Mona vie Breakfast Cereals – Current Year

Mona vie breakfast cereals is a specialized product line of Mona vie Food industries, India.
Mona vie oat meal is one of their very popular breakfast cereals under this product line
Mona vie has following features:
Current strategy : Growth by broad differentiation, Consolidation of current competency
Current Problem : defects in quality, increasing competition, sales increasing by 3% only,
target for another five year was 15% average growth per year, difficulty in winning the
customer loyalty, increasing number of competitors in Indian market

The organization is considering following three projects for coming year.

Because of volatility of the market the management does like to allocate the life of the
project benefit for more than four years

Project A – Sikkim
Project cost INR. 4,10,000
Objective: expansion of existing product line in the new domestic domestic preferably
Sikkim
Major project activities: Market research, recruitment of sales force, establishment of new
sales office , use the same competency but with added market strength
Key benefits :It will discourage the competitors to come into the company’s segment, so the
team feels it is urgent. Until now the sales force and marketing of the competitors is not very
strong in Sikkim

Project B – New Flavor

New differentiated product within the existing line for existing domestic market
Project Cost INR. 8,00,000
Major project activities: Design of a new product concept within the same product line,
Remain within the current competency
Main Benefits: give a comparatively new product to the customers, sales expansion of 10%
predicted but with more opportunities of growth, competitors are however not likely to react
to this move immediately because of the newness of the product
Project C- UK

New differentiated product for a different segment in a foreign country (UK)

Project cost INR 10,50,000
Major project activities : Design of a new product within the same product line but for the
foreign customers in UK, Current competency is partially used but will help to develop new
competency and new learning experience
Benefits: Existing competency used +New competency developed
Competitors are already there but the company will try to win the competition by creating a
very unique design and flavor attractive to UK customers
 The controversy has arisen about this project, because one group of employees is saying that
growth by differentiation means growth in domestic market first. Whereas other group is
saying that if there is no barrier for growth in foreign market, then why not take the
opportunity? Growth means growth everywhere because now it is era of globalization!

Tabulation below shows the comparative study of Financial Projection of three

projects:

PROJECT BENEFITS(INR)
Project
Name Project cost
(Year 0) YearI Year II Year III Year IV
A(Sikkim -410000 140,120.88 145,142.29 159,456.35 172,999.07

B(New
Flavor) - 800000 265,540.85 262,141.84 308,677.45 318,222.71

C(UK) -1050000 315,264.44 347,502.14 435,142.44 449,399.56

Note: Given Current Cost of Capital (COC) 13%.