Post on 03-Jun-2018
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TEAM MEMBERS :
AKSHAY WAGLE (115)DURGESH KESARKAR(52)
SHAYAN KHAN(53)SHREEKANT DAGA(19)
SRINATHSUBRAMANIAN(100)
VISHAL AGRAWAL(4) 1
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The fourth most important tool at all
time, in terms of its impact on humancivilization-survey by Forbes Magazine
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Types of pencils
Wooden pencil Mechanical pencil
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Writing instrument market valued at Rs 28 bn
Increasing demand for branded products
Extensive sales & distribution leading to
increased penetration
79%
15% 6%
Segment share-writing instruments
Pens Pencils Others
Source: BIC Group Investor
Relations Department
Report, January 2009
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Indian SSI/SME sector
Accounts for major share of the stationery market
But in the pencil industry it produces around
5 million gross pencils every year which is a
small proportion of the total production
It is a growing segment increasing its share in the
market
Market Trends
Growth of organised book retailers
Shift in focus from inexpensive to quality products
Entry of foreign brands in Indian market driving theorganised segment
5
27%
73%
Stationery Market
Organised sector
Unorganised sector
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Staedtler set up their business in 1989
Faber castell set up their business in 1998
Concept of brands evolved in Indian Market because of
the competition faced from the above mentioned foreigncompanies which led Indian companies like Hindustan
Pencils to add core values to their recognized labels
Apsara and Natraj and consequently turn into brands.
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The peak demand for pencils begins in June
The major manufacturing season lasts from
January to April, the products are in transit inMay and on the shop shelves by June
Academic segment has remained the single
largest user of pencils
Hindustan Pencils is the leader
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There is sizeable demand from the specializedsegment too. E.g. drawing, glass marking andcosmetic pencils such as liners and shades
Faber-Castell, Mitsubishi and Conte are major brandswhich are outsourcing or setting up overseasmanufacturing facilities in South-East Asia or in India
With a high-tech product, the pencil industry, for all itssimplicity, has gone through a phase of consolidation
Multinationals are setting up manufacturing facilitiesoverseas
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Forest certification in Indiastill at nascent stage
No forests in India are
certified except 644 hectaresof private rubber plantationsin Tamil Nadu
To promote forest
certification, WWF hasadvocated a "step wiseapproach which the Uniongovt of India will implementsoon
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Supply side To gauge the impact of retailer margin on sale of
mechanical pencils
Demand side To determine if there is any shift in preference
from wooden pencils to mechanical pencils
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Not all wood can be used for pencil industry, only the soften
one is suit for pencil making,
--Cedrus deodara (cedar)
- Juniper Virginiana (red cedar)
- Calocedrus decurrens(Incense-cedar)
- Pinus Sibirica
- Pinus Koraiensis- Linden Wood (Basswood)
- Alnus
Wood used for
pencil
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Wood logs
Pencil blocks
Pencil slats
Treat with chemical
Making grooves in to the slats
Fixing of graphite in to the grooves
2nd grooved slat pasted
Compressed
Separation of pencil
Pencil is painted
Flow chart of
pencil
making
13
Pencil
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Pencil
manufacturing
process
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Gripping
AssemblyBarrel Assembly
A Mechanical Pencil Measures:
- 5.5 inches in length
- 0.5 inches in diameter
Description of Mechanical Pencil
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Cost of raw materials (wood, graphite, clay, brass or aluminium for ferrules,lacquer components, etc.)
Cost of parts or other finished components used to assemble the pencil
Cost of transportation and handling of various materials used and of thefinished product to the factory
Cost of labour and benefits for the factory workers employees
Cost of energy
Cost of supplies used to maintain equipment
Cost of government regulations
Cost of capital
Cost of management
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The quality of product they wish to produce will impact which rawmaterials and component parts they will purchase
Alternative suppliers for raw materials
Whether to make internally or buy externally different component parts
like slats, leads, ferrules and erasers or even semi-finished pencils fromother pencil manufacturers
Where to locate their pencil factories
The quantity of product to produce drives the level of investmentrequired in the factory and inventories as well as can effect the cost per
unit produced due to economies of scale
A constant cost industry i.e. because each firms long run average costcurve does not shift up or down as industry output changes
The long run supply curve for a constant cost industry is horizontal
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Pencil type included is mechanical pencils
Data type used: Primary; Gathered near Fort Area
from retailers on quantity sold and current margin;
Judgemental statistics on quantity sold if margin istweaked
To avoid heteroskedasticity, data collected from
only one area
A data point excluded to maintain a certain scale
of operation
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Supply side data collected from retailers because Supply can be calculated only at the last sale point
Before that the supply is merely routing through the
physical distribution system
Hence gauging supply of pencil with the single most
important factor for the seller at that point; i.e. sellers
margin
Demand is held constant since change in retailer
margin does not affect it
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#1Objective: To test if there is any
change in quantity sold if margin is
decreased by 2
Null: There is not much difference in
quantity sold; caused by the margin
Alternate: There is much differencein quantity sold; caused by the margin
#4
Objective: To test if there is any
change in quantity sold if margin isincreased by 2
Null: There is not much difference in
quantity sold; caused by the margin
Alternate: There is much difference in
quantity sold; caused by the margin
#3
Objective: To test if there is any
change in quantity sold if margin isincreased by 1
Null: There is not much difference in
quantity sold; caused by the margin
Alternate: There is much difference
in quantity sold; caused by the margin
#2Objective: To test if there is any
change in quantity sold if margin is
decreased by 1
Null: There is not much difference in
quantity sold; caused by the margin
Alternate: There is much difference inquantity sold; caused by the margin
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Decision rule: Accept Null if
Chi^2calculated is
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#1
Decision: Null Rejected
Calculated statistic = 314
Managerial Outcome: A decrease
in margin by 2 decreases quantitysold significantly
#4
Decision: Null AcceptedCalculated statistic = 40.8516484
Managerial Outcome: A increase
in margin by 2 does not increase
quantity sold significantly
#3
Decision: Null AcceptedCalculated statistic = 21.4349817
Managerial Outcome: A increase
in margin by 1 does not increase
quantity sold significantly
#2
Decision: Null Rejected
Calculated statistic =167
Managerial Outcome: A decrease
in margin by 1 decreases quantity
sold significantly
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#1 Key take away:
Chi square value is huge
If margins are to be decreased by 2
many retailers tend to lose interest inselling and will stop stocking
(Qualitative response)
#2 Key take away:
Chi square value is relatively huge
If margins are to be decreased by 1
few retailers tend to lose interest inselling and will stop stocking
(Qualitative response)
The supply remains relatively inelastic for those retailers at higher margins.
The supply tends to be perfectly elastic at lower margin levels.
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#4 Key take away:Chi square value is near rejection point
If margins are to be increased by 2; it
still does not help in increasing sales
substantiallyFutile activity (Based on
data scrutiny and logical application)
#3 Key take away:
Chi square value is comparatively
smallest
If margins are to be increased by 1 a
bottle neck might arise somewhere in
the PDS (Based on data scrutiny and
logical application)
Manufacturers Cost
Value addition from
production
Manu
factur
ers
Margi
n
Distribu
tors
Margin
Wholesalers
Margin -Retailers Margin
Price Analysis of a Pencil (Based on notion) 24
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Step 1 Collect data of monthly sales of mechanical pencils and there
respective margins Collect data (judgment of retailer) on sales of mechanical pencils
if margins were to be increased/decreased by 1/2 Step 2
Find mean quantity sold at current margin level and the other fourscenarios
Reasoning for usage of means rather than original 30 valuesThe means improved the R square; More importantly use ofmeans removed the size of operation bias for retailers; Theequation does not change significantly; The data set is still
represented; The data becomes fit for analysis Step 3
Plot the mean values on the scatter diagram and find the trendline
Supply of pencil = Independent supply Coefficient + MarginCoefficient (Margin at last sales point)
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19.23333333
24.4
30.1379310331.63333333
33.5862069
y = 3.5939x + 27.798R = 0.932
0
5
10
15
20
25
30
35
40
-3 -2 -1 0 1 2 3
Quantity sold at varied margins
Quantity sold at variedmargins
Linear (Quantity soldat varied margins)
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Change in
Margins -2 -1 0 1 2
Quantity Sold 19.23333 24.4 30.13793 31.63333 33.58621
y = 3.593x + 27.79
Supply of pencil (testing at last sale point) = Margin
Coefficient (Change in margin at last sales point) +Independent supply Coefficient
Analysis of regression line atlower margins
The margin elasticity is high at
reduced margins, hence
reducing margins is not
favorable
Analysis of regressionline at higher margins
The margin elasticity is low
at higher margins, hence
increasing margins is not
favorable
Contrast of actual values and values obtained by substituting margins in the
equation
ManagersDecision
Dont
Change the
Current
Margin
levels 27
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Null Hypothesis
Lack of awareness is not a major cause for lesser
than expected number of beneficiaries subscribingto Rajiv Awas Yojana (RAY)
Alternative Hypothesis
Awareness is a major cause for lesser thanexpected number of beneficiaries subscribing toRajiv Awas Yojana (RAY)
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Responses to the questionnaire of 32 people fromthe LIG and EWG was collected
Status of ownership of television and cableconnection was also sought
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Step 1
Applying weights to the responses for the above questions 5- Strong willingness to subscribe to RAY once informed 4- Moderate willingness to subscribe to RAY once informed
3- Neutral (Null Hypothesis) 2- Moderate unwillingness to subscribe to RAY once informed 1- Strong unwillingness to subscribe to RAY once informed
Step 2
Calculating mean and standard deviation of the sample
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Step 3
Applying z-test of hypothesis
Comparing the calculated and tabulated values of
z at 10% level of significance
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Sample size 32
Population Mean 3
Sample Mean 3.65Sample Std. Deviation 1.13
Calculated z 3.253943
Tabulated z @ 10% 2.33
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Decision We reject null hypothesis since calculated z (>tabulated z
Managerial Outcome Less number of subscribers of the Rajiv Awas Yojana
(RAY) is a reflection of limited awareness of the schemeamong the target segmentLIG and EWG
Key takeaways Govt. needs to initiate awareness measures to increase
the subscription to RAY
Television is the most important medium to carry theseawareness messages as television ownership was
found to be 100% in the sample population 34
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Step 1 Collect data of monthly home sales registration in
Mumbai from July 2010 to November 2012
Collect data of Base rates (HDFC) applicable onhome loans during the same period
Step 2 Plot the values in a X-Y chart and consequently
the trend line
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y = -463.55x + 9316.6R = 0.4284
0
1000
2000
3000
4000
5000
6000
7000
8000
7 7.25 7.5 7.75 8 8.25 8.5 8.75 9 9.25 9.5 9.75 10 10.25 10.5
Series1
Linear (Series1)
Monthly Home Sales
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Demand for Residential Homes in Mumbai
Y = -463.55x + 9316.6
Coefficient of Determination
R^2 = 0.4284
Analysis
Since R^2 >0.05, there is a significant relationship betweensale of residential homes and lending rates
Managerial Outcome
There exists a significant inverse relationship betweenlending rates and residential home sales. High interest ratesaffect demand for residential homes and Rate cuts are
effective means to boost demand 37
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19%
19%
22%
40%
StronglyAgree
Neutral
Disagree
Agree
To gauge if external
environment factors
has affected demandfor pencils in general
59% of the respondents feel that technology hashad an impact on the consumption of pencils ingeneral
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28%
28%
44% Wooden
MechanicalBoth
To compare
demand for each
type of pencil
72% of the respondents use mechanical pencils
which shows a rising preference for the same
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33%
67% AgreeDisagree
To check if the
demand is price
elastic
Among respondents preferring wooden pencil,67% would continue to use wooden pencil even ifprice difference is marginal implying demand formechanical pencils is price inelastic
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47%
34%
3%3%13%
0-1
1-2
2-3
>4
N/A
To know frequency
of purchase of
mechanical pencils
Around 81% of the respondents who use onlymechanical pencils consume within 3 leads whichimplies it is cost effective and efficient
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11%11%
22%11%
45%
0-1
1-2
2-33-4
>4
To know frequency
of purchase of
wooden pencils
Around 56% use more than 3 wooden
pencils per month
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36%
22%
7%
21%
14%0-1
1-2
2-33-4
>4
For students using both type of pencils we can see that usageof wooden pencils of more than 4 shows a sharp decline from45% to 14% implying the effectiveness of mechanical pencils
29%
64%
0% 7%
0-1
1-2
2-3
>4
Mechanical leads/quarter No of pencils /month
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Wooden vs. Mechanical
pencil
Raw Materials Wood pencils require four times more raw materialsthan the plastic pencil. However , the wood pencil
consumes less than half the non-renewable
resources as the mechanical pencil.
Water The wooden pencil consumes approximately 60% of
the water used by the mechanical pencil.
Energy The wooden pencil requires approximately the
same amount of energy as required by the
mechanical pencil.
Consumption
of:
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Wooden vs Mechanical pencil
Atmospheric
Emissions
The wooden pencil results in emissions less than or equal
to those of the mechanical pencil for carbon dioxide,
nitrogen oxide, sulphur oxide, and particulate matter. Thewooden pencil emits 5 to 6 times more carbon monoxide
than the mechanical one. The wooden pencil emits about
10% of organic pollutants of the mechanical pencil.
Waste water
effluents
The wooden pencil emits insignificant quantities of waste
water pollutants; emissions of BOD and suspended solids
are greater for mechanical pencil.
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Wooden vs Mechanical pencil
Solid Waste The wooden pencil generates less net process solid wasterequiring disposal and less post consumer waste than themechanical pencil. The wooden pencil generates more
solid waste a greater proportion of this solid waste is later
recycled into various products.
Hazardous
waste
The wood pencil generates significantly less hazardous
waste than the mechanical pencil.
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The production factors (mainly man, machine, and material)are required to be maintained
Government banning graphite will lead to the loss of a lot ofjobs
Employers, employees, suppliers, the local businesses,energy suppliers, miners, machinist, shippers and producersall suffer which causes a ripple in the economy
The Governments decision to promote Green Pencilscreates an industry for China because of absence of such anindustry in India
Each individual macro economy affects the next microeconomy which affects the next and so on
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Retailer margins for mechanical pencils should remainunchanged
Since there is higher elasticity at lower margin levels, marginsof retailers at low end should not be tweaked
There is an opportunity to reduce margins which are currentlyslated to be high
A new branded market for mechanical pencils is on the rise
Since there are environment costs associated with mechanicalpencils, a new market could be created for eco-consciouspencils
Complementary goods like sharpener will be affected by therise of mechanical pencils
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Economics
Paul Samuelson
Economics: A Contemporary IntroductionWilliam McEachern
The Marketing Whitebook 2011-2012
Statistics for ManagementLevin and Rubin
www.pencil.com
http://articles.economictimes.indiatimes.com/2011-08-26/news/29931612_1_forest-management-t-r-manoharan-forest-certification
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http://articles.economictimes.indiatimes.com/2011-08-26/news/29931612_1_forest-management-t-r-manoharan-forest-certification8/12/2019 Quantitative Research on Pencil_New
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THANK
YOU