This document outlines a plan for Aayam Durables Ltd, a consumer durable company facing financial difficulties, to reduce costs and increase investment. It proposes firing employees across several departments to save over 6 crore in costs. It also estimates over 27 crore in savings from normal attrition. After factoring in needed recruitment, the total manpower cost reduction is estimated to be over 13 crore. Combined with additional available funds, this provides 48 crore to invest in R&D, sales, and marketing to drive revenue growth and reduce losses as the industry is projected to expand 15% in 2015.

1. By-
 Rubina Verma 231123
 Sanchi Grover 231129
 Saumya Mittal 231135
 Shefali Bhardwaj 231141
 Shivam Singla 231147
 Heena Aggarwal 231153
 Stuti Shree 231159
 Sazzad 231165
 Veena Nair 231171
 Dattatreya Singla 231177
AAYAM DURABLES LTD
Scenario II

2. Aayam Durables is a public company which deals in consumer
durable selling
•Flat panel display (LED/LCD)
•Refrigerators &
•Washing Machine
The company is facing tough time due to shortage of funds to
invest in product innovation and marketing.
INTRODUCTION

3. • Expected industry growth in 2015 is 15% over 2014.
• Net revenue for the company is targeted to increase from 842cr.
(2014) to 900cr. (2015).
• Losses have to be reduced from 5.5% to 2.5%.
• Manpower cost has to be reduced from 21.5% i.e Rs. 181.03
crores to 19.5% i.e Rs. 164.19. Thus a total saving of 16.84
crores has to be achieved.
• In 2014, ADL had de-grown by 5% (over 2013) with the loss of Rs
46 crores. The loss was seen in all of their 3 products.
So, Both top and bottom lines were shrinking.
DETAILS OF THE CASE

4. • It was felt that the industry will grow in 2015 by 15% over
2014. As penetration level in the industry was low in India
and there might be global stagnation in economy.
• In the circumstances, it was felt that revenue growth for ADL
was important. The strategic objective of ADL was to achieve
a revenue of Rs 900 crores in 2015 & reduce the loss from -
5.5% (2014) to -2.5% 2015). To achieve this objective, it was
decided to reduce manpower cost from 21.5% to 19.5% (of
2014 revenue level).
SCENARIO II

5. • Firing of employees
• Attrition rate
• Reduction in hiring
• Increased investment in R & D Department
• Increased Advertisement budget
SOLUTION

6. Firing of 1 Corporate HR – Band 3
Band 3 has average CTC of 0.75 Crore.
Cost Saving = 1 * 0.75 = 0.75
Firing of 1 Regional HR – Band 3
Band 3 has average CTC of 0.75 Crore.
Cost Saving = 1 * 0.75 = 0.75
Total Cost Saving = 0.75 + 0.75 = 1.5 crore
HR DEPARTMENT

7. Firing of 2 Corporate CFO – Band 3
Band 3 has average CTC of 0.75 Crore
Cost Saving = 2 * 0.75 = 1.5
Firing of 2 Corporate CFO – Band 2
Band 2 has average CTC of 0.35 Crore
Cost Saving = 2 * 0.35 = 0.70
Total Cost Saving = 1.5 + 0.70 = 2.2 Crore
FINANCE DEPARTMENT

8. R & D Appliances
Firing of 3 persons – band 2
Band 2 has average CTC of 0.35 Crore
Cost Saving = 3 * 0.35 = 1.05 crore
Sales Corp
Firing of 1 person – Band 3
Band 3 has average CTC of 0.75 Crore
1 person – Band 2
Band 2 has average CTC of 0.35 Crore
Total Cost Saving = 0.75 + 0.35 = 1.1 Crore

9. Firing of 1 person – Band 3
Band 3 has average CTC of 0.75 Crore.
Total Cost Saving = 1 * 0.75 = 0.75 Crores
Thus the total saving due to manpower reduction (crores) = 1.5
(HR) + 2.2 (Finance) +1.05 (R n D) + 1.1 (Sales) + 0.75
(Marketing) = 6.6 Crores
MARKETING DEPARTMENT

10. Manpower cost reduction due to attrition
 Band 4 :
10% of 12 = 1 (approx)
1* 1.2= Rs 1.2 crores
 Band 3
10% of 83 = 8 (approx)
8* 0.75 = Rs 6 crores
 Band 2
15% of 158 = 23 (approx)
23*0.35 = Rs 8.05 crores
 Band 1
25% of 327 = 81 (approx)
81* 0.15= Rs 12.15 crores
Total Cost Reduction is Rs 27.7 crores
REDUCTION DUE TO ATTRITION

11. The recruitment schedule is as follows:
Band Number of
employees
Cost
incurred(CTC
in Rs. Cr.)
4 1 1.2
3 5 3.75
2 15 5.25
1 70 10.5
Total cost incurred = Rs 20.7 crores
ATTRITION RECRUITMENTS

12. Total amount invested in the company in 2014
= Revenue - Profit
= 842 - (-46) = 888 (Appendix 8)
Expected amount to be invested in 2015
= Expected Revenue + provision for loss
= 900 + 2.5% of expected revenue
= Rs 922.5 crores
Therefore extra fund for investment for year 2015
= 922.5 – 888
= Rs 34.5 crores
CALCULATIONS

13. Total funds after cost reduction in manpower (Attrition +
employee lay off – recruitment)
= 27.7 + 6.6 – 20.7
= Rs 13.6 crore
So total funds which the company has for investment in 2015
= 13.6 + 34.5 = Rs 48.6 crores
CONTINUED…

14.  As we already saw after reducing manpower costs we are left
with 52 crore to still be able to spend on strengthening ADL.
 High chances of industry to grow at 15% compared to only 1-
2% in previous years.
 Tap this opportunity by spending on:
1. R&D – New features, product redesigning
2. Sales & Marketing - Advertisement
INVESTMENT

15. THANK YOU