situation analysis - seller perspective

[B2B Marketing Assignment - Seller]Seller Perspective

2014

Prajakta Talathi

SP Jain School of Global Management – Contemporary Marketing Management

B2B Marketing Assignment - Seller

Table of ContentsSituational Analysis................................................................................................................................2

5C Analysis.........................................................................................................................................2

Company........................................................................................................................................2

Competitors...................................................................................................................................2

Customers......................................................................................................................................2

Collaborators.................................................................................................................................3

Climate..........................................................................................................................................3

SWOT Analysis...................................................................................................................................3

Strength.........................................................................................................................................3

Weakness......................................................................................................................................3

Opportunity...................................................................................................................................3

Threats...........................................................................................................................................3

BATNA...................................................................................................................................................3

Assumptions......................................................................................................................................3

Calculations.......................................................................................................................................4

Possible Minimum Price........................................................................................................................4

Assumptions......................................................................................................................................4

Calculations.......................................................................................................................................4

ZOPA......................................................................................................................................................5

Assessment of Possible Prices...............................................................................................................5

Scenario Based Calculation................................................................................................................5

Prajakta Talathi – GSEP13CMM031 Page 1


Situational AnalysisThe situational analysis can be done by performing 5C Analysis and SWOT Analysis.

5C Analysis5C Analysis is done to analyse the market environment and internal and external (micro and macro environment) analysis.

CompanyMahek Masala Products Pvt. Ltd. Deals in trading and processing of specialised spices especially from Kerala, Spice Capital of India. Mahek Masala is an established and reputed company and is present in the spice market since many years. The last year turnover was INR 120 Crores with the purchase of only INR 110 crores.

Mahek Masala has recently obtained 1000 kilograms of high quality raw cinnamon bark batch. Cinnamon once cleaned from impurities will become a rare and premium quality product. The floor price of the product is INR 360. Cinnamon can be used to prepare sweets, canned baby product and Ayurvedic medicines etc.

Mahek Masala deals only with premium quality products and not with commonly used second-grade cinnamon powder. This is a differentiating factor of Mahek Masala.

CompetitorsCompetitors generally deal with second-grade cinnamon powder which is used widely. The market price of these products is INR 320.

CustomersSince Mahek Masala deals only with premium quality products and not with commonly used second-grade cinnamon powder, Mahek Masala caters to a very niche segment of customers.

The 2 potential customers are:

Marex Pharma Ltd. Market leader in baby-food segment Possesses good market reputation Offered to buy 700 kilograms of cinnamon at INR 390 First time customer

Offshoot Intermediaries Limited Diversified pharmaceutical company Family run enterprise Employees with smart market sense Indicated to buy the entire 1000 kilograms of cinnamon product Better payment terms than Marex Pharma Not in good terms with current government due to quality problems in one of its

drug formulation



CollaboratorsSuppliers mainly belong to Kerala and provide excellent quality of cinnamon and other spices.

Generally Mahek Masala deals directly with its customers.

ClimateGovernment is soon to issue an ordinance to mandate the quality of ingredients to be used in the baby foods. Also a price subsidy of 10% will be granted to baby-food manufacturers who will be using the high-grade cinnamon powder.

SWOT Analysis

Strength Sells only premium quality spices Well established and reputed company Last year turnover was INR 120 Crores with the purchase of only INR 110 crores

Weakness Most users tend to use second-grade products

Opportunity Government to issue an ordinance to mandate the quality of ingredients to be used in the

baby foods A price subsidy of 10% will be granted to baby-food manufacturers who will be using the

high-grade cinnamon powder 2 potential customers:

1. Marex Pharma Ltd. – Offered to buy 700 kilograms of cinnamon at INR 3902. Offshoot Intermediaries Limited – Indicated to buy the entire 1000 kilograms of

cinnamon product

Threats Shelf life of premium quality cinnamon is only 3 weeks Floor price of cinnamon is INR 390 whereas those of competitor’s second-grade cinnamon

powder is INR 320

BATNA

AssumptionsThe following assumptions are considered:

Cost of manpower resources Cost of transportation Cost of maintaining the inventory Cost of selling



CalculationsThe Best Alternative to a Negotiated Agreement would be calculated as:

No. of Kilograms Price per Unit Total PriceCost of manpower resources (assumed) 1000 3 3000Cost of transportation (assumed) 1000 2 2000Cost of maintaining inventory (assumed) 1000 2 2000Cost of selling (assumed) 1000 3 3000Purchasing Cost 1000 290 290000Processing Cost 1000 70 70000Total COGS 1000 360 370000Selling Price to Marex Pharma 700 390 273000

The shelf life of cinnamon is 3 weeks only, in case the product does not get sold before 3 weeks, it will incur a loss of INR 360,000.

In case 700 kilograms of cinnamon are sold to Marex Pharma at INR 390 per kilogram, loss incurred will be 360000 – 273000 i.e. INR 88,000.

To break even, rest of the 300 kilograms of cinnamon can be sold at minimum of 88000/300 = INR 293.33. This price is below the price of second-grade cinnamon, hence there are chances that the remaining 300 kilograms of cinnamon can be sold at good price. Also since the quantity to be sold it less, a big customer is not required; few small scale customers will also suffice.

Possible Minimum Price

AssumptionsTo determine the minimum price the following assumptions are considered:

Cost of manpower resources Cost of transportation Cost of maintaining the inventory Cost of selling

CalculationsCalculations (per kilogram):

Cost of manpower resources (assumed) 3Cost of transportation (assumed) 2Cost of maintaining the inventory (assumed) 2Cost of selling (assumed) 3Purchasing Cost 290Processing Cost 70

Total 370

From the above calculations, it can be seen that the possible minimum cost is INR 370 per kilogram.



ZOPAThe pitching price of cinnamon powder decided by the Mahek Masala is decided as INR 800. Hence the ZOPA (Zone OF Possible Agreement) lies between INR 370 and INR 800.

These prices are based on calculations only. The subjective aspect of selling premium quality cinnamon can also be considered and accordingly the minimum price and ZOPA can be calculated.

The other factors to be considered are:

Government to issue an ordinance to mandate the quality of ingredients to be used in the baby foods

A price subsidy of 10% will be granted to baby-food manufacturers who will be using the high-grade cinnamon powder

Offshoot Intermediaries Limited – Not in good terms with current government due to quality problems in one of its drug formulation; hence now will need to purchase only premium quality products

Considering these aspects, Mahek Masala should try to sell excellent, rare and premium quality cinnamon at higher prices.

Assessment of Possible Prices

Scenario Based CalculationBest Case Average Case Worst Case

Selling price per kilogram 800 585 370Profit per kilogram 430 215 0Total Profit (1000 kilograms) 430000 215000 0

*The above prices are in INR

Based on the above calculations, anything between average price and best price will help Mahek Masala get a better deal and make good profits.


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