PESTEL ANALYSIS

Political and Legal

Lijjat papad was established in 1959. During those days, India was
striving for economic and social growth. The policies and climate was
very favorable to start a cooperative society. Lijjat papad utilized this
opportunity and evolved as a cooperative society, empowering women
of India and growing steadily since then. The present tax policies are
very favorable. Purchase of raw material is exempted from tax. Papad
as a product is exempted from sales tax. Khadi Village Industries
Commission (KVIC) provides strong support and cooperative societies
can borrow money at a subsidized interest rates. The papad industry
has very little to worry about political factors [6].

Environmental
India is a country blessed with very favorable climate for agriculture,
therefore it is easy procure agro-based raw materials. One of the major
components of papad production is drying of papad. India has 320 days
of bright sun which favors drying at a very low cost.

Socio-cultural
Papad is the integral part of Indian food from centuries. It is a preferred
accompaniment to meal in many families. Statistics say that 67% of
Indian population consume 4 to 5 kilograms of papad in a year.
Therefore going by data, papad industry is a very lucrative industry. The
majority of women of India are adept at the art of papad making. It was
just matter of organizing them and forming a cooperative society. All
these socio-cultural conditions contributed in success of Lijjat papad .
Technology
The use of technology for papad making is intentionally restricted to
provide employment to large number of unemployed, non-earning
women. Technology to test the quality of product is available and is
employed by Lijjat to test its papad.

Economic
There’s a consistent demand for papad throughout the year. The
economic conditions are also very favorable for women empowerment
and women employment. Hence, cooperative society with the focus on
uplifting the women receives many incentives offered by government.
The Lijjat papad has hardly any effect on economic upturn or downturn.
FINANCIAL ANALYSIS
 “Financial Management is concerned mainly with such matters
as how a business unit raises its finance and how it makes use of it
efficiently”.

In simple words, it means raising of adequate funds to the

minimum cost and using them effectively in business. It is mainly
concerned with the financial problems of the business.

The finance department has to cover a long range of functions

such as maintaining adequate funds on hand to meet expenses of both
revenue and capital nature. Smooth availability of finance for running the
enterprise and easy availability of finance for the expansion of the
business , determines the success of the financial management.

Undoubtedly, money occupies a key position in the capitalistic

economics of the modern age. Money is the life-blood of modern
business. Money is required purchase expensive machinery, & also for
day-to-day expenses on raw materials., labour & operational and
administrative needs of business.
 The organization structure of finance department of SHRI
MAHILA GRIHA UDYOG LIJJAT PAPAD (Rajkot Branch) is given as
follows:-

Branch manager

Accountant

Cashier

Clerical staff
 “Capital Structure of a company refers to the make-up of its
capitalization”.

However, in a broader sense, capital structure includes all the

long-term capital including loans, debentures, bonds, share issues,
reserves, etc. and the components of the total capital.

In simple words, capital structure refers to the composition of

capital in an organization. SHRI MAHILA GRIHA UDYOG LIJJAT PAPAD
has acquired their capital by General funds and loans:-

The capitalization of SHRI MAHILA GRIHA UDYOG LIJJAT

PAPAD consists of General Funds and Surplus amounting to Rs.
4,70,57,035

General Funds 4,38,22,252

Reserves and Surplus 32,34,783

Loans 30,00,000
 Charles Prather says that “Fixed Assets are those which are of a
somewhat fixed or permanent in nature and are used by the business in
its normal operations, they do not include items offered for sales”.

Fixed Assets (capital) management is the most important task

which a management has to face in its day to day situations. Fixed assets
includes land machineries, office building, vehicles, and other equipment
used by the enterprise.

The fixed assets of SHRI MAHILA GRIHA UDYOG LIJJAT

PAPAD ( Rajkot branch) are:-

Particulars Net block

Land 3,01,178

Building 7,24,556

Furniture and fixture 22,75,299

Grand Total 33,01,033

 In accounting language, Working Capital is the difference between
the inflow and outflow of funds. It is defined as the excess of current assets
over current liabilities and provisions”.

Thus, it can be said that,

Net working Capital = Current Assets – Current Liabilities

Following table shows the Net Working Capital of SHRI MAHILA GRIHA
UDYOG LIJJAT PAPAD:-

Particulars Amount

Current Assets:-

Inventories 41,25,620

Other receivables 3,32,242

Cash & Bank balances 34,83,276

Loans & Advances 1,00,621

Less: Current liabilities 2,34,379

Net Working Capital 78,07,380

 Receivables are the assets which are created as a result of the
sale of goods or services on credit in the ordinary course of business.
These are known as accounts receivables, trade receivables or customer
receivables.

The following is the amount of receivables in SHRI MAHILA

GRIHA UDYOG LIJJAT PAPAD;-

 Sundry Debtors = 19,180

 Other Receivables = 3,32,242

Forecasting of receivables:-

1) Forecasting Sells
2) Forecasting Cash Discount
3) Forecasting Average Collection Period
4) Forecasting Accounts Receivable
 The main purpose of any business unit is to earn profit. Profit is
the motivating force for business. It is a yard stick of efficiency in
business.

Profit is earned by selling a product at a higher price than is

cost price. In the absence of profit the closure of business is imminent.

In SHRI MAHILA GRIHA UDYOG LIJJAT PAPAD, besides

other motives such as fulfilling social responsibility, providing
employment, growth in the economy, etc.; profit making is also one of
the important objectives .Following are the profit figures of the firm for
last 3 years:-

Financial year Net profit

2007-2008 80,93,891

2008-2009 60,97,737

2009-2010 38,34,783
MICHEL PORTER’S FIVE FORCES MODEL
Competitive Rivalry: Moderate but constantly increasing
It can be attributed to the fact that Lijjat papad is the pioneer in the field
of papads and has maintained market leader position for long years in
India. It has turnover of 829 crores of which 36 crore is from export
revenue [1]. Currently other established food players has jumped into
papad industry to take market share of Lijjat papad. Following table
shows increasing market share of one such competitor.
Highly fragmented industry as more and more major players are
entering.

Threat of New Entrants: Low

Threat for new entrants is low as papad industry requires Economies of
scale.
Also for the new entrant high investment is required in setting up
manufacturing process, setting distribution network and branding
promotion campaign.

Bargaining Power of Suppliers – Low

Lijjat papad have their own flour mills. They have to purchase just dal
and other raw materials from farmers. Due to highly fragmented market
of supplier, they have very low bargaining power.

Bargaining Power of Buyers – High

Papad market is perfectly competitive market. Also the customer
demand is highly elastic. Hence customer is highly sensitive to price.
Customer is highly influenced by marketing strategies.
Customer loyalty fluctuates frequently.

Threat from Substitutes – Moderate

The traditional practice of preparation of papad as a convenient food at
household level is still in practice in India. For e.g. a sample survey in
Dharwad city with sample including retail shops and mahila mandals
revealed that 72% of the sample still relied on house hold preparation.
Various product such as nachos, mathiyas are gaining popularity among
children. They can act as a substitute of starter in Indian food .
 FUTURE OUTLOOK

The future plans of SHRI MAHILA GRIAH UDYOG LIJJAT

PAPAD is as under:-

 The prime goal/plan of the firm is to make women self-reliant &

self confident and for this the firm gives them a platform for
improving their status in the society, which is their justified right.
 The firm is going to open a new branch in Rajkot at 150 ring road
for manufacturing of papad.
 The firm is also intending to have more branches at places like
Sapar-Veraval for expansion purpose.