Prepared by: Deori Adarsh Kumar

(Section D)
Decision Sheet Nirmal Rayons

Problem Statement: The Managing Director of Nirmal Rayons Ltd. needs to decide whether to set up another plant
to increase its capacity and to confirm the consultants prediction and calculation of Total demand (Total market
potential) and future demands.
Reason for expansions:
One of the major players in the market
Production cap increased by the government
Rise in the demand of cellulose film due to certain sectors
Reason against expansions:
Customers moving to other cheap alternatives
Extra capacity granted by the government
Additional license provided to companies
Recommendation:
It is recommended not to proceed with the expansion plans and continue with the current production capacity.
Analysis behind recommendation:
NRL is producing about 15.7 % less than the installed capacity, ie about 1133 metric tonnes more can be produced
with the existing plants, in case demand increases.
The most optimistic demand prediction will be around 9000 tonnes which is less than the required demand(i.e.
15000*80%=12000 tonnes).
The introduction of 15000 tonnes will lead to stiff competition, especially with 2 new competitors entering the
market.
Inconsistencies in consultants predictions:
1. Textiles Industry:
Reduction in the share of cellophane from 74% to 64% (10 %) is not explained. It is not necessary that the
share of cellophane will come down due to PVC and polyethylene as increase in competition in the cellophane
industry might result in competitive prices
2. Cigarette:
According to our calculation using regressing we estimate the demand in 1977 as 2284 tonnes in comparison
to the consultants estimate of 2317 tonnes. The labour situation in the cigarette factories has not been analysed or
taken into consideration
3. Confectionary:
The fact that 80% of the organised sector and only 5% of the unorganised sector is wrapped in cellophanes
is not used in the calculation. Therefore our estimate is 675 tonnes.