Shimla

EXECUTIVE SUMMARY

The report objective is to undertake Shimla Dairy Company analysis and find out the key management issues and concerns and then recommend measures to overcome the problems. Currently Shimla Dairy finds itself in a very crucial stage of its life cycle. The cheese industry is booming and the firm finds itself in a precarious position where it has to take a few important decisions which will have a lasting impact on its future.

Some of the issues that Shimla Dairy is facing now are need for expansion and a focused marketing and branding strategy. Apart from that the company also lacks a clear cut future growth strategy.

During analysis it was found that Shimla Diary may adopt a phased expansion plan by expanding both organically and inorganically. It should also focus on improving the efficiency of existing plans by cutting costs.

Further the firm should start increasing brand awareness by having a detailed marketing strategy. This is essential and should take place concurrently with expansion as then only the increased supply will be adequately met by increased demand.

Finally in order to execute the above two strategies the company should under a restructuring process. There must be a change in the organization structure which will support the expansion of the firm. This will help Shimla Dairy to sustain itself in the market and prepare itself to gear up for future growth.

Shimla Dairy Products was a 30 year old family business turned limited company that began by processing 50 liters of milk a day and evolved to use 10 000 liters of milk per day. Licensed by the government as a food manufacturer, Shimla was working towards being ISO 9002 accredited and certified with HACCP. Currently the cheese market in India has just crossed the infant stage and has progressed into Growth stage. So Shimla Dairy finds itself in the midst of a number of players who have jumped into the market because of the higher growth rate.

The major key issues and challenges that Shimla Dairy is facing at present can be summarized as following:

* One of the major problems faced by Shimla Dairy is its limited capacity which is a big limitation in terms of growth

* Another major problem faced by them is the absence of any kind of marketing and advertising focus

* Finally Shimla dairy also lacks a concrete future growth strategy. At present it is not focused which can give rise to a number of problems in the future

Thus we can see that Shimla Dairy is struggling to adjust itself to the sudden boom in the Indian Cheese market. In order to remain a significant player in this growing industry, Shimla Diary should focus on the above challenges and find a solution as soon as possible when there is still time to remain competitive.

Although there are other challenges facing the organization, I believe that limitations in its production capacity is one problem that may damage the organization more seriously than anything else. The cost of a lost sale can be very hard to comprehend. Sometimes the organization loses a customer for ever. Also non availability of a product due to limited capacity is inexcusable for a firm which had been in existence for the past 30 years. Increase in capacity will also allow the firm to gain economies of scale, the benefit of which can be passed on to the consumer.

SUPPORTING ARGUMENTS

Cheese is a relatively new product in India, and with the Indian Cheese industry moving out of its infancy and more players joining the fray to secure the cheese markets, several issues were raised.

Should the company explore a particular niche(high end or low end cheese)?

And if so, on which area should it focus?

How can its existing capacity help it achieving these targets?

What should be the firm's marketing and advertising strategy?

What geographic areas should the firm focus on?

All these concerns have to be satisfied for Shimla Dairy to establish itself as a significant player in the existing market. We'll try to answer these concerns one by one.

Considering whether the company should focus on a particular niche, it is dependent on the ability of Shimla Dairy to increase its production capacity. This is because if they can do that then I don't there is a requirement for them to look at a niche market. Instead they can focus on the entire range of products. Also the increased capacity will lead to economies of scale. That will allow them to develop an USP against its competitors.

But generally a capacity expansion requires huge amount of cash reserves and considerable amount of time. It is questionable whether the firm can afford to undertake huge expansion plans. There is a possibility that they may not have the required cash for such kind of expansion. Also they cannot wait for it to happen because the industry is already moved into growth and it can move to Industry shake out anytime.

Taking the Michael Porter's Five Force theory, let's do a complete analysis of the Cheese market in India. It shows the constituents and their relative bargaining power.

HIGH

LOW HIGH

HIGH

The porter's five forces model clearly establishes the current state of the cheese industry. As the industry is growing rapidly more and more new entrants are entering the market. This also shows that the industry is in its growth stage where the growth of new entrants is maximum. Thus the threat of new entrants is high.

I believe there hasn't been much change in the bargaining power of suppliers; but as India is one of the largest producer of milk the bargaining power of suppliers is still low. However because of the increasing number of entrants the bargaining power of suppliers has surely increased. It is high as more and more firms enter the market as buyer has more number of choices.

The rivalry inside the industry is heating up as everyone is trying to grab the maximum share of the pie. Finally I don't think the threat of substituted is that important in this industry. For the time being it is low.

Thus the porter's model explains the current status of the industry and therefore also explains the need for Shimla Dairy to expand in order to sustain itself in the market.

Coming to the next major issue i.e.,