Value chain analysis:An Analysis of All Areas of the Ratna Sagar Publishing

An Analysis of All Areas of the Ratna Sagar Publishing

[Year]

A S Bisht IX Batch (Delhi) Executive Program in Management Shailesh J Mehta School of Management IIT, Bombay

Contents

 

                            

Part 1: Understanding Your Business, Value Chain, Operations & Organization Design.

·         Present Business of RatnaSagar Pvt Ltd (RSPL) and the customers.

·         RSPL History, Ownership, Mission, Vision and Values.

·         Long term Objective and Strategy of RSPL.

·         Organizational chart ,

·         Verticals, Hierarchy,

·         Employee strength, Managerial Levels, gender ratio at RSPL.

·         Value chain of the business.

·         Suppliers of RSPL.

·         Outsourcing /co-makers at RSPL.

·         IT infrastructure at RSPL.

·         Investment in ERP Application, data warehousing and data mining at RSPL.

·         BCG Matrix analysis.

Part 2: Understanding your Industry and Microenvironment.

·         How do you define your industry?

·         Who are the competitors, brief description?

·         Industry size (cumulative asset base /investments, cumulative annual turnover-organized and unorganized).

·         Market share of competitors.

·         Future growth projections.

·         Porters 5 forces model to analyse the industry attractiveness.

·         Role of technology at RSPL as well as in Industry (both IT and other technological innovation /usages

Part 3: Understanding the Financial structure of your company and competitors in the Industry.

·         Last 5 years trends of sales & Profit.

·         Financial Ratios.

·         Profitability Ratios, Debt Equity Ratios.

·         Working Capital Ratios, P/E ratios.

·         Other Financial Highlights.

SWOT Analysis, PESTLE analysis & Ansoff Growth Matrix

Part 4: Understanding Current Marketing and Sales Structure.

·         Marketing and sales function‘s.

·         Marketing and Sales Structure.

·         Number of people and functions.

·         Understanding Consumer Behaviour of RSPL.

·         What need want the RSPL product satisfies ,are people brand conscious in general, what values they look for in products they buy.

·         Mention if any previous studies on consumers.

·         Describe the company’s current market ,target market ,segment and target segmentation.

·         Current marketing mix

Understanding Product & Brand Portfolio.

·         Product Portfolio, Product Lines, width, Depth, SKUs.

·         Brands for each of the Products.

·         Describe brand Equity of your company’s and major product brands.

·         What are the major brand values your corporate brand product stands for.

·         Relative brand positioning of your major product with respect to Competitors.

Pricing Strategy

·         Cost to company .price to consumer, Distributor and Retailer Margins.

·         Pricing strategies to different segments of customers-penetration, skimming vis a vis your major competitors.

·         Role of major tax components-VAT, Excise, customs as a part of your price.

Promotion –company’s communication to customers.

·         Various communication/promotional activities  company undertakes ,(Annual promotion budget activity wise)

·         Briefly describe promotional efforts: on advertisement (media, outdoor, print, indoor, POP) sales promotion efforts, event sponsorships, conference sponsorships.

·         Internet marketing ( web site presence and its promotion ,search engine optimization, email marketing ,social media marketing ,blogs/forum ,face book page ,twitter etc.

Advertisement analysis: include at least three of the following pieces in your report.

·         Layout of print advertisement. (specify media and vehicle)

·         Layout of a Brochure.

·         Layout of a direct mail piece.

·         Layout for a billboard.

Place Distribution

·         Distribution structure –Direct or Indirect (pictorial representation of chain of C&F agents), distributor, wholesalers and retailers etc.

·         What are the investments channel members make and their margin and returns on investments analysis?

·         Briefly share your perception of power distribution among channel members.

Relationship marketing focus  of your company .

·         How you maintain relationships with your customers.

·         CRM software and activities.

·         How do you use IT tools to manage that?

Part 5 : New product Launch

·         Value chain analysis.

·         Break Even analysis of the business .

·         STP analysis

·         Product decision (product type ,product Line ,Brand Name )

·         Pricing Strategy.

·         Promotion Strategy (advertising strategy ,sales promotion etc)

·         Distribution strategy.

Acknowledgment

 

We have taken efforts in this project. It has been possible with the support of the guidance & sessions of the Professors. And with the help of the organization’s annual reports which have been extensively studied & referred to while making this project. All the Information arranged in the project is Public in nature & have no any restriction of being used & published under ethical & fair usage.

I Arjun Singh Bisht being the Ratna Sagar Employees would like to express our gratitude towards the member of (Ratna Sagar) for their kind co-operation and encouragement which help us in completion of this project.

Our thanks and appreciations also go to our colleague & Manager in developing the project and people who have directly & indirectly helped us out with their abilities.

For readers, Information which is company confidential in nature has been specified in the page at bottom & should not be used anywhere by any means.

RatnaSagar Pvt limited is a publishing company a pioneer in school books publishing cover a wide spectrum of subjects including business, technology, sciences, law and the humanities. They include books and resources that help students learn, teachers teach, and professionals evolve throughout their careers. The carefully designed learning tools help people around the world to expand their knowledge, develop their skills and realize their potential. The company is committed to provide quality content, assessment tools and educational services in all available media, spanning the learning curve from birth through university and beyond.   

        

According to this matrix, business could be classified as high or low according to their industry growth rate and relative market share.

Relative Market Share =

SBU Sales this year - leading competitors’ sales this year.

Market Growth Rate = Industry sales this year - Industry Sales last year.

1. Stars- Stars represent business units having large market share in a fast growing industry. They may generate cash but because of fast growing market, stars require huge investments to maintain their lead. Net cash flow is usually modest. SBU’s located in this cell are attractive as they are located in a robust industry and these business units are highly competitive in the industry. If successful, a star will become a cash cow when the industry matures.
2. Cash Cows- Cash Cows represents business units having a large market share in a mature, slow growing industry. Cash cows require little investment and generate cash that can be utilized for investment in other business units. These SBU’s are the corporation’s key source of cash, and are specifically the core business. They are the base of an organization. These businesses usually follow stability strategies. When cash cows loose their appeal and move towards deterioration, then a retrenchment policy may be pursued.
3. Question Marks- Question marks represent business units having low relative market share and located in a high growth industry. They require huge amount of cash to maintain or gain market share. They require attention to determine if the venture can be viable. Question marks are generally new goods and services which have a good commercial prospective. There is no specific strategy which can be adopted. If the firm thinks it has dominant market share, then it can adopt expansion strategy, else retrenchment strategy can be adopted. Most businesses start as question marks as the company tries to enter a high growth market in which there is already a market-share. If ignored, then question marks may become dogs, while if huge investment is made, then they have potential of becoming stars.
4. Dogs- Dogs represent businesses having weak market shares in low-growth markets. They neither generate cash nor require huge amount of cash. Due to low market share, these business units face cost disadvantages. Generally retrenchment strategies are adopted because these firms can gain market share only at the expense of competitor’s/rival firms. These business firms have weak market share because of high costs, poor quality, ineffective marketing, etc. Unless a dog has some other strategic aim, it should be liquidated if there is fewer prospects for it to gain market share. Number of dogs should be avoided and minimized in an organization.

Limitations of BCG Matrix

The BCG Matrix produces a framework for allocating resources among different business units and makes it possible to compare many business units at a glance. But BCG Matrix is not free from limitations, such as-

1. BCG matrix classifies businesses as low and high, but generally businesses can be medium also. Thus, the true nature of business may not be reflected.
2. Market is not clearly defined in this model.
3. High market share does not always leads to high profits. There are high costs also involved with high market share.
4. Growth rate and relative market share are not the only indicators of profitability. This model ignores and overlooks other indicators of profitability.
5. At times, dogs may help other businesses in gaining competitive advantage. They can earn even more than cash cows sometimes.
6. This four-celled approach is considered as to be too simplistic.

Understanding Your Industry and Microenvironment

 

Sector Profile

Books have always been regarded as an important media for the development and promotion of human values. They act as catalysts for the advancement of a nation. They record new ideas, preserve and communicate knowledge, impart education and values, and aid the overall development of an individual. The publishing industry in India is counted among the top seven publishing nations in the world. With an estimated market of INR 10,000 crores, India ranks third after the US and UK in English language publishing.

With the coming of the Digital age the nature of the industry has changed. The advancement in technology and Indian’s skilled manpower resource, makes the country a major outsourcing hub for print and pre-publishing services in the world, be it print, design or editorial. The sector has tremendous potential, both in the domestic as well as the export markets.

Currently the sector is witnessing a Compound Annual Growth Rate (CAGR) of 30%. The importance of the Indian market has been recognised the world over, to the extent that India was the market focus at the 2009 London Book Fair. From a humble start under British scrutiny, the sector presently produces 90,000 new books a year in 24 languages including English.

The Indian publishing market is non-homogenous and is structured according to region and language. The 24 Indian languages including English give ample scope and variety to the Indian publishing industry. More than half of the total titles published in India are in Hindi and English, with Hindi constituting about 26%, followed by English at 24%. The textbook market in India is dominated by the government. Prior to the setting up of the NCERT in 1961, the textbook market in India was domination by a handful of foreign publishers. Currently, the government (NCERT, State Text Book Boards, NBT, and Publishing Division, combined) is the largest publisher in the country.

The Government allows 100 percent FDI to publishing houses across the country to make India a publishing hub, by utilising the vast English-speaking technical manpower. There is a huge scarcity of researched data on the publishing industry. Various estimates have been put forward as to the capacity of the sector. However, most fall short of providing the true potential of the sector. In view of this limitation and the fact that the knowledge sector in India is growing at a exponential rate, we can clearly opine that the Indian publishing industry in India is truly a colossus—a giant in slumber, which needs to be awakened and given its due status and identity.

While no one would argue that the Indian publishing industry is growing at an impressive pace, unfortunately there are few statistics that give an exact picture of the Indian market which are also estimates at best. India is one of the few (if at all any) major markets in the world which is still seeing growth in both print and digital publishing and the value of the Indian publishing industry in 2012 is estimated at USD 2 Billion2 with an overall growth rate of around 15% as per conservative estimates. A nationwide survey conducted by the National Book Trust of India in 2010 revealed that one-fourth of the youth population, a staggering figure of 83 million, identify themselves as book readers. India also has about has about 19,000 publishers although out of those only around 12,400 have ISBN’s. It is further estimated that about 90,000 titles are published in India every year which includes books across all genres3.

On the flip side, the per capita number of book titles published in India is around 8 per 100,0004 people which is much lower compared with countries like the United States of America, Germany and France.

Print-runs for fiction rarely exceed 2,000 copies in the first instance. For well-established writers, first print runs can go up to 5,000 and a bestseller is often a book that has sold only as many as 10,000 copies. There is also severe pricing pressure on books because of which the margins for publishers in India show a bleak picture, with only 2.5 to times multipliers, as against UK or US where the publisher can afford to multiply costs by 10-12 times. Prices of books, instead of going up, have gone down further with the popular Rs. 100 (2 USD) - novel trend5.

Publishers: 19.000 (12.400 using ISBN)

Titles published: 90.000 per year

Title published per capita: 8 per 100.000

Breakup of Book Sales

Given that almost half of India’s population is under the age of 25, it’s no wonder large part of the book trade is dominated by academic and children’s books which account for 40% and 30% of the market respectively. The remaining 30% constitutes trade publishing. In terms of print languages, 20% of sales volume comes from English language books which also makes India the third largest market for English

books consumption after the US and UK markets. The largest sales volumes among Indian languages are that of Hindi books which constitute 25% of the market while the rest of the market is divided between other Indian language books

6. Barring some run away successes, print-runs for non-academic books rarely exceed 2,000 copies in the first instance and a bestseller is often a book that has sold only as many as 10,000 copies. A handful of titles such as those by Indian commercial fiction writer, Chetan Bhagat, Gregory David Robert’s Shantaram, the Harry Potter and Twilight series, and Freakonomics have sold more than 100,000 copies.

Market share:

Academic books: 40%

Children’s Books: 30%

Trade publishing: 30%

Distribution and Retail

Although organised retail is growing in India at 15% per annum it still only account for 7% of book sales in India7. This poses a challenge to distribution and availability of titles especially in smaller towns and cities. Having said that ecommerce is fast changing the retail and distribution landscape in India. Online stores have aided book distribution and are able to reach customers in every nook and corner of the country even where there are no book stores. Furthermore due to reduced operational cost vis-à-vis brick and mortal stores, online stores are able to sell books at cheaper to consumers which have hurt sales at individual and chain bookstores forcing some of them to shut down. One major online retailer claims it sells 150,000 books every month and boasts of 6 Million titles.

Major Book Retailers - Online

• Flipkart.com

• InfiBeam

• Amazon (Planning to enter Indian market)

Major Book Retailers – Traditional

• Crossword

• Landmark

• Odyssey

• Reliance TimeOut

Distribution is a major challenge for publishers, be it an indigenous company or a multinational publisher. To ensure that books are readily supplied at all possible retail outlets there are primarily two kind of distribution modules in the country. (a) Books are offered to the store on 100% return basis or (b) Books are ordered by the shops as per the demand of the same. Some publishers like Penguin India distribute its own titles and as well as that of its competitors titles. Rupa & Co and Westland too belong to this league. Publishing houses have their sales team set up in the major states of the country like Mumbai, Bangalore, Chennai, Kolkata, via which they ensure ready supply of their titles across the country. Simultaneously they also tie up with major distributors in the country for the same.

Major Distributors in India

• International Book House – They have 90 plus publisher as its clients and distribute books in all major and local book shops in Mumbai, Delhi, Bengaluru, Pune, Nagpur, Ahemdabad and Bhubaneshwar. They also have alliances with 10,000 international publishers in the UK, USA and other parts of the world8.

• India Book House – One of the largest distributor of books and magazines, in India. IBH is the distribution arm of Amar Chitra Katha Pvt. Ltd., the Publisher of cult brands Amar Chitra Katha & Tinkle. It also represents and distributes around 50 national/international book publishers. It has its centre in Mumbai, Delhi, Chennai, Bangalore, Hyderabad, Kolkata, Ahemdabad, Pune, Chandigarh and Trivandrum9.

• India Book Distributors (IBD) – They are spread over 7 cities, namely Mumbai, Pune, Bangalore, Hyderabad, Chennai, New Delhi and Kolkata10.

Digital Initiatives

Currently the market for ebooks in India is miniscule. A big reason for this is that currently e-readers are still very expensive for most consumers in India which impacts ebook adoption rates. On the positive side publishers feel the digital market will grow substantially in India in the next few years and Indian publishers have already started converting their current lists and back lists into ebook formats. Some publishers have already started selling their ebooks through foreign retailers such as Amazon where the pricing is in foreign currencies. Indian online retailers, not to be left behind, have also started to work with the publishers to incorporate and sell the publishers list ebooks priced in Indian Rupees although at the time of writing this report, July 2012, this service was yet to go live.

Imports/Exports and Rights Sales/Purchase

Unfortunately there is not enough data or breakup available on exports/imports of Indian exports and sale/purchase of ‘Rights’. In the case of global exports of printed and published products, India’s share is 6.46% according to data released by the non-profit CAPEXIL (Chemical and Allied Export Promotion Council of India). The value of book and publication exports was €267 million in 2009–201011.

According to a study in “Buch und Buchhandel inZahlen 2009”, Asian partners are gaining in significance when it comes to licensing deals (this also includes India, with 78 licenses), although its 20 % market share is only half as high as that of Eastern Europe. Business is booming in the category of children’s books (esp. in Asian countries), which is also evident at the NDWBF. The entire children’s book segment constitutes a 25% share of the licensing trade.

Beyond Publishers – Service Providers in India

Other than book publishing India provides a thriving ground for publishing services providers such as printers and digital service providers. The Indian book print industry is pegged at USD 1.4 Billion, is estimated to be growing at 12% and caters to the printing needs of many overseas publishers. In the case of business process outsourcing (BPO) services in publishing, analysts believe globally the value of the industry will be $1.2 billion in 2012 of which India has a huge 60% share12. Indian BPOs offer a range of services, from data conversion, digitization and copy-editing to complete project management. Many major STM publishers, legal publishing firms, magazines, and newspapers, digitize, design, and archive content in India.

Fixed book pricing

Legally regulated price maintenance with many possible exceptions. Publishers determine book prices. The Maximum Retail Price Act stipulates that a maximum price must be printed on every book.

Value Added Tax

No VAT is charged on books and there are no customs fees for importing books.

Copyright laws

• Berne Convention

• Universal Copyright Convention

Associations

• National Book Trust (NBT)

• Independent Publishers Group (IPG)

• Federation of Indian Publishers (FIP)

• Federation of Booksellers and Publishers Association

• Association of Publishers in India (API)

• Federation of Educational Publishers

Book Fairs

There are numerous national book fairs in India. These are the five most important trade fairs:

New Delhi World Book Fair

The New Delhi World Book Fair (NDWBF) is India’s largest international book fair and has been held at the Pragati Maidan Exhibition Centre since its inception (1972). It is the leading trade fair for exhibitors and trade visitors from India and neighbouring countries in the South Asian region and the fair usually attracts more than a million visitors from India and neighbouring countries.

The 20th New Delhi World Book Fair 2012 was held from 25 February 2012 to 4 March 2012 organised by National Book Trust, India (NBT) and hosted 1,300 exhibitors in 2,500 stalls spread over 45,000 square metres. As a new initiative, NBT collaborated with the Frankfurt Book Fair to organise the first ever Rights Table Conference at NDWBF 2012 which was very well received by Indian and International publishers.

From 2013, the fair will be held annually as opposed to biannually, and will be held from February 4-10, 2013.

Kolkata Book Fair

The Kolkata Book Fair is a sales fair for the general public that takes place annually at the end of

January/beginning of February in Kolkata (Calcutta). It is the biggest book fair in the world in terms of retail visitors. The 36th Kolkata Book Fair was held from 25th Jan to 5th Feb, 2012. The guest of honour was Italy.

Delhi Book Fair

The Delhi Book Fair is held every year in August/September. The 17th Delhi Book Fair was held over

nine days from August 27 - September 4, 2011 at the Pragati Maidan exhibition grounds (open daily

from 10 a.m. to 8 p.m.). This fair is particularly popular as a sales event that not only provides information, but also offers books for sale at greatly reduced prices. The general programme

accompanying the fair consists of seminars dealing mainly with topics like copyright or library management. The fair is organised by the Federation of Indian Publishers (FIP), in cooperation with the

India Trade Promotion Organisation (ITPO). There is no distinction made between trade and public visitor days.

The next Delhi Book Fair will be held between September 1-9, 2012.

Chennai Book Fair

The Chennai Book Fair is organised by the Booksellers’ and Publishers’ Association of South India

(BAPASI) and has taken place every year since 1977 over approx. 10 days between the end of December and middle of January. The Chennai Book Fair is a small sales event with a regional character. Exhibitors are primarily publishers, but also IT companies and newspapers. It is one of the largest cultural events in Chennai. The 35th Chennai Book Fair was held from January 5-17, 2012.

Mumbai International Book Fair

The ten-day Mumbai International Book Fair takes place annually in the middle/end of January. It is

organised by the Good Governance India Foundation. The 6th Mumbai International Book Fair 

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