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Group Members : Mukesh Agrawal 10FN-062

Pankaj Gaur
Prateek Shah Prateek Jain Nipun Gupta Rajesh Dutta Nishant Maheswari

10IB-045
10FN-133 10FN-132 10IB-043 10DM-119 10FN-072

Established in Taiwan in 1983 started producing PVC bathtub covers 1988 for export to Japan PRUL is SG Mark(1996) and ISO 9002(2000) certified. Established its own R & D department in 2001 Lately PRUL forayed into plastic-wood like products contributing to Global Environment Conservation effort. Honoured with Europe Award in Paris in 2000 for product and service quality excellence.. Credited with Japans Rising Star Award for outstanding performance in Japanese market by small and medium size importers in 2001 Globally recognized Company

Strive for innovation in its product design and production process in order to build customer satisfaction

Roadmap to success
Use the most advanced technology Maintain very high standards of product quality Understand customer needs Create new ideas Launch and promote new ideas Build awareness among customers to attract them

PRULs product line up consists of


Doors(folding, bi-fold, bypass and folding shower doors) Bathtub covers

Louver panels
Vertical blinds Wood like venetian blinds Extruded plastic foam products

Unique product manufactured especially for Japanese market Reason- Product fits into Japanese lifestyle and their commitment to save energy. Market was very mature by 2001 & no significant growth was expected. Murakami Major players in market:
o Murakami Industrial Co. Ltd. o Nakajima Industrial Co. Ltd. o Takahashi o Nakai o PRUL

Market Share

Nakajima

Takahashi

Manufacturers

Distributors

Retailers

End Consumers

Business to Business Model

Focus only on distributors


Savings in advertising cost and sales effort Consumer purchase habits influenced by advertising & promotional program taken up by distributors

Distributors

Strong relationship between manufacturer and distributor Distributors are eyes and ears of PRUL for market survey and new trends

Retailers

Enjoys high profit margins Loyal to PRUL

Consumers

Nearly every Japanese Purchases based on functionality and price

Marketing activities focused on distributors.

Consistently high quality and innovative products.


Flexible pricing strategy according to market needs and

competitors.

Focus on managing customer relations(distributors).

Research started from a single product sample received from ABE.

R & D focused on bathtub covers.


Focus on improving production efficiency and reducing costs while maintaining high quality standards.

Developed products registered with PRULs own brands and patents.

Main focus for bathtub covers was to automate the production process.

Operators for production line and bath tub lines were

extensively trained in technical knowledge.


QC processes rigorously observed at all stages of production. Of all the products bathtubs required most labor factor which is high in Taiwan.

Quality inspection visits by distributors and retailers.

Training sessions were conducted for all the employees twice

a month.

Based on historical experience PRUL had developed learning curves for every production stage.

No plans to layoff any employee from taiwan factory even if it expand in china too, thus putting great emphasis on employee

morale.

ABE Industrial Co. Ltd.


o Initially ABE had manufactured its own bath tub covers but over the 10 year relationship with PRUL had all share of its business now.

Takahashi Busan Co. Ltd.


o 2nd largest customer after ABE, currently bought about 25% from PRUL and the rest produce in-house. Over the course of time they decided to invest in a new production facility utilizing PRULs core competency of innovation with preferred location as china.

Nakai Industrial Co. Ltd.


o 3rd largest customer after the above two, purchased bath tub covers from PRUL as well as producing some inhouse.

Distributors

In House Manufacturing facility YES YES YES (but not significant)

%age share (in PRULs bathtub production) 32.6 % 18 % 39.33 %

TAKAHASHI NAKAI ABE

High labor cost


o Chinese labor costs one-fifth o Competitors have setup production facility in China

Not Automated process


o Higher Production cost

Improve production efficiency Almost full capacity utilization


o Average cost of production rises

High quality expectation Market is stable

Objective : To reach 30% market capitalization from 15%


o Double up capacity in next 3 years

Strategy
o Increase business from its major customers o Add new distributor customers o Address B2B marketing challenges

B2B marketing strategy o To participate in international award winning activities o Develop credentials and attract more customers o Retailers: Products are selected on functionality first and later by price. o Consumer: Availability on retail store and not brand sensitive Opportunity in China o Save import duty of 3.9% o Overall differential saving:13.5%(Excluding Import duty) o With this PRUL can provide better pricing or increase margin. o Tap growing Chinese urban market in future

Reducing production costs of bathtub covers

Jointly establishing factory in China


Exclusive use for bathtub covers production Exclusive distributor : Takahashi

1.

Whether to accept Takahashis proposal

2.
3.

Where to set up the factory in China


Whether to establish direct contacts with retailers or to go for other distributors

4.

Should they manufacture only bathtub covers or other products as well

5.

Pricing of its products in view of the potential cost savings

PRUL decides to do nothing , foregoes this investment opportunity and expands as needed in Taiwan on its own. Cons associated with Option 1:-

1.PRUL would loose many cost conscious customers as clearly the cost of producing in China in quite less compared to Taiwan. 2. Takahashi may venture up with some other manufacturer and PRU may finally loose business with Takahashi also. 3. PRUL is looking for expansion and increasing its sales, the only way to do that in the present scenario is to lower down the costs and target competitors customers.

Hence Option 1 doesnt go well at all with the Strategy that PRUL is looking forward to.

Invest with Takahashi in building a new factory in China to produce bath tub covers exclusively for Takahashi, and share profit based on investment by each party.

Takahashi would shift its entire bathtub cover production (currently 15% of market) to this plant and hence PRUL would gain the extra 15% without any marketing effort. Investment in the JV 51/49 with majority belonging to PRUL Hence lesser risk involved. This would strengthen its relationship with Takahashi. PRUL would not be able to sell the bathtub covers produced in China Plant to Takahashis competitors such as Nakai. The opportunity to capture New Customers would be more constrained in this case. PRUL would continue to use its Taiwan Plant for producing bathtub covers for ABE, Nakai and other distributors.

Hence we see that if PRUL goes ahead with JV:Total Investment TW$20 million with Plant production capacity 20% of total market

Year 1 (10,835,400) Year 2 - (7,250,000) Year 3 - (678,400) Hence a total of about TW$ (678,400) After three years.

PRUL establishes its factory with 100% ownership in China

New production facility Customers Save 3.9% on import duty Attract new distributors Greater returns than sharing investment with Takahashi PRUL can sell bathtub covers at same prices thus increasing profits Political issues of owning factory by Taiwanese company more as compared to that of Japanese company

Hence we see that if PRUL goes ahead with its own production facility:Total Investment TW$25.8 million with Plant Production Capacity 30% of total market

Cumulative Cash Flow:Year 1 (10,484,400) Year 2 - (1,270,800) Year 3 - 11,155,800 Hence a total of about TW$ 11,155,800 After 3 years

Particulars
Depreciation Gross Margin Gross Margin %

Year 1
601800 5508000 27

Year 2 1530000
601800 8262000 27

Year 3 1530000
601800 11016000 27

Total Investment 7548000

Income After Taxes


Annual Cash Flow

1420146
(5526054)

2756754
1828554 (3697500)

4279716
3351516 (345984)

Cumulative Cash (5526054) Flow

Particulars
Depreciation Gross Margins Gross Margin % Income After Taxes Annual Cash Flow

Year 1
1680000 23200000 29 7635600 (10484400)

Year 2 3000000
1680000 29000000 29 10533600 9213600 (1270800)

Year 3 3000000
1680000 34800000 29 13746600 12426600 11155800

Total Investment 19800000

Cumulative Cash (10484400) Flow

3 cities to consider : a) Shanghai b) Guangzhou c) Shenzhen

Feature SEZ
Transportation Infrastructure International Trading Hub Low Labor Costs

Shanghai Yes
Yes Yes Yes

Guangzhou Yes
No No Yes

Shenzen Yes
No No Yes

Bathtub market is already very mature and scope for further

growth is less

Future expansion plans in Shanghai or other markets require them to look at newer products as bathtubs are not as popular in every market as it is in Japan

Long-term interests

Concentrating on distributors has enabled it to maintain

excellent relationships with distributors

Establishing direct contacts with retailers will lead to additional expenses in the form of advertising costs and marketing effort

Distributors are the strongest link in the supply chain

Relationship Management

Marketing channel
Effect of demography Strategic planning Positioning of product and its sustainability through innovation and customer satisfaction.

International business opportunities and challenges

Thank You

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