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. 4,00,000
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. 8,10,000
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 11,00,000
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!

Comparative Financial Projection of three projects

PROJECT BENEFITS(INR)

Project Project YearI Year II Year III Year IV

Name cost
(Year 0)

A(Sikkim -400000 129,219.44 142,141.39 156,355.53 171,991.08

B(New - 810000 255,840.85 281,424.94 309,567.43 340,524.18

Flavor)

C(UK) -1100000 342,274.66 376,502.13 414,152.34 455,567.58

Questions:

Note: Assume Current Cost of Capital (COC) 13%. ( show your calculations part in
excel sheet)

a. Which project will you recommend on the basis of strategic and financial evaluation?
Prepare the weighted evaluation matrix-i.e Weighted Scoring Model. (strategic and
financial combined - use 20% wt. from strategic analysis and 80% wt. from financial
analysis)
Use following only 5 criteria for Strategic Analysis:
i. Is the project supportive to the organizational strategy?
ii. Does the project stay within the existing core competencies?
iii. How urgent is the project?
iv. Project’s ability to generate additional sales?
v. Degree of uniqueness of the project output?

b. As per the scenario provided in the case, if you have to suggest different cost of
capital to three projects, how would you suggest, explain.
And see how your choice of the projects will be different based on your
recommended COCs?