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C SE STUDYTHE C SE OF EFFECTIVE

DOWNSIZING

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C SE INTRODUCTION The case emphasizes on the poor

performance of the total industries soap and

oil division and what measures were taken

by the top management.

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C SE INTRODUCTIONAbhinav kumar- Managing Director of the

Total Industries

Guneen Roy- President of Total Industries

soaps and oil Division

Both were concerned about the declining

performance of the soap and oil division.

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F CTS BOUT DIVISION PERFORM NCECapacity utilization- anaemic 35%

Profit declined to Rs 0.50 lakh a year.

Profit was the lowest among all divisions ofthe industry.

In retail segment the company was lacking

behind with less than 2% share.

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SOLUTIONS PREDICTED BY MR ROY First either target Institutional buyers like

hotels, hospitals and launderettes

Since its growing at a rate of 2.5% a year

Client- base is captive

Demand is predictable

Supply only to a few centralized buyersNo worry about brand building

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SOLUTIONSPREDICTED BY MR ROY Second option is to become a contract

manufacturer for one of the three companies

in the retail segment of the market

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THE SELECTEDSOLUTIONMr Roy preferred the second option by

selecting to target B&B

B&B is the second largest company in the

retail segment with a share of 36%

The reason behind selecting this option could

be the avoidance of risk since B&B was

already one of the leading players, and by

merging with them they together could lead

the market.

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B BS REPORT AFTER N LYSING THE DIVISION Totals soap and oil divisions cost is very high

Manpower cost comprise 55% and 22% of fixed

and overall costs.

Teeth to tail ratio was 1:18 while it was just 1:4 inB&B indicating the accumulation of unnecessary

workforce.

40% of division employee i.e 160 are over 50 yearsof age which are only 11 in B&B.

number of management layers are 11 while its only

4 in B&B.

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B BS VIEWS They wanted to overtake Indian Soaps LTD,

so they need a captive manufacturingfacilities across the country ( they need a

company that only manufactures for them). IF they form a joint venture with Total, they ll

help them with new technologies andformulations.

They wanted Total to downsize its soapsdivision.

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THE PROPOSED SOLUTION FOR DOWNSIZING

The chairman of the total industries, KUMAR

Senior, proposed the scheme of Voluntary

Retirement in order to decrease their

workforce, which was liked by the otherexecutives of the Total industries and of B&B.

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VOLUNT RY RETIREMENT SCHEME The voluntary retirement scheme(VRS) is themost humane technique to provide overall

reduction in the existing strength of theemployees. It is a technique used by companies

for trimming the workforce employed in theindustrial unit. It is now a commonly methodused to dispense off the excess manpower andthus improve the performance of theorganization. It is a generous, tax-free

severance payment to persuade the employeesto voluntarily retire from the company. It is alsoknown as 'Golden Handshake' as it is thegolden route to retrenchment.

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VOLUNT RY RETIREMENT SCHEMEA business firm may opt for a voluntary

retirement scheme under the followingcircumstances:-

Due to recession in the business.

Due to intense competition, the establishmentbecomes unviable unless downsizing is resortedto.

Due to joint-ventures with foreign collaborations.

Due to takeovers and mergers.

Due to obsolescence's of Product/Technology.

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VOL NT RY RETIREMENT SCHEMEA company may make the following

announcements while implementing a voluntaryretirement scheme:-

The reasons behind downsizing the organization.

The eligibility criteria for voluntary retirement scheme.

The age limit and the minimum service period of employees who can apply forthe scheme.

The benefits that are offered to the employees who offer to retire voluntarily.

The rights of the employer to accept or reject any application for voluntaryretirement.

The date up to which the scheme is open. The income tax benefits and income tax incidence related to the scheme.

It should also indicate that the employees who opt for voluntary retirementand accept the benefits under such scheme shall not be eligible in future foremployment in the organization.