SUMMER TRAINING PROJECT REPORTON

“STUDY OF WORKING CAPITAL MANAGEMENT IN CADBURY PVT.LTD”

ON

AT

SUBMITTED TO :-SUBMITTED TO :-JIWAJI UNIVERSITY GWALIORJIWAJI UNIVERSITY GWALIOR

FOR THE PARTIAL FULFILLMENT OFFOR THE PARTIAL FULFILLMENT OFBACHELOR BACHELOR OF BUSINESS ADMINISTRATIONOF BUSINESS ADMINISTRATION

2011-142011-14 SUBMITTED TO: - SUBMITTED BY:- MS. TANU KHARE ANUJ TIWARI (FACULTY GUIDE ) BBA V Semester

JAIN GROUP OF COLLEGES, GWALIOR

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DECLARATIONThis is to declare that the Summer Training Report has been Submitted by

me and being submitted in partial fulfillment of requirement for the award of

the Degree of Master of Business Administration JAIN GROUP OF

COLLEGE, GWALIOR from Jiwaji University Gwalior The work

has not been submitted by me anywhere else for the award of any degree or

diploma. All source of information are based on my on training experience

and learning.

Date: ANUJ TIWARI

Place: BBAV SEMESTER

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GUIDE CERTIFICATE

This is to certify that MR. ANUJ TIWARI student of BBA V Semester of JAIN GROUP OF COLLEGE,

GWALIOR has successfully completed his Summer Training dated from 45 days and this report is submitted by Him for the completion of the training requirement under my guidance and supervision.

Date : MS. TANU KHARE

Place:

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ACKNOWLEDGEMENT

It is great pleasure for me to put on record my appreciation and

gratitude towards Placement and Training Coordinator JAIN

GROUP OF COLLEGE, GWALIOR My special thanks to my

respected faculty MS. TANU KHARE for his valuable support

and suggestions for the execution of Summer Training. I thank him

for the right direction and providing inputs for the completion of

my summer training project.

Date: ANUJ TIWARI Place: BBAV SEMESTER

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CONTENTS

Page no:-

CHAPTER 1 HISTORY OF THE COMPANY 1-25

CHAPTER -2 CADBURY’S PRICING 26-28

CHAPTER -2 OBJECT OF THE STUDY 29-30

CHAPTER -4 WORKING CAPITAL 31-35

CHAPTER -5RESEARCH METHODOLOGY 36-37

CHAPTER -6ANALYSIS & INTERPRETATION 38-57

CHAPTER 7FINDINGS 58-59

CHAPTER 8CONCLUSION 60-61

BIBLIOGRAPHY 62

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CHAPTER -1

HISTORY OF THE COMPANY

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HISTORY OF THE COMPANY

Cadbury has been synonymous with chocolate since 1824, when John Cadbury opened

his first shop, establishing a flourishing dynasty that today provides the world with many

of its favorite brands of chocolate.

Learn about the fascinating history of chocolate:

How cacao is the Mayan word for ‘God Food’; when and how chocolate was first

introduced to Europe; how ‘xocolatl – a bitter frothy drink, beloved by Montezuma-

made the transaction into food centuries later, how it’s reputation for heightening

pleasure made it the stuff of myth and legend.

Discover the history of Cadbury, from its social pioneering to the perfection of the

recipe for Cadbury Dairy Milk; first launched in 1905, and still a market leader today.

Find out all there is to know about making chocolate, and amaze yourself with the brand

stories and brand timeline that show how many Cadbury brands have been favorites since

the early 1900s

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When chocolate finally reached England in the 1650s, the high import duties on cocoa

beans meant it was a drink only for the wealthy. Chocolate cost the equivalent of 50-75

pence a pound (approximately 400g), when pound sterling was worth considerably more

than it is today. Gradually chocolate became more freely available. In 1657, London's

first Chocolate House was opened by a Frenchman, who produced the first advertisement

for the chocolate drink to be seen in London:

The history of Cadbury as manufacturers of chocolate products in Birmingham dates

back to the early part of the 19th century, when John Cadbury opened a shop in the centre

of the city, trading as a coffee and tea dealer. Soon a new sideline was introduced - cocoa

and drinking chocolate, which he prepared himself using a mortar and pestle. His lifelong

involvement with the Temperance Society led him to provide tea, coffee and cocoa as an

alternative to alcohol, believed to be one of the causes of so much misery and deprivation

amongst working people in Britain at that time.

Fashionable chocolate houses were soon opened where the people could meet friends

and enjoy various rich chocolate drinks, many of which were rather bitter to taste, while

discussing the serious political, social and business affairs of the day or gossiping

The Cadbury family were closely involved in the evolution of drinking chocolate.

From his grocery shop in Birmingham, where he sold mainly tea and coffee, John

Cadbury started preparing cocoa and drinking chocolate, using cocoa beans imported

from South and Central America and the West Indies. He experimented with a mortar and

pestle to produce a range of cocoa and drinking chocolates with added sugar.

By 1831 the cocoa and drinking chocolate side of the business had expanded, so he

rented a small factory in Crooked Lane not far from his shop and became a 'manufacturer

of drinking chocolate and cocoa'. This was the real foundation of the Cadbury

manufacturing business as it is today. The earliest preserved price list of 1842 shows that

John Cadbury sold sixteen lines of drinking chocolate and cocoa in cake and powder

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forms. Customers would scrape a little off the block and mix it with hot milk or water. A

solid chocolate for eating was introduced by John Cadbury in 1849, which by today's

standards wouldn't be considered very palatable.

In 1866 George Cadbury (John 's son) brought to England a press developed in Holland

by Van Houten. The press changed the face of cocoa and chocolate production, as it was

designed to remove some of the cocoa butter, enabling a less rich and more palatable

drink to be produced. There was no longer any need to add the various types of flour and

Cadbury's new cocoa essence was advertised as 'Absolutely pure...therefore Best'.

Established by Richard and George Cadbury, two Victorian businessmen with great

industrial and social vision, Bourneville Village is a story of industrial organization and

community planning covering well over a century. It embraces the building of a factory

in a pleasant 'green' environment (in stark contrast to the oppressive conditions of the

Victorian industrial scene), the enhancement of employees' working conditions and

overall quality of life and the creation of a village community with a balanced residential

mix (both employees and non-employees).

George Cadbury was a housing reformer interested in improving the living conditions

of working people in addition to advancing working practices. Having built some houses

for key workers when the Bourneville factory was built, in 1895 he bought 120 acres near

the works and began to build houses in line with the ideals of the embryonic Garden City

movement.

Motivation for building the Bournville Village was two-fold. George Cadbury wanted

to provide affordable housing in pleasant surroundings for wage earners. But as the

Bournville factory grew, local land increased in value and was ready to fall into the hands

of developers. The last thing the brothers wanted was that their 'factory in a garden'

would be hemmed in by monotonous streets.

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Dame Elizabeth Cadbury was involved in the planning of Bourneville with her

husband, George. Her memoirs tell us how these plans became reality:

"When I first came to Birmingham and we were living at Wood Brooke, morning after

morning I would walk across the fields and farmland between our home and the Works

planning how a village could be developed, where the roads should run and the type of

cottages and buildings.

Gradually this dream became reality, houses arose and many of the first tenants being

men in Mr Cadbury's Adult School Class - which met every Sunday morning at 8.00am

in Bristol Street - who had previously lived in the centre of the city and had never had a

garden. Also workers in the factory became tenants.

They too enjoyed their homes in the healthy surroundings, cultivating their gardens,

rewarded in many instances by splendid crops of apples from the belt of apple trees

which each tenant found at the bottom of his garden."

The consequent availability of cocoa butter led to the development of the smooth

creamy chocolate we know today.

Manufacturing Process

Cadbury makes a variety of chocolates for different purposes but the two main types

are Cadbury Dairy Milk, milk chocolate and Cadbury Bourneville plain chocolate.

The taste and texture of Cadbury chocolate are based on long traditions of expertise in

recipe and processing unique to Cadbury. Techniques are improving all the time and new

technology enables the whole process to be finely tuned to match evolving tastes and

preferences.

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Production starts at the Chirk cocoa factory, where the highest quality cocoa beans are

processed to produce cocoa mass containing 55% cocoa butter plus extracted cocoa

butter, the basis for all chocolate products.

When plain chocolate is made the 'mass' goes straight to the Bourneville factory in

Birmingham while the 'mass' for milk chocolate production is taken to the Cadbury milk

factory at Marl brook, Herefordshire, in the heart of English dairy country.

At the milk processing factory fresh liquid full cream milk is cooked with sugar and

condensed to a thick liquid. Cocoa mass is added, making a rich creamy chocolate liquid,

which is then evaporated to make milk chocolate crumb. As these ingredients are cooked

together the very special rich creamy taste of Cadbury chocolate is produced. 95,000

tonnes of crumb a year are produced at Marl brook to be made into chocolate at the

Cadbury chocolate factories at Bourneville, Birmingham and Somerdale, Bristol.

On arrival at the chocolate factory the crumb is pulverized by heavy rollers and mixed

with additional cocoa butter and special chocolate flavorings. The amount of cocoa butter

added depends on the consistency of the chocolate required: thick chocolate is needed for

molded bars, while a thinner consistency is used for assortments and covered bars.

In the UK up to 5% vegetable fat is added to compensate for variations in cocoa

butter, allowing the melting properties of the chocolate to be controlled to a precise

standard, and preserving the full taste and texture of the chocolate. Cadbury use carefully

selected vegetable oils similar in nature to cocoa butter: African Shea, Indian Sal and

Malaysian Palm oils are all part of the recipe.

Both milk and plain chocolate, which has had sugar and cocoa butter added to the mass

before pulverizing, undergo the same final special production stages, producing the

famous smoothness, gloss and snap of Cadbury chocolate.

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CADBURY PRODUCTS

Cadbury Perk

A pretty teenager; a long line, and hunger! Rings a bell? That was how Cadbury launched

its new offering; Cadbury Perk in 1996. With its light chocolate and wafer construct,

Cadbury Perk targeted the casual snacking space that was dominated primarily by chips

& wafers. With a catchy jingle and tongue in cheek advertising, this 'anytime, anywhere'

snack zoomed right into the hearts of teenagers.

Raageshwari started the trend of advertising that featured mischievous, bubbly teenagers

getting out of their 'stuck and hungry' situations by having a Cadbury Perk. Cadbury Perk

became the new mini snack in town and its proposition "Thodi si pet pooja" went on to

define its role in the category.

As the years progressed, so did the messaging, which changed with changes in the

consumers' way of life. To compliment Cadbury Perk's values, the bubbly and vivacious

Preity Zinta became the new face of Perk with the 'hunger strike' commercial in the mid

90's.

In the new millennium, Cadbury Perk moved beyond just owning 'hunger' to a "Kabhi bhi

kaise bhi" position, because the urge for Cadbury Perk could strike anytime and

anywhere.

With the rise of more value-for-money brands in the wafer chocolate segment, Cadbury

Perk unveiled two new offerings - Perk XL and XXL.

The temptation to have more of Cadbury Perk was made even greater with the launch of

Cadbury Perk Minis in 2003 for just Rs. 2/-

In 2004, with an added dose of 'Real Cadbury Dairy Milk' and improved wafer', Perk

became even more irresistible. The product was supported in the market with a new look

and a new campaign. The advertisement spoke of the irresistible aspect of the brand, with

'Baaki sab Bhoola de' becoming the new mantra for Cadbury Perk.

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Did you know:

Cadbury Perk advertising has been a launch pad for Bollywood stars - Preity Zinta,

Raageshwari, Gayatri Joshi and Amrita Rao, were all Perk models before they made it

big on cinema screens.

Cadbury Five Star

Chocolate lovers for a quarter of a century have indulged their taste buds with a Cadbury

5 Star. A leading knight in the Cadbury portfolio and the second largest after Cadbury

Dairy Milk with a market share of 14%, Cadbury 5 Star moves from strength to strength

every year by increasing its user base.

Launched in 1969 as a bar of chocolate that was hard outside with soft caramel nougat

inside, Cadbury 5 Star has re-invented itself over the years to keep satisfying the

consumers taste for a high quality & different chocolate eating experience.

One of the key properties that Cadbury 5 Star was associated with was its classic Gold

colour. And through the passage of time, this was one property that both, the brand and

the consumer stuck to as a valuable association.

Cadbury 5 Star was always unique because of its format and any communication

highlighting this uniqueness, went down well with the audiences. From 'deliciously rich,

you'd hate to share it' in the 70's, to the 'lingering taste of togetherness' & 'Soft and

Chewy 5 Star' in the late 80's, the communication always paid homage to the product

format.

More recently, to give consumers another reason to come into the Cadbury 5 Star fold,

Cadbury 5 Star Crunchy was launched. The same delicious Cadbury 5 Star was now

available with a dash of rice crispies.

Cadbury 5 Star & Cadbury 5 Star Crunchy now aim to continue the upward trend. This

different and delightfully tasty chocolate is well poised to rule the market as an extremely

successful brand.

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Cadbury Dairy milk

The story of Cadbury Dairy Milk started way back in 1905 at Bournville, U.K., but the

journey with chocolate lovers in India began in 1948.

The pure taste of Cadbury Dairy Milk is the taste most Indians crave for when they think

of Cadbury Dairy Milk.

The variants Fruit & Nut, Crackle and Roast Almond, combine the classic taste of

Cadbury Dairy Milk with a variety of ingredients and are very popular amongst teens &

adults.

Recently, Cadbury Dairy Milk Desserts was launched, specifically to cater to the urge for

'something sweet' after meals.

Cadbury Dairy Milk has exciting products on offer - Cadbury Dairy Milk Wowie,

chocolate with Disney characters embossed in it, and Cadbury Dairy Milk 2 in 1, a

delightful combination of milk chocolate and white chocolate. Giving consumers an

exciting reason to keep coming back into the fun filled world of Cadbury.

Our Journey:

Cadbury Dairy Milk has been the market leader in the chocolate category for years. And

has participated and been a part of every Indian's moments of happiness, joy and

celebration. Today, Cadbury Dairy Milk alone holds 30% value share of the Indian

chocolate market.

In the early 90's, chocolates were seen as 'meant for kids', usually a reward or a bribe for

children. In the Mid 90's the category was re-defined by the very popular `Real Taste of

Life' campaign, shifting the focus from `just for kids' to the `kid in all of us'. It appealed

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to the child in every adult. And Cadbury Dairy Milk became the perfect expression of

'spontaneity' and 'shared good feelings'.

The 'Real Taste of Life' campaign had many memorable executions, which people still

fondly remember. However, the one with the "girl dancing on the cricket field" has

remained etched in everyone's memory, as the most spontaneous & un-inhibited

expression of happiness.

This campaign went on to be awarded 'The Campaign of the Century', in India at the

Abby (Ad Club, Mumbai) awards.

In the late 90's, to further expand the category, the focus shifted towards widening

chocolate consumption amongst the masses, through the 'Khanewalon Ko Khane Ka

Bahana Chahiye' campaign. This campaign built social acceptance for chocolate

consumption amongst adults, by showcasing collective and shared moments.

More recently, the 'Kuch Meetha Ho Jaaye' campaign associated Cadbury Dairy Milk

with celebratory occasions and the phrase "Pappu Pass Ho Gaya" became part of street

language. It has been adopted by consumers and today is used extensively to express joy

in a moment of achievement / success.

The interactive campaign for "Pappu Pass Ho Gaya" bagged a Bronze Lion at the

prestigious Cannes Advertising Festival 2006 for 'Best use of internet and new media'.

The idea involved a tie-up with Reliance India Mobile service and allowed students to

check their exam results using their mobile service and encouraged those who passed

their examinations to celebrate with Cadbury Dairy Milk.

The 'Pappu Pass Ho Gaya' campaign also went on to win Silver for The Best Integrated

Marketing Campaign and Gold in the Consumer Products category at the EFFIES 2006

(global benchmark for effective advertising campaigns) awards.

During the 1st World War, Cadbury Dairy Milk supported the war effort. Over 2,000

male employees joined the armed forces and Cadbury sent books, warm clothes and

chocolates to the front.

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Cadbury's big Bytes

Kuch meetha ho jaye suggests Cadbury India, its brand ambassador Amitabh Bachchan

smiling down the hoardings lined along Mumbai's Marine Drive right down to the

company's corporate head office at Mahalakshmi. While the chocolate major is waiting

for Diwali to see a turnaround in its business after the worm’s controversy, at the moment

it's all about driving growth for the category, which has seen a decline since the first

quarter of this year.

Being the market leader in chocolates with a 70 per cent share, the company has

attempted to stretch the boundaries within chocolate confectionery. It has also been

adventurous in unleashing a brand new category within chocolate early this year.

Introducing the concept of sweet snacking, it launched Cadbury Bytes in the south with

the positioning `Snacking ka meetha funda.' The product is a crunchy wafer pillow with a

choco-cream centre and is being rolled out nationally.

Explaining the need to introduce this new category, Bharat Puri, Managing Director,

Cadbury India, says, "While we were sure of our core competencies, there was need for

innovation to deliver double-digit growth. What we found was that we were under-

represented in the area of snacking on the go and that there was a need for a light crunchy

snack." While entry into salted snacks was ruled out, sweet snacks were the obvious

choice, and Bytes is unique to the chocolate major's Indian portfolio.

Getting the right product and packaging was a challenge for the company. It has sub-

contracted the product to get the volumes and is poised for a national launch. Adds Puri,

"After all this was the first category anywhere in the world that Cadbury was entering and

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we did not have the expertise. So the best way was to test-market the product and today

we find that it has already bagged five per cent of the chocolate market."

The company has no apprehensions of cannibalization of its chocolate brands. It believes

that while its chocolates are more of indulgence products, Bytes is about snacking when

one is hungry and can be treated as a snack in between meals.

In the past when Cadbury tried out a biscuit brand, Chocobix, there was fear about some

amount of cannibalization. After all, it was simply a biscuit coated in chocolate, and was

perceived to be another chocolate brand in Cadbury's portfolio.

Stresses Puri, "Cadbury Bytes is adjacent to chocolates and in the markets that we have

launched it, there has been no cannibalization. Chocolates is largely an indulgence

product while Bytes is about between-meals snacking. A product which is consumed

when one is feeling hungry or peckish."

Another thrust area Cadbury has been re-evaluating is confectionery. While growth rates

in this segment are healthier compared to chocolates, it has always been a difficult market

to crack. Cadbury's own experiences have led it to withdraw certain brands but now with

Warner's Lambert's international kitty under its fold, there are chances of reconsidering

the segment once again.

"Through the acquisition of Warner Lambert, there is a great set of brands already

available to us. We are still examining which are the right brands for the Indian market,"

says Puri. Cadbury has already identified Halls as the strongest brand in Warner

Lambert's portfolio and re-launched the brand early this year. Adds Puri, "Halls was not

doing well for a while so we re-launched it this year. When you have the existing assets,

it is necessary to get them right first. Halls is the first brand that we have revived and it is

now doing well."

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In April 2003, Cadbury India's foreign parent acquired Pfizer's interests in the

confectionery business for $4.2 billion. That included the Warner-Lambert product

portfolio, known best for Halls, Clorets and Chiclets. The acquisition is now poised to

become a growth area for Cadbury India, whose confectionery brands include Éclairs and

Googly. But instead of selling confectionery through its existing chocolate network,

Cadbury has set up an entirely new network.

While Halls has been revived with new packaging, there has been no change in the status

of its other brands. Chiclets had been discontinued long before it belonged to Cadbury

and Clorets continues to sell with a small franchise. But now Cadbury is looking closely

at Warner Lambert's gums portfolio (it is one of the world's largest gum manufacturers)

and is considering its viability for the Indian market. Sugarless gum brands such as

Dentyne Ice and Trident White have been known for their functional benefits worldwide

but steep pricing may be a deterrent to their entry into the country.

"The gum market has not done well in India. But gum has functional properties and is not

merely a breath freshener. We are now evaluating whether there is a market for them in

India and whether it is going to be worth our while," says Puri.

The confectionery market may be huge in volumes but making money on it remains a

tough task with its low margins. Governed by price points, one can sell at only at a Re 1

or 50 paise unit price. "The issue is not of garnering volumes but making money out of

those volumes. The offer should be one which can get you both top and bottom lines,"

states Puri. Having shifted focus from Googly, Cadbury has tasted success with its age-

old Éclairs which continue to bag almost 50 per cent of the market.

"There is scope in the market. Our Éclairs has been growing and this has been evident in

our past numbers," claims Puri. At the same time the sugar confectionery market is

highly competitive and it's all about finding the right consumer proposition and a

business model that can deliver both top line and bottom line growth.

In spite of the new categories being explored by Cadbury, its star brand remains Cadbury

Dairy Milk (CDM), which continues to corner almost 30 per cent of the chocolate

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market. It is followed by brands such as 5-star, perk and Gems. Each of these has been

revamped over the years to generate excitement for the category. For instance, recently

Perk was rejuvenated as a crunchier wafer while CDM came up as a white-and-brown

variant in the market.

"The chocolates category thrives on excitement. It's all about giving the consumer a

choice and taste which they enjoy," adds Puri. For instance, in beverages, in spite of its

malted food brand Bournvita, Cadbury decided to introduce a milk additive brand such as

Delite, just to give its consumers the real taste of chocolate. Delite has added flavors such

as strawberry and mango and is not expected to encroach upon Bournvita’s shares.

According to Puri, "There is still a large section of people who do not add anything to

milk. This will apply to children for whom milk is a problem and having an additive will

make it a pleasurable experience."

Making changes in its distribution network, Cadbury split its sales and marketing team

between its mass (confectionery) and core brands last year. "Chocolates needed to get

retailed at larger and better outlets while all the products below Rs 3 needed a different

distribution network," says Puri. Today Cadbury's distribution network reaches out to six

lakh outlets each for its confectionery and chocolate brands.

With the worm’s episode behind it, there are other issues bothering the company,

especially that of the rising input costs of cocoa, sugar and milk. Although Cadbury has

been able to maintain prices, it is still grappling with the upward trend in prices for its

basic raw materials. But its challenge remains that of growing the chocolate market in

spite of the odds. Posting a turnover of Rs 729 crore last year, Cadbury is waiting for

Diwali to make a turnaround for both itself and the category which has been through

troubled times.

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PRICING BATTLE

Cadbury's efforts to exploit untapped potential and reach every pocket have a lot to do

with outwitting Nestle in the war of the wafers.

Its latest annual report states: `Cadbury is all set to satisfy untapped potential. With brand

launches, re-launches and new products, the thrust is on reaching every individual,

satisfying different palates and being within varying budgets. Basing its operations on

this vision, Cadbury is charting a new course of action. With the product, place, price and

promotion synergies working in tandem, it won't be long before we find a Cadbury in

every pocket.'

This may sound like a reiteration of its earlier claims, but in its heart of hearts, Cadbury

India, in spite of being the leader in the chocolate market, is still trying to settle scores

with Nestle in the wafer-coated chocolate market, where it has yet to grab a dominant

share.

Creating new launches and extensions may be an ongoing exercise for the Rs 511-crore

chocolate multinational, but lately it has set its sights on the Swiss food giant, Nestle,

which is going through a rough patch with its flagship brand, Kit Kat.

In fact, the wafer chocolate war started in 1995 when both Perk (from Cadbury) and Kit

Kat (from Nestle) were launched. It had Cadbury running for cover to protect its largest

brand, Cadbury's Dairy Milk, which it did by extending its positioning on the adult

platform. The power-packed campaign from HTA (`Have a Break') did wonders for the

Kit Kat brand at that point of time, but its premium pricing proved to be the main hitch,

which has seen its volumes dipping from 15 per cent in 1997 to 9.5 per cent this June, as

per ORG-Marg figures.

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Despite its share of the volumes coming down, Kit Kat still has a dominant share in the

market while Cadbury's Perk has seen steady shares between 1997 and 2000 with present

volume shares at 8.8 per cent, as per ORG-Marg figures. Perk has also stretched itself to

variants such as Mango, Strawberry and Mint to generate some excitement around the

brand.

So, while Kit Kat has taken a battering with its premium pricing and image, Cadbury

India is taking this chance to put its might behind its wafer category, with Perk and the

newly-launched Milk Treat, to beat Nestle in this category.

But then, the price points in the wafer chocolate category were redefined by Nestle when

it launched Munch at Rs 5 last year. Cadbury had to react to this lowering of price within

the wafer chocolates category and had to stretch Perk-to-Perk Slims at Rs 5 to counter it.

Explains Rajat Sabharwal, an analyst with Kotak Securities, ``the growth rates have come

to a standstill in wafer chocolates and the market is not buoyant in this category. With

Nestle coming out with a lesser-priced brand, Cadbury is responding now.'' So, despite

Nestlé’s flagship brand suffering to a certain extent, a flanking brand such as Munch has

taken care of the dipping shares.

Highlights Nirav Sheth, an analyst with SSKI Securities, ``In the first three years since

the launch of Kit Kat, its price rise has been too fast and this has backfired. Today, its

price cuts have been prompted by competitive pressures and the purpose is obviously to

gather volumes.'' But then, the prices of cocoa have also been crashing, perhaps helping

Nestle absorb the price cuts, which, possibly it would not have been in a position to do

otherwise.

Today, Nestle seems content with its strategy and admits that though shares of Kit Kat

have dipped, Munch has succeeded in doing what it was expected to do. Says Sanjay

Sehgal, Executive Vice-President (Marketing), Nestle India, ``Cadbury has reacted to us.

In fact, Munch could also be responsible for eating into the shares of Kit Kat along with

Cadbury's own brand. There has been a redefinition of pricing strategy for KitKat and we

are hoping it will show.''

KitKat continues to sell at a slight premium to Perk though it is now offering a price

discount of nearly 20 per cent, which indicates that Nestle either had great margins on the

brand earlier, or is in trouble.

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For Cadbury, Perk is basically a fighter brand being used to flank the mother brand. In

fact, the fight is almost similar to what HLL did with Wheel (though it was not making

money on the brand) to counter Nirma in the detergent market while Surf sat pretty as the

mother brand in Lever's portfolio.

However, in the case of wafer chocolates, it is not a very happening category since

consumers have realized that they are not paying for pure chocolate, but for a chocolate-

coated biscuit. For Cadbury, its cash cow will always remain its Cadbury's Dairy Milk.

Both are players fighting with their higher reserves, trying to establish themselves with a

dominant share in the wafer chocolate category.

The new Perk has four wafer layers covered with chocolate and is lighter and crisper. Its

packaging has also undergone a change and has used Cadbury's trademark purple

background with the dark brown wave of chocolate on the wrapper, indicating the

presence of pure dairy milk chocolate, to set it apart from a common biscuit chocolate.

Cadbury is targeting a 12 per cent volume share for the Perk brand after this relaunch and

expects to overhaul Kit Kat. As Bharat Puri, Director (Sales & Marketing), Cadbury

India, declares: ``our objective is to be the largest wafer-coated brand in the country.''

A new campaign has been developed for the relaunch of the brand where through three

commercials the differences in the new Perk are highlighted through dialogues alluding

to match fixing -- Khule Aam Khayiye. Kabhi Bhi. Kahin Bhi.

Explains Piyush Pandey, National Creative Director, Ogilvy & Mather, ``Through the

commercials we are trying to bring out various explanations about the changes in Perk.''

The original campaign of Thodi Si Pet Pooja, Kabhi Bhi, Kahin Bhi will continue

through another new commercial, of a lady secretly eating Perk on the occasion of Karwa

Chauth.

Meanwhile, another wafer chocolate brand that has been targeting kids is Milk Treat, four

wafers with butterscotch-flavored cream embedded in milky white chocolate. Though

Cadbury did have a white bar, Creamy Bar, it was never treated as a major brand. Milk

Treat is pitted against Nestlé’s Milky Bar though it is in a moulded form unlike the

former, which is in count form. There are expected to be more variants under the Milk

Treat brand for children. Both Milk Treat and Perk are priced on par at Rs 10 for 27 gm.

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Despite all the action in the chocolate wafer segment, growth for Cadbury has always

come from its mother brand - the Rs 117-crore Cadbury's Dairy Milk which today

straddles all possible price points.

Explains an analyst with Motilal Oswal Securities, ``For Cadbury, its growth has been

coming from Cadbury's Dairy Milk and what it is doing to Perk is just to gather

momentum in the chocolate market which thrives on innovation and excitement.''

In 1999, Cadbury recorded an eight per cent turnover growth in chocolate confectionery

led by its flagship brand Cadbury's Dairy Milk, which registered a growth of over 40 per

cent. The malted food drinks category reported a growth of 14 per cent while the sugar

confectionery segment rose a mere three per cent. The Éclairs brand grew by a healthy 14

per cent.

In fact, Cadbury has consciously stayed away from meddling too much with its heritage

chocolate brands -- Dairy Milk and 5 Star. Explains Puri, ``As a marketer, it is best not to

do too much to these heritage brands which already have strong equity. Not that we will

never relaunch them but right now they enjoy a strong equity.''

But, it did relaunch its heritage brand of malted drinks, Bournvita, last year when it lost

share to the white drinks segment. There are plans to extend this strong brand in the

future, about which Cadbury does not want to reveal its plans right now. Interestingly,

there already exists a similar sounding dark chocolate brand for adults, Bourneville, in its

kitty for many years, which has not seen much advertising.

While its chocolate brands are continuing to get broad based, its sugar confectionery

brands will get upgraded to higher price points. For instance, its hard-boiled sweets such

as Googly, Mocka and English Toffee are gradually being phased out, while the new

brands such as Frutus, a chewy sweet (Re 1) and the jelly, Gollups (Rs 2), are expected to

see some healthy growth. Adds Puri, ``It is not possible to build brands at such low price

points. While there are volumes, the margins are thin in this category.''

Besides, the latest Budget has hiked the duties of sugar confectionery products from eight

per cent to 16 per cent, which in any case has led to an increase in prices and thereby

affected brands such as Googly.

But one thing that Cadbury has realized through all this is that it has got cheaper with

more products in the Rs 3-5 category. Its premium brands such as Cadbury Gold, Truffle

49

and even Picnic have never really been accepted in the chocolate market. Today, Cadbury

is constantly looking at pushing volumes at the lower end of the market and brands such

as Relish, Break, 5 Star and Dairy Milk have Rs 5 variants catering to this lowest price

point. Perk Slims is the latest Rs 5 brand to be added to this list.

As for taking the chocolate wafer war to the enemy camp, it might take a while because

Nestle also has deep pockets and has established itself in the chocolate wafer category in

spite of dipping shares. However, Cadbury will always be the leader with its heritage

brands. As Rajat Sabharwal, an analyst with Kotak Securities states, ``Nestle may be a

key player in the Indian chocolate market but there is no possibility of it emerging as a

category leader.''

49

CADBURY’S PRICING

Organizational structure of Cadbury Hierarchical structure is based on distinct chain of commands from Managing director to

Clerical Support assistants (according to Cadbury). Decisions are made at the top and

pass down. Such organizational are usually based on clearly defined procedures and

roles.

Cadbury organization is based on more democratic. Decisions are made as a

result of a consultation process involving various members of the organization

(Cadbury). Ideas would be discussed and thought through collectively.

Within Cadbury organization we can find a Democratic structure, Because

Cadbury tends to be found in situation were it is felt to be important for all

members of the organization to understand what they are doing, were decisions

require individual initiative, and where member of staff need to work as a team.

How management style, Culture and Organizational structure interrelate

Management style, culture and organizational structure interrelate together in

Cadbury because they all work together to help the business to achieve its

objectives; in order to lead a successful business.

Cadbury has strategies for the organization, continually to motivate members of

staff to support this process, and market change within the organization.

Management style, culture and organizational structure interrelate together in

Cadbury because they all work together to:

UNDERSTANDING COSTS AND PRICING FOR SUCCESS

We have many ways of pricing our products or services. The first thing to understand is

the cost elements that make up our offering. This unbundling of cost must be known prior

to setting prices, however it may have only limited influence in the price finally set. You

may deliberately price an element at a loss, and another at a huge profit because the

49

market with bear this. The loss leading offering maybe the carrot required to differentiate

you from your competition, make your offering seem fresh and market leading, and your

competitions offering, old hat. But if you haven’t done your forecasts and understood

your cost models properly before going to market, then the end result of your sales

success could be a huge loss.

And in pricing, you need to look clearly at your business goals. Do you want to:

- Sell your products or services?

- Dominate the market?

- Force the market to purchase your product?

- Have fun?

You may try different strategies at different times depending on what result you are after.

If you a new to a market, then you may employ an “early adopter” strategy to achieve

some presence and reference. Later in the lifecycle, you may use a strategy that achieves

greater returns in a more traditional manner.

With our LINC product in 1980, we identified we had only four potential clients – IBM,

Burroughs, NCR, and Digital. So we had to prepare strategies, which would achieve the

business goals we wanted – to establish our company as a developer of good

development and deployment environments, and to earn and excellent stream of

profitable revenue for several years. We sold LINC to Burroughs for US$1 plus the rights

to continue manufacturing new feature content for on a predefined costed basis and to

provide product support. Thus profitability was guaranteed so long as product quality

levels were maintained. So knowing your costs is important if you wish to position your

prices for profitability.

But knowing your costs is not enough. You also need to know all about yourselves as a

company and position your business. You need to:

- Know what exactly is your business solution?

- Who exactly are your potential clients?

- What is your unique customer advantage?

- What is your business identity?

49

- What is your elevator statement?

Without this business knowledge, you do not have a hope of pricing your product to meet

your business goals and to effectively compete in the market place.

In my days in the fishing industry, selling Orange Roughy frozen fish fillets, we were one

of several players in a market place for a variety of fish that was not a household name

but was distinctive. We needed to differentiate ourselves as the product to be sought after

ahead of other fish brands, and competitor products. Our objective was to be the fish fillet

provider of choice in the Great Lakes region of the United States of America. We

launched our Fletcher Quality Orange Roughy brand at a 10% premium price over our

competitors. We launched as the top quality product, a USA hygienic clean white fish

meat (some would say “tasteless”), in a special display pack. And in a market where

everyone delivers late, delivery on time. So our differentiators were top quality, special

display pack and delivery on time. Orange Roughy was a distinctive name. People were

amazed that such a good-looking fish fillet could have such a horrid name, yet if we

could get them to try the fish, they would love it and would tell all their neighbours and

friends. The name “Orange Roughy” was a memorable name and by making the fish look

in a class of its own in the shop window display pack, we captured a strong market.

Within a year, Fletcher brand Orange Roughy was commanding a 30% margin and was

selling ahead of any other brands.

So knowing your business, your unique customer advantage, who you are, and what you

are pitching is vital to your success.

49

CHAPTER -2

OBJECT OF THE STUDY

49

OBJECT OF THE STUDY

The major objectives of the resent study are to know about financial strengths and

weakness of CADBURY INDIA LIMITED, MALANPUR through FINANCIAL

WORKING CAPITAL.

The main objectives of resent study aimed as :

To evaluate the performance of the company by using ratios as a yardstick to measure the

efficiency of the company. To understand the liquidity, profitability and efficiency

positions of the company during the study period. To evaluate and analyze various facts

of the financial performance of the company. To make comparisons between the ratios

during different periods.

1. The study has great significance and provides benefits to various parties

whom directly or indirectly interact with the company.

2. It is beneficial to management of the company by providing crystal clear

picture regarding important aspects like liquidity, leverage, activity and

profitability.

3. The study is also beneficial to employees and offers motivation by

showing how actively they are contributing for company’s growth.

4. The investors who are interested in investing in the company’s shares will

also get benefited by going through the study and can easily take a decision

whether to invest or not to invest in the company’s shares.

OBJECTIVES

1. To study the present financial system at CADBURY

INDIA LIMITED, MALANPUR.

2. To determine the Profitability, Liquidity Ratios.

3. To analyze the capital structure of the company with the

help of      Leverage ratio.

49

4. To offer appropriate suggestions for the better performance

of the organization

WORKING CAPITAL

Financial Analysis

Financial analysis is the process of identifying the financial strengths and weaknesses of

the firm and establishing relationship between the items of the balance sheet and profit &

loss account.

Financial ratio analysis is the calculation and comparison of ratios, which are derived

from the information in a company’s financial statements. The level and historical trends

of these ratios can be used to make inferences about a company’s financial condition, its

operations and attractiveness as an investment. The information in the statements is used

by

Trade creditors, to identify the firm’s ability to meet their claims i.e. liquidity

position of the company.

Investors, to know about the present and future profitability of the company and

its financial structure.

Management, in every aspect of the financial analysis. It is the responsibility of

the management to maintain sound financial condition in the company.

Ratio Analysis

The term “Working ” refers to the numerical and quantitative relationship between

two items or variables. This relationship can be exposed as

Percentages

Fractions

Proportion of numbers

Ratio analysis is defined as the systematic use of the ratio to interpret the financial

statements. So that the strengths and weaknesses of a firm, as well as its historical

49

performance and current financial condition can be determined. Ratio reflects a

quantitative relationship helps to form a quantitative judgment.

Steps In Working Capital

The first task of the financial analysis is to select the information relevant to the

decision under consideration from the statements and calculates appropriate

ratios.

To compare the calculated ratios with the ratios of the same firm relating to the

pas6t or with the industry ratios. It facilitates in assessing success or failure of the

firm.

Third step is to interpretation, drawing of inferences and report writing

conclusions are drawn after comparison in the shape of report or recommended

courses of action.

Basis or Standards of Comparison

Ratios are relative figures reflecting the relation between variables. They enable analyst

to draw conclusions regarding financial operations. They use of ratios as a tool of

financial analysis involves the comparison with related facts. This is the basis of ratio

analysis. The basis of ratio analysis is of four types.

Past ratios, calculated from past financial statements of the firm.

Competitor’s ratio, of the some most progressive and successful competitor firm

at the same point of time.

Industry ratio, the industry ratios to which the firm belongs to

Projected ratios, ratios of the future developed from the projected or pro forma

financial statements

49

Nature of Working Capital

Ratio analysis is a technique of analysis and interpretation of financial statements. It is

the process of establishing and interpreting various ratios for helping in making certain

decisions. It is only a means of understanding of financial strengths and weaknesses of a

firm. There are a number of ratios which can be calculated from the information given in

the financial statements, but the analyst has to select the appropriate data and calculate

only a few appropriate ratios. The following are the four steps involved in the ratio

analysis.

Selection of relevant data from the financial statements depending upon the

objective of the analysis.

Calculation of appropriate ratios from the above data.

Comparison of the calculated ratios with the ratios of the same firm in the past, or

the ratios developed from projected financial statements or the ratios of some

other firms or the comparison with ratios of the industry to which the firm

belongs.

Interpretation of The Working s

The interpretation of ratios is an important factor. The inherent limitations of ratio

analysis should be kept in mind while interpreting them. The impact of factors such as

price level changes, change in accounting policies, window dressing etc., should also be

kept in mind when attempting to interpret ratios. The interpretation of ratios can be made

in the following ways.

Single absolute ratio

Group of ratios

Historical comparison

Projected ratios

Inter-firm comparison

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Guidelines or Precautions for Use of Working s

The calculation of ratios may not be a difficult task but their use is not easy. Following

guidelines or factors may be kept in mind while interpreting various ratios are

Accuracy of financial statements

Objective or purpose of analysis

Selection of ratios

Use of standards

Caliber of the analysis

Importance of Working Capital

Aid to measure general efficiency

Aid to measure financial solvency

Aid in forecasting and planning

Facilitate decision making

Aid in corrective action

Aid in intra-firm comparison

Act as a good communication

Evaluation of efficiency

Effective tool

Limitations of Working Capital

Differences in definitions

Limitations of accounting records

Lack of proper standards

No allowances for price level changes

49

Changes in accounting procedures

Quantitative factors are ignored

Limited use of single ratio

Background is over looked

Limited use

Personal bias

49

RESEARCH METHODOLOGYThe Research

Research is a “careful investigation or inquiry especially through search for new

facts in any branch of knowledge.”

The project is a systematic presentation consisting of the enunciated

problem, formulated hypothesis, collected facts or data, analyzed facts and

proposed conclusions in form of recommendations.

Kind of ResearchThe research done by

Exploratory research: This kind of research has the primary objective of development of insights into the

problem. It studies the main area where the problem lies and also tries to evaluate

some appropriate courses of action.

Data Collection

The data for the survey will be conducted from both Primaries as well as Secondary

sources.

Primary Data: -

Using personal interview technique the survey the data will collect by using

questionnaire. The primary data collection for his purpose is supposed to be done

by judgment sampling conversation sampling. Questionnaire has been formatted

with both open and close structure questions.

The information is collected through secondary sources during the project. That

information was utilized for calculating performance evaluation and based on that,

interpretations were made.

Sources of secondary data:

49

1. Most of the calculations are made on the financial statements of the

company provided statements.

2. Referring standard texts and referred books collected some of the

information regarding theoretical aspects.

3. Method- to assess the performance of he company method of observation

of the work in finance department in followed.

Research Design

A research design is the specification of methods and procedure for acquiring the

information needed to structure or to solve problems. It is the overall operation pattern or

framework of the project that stipulates what information is to be collected from which

source, and be what procedures.

“A research design is the arrangement of condition for collection and analysis of

data in a manner that aims to combine Relevance to the research purpose with

economy in procedure”.

Design decision happens.

1. What is study about?

2. What is study being made?

3. Where will the study be carried out?

4. What type of data is required?

5. Where can the required data be found?

6. What will be the sample design?

7. Technique of data collection.

8. How will data be analyzed?

9. How can the customer can be persuaded for opening current with CADBURY INDIA

LIMITED, MALANPUR?

10. How to increase the market share of CADBURY INDIA LIMITED, MALANPUR?

11. Who is the competitor of CADBURY INDIA LIMITED, MALANPUR?

49

WORKING CAPITAL MANAGEMENT

WORKING CAPITAL – CONCEPTUAL VIEW

“Working Capital, also called net current assets, is the excess of current assets

over current liabilities. All organizations have to carry working capital in one form or

another. The efficient management of working capital is important from the point of view

of both liquidity and profitability. Poor management of working capital means that funds

are unnecessary tied up in idle assets hence reducing the ability to invest in productive

assets such as a plant and machinery, so affecting the profitability”.

Working capital management may be defined as the management of firm’s

sources and uses of working capital in order to maximize the wealth of the shareholders.

The proper working capital management requires both the medium term planning(say

upto three years) and also the immediate adaptations to changes arising due to

fluctuations in operating levels of the firm.

CONCEPT OF WORKING CAPITAL

1) GROSS WORKING CAPITAL (TOTAL WORKING CAPITAL) : The

gross working capital refers to the firm’s investment in all the current assets taken

together. The total investments in all the individual current assets is the gross

working capital. For example, if a firm has a cash balance of Rs.50,000 , debtor of

Rs.70,000 and inventory of raw materials and finished goods has been assessed at

Rs.1,00,000 , then the gross working capital of the firm is Rs.2,20,000(i.e.

Rs.50,000 + Rs.70,000 + Rs.1,00,000).

49

2) NET WORTH CAPITAL : The term working capital may be defined as the

access of total current assets over total current liabilities. The current liabilities

refers to those liabilities which are payable with in a period of one year. The

extent, to which the payments of these current liabilities are delayed, the firm gets

the availability of funds for that period. So, a part of the funds required to

maintain current assets is provided by current liabilities and the firm will be

required to invest the funds in only those current assets which are not financed by

the current liabilities.

The gross concept is sometimes preferred to the net concept of working capital for

the following reasons:

a) It enables the enterprise to provide correct amount of working capital at the right

time.

b) Every management is more interested in the total current assets with which it has

to operate than the sources from where it is made available.

c) The gross concept takes into consideration the fact that every increase in the funds

of the enterprise would increase its working capital.

d) The gross concept of working capital is more useful in determining the rate of

return on investments in working capital.

The net working capital concept, however, is also important for the following reasons:

a) It is a qualitative concept which indicates the firm’s ability to meet its operating

expenses and short-term liabilities.

b) It indicates the margin of protection available to the short-term creditors, i.e., the

excess of current assets over current liabilities.

c) It is an indicator of the financial soundness of an enterprise.

d) It suggests the need for financing a part of the working capital requirements out

of permanent sources of funds.

49

49

COMPONENTS OF WORKING CAPITALA large amount of working capital remains tied up in various working capital

components like :

a) Raw materials

b) Work-in-progress

c) Finished goods

d) Receivables etc.

An industry has to hold raw materials and work-in-progress to maintain production flow

and finished goods to meet the timely needs of its customers. The working capital

requirement is, therefore, directly linked with the level of inventory and the time taken by

the purchaser of the goods to pay the amount.

1) RAW MATERIALS:

The stocking of raw materials is linked to a number of factors like level of production,

location of resources of supply and availability position, storing capacity of godowns,

seasonal availability and price etc.

2) WORK-IN-PROGRESS:

Every industry is essentially required to carry some stocks at various stages which lie as

semi finished goods at various stages of production.

3)FINISHED GOODS:

The quantum and value of finished goods depends upon the type and variety of products.

This also depends upon the lot sizes, which are required to be delivered, and availability

of inspection staff. The seasonal effect in some products like fans, coolers,

refrigeworking n, air conditioner etc, can also force to carry a higher level of finished

goods inventory in the off-season.

4) RECEIVABLES:

The amount of money outstanding at a particular point of time representing realization

against sales is termed as receivables. These receivables are influenced by a number of

factors like credit policy, market strategy, pricing policy, type of buyers, credit allowed

by companies etc.

49

CLASSIFICATION OF WORKING CAPITAL

Working capital may be classified into two ways:

a) on the basis of concept

b) on the basis of time

On the basis of concept, working capital is classified as gross working capital and net

working capital. This classification is important from the point of view of the financial

manager. On the basis of time, working capital may be classified as:

a) Permanent or fixed working capital.

b) Temporary or variable working capital.

1) Permanent or fixed working capital:

It is the minimum amount which is required to ensure effective utilization of fixed

facilities and for maintaining the circulation of current assets. There is always a minimum

level of current assets, which is continuously required by enterprise to carry out its

normal business operations. For example, every firm has to maintain a minimum level of

raw materials, work-in-progress, finished goods and cash balances.

2) Temporary or variable working capital

It is the amount of working capital which is required to meet the seasonal demands and

some special exigencies. Variable working capital can be further classified as seasonal

working capital and special working capital. Most of the enterprise have to provide

additional working capital to meet the seasonal and special needs.

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PRINCIPLES OF WORKING CAPITAL

The basic objective of working capital management is to avoid over investment or under

investment in current assets, as both the extremes involve the adverse consequences.

Over investment in current assets may lead to reduced profitability due to cost of block

funds, extra storing space required, extra efforts for follow up, possibility of malpractice

etc.

The objective of working capital management is to ensure. In other words, working

capital management intends to ensure that the investment in current assets is reduced to

the minimum possible extent. However, the normal of the organization should not be

affected adversely. If the normal operations of the organizations are affected adversely,

reducing the investment in current assets is fruitless.

NEED OR OBJECTS OF WORKING CAPITALWorking capital is needed for the following purposes:

1) For the purchase of raw materials, components and spares.2) To pay salaries and wages.3) To incur day-to-day expenses and overhead costs such as fuel, power and office

expenses etc.4) To meet the selling costs as packaging ,advertising etc.5) To provide credit facilities to the customers.6) To maintain the inventories of raw material, work-in-progress, stores and spares

and finished stock.

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DEBTOR

CASH

RAW MATERIALS

FINISHED GOODS

WORK IN PROGRESS

IMPORTANCE OF WORKING CAPITAL

Working capital is the lifeblood and nerve center of a business. Just as circulation of

blood essential in the human body for maintaining life, working capital is very essential

to maintain the smooth running of a business. No business can run successfully without

an adequate amount of working capital. The main advantages of maintaining adequate

amount of working capital are as follows:

1) Solvency of the business:

Adequate working capital helps in maintaining solvency of the business by

providing uninterrupted flow of production.

2) Goodwill:

Sufficient working capital enables a business concern to make prompt

payments and hence help in creating and maintaining goodwill.

3) Easy loans:

A concern having adequate working capital, high solvency and good credit

standing can arrange loans from banks and other on easy and favorable

terms.

4) Cash discounts:

Adequate working capital is also enables a concern to avail cash discounts in the

purchases and hence it reduces costs.

5) Regular supply of raw material:

Sufficient working capital ensures regular supply of raw materials and

continuous production.

6) Regular payment of salaries, wages and other day-to-day commitments:

A company which has ample working capital can make regular payments of

salaries, wages, and other day-to-day commitments which raise the morale of

49

its employees, increases their efficiency, reduces wastages and costs and

enhances production and profits.

7) Ability of face crisis:

Adequate working capital enables a concern to face business crises in

emergencies such as depression because during such periods, generally, there

is much pressure on working capital.

8) High Morale:

Adequate of working capital creates an environment of security, confidence,

high morale, and creates overall efficiency in business.

9) Quick and regular return on investment:

Every investor wants a quick and regular return on his investments.

Sufficiency of working capital enables a concern to pay quick and regular

dividends to its investors, as there may not be much pressure to plough back

profits. This gains the confidence of its investors and creates a favorable

market to raise additional funds in the future.

49

FACTORS DETERMINING WORKING CAPITAL REQUIREMENT

The working capital needs of a firm are determined and influenced by various

factors. A wide variety of consideworking ns mat effect the quantum of working

capital required and these consideworking ns may vary from time to time.

Following are some of the factors which are relevant in determining the working

capital needs of the firm.

1) Basic nature of business:

The working capital requirement is closely related to the nature of the firm. In case of

FLEX ENGINEERING LTD., a manufacturing company, different types of

production processes are performed. One unit of raw material introduced in the

production schedule may take a long period before it is available as finished goods for

sale. Funds are blocked not only in raw materials but also in labor expenses and

overheads at every stage of production. The operating cycle is usually a longer one

and sales are made generally on credit terms. So, there is always a requirement of

substantial amount of working capital.

3) Business cycle fluctuation :

Different phases of business cycle i.e. boom, recession, recovery etc. also affect the

working capital requirement. In case of recession period there is usually a dullness in

business activities and there will be an opposite effect on the level of working capital

requirement. There will be fall in inventories and cash requirement etc.

3) Seasonal operations :

If a firm operating in goods and services having seasonal fluctuations in demand, then

the working capital requirement will also fluctuate with every change. If the

opeworking ns are smooth and even throughout the year the working capital

requirement will be constant and will not be affected by the seasonal factors.

49

4) Market Competitiveness:

It has an important bearing on the working capital needs of firm. In view of

competitive conditions prevailing in the market, the firm may have to offer liberal

credit terms to the customer resulting in higher debtors. On the other hand, a

monopolistic firm may not require a large working capital. It may ask the customers

to pay in advance or to wait for some time after placing the order.

5) Credit Policy :

Credit policy means the totality of terms and conditions on which goods are sold and

purchased. A firm has to interact with two types of credit policies at a time. One, the

credit policy of the supplier of raw materials, goods etc., and two, the credit policy

relating to credit which it extends to its customers. In both the cases, however, the

firm while deciding the credit policy, has to take care of the credit policy of the

market. For example, a firm might purchasing goods and services on credit terms but

selling goods only for cash. The working capital requirement of this firm will be

lower than that of a firm which is purchasing cash but has to sell on credit basis.

4) Supply Conditions

The time taken by a supplier of raw materials, goods etc. after placing an order, also

determines the working capital requirement. If goods are received as soon as ordered

or in a short period after placing an order, then the purchaser will not like to maintain

a high level of inventory of that good. Otherwise, larger inventories should be kept

e.g. in case of imported goods.

49

6) Nature of Products :

Whether the products manufactured by the industry are influenced by seasonal factors

e.g. sugar, tea, jute, vegetable oil, fans, refrigerators etc.

7) Operating Cycle :

Time taken from the stage when cash is put into the business upto the stage

when cash is realized from sale of finished goods.

NEGETIVE WORKING CAPITAL

ADVANTAGE:

A negative working is a sign of managerial efficiency in a business with low inventory

and accounts receivables ( which means they operate on an strictly cash basis ).

Dabur India Limited has a negative working capital Rs. crores in the financial year

200 – 200 which shows that the company is extremely good in controlling its cash flows.

It has efficient financial management through which has it enabled in bringing down the

working capital figure to a negative one.

LIMITATIONS:

In any other situation, it is a sign a company may be facing bankruptcy or serious

financial trouble.

So having a negative working capital may prove a boon or bane.

49

FIGURE BELOW SHOWS THE SOURCES AND USES OF WORKING CAPITAL

SOURCES USES

49

Operations

Issue of share capital

Long-Term Borrowings

Sale of Non-Current assets

Working Capital pool

Dividends

Repayment of Long-Term Borrowings

Purchase of Non-Current Assets

COMPARISON OF CADBURY WORKING CAPITAL WITH OTHER

COMPANIES

Company’s

Name

Financial

Year

Current

Assets

Current

Liabilities

Networking

capital

CADBURY

Ltd.

2005-06 471 436 35

Britannia

Industries

2005-06 2399.61 2356.68 42.93

Hindustan

Lever Ltd.

2005-06 38878.80 39802.49 -1013.69

Marico

Industries

2005-06 1917.25 1066.70 851.11

Cadbury

India Ltd.

2005-06 2175.90 1352.40 823.50

Nestle India

Ltd.

2005-06 5512.44 8100.8 -2588.36

49

The above chart displays the working capital of CADBURY Limited. CADBURY has been constantly reducing its working capital and in the year 2009-2010, a steep decline has taken place in the company’s working capital resulting in the company’s working capital going negative.

This has proved the managerial efficiency at CADBURY at its finances. The company has reduced its payment period from 39 days to a negative of five days, which shows that the company has enough of funds available on credit for its suppliers, and is collecting money from its debtor at a fast pace to avoid much of baddebts.

49

WORKING CAPITAL OF CADBURY INDIA LTD.

F/YF/Y 20072007 20082008 20092009 20102010

WORKINGWORKING

CAPITALCAPITAL 941.34941.34 1079.831079.83 1307.71307.7 823.5823.5

The above graph displays the working capital for various year of Cadbury India Limited. The working capital of this company has been constantly increases except for the year 2009-2010 where it has declined. This shows thet Cadbury India Limited has lot of cash blocked in the form of current assets. Hence because of this the working capital of company is positive and high.

The company needs to strengthen its cash policies and reduce its money blocked in the current assets. Also, by decreasing the payment period the company can improve upon the working capital.

49

WORKING CAPITAL OF HINDUSTAN LEVER LTDWORKING CAPITAL OF HINDUSTAN LEVER LTD

F/YF/Y 20062006 20072007 20082008 20092009 20102010

WORKINGWORKING

CAPITALCAPITAL

1872.481872.48 -3733.77-3733.77 1714.391714.39 300.96300.96 -1013.69-1013.69

The above graph displays the working capital scenario of Hindustan Lever Limited, one of the

largest FMCG company in the world.The company has been having an enormous cash for

planning out its future investments. The working capital has been almost nil and negative since

the past few years, showing that the company has an excellent and well planned finances.A

company with negative working capital has a faster period and a slower payment period.

49

WORKING CAPITAL OF BRITANNIA INDUSTRIESWORKING CAPITAL OF BRITANNIA INDUSTRIES

F/YF/Y 20062006 20072007 20082008 20092009 20102010

WORKINGWORKING

CAPITALCAPITAL 51.5751.57 256.96256.96 592.21592.21 746.65746.65 42.0342.03

Britannia Industries Ltd. Working capital was increasing set up from 2000 to 2003,

when finally the company realized it had to do something to control its blockage of

free cash in the current assets.Thereby, though its managerial skills and efficient

functioning the company reduced its working capital from Rs. 746.65 crores in

2009-2010 to Rs. 42.03 crores in 2009-2010, a decline of almost 94%.

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WORKING CAPITAL OF NESTLE INDIA LTD.WORKING CAPITAL OF NESTLE INDIA LTD.

F/YF/Y 20062006 20072007 20082008 20092009 20102010

WORKINGWORKING

CAPITALCAPITAL

-745.12-745.12 -317.74-317.74 -743.81-743.81 -1388.53-1388.53 -2588.36-2588.36

The above graph displays the working capital of Nestle India Limited, which has

been negative 2009-2010.A brilliant and efficient working and managerial scenario

is depicted through the working capital of the company.

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WORKING CAPITAL OF MARICO LIMITEDWORKING CAPITAL OF MARICO LIMITED

F/YF/Y 20002000 20012001 20022002 20032003 20042004

WORKINGWORKING

CAPITALCAPITAL

494.22494.22 466.88466.88 594.86594.86 827.67827.67 851.51851.51

The graph shown depicts the working capital from the year 2000 to 2004 of Marico

Industries Limited, another renowned FMCG company.The working capital of this

company has been increased continuously, showing that the company is blocking its

cash available in current assets or is incurring large bad debts.

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FINDINGS

1. The current ratio has shown in a fluctuating trend as 7.41, 2.19, 4.48, 1.98, and 3.82

during 2006 of which indicates a continuous increase in both current assets and

current liabilities.

2. The quick ratio is also in a fluctuating trend through out the period 2006 – 07

resulting as 7.41, 1.65, 4.35, 1.9, and 3.81. The company’s present liquidity position

is satisfactory.

3. The absolute liquid ratio has been decreased from 3.92 to 1.18, from 2006 – 07.

4. The proprietory ratio has shown a fluctuating trend. The proprietory ratio is increased

compared with the last year. So, the long term solvency of the firm is increased.

5. The working capital increased from 0.72 to 1.13 in the year 2006 – 10.

6. The fixed assets turnover ratio is in increasing trend from the year 2006 – 10 (1.26,

1.82, 4.24, 3.69, and 6.82). It indicates that the company is efficiently utilizing the

fixed assets.

7. The capital turnover ratio is increased form 2006 – 08 (0.98, 1.01, and 1.04) and

decreased in 2009 to 0.98. It increased in the current year as 1.00.

8. The current assets to fixed assets ratio is increasing gradually from 2006 – 10 as 2.93,

3.74, 4.20, 6.07 and 8.17. It shows that the current assets are increased than fixed

assets.

9. The net profit ratio is in fluctuation manner. It increased in the current year compared

with the previous year form 0.33 to 0.42.

10. The net profit is increased greaterly in the current year. So the return on total assets

ratio is increased from 0.17 to 0.31.

11. The Reserves and Surplus to Capital ratio is increased to 4.19 from 2.02. The capital

is constant, but the reserves and surplus is increased in the current year.

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12. The earnings per share was very high in the year 2006 i.e., 101.56. That is decreased

in the following years because number of equity shares are increased and the net

profit is decreased. In the current year the net profit is increased due to the increase in

operating and maintenance fee. So the earnings per share is increased.

13. The operating profit ratio is in fluctuating manner as 0.99, 0.51, 0.41, 0.57 and 0.69

from 2006 – 10 respectively.

14. Price Earnings ratio is reduced when compared with the last year. It is reduced from

3.09 to 2.39, because the earnings per share is increased.

15. The return on investment is increased from 0.32 to 0.42 compared with the previous

year. Both the profit and shareholders funds increase cause an increase in the ratio.

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CONCLUSION

The employers should keep in mind these four rules of thumb when designing the

company’s strategy and solution:

Rule #1: Internet technology is the key to a profound revolution in learning.

The effects of Internet technology on employee training are indeed profound;

however, technology - any technology - should be seen as a tool, not a strategy or

final goal. Just because they have good word processing software doesn't mean

you write well. Likewise, the Internet cannot, in and of itself, improve the quality

of the learning and the content they put on it. The employers need to use Internet

technology combined with high quality, effective learning to maximize learning

and retention levels.

Rule #2: There is an enduring and important role for traditional classroom

instruction.

People who believe technology will totally replace great teachers in front of

classrooms of highly motivated learners are as misguided as those who believe the

Internet is a passing fad. The blended learning solution, i.e., a mixture of

classroom and Web-based training is the most effective and comprehensive

learning strategy.

Rule #3: Learning is a continuous, cultural process - not simply a series of

workshops.

Employees retain about 50% to 60% of what they learn in a formal training

workshop. Often, employees forget what they have learned within two months of

the workshop. Therefore, access and opportunities to learn should be available to

anyone, anywhere, and at any time within an organization. Organizational learning

is as much about what happens outside formal learning programs as it is about the

programs themselves.

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Rule #4: Strategy development and implementation are never really finished.

Employers change as their business changes. They adjust it as their people become

more skilled and knowledgeable. The employers redefine it as new technology

options become available. And, they constantly test it against the mission and

vision of their business, making sure they are always in alignment.

Due to training there is greater stability, flexibility and capacity for growth in an

organization. Accidents, scrap and damage to machinery and equipment can be

avoided or minimized through training. Even dissatisfaction, complaints,

absenteeism, and turnover can be reduced if employees are trained well. Future

needs of employees will be met through Training And Development

programmes. Organizational take fresh diploma holders or graduates as

apprentices or management trainees. They are absorbed after course completion.

Training serves as an effective source of recruitment. Training is an investment in

HR with a promise of better returns in future. Though no single training

programme yields all the benefits the organization which devotes itself to

Training And Development enhances its HR capabilities and strengthens its

competitive edge. At the same time, the employee’s personal goals are furthered,

generally adding to his or her abilities and value to the employer. Ultimately, the

objectives of the HR department and also of the organization are also furthered.

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SUGGESTIONS

1. Necessary knowledge and skills about new learning strategies at all levels;

2. Accreditation of the current teacher training and staff development programs

offered by various providers;

3. A critical mass of local experts to spread the new knowledge and skills

throughout the teachers in the country;

4. Suitable alternative model for in-service training;

5. A plan for national implementation;

Indication of support and commitment by the government

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BIBLIOGRAPHY

REFFERED BOOKS

FINANCIAL MANAGEMENT - I. M. PANDEY

Financial Management using Financial Modeling by Ruzbeh J. Bodhanwala

REFFERED WEBSITES

www.google.com

www.cadburyindia.com

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