Cold Storage vs Knitwear

822 Words Sep 17th, 2011 4 Pages
Cold Storage vs. Knitwear

Ajay and Durgesh studies together till 12th standards and then did M. Com and B. Tech respectively before joining MBA together. During their degree they interned in different industries so at to get maximum exposure and to gain practical experience. Both came from business oriented families. Ajay’s family was in retailing of textiles while Durgesh came from agriculture based family. After their internship they looked for the prospects of doing a business jointly as they knew each other for a very long time. Ajay was interested in entering knitwear industry while Durgesh was interested in setting up a Cold storage. Their families were happy for their children to starting up a business together and offered them
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Total cost structure suggests that the costs they will incur during the business would be 8,196,000 per annum and the revenue generated for the project would be 12,100,000 per annum.
The total profit before tax for this business would be 2,809,000 per annum and return on capital before tax would be 112% for running on full capacity which at the same time is to be acquired after 3 years as suggested in the report.

Other Facts As mentioned in the case the cold storage will operate at its full capacity from the start as there is more demand in the market to supply. Secondly, there is an opportunity available for cold store to increase its profitability through trading. So there is an expansion opportunity for cold storage. Managerial problems would be at low level for cold storage; these problems might emerge after expansion in trading. There is also the opportunity of expansion with the chain of cold storage. On the other hand for knitwear all the numbers mentioned in the report are acquired when the facility is operating at its full capacity which is after 3 years. The profitability would be affected by the variation in the prices which consisted of major part of cost of production. There is an intense competition in this industry which will affect the sales prices as well and eventually profitability. Huge promotional efforts are required in this industry to overcome competition which would incur
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