Decision Sheet - A-One Starch Products Ltd1

Problem Statement:

A-One Starch Products Limited (B) has to develop a market plan to sell its leading product, Gluco-One (liquid glucose) while tackling forecasted increase in input (maize and tapioca) prices and rising dissatisfaction among customers regarding distribution mechanisms and product quality. There needs to be prioritization in terms of target segments to provide better value to the customers chosen.

Issues:

The market for Gluco-One is mainly comprised of confectionery and pharmaceuticals industries, with the former being the major market (85%) and the latter making up 5% of the market. The market could further be classified into organized and unorganized sectors. The organized sector consisted of 100 customers with average requirement of 300 tonnes per year per customer, while the unorganized sector comprised of about 3,000 customers (most of them being small) with average consumption of 27 tonnes per year per customer. There was also a split between price-conscious and quality conscious customers. The quality levels demanded by pharmaceutical sectors were more stringent in terms of product quality, packing and delivery schedules.

In light of increasing demands and decreasing number of players in the market, there have been slips in product quality (haziness), customer communication (no enquiry about requirements and no prior information related to price rises) and distribution mechanisms (delivery schedules and procedures not being adhered to, drum specifications and hygiene factors being compromised). Due to high quality of product by A-One, prices of products were quite high and in the light of increase in forecasted demand and rise in prices of the raw materials required, it is in a dilemma.

Options:

1. Reducing the unorganized customer base and continue with the remaining customers

A-One has been a market leader owing to its superior technology and product quality and holds a market share of 12-13%. Due to fragmentation in the market (organized and unorganized), there have been difficulties in customer satisfaction, slips in sales at indirect channels, inferior packaging (leakages from drums) and not meeting the transportation demands of the customers. There have been problems relating to quality regarding supplies to a pharmaceutical MNC. Due to direct sales to many small customers (which constituted about 70% of the market), there have been problems in the sales administration. Doing away with some of the smaller customers and focusing on maintaining the quality of the product till it reaches the customer can eliminate some of the problems.

1. Reduce its prices and positioning the product as low cost liquid glucose in the market

Growth in the confectionery sector demand is predicted to A-One can reduce the price to retain the price conscious customers of the unorganized sector (~65,000 tonnes demand) who can compromise on the quality of the products if it is available at a cheaper price. But it would lead to decrease in the image of A-One in the market which boasts of its good quality product as well as reduction in demands from other customers in unorganized sector which require some amount of quality and communication levels to be maintained by their suppliers. The unused production capacity of 4,000-8,000 tonnes can be explored if there is increase in customers following the price reduction.