2. Introduction
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.
4. Expected
Growth
•Expected Growth Rate in 2015 is 15%.
Net
Revenue
•Net revenue for the company is targeted to increase from
842cr. (2014) to 900cr. (2015).
Losses
•Losses have to be reduced from 5.5% to 2.5%.
Manpower
Cost
•Manpower cost has to be reduced from 21.5% i.e Rs. 181.03
cr to 19.5% i.e Rs. 164.19 cr. Thus a total saving of 16.84 cr.
Company
•ADL saw a loss in all three products and an overall loss of 46
cr.
5. Scenario II
• 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).
6. Solution
• Attrition of employees
• Layoff due to underperformance
• Reduction in hiring
• Reduction in the % of salary increase
• Increased manpower in R & D Department
• Increased manpower in sales Department
7. Reduction due to Attrition
Manpower cost reduction due to attrition
Band 4 :
10% of 12 = 1 (approx)
1* 1.2= Rs 1.2 cr
Band 3
10% of 83 = 8 (approx)
8* 0.75 = Rs 6 cr
Band 2
15% of 158 = 23 (approx)
23*0.35 = Rs 8.05 cr
Band 1
25% of 327 = 81 (approx)
81* 0.15= Rs 12.15 cr
Total Cost Reduction is Rs 27.7 crores
8. HR Department
Firing of 1 General Affairs HR – Band 3
Band 3 has average CTC of 0.75 Crore.
Cost Saving = 1 * 0.75 = 0.75 appendix 7
Firing of 1 Regional HR – Band 3 appendix 7
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 cr
9. Finance Department
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 3 Corporate CFO – Band 2
Band 2 has average CTC of 0.35 Crore
Cost Saving = 3 * 0.35 = 1.05
Total Cost Saving = 1.5 + 1.05 = 2.55 Cr
10. R & D Electronics
Firing of 3 persons – band 2
Band 2 has average CTC of 0.35 Crore
Cost Saving = 3 * 0.35 = 1.05 crore
Supply Chain
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
11. Marketing Department
Firing of 1 person – Band 3
Band 3 has average CTC of 0.75 Cr.
Total Cost Saving = 1 * 0.75 = 0.75 Crores
Thus the total saving due to manpower reduction (crores)
= 1.5 (HR) + 2.55 (Finance) +1.05 (R n D) + 1.1 (Sales) +
0.75 (Marketing) = 6.95 Crores
12. Attrition Recruitments
The recruitment schedule is as follows:
Total cost incurred = Rs 11crores
BandsDe
pt.
Customer
Service
R & D Corp- HR S & M CTC (in cr)
Band 4 - - - - -
Band 3 1 - 1 - 1.5
Band 2 2 4 1 3 3.5
Band 1 15 10 - 15 6
13. Calculations
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 + Increment in salary
= 900 + 2.5% of expected revenue+ 24.39 cr
= Rs 946.89 cr
Therefore extra fund for investment for year 2015
= 946.89 – 888
= Rs 58.89 cr
14. Continued…
Total funds after cost reduction in manpower (Attrition +
employee lay off – recruitment)
= 27.7 + 6.95 – 11
= Rs 23.6 crore
So extra funds that the company needs in order to meet
expenses :
= 58.89 -23.6 = Rs 35.29 crores
