Chemical Products Limited

Chemical Products Limited (A)
Tanzeel Ahmed
PGP13361
Section B
Chemical Products Limited is a leading chemical manufacturer-cum-marketer firm in
India
catering
industries
ranging
from
pharmaceuticals,
paints,
adhesives
insecticides etc. Recently, the company has achieved a breakthrough in evolving a

process to produce synthetic menthol which was equivalent to natural menthol in all
respects. Menthol majorly comes in two form, L-menthol which is active in nature
and produced from natural sources. R-menthol is cheaper synthetic menthol and
produced from thymol. Menthol produced in India was almost from natural resources.
Menthol is used in liquors, perfumes, toiletries but this may not be substantial.
Consumption of menthol in pharmaceutical industry could be substantial. Typical
local use also accounted for 1/3rd of the total menthol usage.
Now the major question in front of the firm is,
1. Whether to commercially produce synthetic menthol through the recently
developed process
2. If yes, what should be the size of the plant
In this regard, the important criteria against which the options have to be evaluated
are the difference between the supply and demand of menthol, the price of menthol
in the international market and profitability of the venture. The decision on the plant
size would be a derived decision.
The research problems comprises of estimating the current demand for menthol and
then projecting the demand for next five years. This will help us in determining the
trend in the requirement of menthol in the future which will be a major variable in
deciding whether to go ahead with the project or not. Based on a % market share
CPL can decide the demand of its product in the market which will be beneficial in
calculation of the NPV of the project as well as the IRR. Moreover, the prices will
also be an influential factor the customers are price sensitive and thus any increase
in prize will lead to decrease in demand. Hence analysing the past prices behaviour
and then projecting it over the next five years will help CPL in determining the price
levels, the price it can charge from the customers and hence its profit over the years.
Moreover, based on the different segments in the market, it will help us in differential
pricing as well as determining the target segment to which the product would cater
to. As the major menthol in India is derived from the natural sources hence
determining the future production of menthol from natural sources will help in
determining as to what would be the likely market share of CPL which will be key
deciding variable. Lastly, as CPL faces stiff competition hence determining the trend
in imports and exports of menthol would also have an effect in deciding whether to
go ahead with the project or not.
Assessing the demand of menthol is hence of prime importance which has to be
done for the current year and next 5 yrs. It was decided that the quantity would be
assessed and then multiplied by the price to get the demand in terms of rupee value.
This is beneficial as any change in price can then be incorporated easily and the
demand in terms of rupee value can then be updated accordingly.
For assessing the supply, the current capacity, utilization, profitability and future
plans of different manufactures need to be estimated to determine the supply of
menthol. This will help in the estimation of the production capacity of CPL. Projection
of prices can be done on the basis of statistics as well as the based on the behaviour
of the people and the maximum price that they would be willing to pay. This can be
done on the basis of GDP growth estimation and the growth in income of the people.
For assessing the international trade, the data was already available which could be
used to assess the same. For the assessment of prices, the prices paid by the end
customers would need to be assessed as that is the price that would affect the
demand levels. For the import levels, USA and Europe were the major importers
from India and hence information needs to be collected from the importers and
export companies of Europe about their intentions and the price acceptable to them
which would decide the future import and export levels.
As such all the suggestions made by executive are in sync and would be beneficial
in determining the decision whether to go ahead with the project or not.

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Chemical Products Limited (A)

insecticides etc. Recently, the company has achieved a breakthrough in evolving a

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