B-TEAM

Team Members-
Ayush Sheohare +917503406578 me2130770@iitd.ac.in
Himanshu Bhargava +917503345078 me2130780@iitd.ac.in
Ankit Jatav +918802839175 ch7130151@iitd.ac.in

Scenario Analysis of Batton Bicycle

A Case Study competition by EDC-IIT Delhi
Introduction-Critical Success Factors for Batton Bicycle-
Marketing Work
Operations Culture

Increasing
Good Market
Future Share/Sales
Prospects

Low
Good Critical Success Working
Financial
Stability/ Factors(CSF) for Capital
Investment
Profit Batton Bicycle / Inventory

R&D/
Dynamic
Capability High
Customer
Satisfaction

Good
Increasing
Workforce
Brand
Satisfaction
Value

CSF are a set of factor or activity required for ensuring the success of the company. It is important that each of the CSF
remains positive for a healthy business in both short term and long term goals.
Introduction-Current scenario at Batton Bicycle-
Profitability of company is decreasing yearly- 2013 2014 2015
Gross Profit Margin- 37% 34% 30%
Net Profit Margin 11.5% 7% -----
Revenue increasing annually but net profit decreasing
Batton has accumulated huge amount of liquid asset(cash) $2,231,000 at the end of 2014. Thus, improvement projects can
be undertaken, and further if need be money can be borrowed from bank
Huge brand value of the company, people are proud owners of Batton Bicycle
Zero R&D carried out by Batton thus, the company lacks dynamism to adopt to new and changing market needs
Workforce needs change in work environment and nature of work, possible loss of workforce due to recent construction of
wheelchair factory with similar work requirement
Shift in market demand and customer need, now high demand for custom made and light material bike and low demand for
old and traditional bikes, so Batton needs a change in marketing and sales strategy
Plant production is limited by its capacity and thus cannot meet the increasing demand with production for a long time
The plant operates in inventory intensive production system because of constant production in each month, this is signified
by huge 18% of inventory in current assets
Tyre supplier has gone out of business due to a major fire breakout thus, no source of tyres for a month while other inventory
is present on hand
Costing method is very trivial and old, new costing methods like ABC, marginal or throughput accounting method needed
 Scenario Analysis Q.1 Case I- Factory Closed for a month
Q. What will be done during that time?
A. Production process will be automated with repetitive operation(bending, brazing) performed by machines and
final assembly done by labours, meanwhile available inventory will be released and labour will be trained
IMPLICATIONS ON CSF-
Financial- Short Term-Huge capital investment but cash is available to undertake such project (-)
Long Term- Increased profits, Improved market share and sales will overcome the financial investment incurred (++)
Improved labour wages but decreased number of labour will result in almost constant labour cost (=)
Workforce- Short Term-One month salary to be provided and training process to be undertaken to train all the labour for assembly process. Salary
has to be increased to prevent loss of excess workforce to the nearby factory (-)
Long Term- Skilled and satisfied labour because of change in work nature and increased salary (++)
Brand Value- Improve in long term because same quality product will be provided keeping in mind the customer need and with reduced price (++)
Market Share- Improve in long term because of increased production in a high demand market with production of customer oriented products (++)
Inventory- Short Term- Stored Inventory will be dispatched during the closed period (+)
Long Term- Inventory will decrease due to flexible production volume depending on seasonal demand, thus reducing the need for constant
monthly production (++)
Future Prospects- Improved future status of the brand due to good market and customer orientation i.e. providing custom made and light weighted alloy
based bicycles (++)
R&D- Improve over period thus, company will be dynamics to market changes and changing customer needs (++)
Customer Satisfaction/L.O.S- Short Term- Will decrease due to shortage of product (-)
Long Term- Will improve due to better product with same traditional and indigenous quality and reduced price (++)
Work Culture- Improvement in work culture in long term due to better labour satisfaction and labour laws (++)
( )- Represents the impact of change in Critical Success factor + Positive Impact = No major impact - Negative Impact
 Number and Figures Supporting Financial Validity of Case I-
Based on assumption that automation will double the electricity overhead and process like bending, brazing and painting
will be automated and production capacity will be doubled.
Changed Variables Changed Variables
Direct Labour per Cycle Production Overhead-
Traditional Roadster Total Y$
Process hours: Energy 5,200,000
Bending 0.00 0.00 Depreciation 1,000,000
Brazing 0.00 0.00 Quality control staff 180,000
Painting 0.25 0.25 Packaging staff 120,000
Assembly 1.75 2.00 Packaging materials 330,000
Total direct labour hours 2.00 2.25 Production management 240,000
Direct labour cost per bicycle at Y$15 per hour Y$ 30.00 Y$ 33.75 Other production overheads 2,175,000
Bicycles output 35,000 40,000 75,000 Total production overhead 9,245,000
Direct labour hours required for production 70,000 90,000 160,000 Total budgeted direct labour hours 160,000
Total direct labour hours available 161,280 Production overhead absorption rate 57.78
Overtime hours required to be worked 0 (in Y$ per hour)

Budgeted gross profit per unit-

Traditional Roadster
Per unit Per unit
Gross profit per unit
Y$ Y$ increases from
Sales price 625.00 725.00 $207.5 to $264.5 and
Material costs:
Financially very stable from $208.75 to
Metal tubing 80.00 100.00
and beneficial for long Paint, brazing and cleaning chemicals 25.00 25.00 $281.25 for
term Bought in parts & accessories 110.00 155.00 Traditional and
Total materials cost per unit 215.00 280.00 Roadster respectively
Production labour 30.00 33.75
Production overhead 115.5 130.00
Total budgeted production cost 360.50 443.75
Gross profit per unit 264.50 281.25
 Case II- Factory is Open

Q. What will done during that period?

A.Cycles will be manufactured without the tyres and will be stored for a month as inventory in some other place, workers will be paid
more due to the wheelchair factory and no improvisation projects will be undertaken

IMPLICATIONS ON CSF-
Financial- Short term- Cash will be used up to make inventory, also money will be spent to rent out a storage place (-)
Long Term- No financial gain over long term moreover labour cost will increase reducing the profit for the company even more(-)
Workforce- Labour will work as usual but will be paid more than the salary provided by the wheel chair factory (-)
Brand Value- Short term- Will decrease because of shortage of supply to the customer (-)
Long term- No major change in brand value (=)
Market Share- Will decrease in long term because of shift in market and customer need and due to lack of dynamism of Batton (-)
Inventory- Short Term- Will increase due to additional bikes being stored at an additional area (-)
Long term- No significant change in inventory, process is still inventory intensive (=)
Future Prospects- Due to decreasing market share and reducing profitability trend noted in 3 years, future prospects are very bleak for Batton
Bicycle(-)
R&D- No attention paid to R&D thus, company lacks dynamism (=)
Customer Satisfaction- Short term- Will reduce due to lack of product supply (-)
Long term- Will reduce due to lack of customer oriented product (-)
Work Culture- Will remain same in both short and long term (=)
( )- Represents the impact of change in Critical Success factor + Positive Impact = No major impact - Negative Impact
Analysis of two cases-
Case I Case II
10 positive impacts on CSF 1 positive impact on CSF
3 negative impacts on CSF 9 negative impact on CSF
1 no major impact on CSF 4 no major impact on CSF

Case I: Closing the factory for a month and carrying out improvement projects is the better option of the two because of huge
positive long and short term impacts

Answers to questions asked by Ken Styles-

A1. NO, I dont agree with the conclusion of Tom because the math done by him to support the decision is wrong but I agree to
the decision of stopping production for a month. During that time, improvisation projects have to be undertaken to convert this
setback into an opportunity of achieving long time success for the brand. Decision support analysis has been done in the
previous slides.
A3. Total cash inflow= budgeted cost*(number of cycles produced)
=$(496,875+744,375)
= $1,241,250
This cash inflow will be converted into Work in Progress Inventory and will be considered as current assets for the brand. Huge
amount of cash tied up as inventory is bad for the health of the brand. Moreover, there will be some cash inflow in form of funds
required to rent a storage space to hold all the inventory for a month.
A2. Information needed to help analyse the decision-
Seasonal demand data for bicycles
Salary provided by the other factory
Current market share of Batton Bicycle
Cost to rent the additional space
Budget allocated for automization of production process
Price and time required to install new machinery and equipment
Demand forecast on changing price and product supply
Current inventory
Price of outsourcing the production process for the time being
Labour demand change in work nature and environment
Companys aim for future
 Supplier Selection Wheel
Explained by Paul Cousin in 2002. Cousin explains that the supply chain strategy of an organization must consider a number of important
areas described by spokes in the wheel. This wheel suggests that it is very crucial for an organization to maintain an alignment between
its corporate goals and supply chain policies so that the organization functions efficiently.

Effective Organization Of Staff And Equipments Build And Maintain Good Relations With Suppliers
The space-oriented organization of the company
could be efficiently managed to reduce time
and labour. The manufacturing methods have ORGANISATIONAL RELATIONSHIP
Also not being reviewed for many years. STRUCTURE PORTFOLIO

ORGANIZATIONS
Collect, Analyze And Report The POLICIES & Apply It To All New Policies & Opportunities To
Performance Parameters Of Supply Chain STRATEGIES Ensure Cost Justification
The cost and quality of raw materials The CB analysis can provide us the details
PERFORMANCE COST & regarding the efficient application of new
provided by the suppliers needs to be MEASURES BENEFIT
reviewed so that any scope for cheaper & ANALYSIS
policies that will earn short and long term
better quality materials can be thoroughly SKILLS AND benefits and explore the opportunities to earn
studied. COMPETENCIES more ROI.

Develop Skills Through Training And Recruitment

The experienced workforce can be employed to train the younger workforce to
increase the quality of goods produced and save time. The redundant
workforce can be scrapped and new, talented people can be hired to add
benefit.
 Supplier Relationship
As per Cousins speculation, supplier relationships are made at operational levels, i.e. any change is policies
and practices will impact the existing relationships. So any changes that we decide to implement in our
company must align with the existing or a better supplier norms.
First, the organizational structure of the company including rearrangement of equipment and staff
management needs to be addressed followed by CB Analysis of any new policies that we decide to
implement.
Following steps can be taken to establish and maintain supplier relationship:
categorizing the company's purchases according to the strategic importance of the purchase and the
difficulty of managing the purchase situation.
analyzing the current supplier relationships, using another portfolio model based on the relative
supplier attractiveness
Existing guidelines on how to establish an order of priority among the resulting actions plans can be
employed to extend our supplier relationships.

Salary
BL equipment offering higher salary.
We might need to increase our
paycheck if no other alternatives.
Extra rewards, compensation etc.
can be taken into consideration.
Nature of work
Employees have complained about
repetitive nature of work.
Though this repetitive nature cannot
be completely removed, we could
look into alternatives to make the
work more interesting and fun.
Staff Retention
Recognition
We need to consider a appreciation
strategy for the workforce other than
yearly bonus.
The workforce needs to feel that the
company is thinking about them.
This can be used to foster loyalty and
establish proper relationships
Work Environment
A proper arrangement of equipment
could improve the working conditions
of the workforce.
Get-together events etc. can be taken
into consideration.
Role of Supervisor
The supervisor plays an important
role in
the quality and retention of
workforce.
Supervisor must be advised to
make use of the existing
relationships with the workforce
and motivate them to stay with us.
Benefits
Multi-generation benefits must be
understood since all employees
have different demands.
Health Saving Accounts, Higher
Deductible, Additional Coverage
can be taken into consideration.
 Brand Image
Patriotic and quality reputation in the market due
to which we are able to charge double the industry
price for our cycles. We need to retain our brand
value to compete in todays competitive market.
Though there are few limitations:
Small company size
Tradition manufacturing methods
narrow range of products
Limited production.
Overall profit is declining.
The existing image along with a review of
companys equipment, policies and market
approach can be used to extend our reach to more
customers.
The current image of the company is the result of
100% homemade and good quality products.
Since no extra cost was reported in the
development of current brand value, it cannot be
included in the statement of financial position as
per Accounting Standards and is accounted as fair
value.
The statement of financial position only includes
historical costs incurred so brand value could
appear as goodwill for any acquiring companys
balance sheet.
Sources of Information-
http://guides.wsj.com/small-business/hiring-and-managing-employees/how-to-retain-employees/
https://www.kbresearch.com/cips-files/Supplier%20Relationship.pdf
http://www.chegg.com/homework-help/questions-and-answers/explain-cousins-strategic-supply-wheel-
help-organisation-considering-moving-away-price-bas-q6908363
http://www.cio.com/article/2868419/careers-staffing/how-to-improve-employee-retention.html
http://www.managementstudyguide.com/employee-retention.htm
https://www.smartimage.com/build-maintain-brand-consistency/
http://www.ducttapemarketing.com/blog/social-brand-identity/

Thank You!