THE PROPOSAL FOR TURNAROUND
5.1. THE REVITALIZATION PROPOSAL.
The company at present is suffering from heavy liabilities that
amounts to 317.00 lakhs. The lack of competitiveness
and marketing strategies will increase the liabilities further. The
loosing spirit and morale of the employees will lead the company to its
natural death in the immediate future. However, the organizational analysis
of the company shows that there are chances of revival of the
company. This needs a strategic as well as phased action plan.
The revitalization programme is assumed to be implemented from 01.04.2000. The projected profitability statement of the company for 10 years, i.e.., from 01.04.2000 to 31.03.2010 is also given in annexure II. The success of the proposed revitalization programme depends upon the following basic sacrifices or considerations:-
o Substantial sacrifices from the part of management.
o Reasonable sacrifices from the part of suppliers.
o Considerable sacrifices from the part of the banks
o Creative sacrifices from the part of employees.
o Sympathetic approach and dedication of the people of Thrissur district.
o Sympathetic favours and considerations from the state government.
5.2. ASSUMPTIONS FOR THE PROFITABILITY STATEMENTS.
The assumptions for the projection of profitability statement can be categorized into four:-
1 Production.
2 Marketing.
3 Diversification.
4. Advertisement.
5.2.1. Production.
The most important assumption is that the company will improve the quality of the newspaper by improving the quality of the newsprint. There is considerable increase in the allocation of funds for the purchase of quality newsprint. The proposal recommends purchase of bulk quantity of newsprint instead of going for piece meal purchase. At present the company is purchasing a small quantity of newsprint that lasts for two weeks. This is not at all economical and viable, because the cost will be high on small quantity.
The first phase of production as per the revitalization proposal starts from 01-04-2000, targeting an initial circulation of 30000 copies (Annexure-II). As a part of diversifying the business, the proposal recommends the publishing of a best seller type weekly by the fifth year i.e.., 2004-2005, targeting an initial circulation of 25000 copies. During the first phase itself, the proposal strongly recommends modernization of technology in order to increase the quality of the
products and also to increase the capacity of the unit. The proposal has allocated an amount of Rs.150 lakhs for the technology upgradation during the year 2002-2003 to 2003-2004. Besides, an additional 31 lakhs has been provided for the technology management for the future years.
By the end of tenth year i.e.., 2009-2010, it is assumed that
the newspaper and weekly will be able to touch the target of 75000
and 50000 copies respectively. The proposal also recommends
the publishing of good quality of calendars and dairies every year.
The profit before depreciation accumulated by the end of tenth year
i.e.., 2009-2010 is assumed to Rs.203.04 Lakhs.
5.2.2. Marketing.
The core area of the revitalization proposal is marketing. The Express Malayalam daily is always known for its Thrissur identity. Accordingly the proposal concentrates more on the demographic structure of the Thrissur district. The population of the district is 28 lakhs. It consists of 250 villages. Since the paper is applauded for its acceptance in the working class, it is proposed that the paper can be marketed well in the villages. Besides, the Express Malayalam daily is the only low priced morning Malayalam newspaper now available in the market.
It is proposed that the company will appoint two saleswomen probably housewives, in 250 villages. There are three reasons behind the strategy of appointing women. One is that the women labour is cheap and the second is that they have better accessibility to reach every nooks and corners of the villages. The third reason is perhaps the most relevant one . Because as per the proposal, the company will launch a best seller type weekly by the year 2004-2005.
The weekly of these kinds are widely read by the majority of village women. Hence the women will be able to market it effectively. It is assumed that they will be able to raise the circulation of the newspaper as well as weekly at the rate of 5000 copies per year.
The economical aspect behind the appointment of saleswomen is assumed to be highly feasible as well as viable. Because the expenditure towards the salary of 500 sales women for raising the circulation from the dangerous level of 30000 copies to the promising level of 75000 copies with in a span of ten year is 60 Lakhs. This also includes their
effort of raising the circulation of the weekly from 25000 copies to 50000 with in a span of five year. In order to retain the readers as well as the saleswomen, the proposal also recommends the launching of reader-benefit programmes that attracts the village women population.
5.2.3. Diversification.
The revitalization proposal strongly recommends for a related diversification programme. This is the launching of a best seller type weekly to feed the tastes and preferences of the village women population. As per the proposal action plan the first phase of the plan period i.e.., 2000-2001 to 2004-2005, the focus will be on the effort to re-establish the presence of the paper and to increase its circulation from 30000 to 50000. The expected accumulated profit before depreciation during this period is 67.20 Lakhs.
The second phase of the proposal action plan period starts from 2005-2006 to 2009 to 2010. The diversification programme is expected during this period. The diversification is a related one. Accordingly the company will launch a best seller type weekly targeting the market segment of village women population of the Thrissur district alone. The attraction of this diversification is that the company need no additional technology, human resource and sales and distribution network. But there will be an additional 50 % expenditure towards the cost of raw materials and production cost and 60 Lakhs towards the salary of marketing people. However the company will keep on its healthy trend in profitability.
5.2.4.1. Advertisements-promotions and returns.
The advertisements has two areas of performances:
i). Advertisement promotions and ii). Advertisement returns.
Advertisement promotions means the promotional efforts to increase the market share of the newspaper and the weekly. Advertisement returns means the revenue accumulation from the advertisements published in the newspaper and the weekly
5.2.4.2. Advertisement promotion.
Advertisement promotion is the vital area neglected by the Express management for the last fifty years. So the revitalization proposal gives more emphasis to this area. An amount of 58 lakhs has been allocated for the whole proposal action plan period of ten years.
It is assumed that the company will spend an average of Rs.5.8 Lakhs on advertising the newspaper and its weekly in print media as well as television media. The identified market segmentation being the village women population, the company would also formulate certain reader-benefit schemes to attract and retain the readers of the newspaper and weekly.
5.2.4.3. Advertisement returns.
At present the company's advertisement revenue is almost nil. The revitalization proposal has targeted an average of Rs.1260 Lakhs and 24 lakhs towards advertisement returns from the newspaper and weekly respectively during the first phase of the proposal action plan period i.e.., 2000-2001 to 2004-2005. The second phase of the proposal action plan period i.e.., from 2005-2006 to 2009-2010 is very remarkable and significant because of the impact of the related diversification programme. During this period it is assumed that the newspaper and
weekly will accumulate an average of Rs.2160 Lakhs and Rs.192 Lakhs towards advertisement revenue respectively.
5.3. SACRIFICES AND ACTIONS.
The management of a sick industrial unit is always in a dilemma. They can not either close down the company or to invest more to gamble their luck factor. But the revitalization proposal is drafted under the strong assumption that the company would take one more decisive step to invest substantially for the proper turnaround of the company. This is indeed an inevitable sacrifice expected from the part of the management.
5.3.1. Financial sacrifices.
The company should mobilize the working capital requirements either by their own effort or through financial institutions. The required working capital assumed therein is Rs.200 lakhs. This fund will be provided either by the Lord Krishna Bank Ltd. Thrissur (company's Bank) or other nationalized bank on need based ground. As per the projected statement of profitability this loan can be refunded during the period of the revitalization programme. The accumulated profit before depreciation during this phase is Rs.203.04 Lakhs.
5.3.2. Actions from management.
The actions expected from the management is very decisive. The organizational analysis shows that the company does not have any scientific management functions since its inception. Hence it is very much essential to professionalize the management according to its environment. The major actions are as follows:-
Constitute an innovative general management system. Computerise the office functions and develop a Management Information System.(MIS).
Develop a financial management system and formulate a computerised financial accounting system. Periodical financial planning, monitoring of financial functions and proper review and feedback should be conducted.
Constitute a strong production management system, Quality control system and develop an effective inventory control system.
Constitute a marketing management system and introduce innovative marketing strategies.
Establish good industrial relations and climate.
5.4. Sacrifices from employees.
The success of the revitalization proposal is mainly depend upon the sacrifices from the part of the employees. At present the company is following the strategy of 50% salary cut in order to economize the management. The revitalization proposal strongly recommend the continuance of this strategy but propose to cut only 20% during its first phase in view of attaining future stability. From seventh year onwards i.e.., 2006-2007 salary of the employees can be given in full. It is also assumed that the employees would create a harmonious industrial environment and no further claims and demands regarding wages and salary will be raised during the first phase of the revitalization.
5.5. Sacrifices from financial institutions and suppliers.
The company has accrued financial liabilities to the tune of Rs.105 Lakhs towards the Lord Krishna Bank, Thrissur and suppliers of newsprint and machineries. The liability to the Lord Krishna Bank is for Rs.30 Lakhs and Rs.75 Lakhs to the suppliers of newsprint and machineries.
The economic viability of the revitalization proposal is under the assumption that these liabilities will be treated as interest free and the principal will be refunded within the proposal action plan period i.e.., ten years.
Besides, it is also assumed that the Lord Krishna Bank, Thrissur will provide the sufficient working capital on need base at the current interest rate as a part of negotiation. The suppliers are also expected to extend their credit facilities to the company on sympathetic grounds and considering the future business deal.
5.6. Sympathetic consideration of the local people.
The main thread of the revitalization proposal is the strong assumption that the people of Thrissur district will accept the newspaper as their own local communication media. The simple demographic details of Thrissur along with the expected subscribers with the implementation of the revitalization proposal is given below:-
5.6.1. Demographic details of Thrissur District.
Category
Population
Expected subscribers
%
Male
1312683
60000
4.57
Female
1424628
65000
4.56
Total
2737311
125000
4.57
The marketing strategy on which the viability of the revitalization proposal stands is under the strong assumption that the village women population will be attracted to the low price of the paper and weekly. In addition to this it is also assumed that they can be well influenced by the female sales force probably the housewives of the villages. It is also assumed that the village women population can be attracted by introducing certain schemes that have women interests.
5.7. Support expected from State Government.
There are so many privileges, welfare schemes and subsidies from the State Government to the print media industry and the press persons. But all these favours are controlled or regulated by certain norms linked to the circulation of the newspapers. Besides, political lobbies and corporate press media are also plays their illicit roles for grabbing such favours. The revitalization proposal expects a humanitarian approach from the part of the government in such matters. It is assumed that the government will favour the company with following considerations:-
• Maximum privileges should be given to the reporters and the journalists of the paper considering their problems in working with an industrially sick organization.
• Maximum subsidies and other welfare schemes should be made applicable to the employees of the company without any discriminations or rigid regulations.
• Maximum release of government advertisements to the newspaper and weekly without the constrains of the circulation and early payments for the same.
• Advertisement's production should be qualitative. For this printing technology should be modernized.