section b group 7 coma

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THAKKER STORES-Cost Accounting and Business Analysis

By,

Group 7Section B

Anagh Agrawal- 2011068

Gaurav Kumar Dani-2011078

Prajakta Athavale- 2011098

Shruti Chodankar- 2011108

Tanmoy Chakravarty - 2011118

Vishal Pathak- 2011122


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Contents

Background ............................................................................................................................................. 3

Product Mix: ............................................................................................................................................ 3

Distribution Strategy: .............................................................................................................................. 4

Market details: ........................................................................................................................................ 4

Customer Value:...................................................................................................................................... 4

Pricing Strategy: ...................................................................................................................................... 5

Price competitiveness of the products ............................................................................................... 5

Inventory Management: ......................................................................................................................... 6

Challenges Faced:.................................................................................................................................... 6

SWOT Analysis: ....................................................................................................................................... 7

CVP Analysis ............................................................................................................................................ 7


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Background

Thakker Stores was started in the year 2000 by Mr Manoj Thakker. He had prior experience in

retailing which dealt with general goods like cosmetics and other FMCG products. Over the years

they found their interest in wholesaling and distribution. The firm initially dealt with the distribution

of Eveready batteries and torches and now it deals with the distribution of Panasonic batteries and

torches. The store has one sales representative which is appointed by the Panasonic. Thakker Stores

has a sister concern Thakker Marketing which deals in Parle agro limited, Bajaj bulbs and tubes and

other wholesaling products of Procter & Gamble and Hindustan Unilever Ltd.

Their office is located in Vasco, which is one of the main cities in Goa. They have two warehouses

also located in Vasco which are used for storage purposes.

Product Mix:

Thakker Stores deals with the distribution of Panasonic batteries and Torches. For each of these

categories, following are some of the products available:

Batteries

AA

AA metal

AAA

D size

C size

AA alkaline panasonic

AAA alkaline

Torches

Super light torches

Novino flash light

Super glow light


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Distribution Strategy:

Panasonic Ltd. has a depot of its own in Panjim, where, all the transactions between thecompany and the distributor take place

From here, the goods are supplied to the distributors warehouse This replenishment of the inventory at the distributors end is done every 15 days The sales representatives go in the market every day in different areas to get the orders from

the retailers and wholesalers

Once they have collected the orders in their order form, the same is given to the distributor On the same day, the distributor makes the respective bills and loads the goods in his van On the next day, these goods are supplied to the customers

Market details:

In case of Panasonic batteries, there are few competitors in the market selling batteries of other brands

like Ever-ready, Nippo, Godrej, Duracell.

Their products and pricing is almost the same as Panasonic but, sales of Panasonic batteries is higher

than the others since they have better supply with on time delivery, better offers and good customer

relations.

Customer Value:

For any trade to take place, there are some customer expectations that need to be taken into

consideration. In case of Thakker Stores, we were able to identify some of these values which they

think is what their customers look for while purchasing the goods:

Good quality Proper supply Credit limit Cash discounts in case of immediate cash payments Special offers Higher profit margin


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In comparison to the other competitors, Panasonic being an international brand for many products,

ensures that the quality of their products are not only evenly matched with their competitors but are of

a superior quality at the same price.

Pricing Strategy:

Following are the pricing details for the batteries and torches that Thakker Stores deals with:

Cost in rupees

Product Lending cost Selling cost MRP

Batteries-

AA 5 6 9.5

AA metal 3.8 4.5 6

AAA 6.3 7.5 10

D size 10.5 12 15

C size 9.5 10.5 11.5

AA alkaline 22 26 32

AAA alkaline 22 26 32

Torches-

Super light torches 82 88 100Novino flash light 237 267 299

Super glow light 88 97 110

Note:

Lending costThis is the cost at which the supplier sells his goods to the distributor

Selling cost- This is the cost at which the distributor sells his goods to the retailer

MRP- This is the cost at which the retailer sells the product to the final customer

Price competitiveness of the products

The products are sufficiently price competitive in case of Thakker stores. For example, the non-

alkaline batteries are economical and the pricing is same as the ones that other brands have to offer. In

alkaline batteries, it competes with Duracell, which is equally priced but the setback in alkaline

batteries in relation to sales is that, it is not advertised properly and not many offers are provided as

they are priced high.


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An analysis of price to volume relationship at the market place:

On bulk purchases of items, trade discounts are offered of around 2-3%. For example, on purchase of

1 box of batteries, the cost to the retailer is Rs.600. But, on purchase of 10 such boxes, Rs.30 discount

is provided on each box. Sometimes, the supplier has some special offers too, especially duringfestive seasons where they offer higher margins and other incentives like gifts.

Special Schemes and Offers:

Schemes provided by Thakker Stores:

On purchase of 10 boxes of AA size batteries get one torch free Providing cash discounts for immediate cash payments

On purchase of one box of AA one strip freePanasonic Schemes:

Coupons inside the box offering prize money Sales target if achieved by any retailer, gifts are allotted Lottery system

Inventory Management:

A minimum level of inventory is always tried and maintained. Usually, after every 15 days, when it

reaches the minimum level, a new order is placed to its maximum level. In case of bulk orders, there

are chances of stock outs which can be met within a days time because the company has its own

Depot in Panjim-Goa.

Challenges Faced:

The distributor had to face a few issues when the Panasonic company took over the brandNovino because it was already an established brand. So when the name changed to Panasonic,

customers hesitated to buy the same

Another problem faced by them is that of stock outs. Stock-out loss occurs when there issome bulk order placed at the end of the business day for urgent delivery requiring the

distributor to provide the goods on the same day and the distributor is not able to supply the

same


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Sometimes, the company sales representatives quote the product at a lesser price just toincrease the sale. This leads to a lower profit margin to the distributor

Sometimes dumping of the products by the company happens to meet its targets. Here, thecompany sales rep tries to pressurize the distributor to purchase the goods who in turn, has to

work hard to sell the same to the retailers and might have to compromise on the profit

margins

SWOT Analysis:

The owners of Thakker Stores always try to stay ahead of the competition by analysing the market

situation and making the best out of their strengths which is primarily focused on customer value.

Following is an analysis of their practices:

Strengths:

The brand name is well known

The quality of service. For example, damages claimed are settled instantly.

The goodwill in the market

Timely delivery of goods as compared to the other competitorsWeaknesses:

Adherence to business principles which might lead to the customers going to competitor brands.

For example: More credit period offered by the competitors.

Opportunities:

Deal in wholesaling and distribution of other products

Introducing Panasonic products in the market against the competitor products and creating demand for

the same.

Threat:

The other competitors coming up with competitive but lower pricing for similar products

CVP Analysis

Total Variable Costs= 12, 93, 642


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Fixed Costs= 44, 193

= 10 %

In this case, the variable costs are really high which has led to a smaller contribution margin.

Since, the business model adopted by the distributor runs mainly on a variable basis, the amount of

costs directly related to the sales are higher. However, the distributor should try to reduce the

amount of variable costs so as to leave a greater margin for other fixed costs that will be occurred.

= 4, 41, 930

Breakeven point is the point at which gains equal losses. Breakeven point analyzes which

quantity or amount of sale of products will be most profitable to the business

= 13, 66, 799

Margin of safety is how much output or sales level can fall before a business reaches its

breakeven point.

The distributor enjoys a higher level of margin of safety. This means that even though sales

fall in the coming period by a margin, the distributor will be able to cover the variable costs incurred

by him and some portion of fixed costs.

= 0.96

High operating leverage magnifies changes in earnings so that small changes in sales lead to

earnings instability. Since we have a lower operating leverage, the proportion of changes in the

earnings stay stable with respect to the level of sales.
http://en.wikipedia.org/wiki/Outputhttp://en.wikipedia.org/wiki/Breakevenhttp://en.wikipedia.org/wiki/Breakevenhttp://en.wikipedia.org/wiki/Output


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Figure 1 - CVP Analysis

section b group 7 coma

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