s.k.agarwal (case) - entrepreneurship

Group Number : 15th April 2011

Surendra Kumar Agarwal : Long Way from Brass Utensils to Construction Industry

A Case Study ( Case No : 5)

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Case Introduction

Surendra Kumar Agarwal ,a fresh mechanical engineer from the Benaras Hindu University

started his entrepreneurship journey by taking over his father’s business namely Paras

Metal Works - a company dealing in the manufacturing of non-ferrous utensils.

Understanding the facts of business in terms of raw-material procurement practices and finished

product market ,Agarwal decided to shift to Pune. A n approach to stay more closer to the

market.

Establishment of Vishnu Metal works in the year 1969 at Vadgaonsheri with an initial investment of 4,30,000.

Struggling for two years Agarwal barely met with break even for his Vishnu Metal Works.

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Case Introduction

Vishnu Metal Works specialized in the production of superiorly curved and light weighed

brass utensils which emerged as popular product in terms of both cost leadership and

superior product quality.

Boosted with rapid growth of business with a turnover of 25 lakhs (in five years) ,Agarwal

decided to expand his operations and eventually started Five Star Metal works ,B.T. Rollings

Bramha Metal Works and Radha Rollings.

By 1980 Agarwals business grew rapidly and reached a turnover of 75 lakh with production

rising to 500 kg of utensils per day.

The year 1980 experienced the beginning of another era of Agarwals Business with diversification into the manufacture of HDPE bags with the establishment of Pawgir Jute Mills.

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Case Introduction

Faced with severe competition from the stainless steel industry Agarwal decided to further

diversify his business and ventured into real estate (named Bramha Reality) with the

purchase of 60,000-sq-ft-plot costing 32 lakh.

Pune witnessed emergence of Bramha as leading builder with all-round real projects ranging

from apartments,bunglows to office space,shops etc.

Ventured into the hospitality business in the with the establishment of residency club and then

with Bramha Bazar Hotels Ltd.

Chipped in Hafeez Contractor to establish what is now one of the pioneer 5 star hotel in Pune

namely Le Meridian which enjoyed a turnover of 35 crore in the very first year of coming into

operations.

Intimidated with the success of his first hotel Agarwal decided to expand his hotel chain further in and around various location of Pune and Mumbai.

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The Term “Entrepreneur”

As Explained by Experts

“An Entrepreneur (ahn’tra pra nur) is a person who organizes and manages a business undertaking, assuming

the risk for the sake of profit. Any person (any age) who starts and operates a business is an entrepreneur”.

The Case States

“A Visionary who has the capability to gauge market need ,sentiments in order to react in establishing business units which lead to value additions for the economy, people and also for his own sustenance. He is also a person who understand business risk in advance and reacts to protect the interest of the stakeholders either through a mitigating reaction or through diversification which enables him to spread business risk over a number of business operation with significant success”.

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Role of Manager in Entrepreneurship ( In General)

Organization established by an Entrepreneur is something like a tree that has started its

growth based on a single seed and have taken years of struggle to shape itself into the one it is

today.

Managers for an organization are people who are collectively made responsible for the

upbringing of the tree (read organization) ensuring its all-round growth and development.

He is one who needs to maintain integrity amongst employees of the organization. He also acts

as an interface between apex and bottom of an organization.

He needs to convert all the resources into the other that are needed. He is ought to be

stubborn to fire someone, along with that he needs to be polite at the same time to bring out

maximum business.

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Role of Manager in Entrepreneurship (In General)

He needs to be straight forward, sincere and all the positive qualities a supreme man needs

to possess.

He keeps an eye on everything related to employees. He checks that, is the work assigned to

employees is properly distributed keeping their capability in mind, and also the time taken to

pursue it .One of the most important tasks of a manager is to eliminate his people's excuses

for failure.

He is the most answerable person in an organization because he is person who taken

collectively shouldered the organization’s vision and responsibility for continuous growth and

sustenance .

At last manager is one who’s “Managing is getting paid for home runs that someone else hits.”

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SWOT Analysis

Strength

Strong Business Understanding – Ability to read market conditions. Sound Technical Knowledge of the Entrepreneur. Intension to Achieve and Prosper Ability to foresee future. Fearless attitude even to take the most difficult decisions. Liking for seeking the best for his business. Customer Orientation

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SWOT Analysis

Weakness

Inability or unwillingness to create new market for his product.

In some extent he tend to be more reactive .

Sometimes tend to be too optimistic.

He never tried to develop his capabilities further ,facing a threat he shifted his gears to a all

- together different level.

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SWOT Analysis

Opportunities

He diversified towards a very lucrative segment which at that time was unexplored and has

great potentials. Real Estate in Pune – a business having the potentiality to be a sure shot s

success. Pune was becoming one of the most significant hubs of industrialization (in various

sectors)

in the West apart from its tourist attractions. This created demand for quality hotels which

was not tapped adequately. The success Agarwal achieved with his first hotel within two

months of operation is proof of the same. He ventured into a niche segment in the form of his club business which was likely to

blossom more and more. We also see another opportunity for Agarwal, with his knowledge of producing brass

utensils

he could have chipped into the stainless steel utensil industry. There was always a chance of

making a significant dent in the market.

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SWOT Analysis

Threat

Threat from new entrants both in the real estate as well in the hospitality business.

Saturation of the market specifically in the real estate business.

Tough Competition from major players who were veteran in the business where he diversified.

Source of Constant Fund (specifically at the time when the case was written).

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Analysis of the Case from Henry Fayol’s “POM” Perspective

Due to paucity of information not all perspective of Fayol’s 14 principles of management can be referred.

Division of Work

Post establishment of his unit in Pune Agarwal understood the need to have two separate rolling mills and hence went for establishing Five Star Metal Works,B.T. Rollings Bramha Metal Works and Radha Rollings. The entire product was produced with the help of the specialization that this individual units offered such as melting scrap metal in the foundaries,rolling them and then their pressing,polishing,finishing .

Authority

S.K.Agarwal assumed the authority as well the responsibility for his establishments. He was the person who assumed the authority to take decision of shifting his base from Bandara to Pune and others associated with him followed his will. He also took up the responsibility to ensure that he took proper business decisions at “right time” for his business long term sustenance.

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Analysis of the Case from Henry Fayol’s “POM” Perspective

Unity of Direction

The entire organization promoted by S.K.Agarwal was moving towards a common direction i.e. to establish itself as a pioneer in respective industries in which they are operating.

Subordination of Individual Interest to General Interest

There are two instances in this regard, one when he decided to shift his entire family from Bandara to Pune and struggled his family life in 500 sq-ft room. He considered his organizations interest over his and his family.

The second instance is when he decided to diversify his business facing competition from the stainless steel industry and eventually decided to sell his “very close” metal work business for funding his diversification operations.

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Analysis of Case as seen through Managerial Functions

Planning : The case provides an insight into Agarwal’s excellent planning capability. His business decisions pertaining to both his utensil business as well as his diversification into the service sector was backed by meticulous planning.

His planning skill is particular depicted through his decision to move his base to Pune and he way he undertook the entire diversification activity.

Organizing : This is another area where the case throws special focus. Mentioning about

Agarwals Utensil business he showcased his excellent organizing skill through his

establishment of the processing units in Pune.

Secondly the way he organized the plots , managed location ,engaged professionals for his real estate and hospitality business. shows how a “well thought “ organization process can enhance business success and growth factors.Agarwal was successful with all the business in which he invested his mind showed how skillfully he

organized the resource before plunging into any business.

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Staffing :No business can attain success, taste growth or sustain without proper staffing activity.

Though the case has limited information in this regards but through Agarwal’s decision to chip Hafeez Contractor for designing his hotel with the intention of banking upon Contractor’s long felt dream of getting associated with the architectural work of a Five Star Facility and his decision to bring in 300 skilled artisans from the pink city is a clear indication of his understanding of the importance of quality staffing.

Directing : We have not information with this regard from the case but the case states that Agarwal kept himself engaged with helm of affairs for each business that he ventured into. According to the case though he struggled but he never met failure rather he made profit very soon.

His utensil business enjoyed a turnover of INR 75 lakh by 1980.Turnover for his real business was 10 crore by 1990,his club which commanded an initial fee of INR

1,00,000 has 2000 members till date (i.e when this case written).His hotel met 45 occupancy rate within two months of establishment. This shows how good and

technically sound he was with his directing abilities.

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Controlling : It implies measurement of accomplishment against the standards and correction of deviation if any to ensure achievement of organizational

goals.

The purpose of controlling is to ensure that everything occurs in conformities with

the standards. An efficient system of control helps to predict deviations before

they actually occur. In this regards we don’t have sufficient information from the case to make a comment. But his business success figures and the way he performed his business showed that had the much needed controlling ability.

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The “4” M’s

Men : As head of the business Agarwal himself was a perfect human resource for the company. His judgment of who can make his dreams come true and who can help him in meeting his business goals showed how much importance he attributed to his human resource.

An example from the case which justifies this is his decision to chip in Hafeez Contractor and 300 artisans from Rajasthan to design his hotel.

Money : In the case we have few financial information and even those are restricted to the cost that he incurred in his acquisition activities and his turnovers. But as it is never

mentioned that he had difficulty in arranging for funds for both continuing the business as well as his acquisition activities proves that he had adequate means and options for funding his business.

He was financially sound and had strong resource base in this regard. This is a “must” for the success of any business.

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The “4” M’s

Material : Agarwal was very specific in this regards. He shifted his base from Nagpur to Pune for facilitating his material resources required for his business. He had always

ensured that could get the best of the material for his business interest.

Even with his service sector business he had a good restaurant – it becomes good only when you use the right combination of material to produce the output (i.e. quality food).For his hotel he engaged expert to install his utilities which are a very important input for the success of a hotel.

Machine :Agarwal produced lightweighted,superior finished brass utensils ,this was possible because of his technologically superior machine strength. He had a well-equipped health club again proving his intentions to have the best machines in place for his business.

These are certain examples which shows how important it is to get the right machine resources for attaining success in business.

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Case from the marketing view point

S.K.Agarwal’s Business Interest can be classified in two broad segments :

1. Manufacturing Segment ( Utensil and HDPE bag business)

2. Service Segment (Real Estate and Hospitality Business)

With Regards to the Manufacturing Segment the case be analyzed with the help of 4 P’ s of

Marketing .

3. Product - Agarwal’s Vishnu Metal Works was specialized in providing light weighted

utensils which had superior finishing.

2. Price - The specialization that the company had and their near location to the source of

3. resource enabled them to cut manufacturing cost and hence the company could

4. offer its product at the cheapest price

2.

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Case from the marketing view point

3. Place (Distribution) – When S.K. Agarwal first took over the business of his father he

understood that large portion of his customers are located in and

around the Mumbai, Pune region of Maharashtra.

He understood that transportation cost (from Bandara to these places)

was adding to his product price. Hence he decided to relocate to a

location near to his target market which will help him cut down a number

of cost and will also enable him to stay close to his target consumers.

4. Promotional Decisions - In this respect not much information is available in the case , however the only thing that he have been done is he has kept himself in close proximity with his buyers in particular and his main

market in general.

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Case from the Marketing View Point

Agarwals service sector initiatives (real estate and hospitality business) :

Product : His basket of offerings was designed with the correct understanding of the market and its need. In Real Estate he offered both commercial as well residential

building keeping into consideration that Pune was likely to become one of the prime locations.

A whooping turnover of INR One Crore in the very first justifies his sence of business

understanding.

In the hospitality segment he understood the need of the hour and offered a club which had all the facilities for that “luxurious feeling". With his Residency club he have got the bulls eye. His venture into hotels was also successful with his first project “Le Meridian Pune” hit near breakeven sales within the first two months of operations.The hotels design has become a benchmark for many.

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Price : Though not much information in this regard is available in the case study yet his

success figures speaks that his pricing strategies was done very intelligently to keep

that “feel good” factor attached with his offerings.

Place : Agarwal’s project was planned around the best of the places in Pune. His first project in

real estate was in a prime location in the heart of the city.

Agarwal’s club came in beautiful British Mansion (British Architectures of those days

are head turners ) located near Pune Railway station – a posh area.

Agarwal’s first hotel project was again located in a prime location behind Pune

Railways Station.

Promotion : His success speaks about his promotional efforts. He met overwhelming success with his real estate projects. His club was another success and after that he tasted success with his hotel. We feel that his offerings and their quality also served a

strong promotional tool.

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People : People are key to the success of service industry. Though we don’t have information

on his people for both his real estate project as well as his club but the kind of people

who he associated with his hotel project speaks about the kind of hands he had with

him.

His hotel was designed by Hafeez Contractor ,one of the pioneer architects of the

country. The entire designing along with the installation of utilities was assigned to him.

Hafeez longing for an opportunity to design a five star hotel gave his best shot and

meticulously chalked out a hotel which stands tall even today as an outstanding art of

architecture.Agarwal chipped in the artisans from Jaipur who are know globally for

their work

Processes : They are important to deliver a quality service. Services being intangible,

processes become all the more crucial to ensure standards are met with.

The way he performed his business have proven that his processes was perfect.

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Physical Evidence : Services being intangible, customers depend on other cues to judge the offering. This is where physical evidence plays a part.

For Agarwal’s business his project location for both real estate and hospitality business, the location of his club both place and the building (An Old British Mansion with luxurious facilities), his hotel's location and its designing (exterior and interior) etc .

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Factors Favoring Diversification

1. Threat to the brass utensil industry with the growing popularity of the stainless steel utensil

industry (both in terms of affordability and product features). The threat was so dangerous

Agarwal understood that either he diversify or perish.

2. Boom in the Real Estate Business in Pune – both residential and commercial. Pune was becoming the hub of commercial and residential establishment. His Turnover which increased from INR 01 crore since his first project in real estate to INR 10 crore + by 1990 speaks about the amount of prospect that real estate business had in those days.

3. There was a chance in the Club Business with demand exceeding supply (i.e. interms of opportunity to secure membership) many times. The success in terms of members (2000 in number) who enrolled with club and the initial fee which escalated from INR 20,000 to INR1,00,000 speaks in favors of Agarwals decision to diversify.

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Factors Favoring Diversification

4. Demand for rooms in his club exposed him to an opportunity to diversify in the main line hotel industry. Pune was always a great destination for leisure tour and Agarwal further identified its potential of becoming a prominent business location. He

identified the need of those who intend to enjoy a five star stay.

Gauging this he ventured into the hotel industry with the establishment of Pune’s Largest five star hotel. He chipped in the best hand to design the hotel, equipped it with the best in class facilities with some absolutely new one (videoconferencing facility ,squash court) etc.These facilities were designed keeping into consideration the need of the business as well leisure travelers.

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Comments

The Case provides an example of a road to success from a mere struggle to sustain. Faced

with a crisis just after taking over business as a fresh engineering graduate Agarwal took

calculative steps not only to sustain his business but to taste success.

The Case has justified certain business principles such as :

a. Stay close to the source of raw material and your customer as far as possible.

b. Identify Business Opportunities and Threats early

c. Diversify for sustenance and further growth.

d. React to market demand and create facilities (product or service. which will create further demand.

Agarwal Business sense was meticulous. Even when he ventured into the real estate business he floated his business risk into two kind of properties one the residential one and the other the commercial one.

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Comments

The case speaks about the flexibility which need to be incorporated while making business

decisions. Agarwals prime business was facing with a crisis in the form of intense competition

and hence he decided to diversify. He funded his diversification activities by selling off his

brass utensil industries and his jute mill.

His diversification decision was based on a solid market study, meticulous understanding of

the market need and project demand.

The case also speaks about organizing decisions which has a definite positive impact on

business success.

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Case Limitation

When Agarwal decided to move to Pune his decision was influenced by two factors which are

cutting down the cost of raw material and keeping a close tap on the largest brass utensil

market. Though these are right decisions yet we strongly feel that Agarwal showed very little

interest in developing new market for his products. This could have helped him to stay longer

in business than he actually did.

The case does not provide any an sight into the real figures which have prompted agarwal to

diversify. Agarwal was operating a jute mill which in those was profitable venture, still he

closed it down to finance his diversification. This probably raises a question pertaining to

why he did so.

The case lacks adequate statistical information which could help in better evaluating. garwal’s success figures. For example his success has been shown in terms of turn over

he reached with his business but turnover in real sense is not a very clear measure of success.

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Future Scope and Conclusion

The case provides an insight a very interesting entrepreneur ship case where in business decisions and will power have paved the way to success for Mr.S.K.Agarwal.

These case stands an example of how with determination, market understanding and hard work can make one a successful entrepreneur. This case stands an example for who wish to take up

entrepreneurship as a career option.

We conclude by mentioning that entrepreneurship is skill which if nourished can lead to astonishing results.Mr.Agarwals business decisions and his ability to cope up with change have always resulted in his success.

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THANK YOU

s.k.agarwal (case) - entrepreneurship

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