A-One Starch Products Case Analysis

A-One Starch Products Ltd.

NEERAJ THOOTA, 17216 (Section C)

Problem Statement

A-One Starch is facing difficulty in meeting needs of multiple sectors and delivering accordingly. Due to its current strategy of competing in all sectors, varying issues are arising across them which require specific solutions. Stability in sales and growth in price realization need to be achieved in spite of issues regarding high costs and low price sensitivity to input prices among large buyers.

Issues

The majority of the market for Gluco-One is confectioneries (85%) followed by Pharma (10%) and the rest are other applications. Stability in sales was affected due to large fluctuations in prices of maize and tapioca due to high price sensitivity in the unorganized sector. Although A-One Starch is performing well in the organized sector for Confectioneries, it is difficult to increase sales due to lack of product differentiation among the competition. It is also coupled with delivery and customer communication issues faced by the unorganized sector due to A-One’s policies and lack of proper quality control. A-One also faced quality control (haziness of liquid glucose), delivery (Plastic drums used by A-One in contrast to MS drums demanded) and packaging issues (misalignment of drum labeling) in the pharma sector.

Options

1. Cater to unorganized sector through low cost, lower quality product
2. Cater to organized sector through high-quality high-reliability product
3. Continue current strategy of catering to multiple sectors

Evaluation

Unorganized sector:

A-One’s current product suits the customers producing branded products in the unorganized sector but they comprise only 10% of this sector. A-One cannot increase prices to match their high costs as the unbranded product customers will easily switch over to another supplier. Also, the key to growth in this sector is to compromise on quality to reduce costs but this is against A-One’s branding as a leader in technology and product quality. In spite of this brand, A-One has already faced complaints from ABC Confectioners about their product quality, delivery, and communication.

Organized sector:

In line with its core competency of product quality and innovation in technology, A-One can concentrate on the organized sector where quality and timely delivery is valued over price. Also, large margins are possible in dealings with big buyers so A-One can compensate for their high costs. They can also customize delivery (MS drums for supply) and introduce stringent quality control measures (rectify haziness in liquid glucose) to ensure better performance in the pharma sector by increasing prices as customers are not very bothered by prices. Also, pharma sector is expected to grow at a much more rapid pace which can be leveraged to increase sales.