5 a Bergerac

Bergerac Systems: The Challenge of Backward Integration Group 5: Ashutosh B16013 | Narasimha B16028 | Pulkit B16035 | Sahil B16041 | Samiksha B16042 | Sharodiya B16046 PRB!"# ST$ ST$T"#"%T T"#"%T Veteriary e!"editure has #ee o a i$reasi% tred due to the i$rease i "et o&ershi" i the 'ited 'ited States States(( Ber% Ber%er era$ a$ is a $om"a $om"ay y "rodu "rodu$i $i% % e)ui"m e)ui"met ets s used used *or testi testi% % "et "atie "atiets ts i the +eter +eteria iaria ria  $lii$ $lii$s( s( ,mi+u ,mi+ue e is oe o* the most most su$$e su$$ess* ss*ul ul e)ui"m e)ui"met ets s "rodu$ed #y the $om"ay- &hi$h is "ri$ed at a $om"etiti+e rate to attra$t lo&er ad middle si.ed +eteriarias( /he "rodu$tio o* ,mi+ue i+ol+es the use o* "lasti$s ad $hemi$al rea%e rea%ets ts su""li su""lied ed #y t&o maor maor su""li su""lier erss- eie/ eie/e$h ad lsio lsiore re(( /he maa%e maa%eme met t o*  Ber%era$ is "lai% to take $otrol o+er its su""liers to redu$e the "rodu$tio u$tuatio ad o+erhead $osts o* the rm( /here are t&o strate%i$ alterati+es *or the $om"ay to im"lemet its *uture "las( t $a o"t *or Buyi%7 out its su""lier thus ite%rati% #a$k&ards or #y #uildi% it maki% their o& "lasti$ $om"oets i their "lat( &$!S" $SS'#PTI%S () $ssumption of "*ual Production:

 /here has #ee a uderlyi% assum"tio that Ber%era$ &ill "rodu$e same amout o*  $artrid%es des"ite eie/e$hs hi%her $a"a$ity to sell to e!teral "arties( Additioal sales ad $otri#utio resulti% *rom e!tra $a"a$ity to de$rease B9 +olume #ased o e!isti% lo%;term $otra$ts<( =ost stru$ture due to the a$)uisitio is "er$ei+ed hi%h- #ut "rodu$tio o* eie/e$h eie/e$h is 2> that o* i;house( /his shall $otri#ute i the i$reasi% demad o* the idustry( ?ore +olume i$reases +aria#le $osts- #ut !ed $osts remai relati+ely u$ha%ed- thus redu$i% $ost #y s"readi% it o+er more um#er o* "rodu$ts( +) %egation of Sal,age -alue:

Various s$hools o* thou%ht i%ore sal+a%e +alue *rom selli% eie/e$h i the *uture $om"ared to o;e!istet sal+a%e +alue o* i;house "rodu$tio i the $ase o* make de$isio( /he $a"ital lo$ked i the latter o"tio is mu$h hi%her ad risky( .) %egation of $dditional Capacity "/pansion and Training Costs: Ber%era$ &ill i$ur *uture $osts i* Ber%era$ &ats to meet %ro&th i demad( /he su#se)uet $al$ulatios sho& ho& &ith the make de$isio Ber%era$ &ot #e a#le to s$ale u" *or the *uture( No idi$atio o* hiri% ad traii% la#orers( t &ill ha+e to udertake e!tra $ost i traii% ma"o&er to o"erate the "lat( $lternati,es: @e ha+e "er*ormed a a$ial aalysis o* the t&o alterati+es to "i$k the #est $hoi$e( S.No   It Items . 1  No. of Moulds 2 Parts per moulds 3 Cycle Time 4 Cycle/shift 5 Parts/Shift 6 Cartride/Shift ! "ptime # Cartride/Shift $ %&&ual Capacity 1' ( "tili)atio&

     

Buy

In House

8 10 75 384 30720 15 15360 90% 13 13824 10368000 46 46

4 10 70 411 16440 8220 95% 7809 5856750 81

'tili.atio o* the $a"a$ity o* the $hoi$es is de"edet o the um#er o* moulds- $y$les "er shi*t- u"time ad $artrid%es "er shi*t( t turs out to #e 46 *or #uy de$isio ad 81 *or ; house de$isio at the ed o* the rst year(

Working et!i"s In# House !5'' 2.5 25' 46#!5'' 46#!5'' 11$5312 112'312 5 5 4335$3! 4335$3! 5 5 3140625 3215625 0 0

Buy

*&stalled +ase Test/,ay -ori& day/year Total Cartride Cost 02.55 02.3$ Selli& Price 0$.25   $eenue

 /he total $artrid%es re)uired i 2010 &ould #e 4-68-500( /he re+eue %eerated *rom the sale is sli%htly diCeret i #oth s$earios &ith hi%h re+eues i the $ase o* ;house( &!rtri'ge em!n' (ro)t* r!te #( $( 1'(

2010 46#!5'' 46#!5'' 46#!5''

2011 5'625'' 51'$3!5 515625'

2012 546!5'' 556$21# 56!1#!5

2013 5$'4$'' 6'!'44! 623$'62

2014 63!!2$2 6616!#! 6#62$6#

2015 6##!4!5 !2122$! !54$264

 /he de$isio also hi%es o the *a$t that the market is e!"adi% at the rate o* 8(5 "er year(  /he ta#le a#o+e $a"tures the demad *or $artrid%es i the e!t 6 years( /he o"tio o* #uyi% looks more suited &he &e a$$out *or %ro&th as the demad $ould #e satised &ith the a$)uisitio( But &ith i;house- &e eed to udertake multi"le sta%es o* e!"asio to kee" u" &ith the "ossi#le %ro&th i the idustry(

Profit Mari&s * Co&ti&uous e7e&ue 9i&a&cial is /er!""

+in!n,i!" -se,ts In#*ouse ih Medium 8es ih (oo'

Buy Medium Medium 8es ih (oo'

Both the de$isios look e)ual &he &e take ito a$$out the a$ial e!$e"t that "rot mar%is are a little hi%her *or ;house as deli+ery $osts are e!em"ted( @e $a attai yearly sa+i%s o* D1-64E-131 more #y %oi% i;house( Su"y &*!in -se,ts In#*ouse *mpact o& Compo&e&t Supplier Neati7e ,istri:utio& Net;or / Sales 9orce Need to Create Cartride Supplier Support Need to Create Petrochemical M Supplier Net;or Need to Create Supply Chai& is Not Me&tio&ed /er!"" Not $e,ommen'e'

Buy Neati7e %7aila:le Neati7e %7aila:le Not Me&tio&ed o'er!te /

,e o* the #i%%est ad+ata%es to #uy is that &e ha+e a esta#lished et&ork o* distri#utors to sell the $artrid%es as there is o+er $a"a$ity iitially( @e are #etter e)ui""ed to deal &ith Petro$hemi$al "ri$e u$tuatios as &e ha+e sta#le "arters( !n!geri!"  Str!tegi, -se,ts In#*ouse Core Compete&cy / 9ocus Not %7aila:le -ill ha7e :i Tech&oloy Cha&e i& future impact Core Pro:lem of Petroleum M Supply -ill :e +i issue Su& Cost ih

Buy %c
Competitors eactio& Ma&aerial is /er!""

ih -ill *&crease No

Medium -ill educe !y Be

 /he #i%%est ad+ata%e o* #uyi% is the te$hi$al ko&;ho& o* $artrid%e mau*a$turi% "ro$ess( Ber%era$ $ould le+era%e the FGH to kee" itsel* u"dated &ith the treds i te$holo%y ad also le+era%e the maa%erial a$ume( =artrid%e mau*a$turi% is also ot a $ore $om"ete$y o* Ber%era$ ad a i;house mau*a$turi% &ould *or$e it di+ert its attetio ad *o$us(  /here are also $ertai ita%i#le $osts asso$iated &ith i;house de$isio as &ell as Buy de$isio( In0house decision:  e!"erie$e &ith the "ro$ess ad idustry $ould lead to lo&er "rodu$ti+ity ad te$holo%i$al io+atio $ould take time ad ally to set u" a stadardi.ed "ro$ess &ith suI$iet )uality $he$ks &ould oly take more time( Buy 1ecision:  /he lo$k;i "eriod is too hi%h ad Ber%era$ $ould miss out o the o""ortuities to i+est else&here( te%ratio o* the e& $om"ay $ould #e a $halle%e due to "otetial $oi$ts #et&ee the old ad e& staC( 1ecision:  /hou%h #oth the de$isios ha+e their merits- &e ad+ise Ber%era$ to #uy as the %ro&th "ros"e$ts o* the idustry seem stro% ad Ber%era$ $aot aCord to lose its *o$us *rom its $ore $om"ete$y( /he $om"etitio i the market is also hi%h ad Ber%era$ does ot ha+e time to set u" the i house ad sta#ili.e the "ro$ess till its a&less( t $ould also #e im"aired #e$ause o* la$k o* te$holo%i$al "ro&ess ad $ould as &ell #e le*t #ehid i $ase a e& te$holo%y emer%es( References: • •

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