customer base in Oman and Dubai | Poor response only |
5. | Interviewing the retail outlets in Oman and Dubai | Language problems |
Figure 1 - Table On Anticipated Limitations And Reasons
DATE (2018) | ACTIVITIES |
---|
Jan-Feb | Brainstorming and selecting a research topic. |
March-May | Drafting and submitting the research Proposal. |
June-July | |
August | |
September- October | |
November | |
Figure 2 - Table On Action Plan
Introduction
East Asia Trading is a firm based in Mumbai, which exports fruits and vegetable to the Middle East countries such as Oman, Bahrain, UAE and Qatar. The Kallatra Parivar operates it. It is one of the dominant players in the market. Its head office is based in Mumbai and has many other offices in the Middle East. Their raw house is also based in Mumbai. Part of the Raw Vegetables and fruits usually is wasted due to Fluctuating demand in the Middle East market. Hence, they are considering investing in Food processing facilities so that the Vegetables and fruits, otherwise wasted can be used efficiently to develop a new business of processed food by adding value to it.
It is very important for a company in the primary sector to diversify to the secondary sector to reduce risk and grow. The prospect of food processing plant is to use the left out fruits and vegetables. The left out raw material will be used as raw materials for food processing, so that that the cost of wastage can be saved and used efficiently. This would prove as an expansion strategy for the company to spread the risk.
Therefore, Should East Asia Trading expand the business by investing in food processing facilities?
Methodology
The study will be based on primary data. Several sources will be used for data collection such as interviewing the stakeholders, review and suggestion from the customers.
Main results and findings
East Asia Trading a leader in the export of superior quality fresh fruits and vegetables from Mumbai. They cater to retailers, importers, wholesalers and distributors in more than 40 countries, majorly in the Middle East countries, regularly, for twenty years. They are appreciated by their clients for their ‘reliable service’ and ‘attention to detail’. They have offices in Oman, Bahrain and UAE. It is very important for a company in the primary sector to diversify to the secondary sector to reduce risk and grow.
Fishbone analysis
Fish Bone Analysis is used to study the cause and effect relationship between factors to arrive at a decision.
Investment appraisal
Year | Cashflow | Cumulative cash flow |
---|
0 | 40,00,000 | |
1 | 800,000 | 800,000 |
2 | 9,60,000 | 17,60,000 |
3 | 12,00000 | 29,60,000 |
4 | 13,80,000 | 43,40,000 |
5 | 15,18,000 | 58,58,000 |
Figure 8 - Table On Investment Appraisal
Gross profit ratio
Gross Profit Ratio = \(\frac{Gross\ Profit}{Net\ Sales\ (Net\ revenue\ from\ opeRatios)}\times\)100
Gross Profit = \(\frac{216816.60}{3408944.32}\times\) 100 = 6.36%
Net Profit ratio
Net Profit Ratio = \(\frac{ Net\ Profit }{Sales\ (Revenue\ from\ opeRatios)}\times\)100
Net Profit = \(\frac{43763.86}{3408944.32}\times\)100 = 1.28%
Current ratio
Current Ratio = \(\frac{Current\ Assets}{Current\ Liabilities}\)
Current Assets = \(\frac{975581.71}{387458.30}\)
= 2.51 times a very sound ration as its able to meet its short term debts.
Liquidity ratio
Liquidity Ratio = \(\frac{Liquid\ Assets}{Current\ Liabilities}\)
\(\frac{= 143235.68}{387458.30}= 0.369 \times\)
Not at all sound position. Make arrangements to recover the dues under APEDA and VKGUY as early as possible.
STEEPLE of miidle east
STEEPLE Analysis is an indispensable tool for strategic management decision making. EAT management can use this tool for deciding on launching the processed food at a better quality and cheaper cost,in the Middle East Countries, where its currently exporting fresh fruits and vegetables.
STEEPLE ANALYSIS includes a cross section analysis of the following external environmental factors which can affect the decision of EAT-
Conclusion and recommendations
In the light of the above analysis, I would recommend ETA to enhance its growth prospects by stepping in to food processing unit. As the land is already available and the existing machineries are operating in 80% capacity only, hence there is scope for further expansion. However, the following recommendations are noteworthy-
- Getting proper approval for renting cold storages provided by the Governmentof India.
- Also, Obtaining proper sanctions and approval from the law department of the concerned country in Middle East/ GCC.
- The International Standards for Quality Control and accreditation.
- Funds arrangement from Banks and the repayment terms.
- Training and skills upgradation by the staff for hygiene and preserving shelf life of the produce.
- The strong well established brands already existing in India and abroad.
- EAT has to take immediate and strong measures to get the amounts of refund under APEDA and VKGUY to get a better cash supply in hand to meet working capital requirements easily.
Hence, as a final note it is advised that ETA can think of growth by diving in food processing unit but should take up on a small scale operations only. Further, this is only a basic research done from my end. ETA should undertake a much elaborate and deep market research from their end to take a final decision.