This paper is a study report on the Sanspareils Greenlands (SG) business. It will present a study report on the four main areas. These areas will include introduction to the SG business and its business environment, production cost and sales, macro business environment and sustainability practice.
Sanspareils Greenlands (SG) is txhe name of the business chosen to produce a business study report about. The SG made its nationwide debut in 1982 under the ambassadorship of Sunil Gavaskar. A great percentage of people might be acquainted with the SG cricket bats rather than the brand Sanspareils Greenland. The SG is located in India where it has remained a market leader in the cricket bat alongside cricket associated accessories in India based on the endorsement with such legends as Rahul Dravid and Sunil Gavaskar (Goyal, 2011).
The SG is a manufacturing type of a business whereby it manufactures cricket equipment. It operates in Indian Domestic sports good market which is worth about Rs 200 crore besides all the potential to grow in the upcoming decade. The cricket associated commodities accounts for about seventy percentage of the entire market (Toffel, 2014). The market is primarily regarded as a cottage or small scale with the industry saturated primarily on Northern India. The export market is much bigger with an estimate figure of Rs 300 crore (Mallik & Chowdhury, 2001).
SG remains the largest exporter of the cricket products in India. It manufactures balls utilized in Test cricket as well as in the Ranji Trophy in India (Pretty, 2015). These ball have more prominent seam compared to the Kookaburra balls utilized for Test matches in the entire part of the globe with exemption of England and West Indies due to their thicker thread applied in stitching (Simpson & Bradford III, 2006). The SG’s factories have been in Meerut, Uttar Pradesh right from 1950. It has been exporting bats that are manufactured in Meerut to the United Kingdom as well as Australia for many of the international cricket brands. The Test balls of SG are handmade and have been used in the matches played in India since 1994 (Kilpatrick, 2010).
The balls are charged at Rs 1149 each which is twenty percent the price of the competitor Kookaburra balls. SG also manufactures both Kashmir and English willow bats, gloves, Test criketworthy balls besides additional protective gear in Meerut. About one-thousand bats, five hundred pairs of gloves, four hundred pairs of pads as well as sixty dozen balls are manufactured per day at the clock-like pace factory in Meerut that are transported to large brands foreign like Reebok and Nike alongside the network of distribution in the India’s economy. The biggest brand ambassadors for SG brand are Suresh Raina and Virender Sehwag presently.
The Company has been plagued by particular troubles with respect to competition that was escalating in sports commodities with the technically- ground-breaking commodities being mass-produced in economies such as China. This was the reason that made the SG to shift exclusively to the cricket gear in the 1960s that saw the brand being renamed and listed as SG in 1979 from the initial name Greenlands launched by Kedarnath.
Technology became the essential to accomplishment in the 1980s following the inauguration of the double-finger-protection gloves. Such gloves were intended to assist Gavaskar following injuries. Moreover, there was a perfect blend of cork balls and cotswool that were easily adopted by the Board of Control for Cricket in India based on their best production quality in the game.
However, the stiff competition in the sector will make the SG to up its game in fighting the Goliaths that has remained tough. The SG is the solely the authorized supplier of cricket balls to the BCCI in the domestic circuit. Nevertheless, the Company’s cricket balls are facing the end of the road triggered by the competition from the Kookaburra, the global leader. Again the MRF is also competing with the SG after making an entry into the cricket bat production where people who see its logo in bats triggered a series of queries at sports good stores for the MRF bats. The venturing of MRF into bat making or marketing has tapped the potential thereby triggering stiff competition.
Moreover, the endorsement of this is because by 2011, the SG’s brand was invisible to the top-end customers coupled with the fact that as India’s economy matures with enormous-design stores, it shall be a dwindling market strategy and SG’s market size might decline. A growing domestic market had been predicted for SG’s products in 2011 for sports retailers enlarging operations of the Company in India. It is noted that SG shall have its solution in a tagline since it has developed up for decades “Only the Best Survive being replaced by “Believe, Become”.
The India’s bat industry has grown from a refugee camp to a multimillion-dollar businesses making this but-making industry to have several competition wars. The cricket makers in India besides the global sports firms have remained trapped in a struggle for the economy’s customers, 1 of the largest global market for these commodities (Haanaes et al. 2012). The market is a progressively brand-conscious whereby a lot suspends on the designation as well as the overseas ones enjoy increasing appeal. The cricket has endured through an effective profitable conversion over the previous 5 years saves to the Indian Premier League with a booming petite arrangements of games besides the triumph of the National Team of India (Caniato et al. 2012).
The growing popularity of this game has culminated in a sustained competitive advantage to the Meerut workshops, which is a grimy city approximately eighty kilometers eastwards of New Delhi whereby the handmade bats are made for both the domestic market as well as export market. There is also an industrial bunch that produce badminton, leather balls and bats, hockey sticks as well as tennis nets being concerted in 2 unpleasant residential-style conurbations of the Sports of Goods Complex as well as the colony of Suraj Kund sports. The plank of willow remain fixed meters tall in streets to be shaped into the bats through workers sitting amongst the shavings of wood. Moreover, some remain cradling over brass hubs sewing the layers of such cricket balls (Misra & Puri, 2005).
The SG faces the major stiff competition from such big names specializing in the cricket supplies including SS and BDM. These are cottage industries with some being suppliers of the English bat brands of the Gray-Nicolls besides Gun & Moore alongside Australia’s Kookaburra have remained shrugging off the worldwide economic recession. The revenue of the BDM has increased ten percent compared to the previous year. The Nelco is the subsequent door and an athletics gear manufacture which is exporting to fifty-seven nations, convalesced from the demanding family disagreement to increase incomes sixty percent.
The indigenous cricket suppliers have also enlarged their operations into clothing, pads as well as helmets. The BDM that employs around three-hundred workers in Meerut owns outlets in the United Kingdom, Australia, Dubai, South Africa, as well as Sri Lanka. The industrialized maneuvers in the United Kingdom and South Africa are also being considered. The BDM supplies A to Z supplies of cricket with solely boots being subcontracted from China. The triumph of the sport industry in India is attributed to the cheap Indian labour as well as eminence English willow which are both difficult to duplicate.
From the above information, the researcher is persuaded to believe that the SG’s competitive environment where it operates is likely to be closer to perfect competition. This is because there are many players both local and foreign firms that manufacture the cricket and related products alongside many buyers or consumers in the sport industry buying or consuming these products (Lehtoranta et al. 2011). SG manufactures cricket and associated products that have a range of close substitutes provided by other industry players including the MRF, Nelco, BDM and SS among other global or foreign manufacturers (O'Rourke, Connelly & Koshland, 2010). The cost of products is relatively low thereby affordable to the average income of the SG’s customers.
This is why the SG is able to charge less amount compared to its main competitors like Kookaburra and Slazenger. For example, the SG charges 20% of the price charged by Kookaburra which demonstrates that its products are cheaper. The demand curve facing SG is likely to be relatively elastic due to the existence of many substitutes just it would always happen a perfectly competitive market. The firm is, therefore, constrained and cannot mark up its price beyond the marginal cost as the competition is higher and hence uses the low price as mechanism to attract and retain customers.
Production Cost and Scale
SG faces both fixed and variable costs in its large production scale. Some of the fixed cost facing SG include utilities, rent, salaries, insurance, property taxes, amortization, and depreciation. Regarding the salaries, SG pays a fixed compensation amount to over 1,000 workers, irrespective of their hours worked. This cost is unlikely to vary much according to the quantity of goods produced or sold. The SG also faces the fixed utility cost of electricity and phones which has some variable element though largely fixed. Therefore, these cost are unlikely to change much irrespective of the goods produced or sold.
The SG is also facing the property taxes charged by to its business by the local government that is anchored on the cost of its assets. Even though SG has several and expensive equipment for the production which attracts large amount of the property taxes, the cost remains insensitive to the amount of goods produced or sold. The firm also faces a fixed cost of depreciation for the many machines involved in the production. These equipment attracts a gradual charging to the expense of the cost of the tangible asset over the useful life of these assets.
However, just like other fixed cost, the depreciation cost is unlikely to vary with the scale of production or sales. The SG is also under the insurance contract and hence incurs the fixed insurance cost which is periodically charged under such an insurance contract. The insurance cost is insensitive to the amount of goods produced or sold and hence SG has to pay for the insurance cost.
This a cost that fluctuates with respect to the fluctuations in an operation or activity. In the SG business, the activity is usually the production volume, with sales volume being another probably triggering event. Therefore, the materials used by the SG as the components in its cricket and associated accessories are regarded as variable cost since they fluctuate directly with the quantity of units produced and sold. It is significantly useful to comprehend the proportion of variable cost in SG business because a high proportion implies that a business can continue to run at a relatively low revenue levels.
On the other hand, a high production of fixed cost needs that the business uphold a high revenue level to remain operational. Accordingly SG faces the following variables cost: direct materials, piece rate labor, production supplies, billable staff wages, credit card fees and freight out just to mention a few (Goodstein, 2011). The direct materials used by the SG including willow are the most purely variable cost of all, as they are the raw materials that go into the bats products. These cost are likely to increase with the increasing production and sales. The SG also faces the piece rate labor variable cost that is the cost paid to workers for every unit completed thereby highly likely to increase with the increasing production and sales. The production supplies such as machinery oil are consumed in SG based on the amount of the machinery usage and hence such costs fluctuate with the volume of production.
The SG also faces the credit card fees as a variable cost of production and these fees are solely charged to a business if it accepts credit card purchases from customers. Particularly, the firm incurs the credit card fees as a percentage of sales that are hence regarded as the variable cost and hence they are likely to increase with the increasing production volumes and sales volumes. Freight out is also incurred by the SG as a shipping cost only where it sells and ships out a product. The firm exports some of its products to the global market and hence incur freight out costs which vary with the fluctuating production and sales volume.
From the above information on production cost, the likely overall cost structure of SG business can be determined by comparing the magnitude of fixed cost to that of the variable cost. In my view, the fixed cost of production are large relative to the variable cost as the SG is purely a manufacturing type of business with many fixed equipment for production and over 1000 workers. This, therefore, implies that the SG’s optimal size is likely to be large. This is based on the definition of the firm’s price on the basis of the number of employees and hence a firm with over 1000 employees will definitely be ranked as a large firm.
Macro Business Environment
The SG operates in an Indian macroeconomic environment that can be determined by the four component economic system, anatomy and functioning of the economy, national economic planning and economic policy instruments. The economic system ranges from free market capitalism to planned socialism alongside their variants. The Indian economic environment is designated as ‘mixed economy’ that has shifted from the accepted socialist path of development following India’s independence in 15th August 1947 whereby the state was playing a key role. The country adopted planning in 1951 which saw plans being implemented in the framework of a mixed economy within a firm interventionist state.
SG is, therefore, operating in an environment that features a mixture of planning and market-determined price mechanism which is an admixture of plan stimulus as well as control alongside market efficiency. Regarding the anatomy and functioning of the economy it is easy to understand the structural characteristics of the Indian business environment- the interrelationship between various sectors of Indian economy that is primary, secondary and tertiary sectors. The SG operates in an economy that has undergone various structural changes. For example at the time of independence, the Indian economy was primarily agrarian but this has changed over time in terms of economic contribution from 55% of its GDP to 19.4% in 2007-08 of GDP.
Also, a structural change has been witnessed in India’s industrial structure whereby it is noted the predominance of consumption goods-primarily durable goods-sector. The capital goods production, however, are being presently necessitated by the economic development. Employment trend has, however, remained unchanged substantially over the previous sixty years (Katz & Shapiro, 2010). Currently, slightly over 56% of the entire population are engaged in the primary sector as compared to 100 years ago where it was 72% in 1900 thereby indicating stationary occupational trend (Burnside, 2011). The above structural changes comes with the change in the productivity structure whereby in the industrial sector, labor productivity is greater than agricultural sector.
Regarding the national economic planning component, it has been regarded as method for managing India’s economy to solve the situation where India’s economy becomes complex as well as subject to fast fluctuations and transformation. For example, India’s Eighth Plan has been regarded as an indicative planning instead of conventional central planning variety (Hatch & Dyer, 2014). Under such planning the market function but the state is assigned particular special responsibilities based on the earmarked areas of government action and planning. For example, the human resource development calls urgently for the government initiatives where it is argued that the most significant function of planning is to lobby for the poor in economic policy marking.
Regarding the last component, economic policy instruments, SG operates in a microeconomic environment which calls for the adjustment of the prevailing economic policies of the government in the face of the changing environment internationally and domestically. The policy parameters include fiscal policy, trade policy, industrial policy as well as industrial policy. These policies are more appealing and effective than other where the macroeconomic environment of business fluctuates (Fletcher, 2013).
In conclusion, SG operates in a political stable and liberalized free market-oriented economy. India has accepted the globalization as an irreversible process and the economy is being integrated more and more with the global economy. The general level of inflation rates in India can be accessed through the examination of consumer prices (Madhukar& Nagarjuna, 2011). These prices have increased 3.63% year-on-year in November of 2016 after 4.2% rise in October and well below the market anticipation of 3.9%. This has been the lowest inflation rate since November 2014 where food inflation eased for the 4th straight month to 2.56%. The Inflation Rate in India averaged 7.5% from 2012 until 2016, hitting an all-time high of 12.7% in November of 2013 as well as a record low of 3.27% in November of 2014 (Besley, 2014).
The rates of unemployment in India has declined to 4.9% in 2013 from the 5.2% in 2012. The unemployment rate in India averaged 7.32% from 1983 till 2013, hitting an all-time high of 9.4% in 2009 and a record low of 4.9% in 2013 (Krishna, 2013).
From the above information, India is must get prepared for a recession in following the oil crash from $110 per barrel to $28 per barrel which even further expected to fall to $20 per barrel. Moreover, many product prices have crashed which gives clear indication of possible recession. SG exports its products to UK, US and other places. For example, the exchange rate for India to US is 1 Indian Rupee is equivalent to 0.015 US.
Finally, the above information indicates that the SG main products are likely to be normal and hence the demand is probably to decrease during the recession (Fields, 2015). Thus, the economic climate of the economies in which mist of the SG customers live is likely to reflect well on the SG sales (Pastakia, 2013). This will likely make SG to face problems getting access to key factors of production such as willows due to the increased in prices thereby negatively affecting the SG’s future operating costs.
Sustainability Practice of SG
The production by SG produces both negative and positive externalities. For example, some of the negative externalities arise from the industrial waste disposed by the SG manufacturing plants (Ascher, 2010). These negative production externalities include the pollution produced by a SG factory in Meerut which impose cost on others. The emission of gases or smoke from the factories leads to air pollution thus health risks to the people. The government has, however, ensured that the SG buys patent rights and taxed to meet the negative externalities created by them (van Hoof & Lyon, 2013).
The consumption of goods creates positive externalities to the cricket players and associated fans. These is because these players earn their income by using these products while the fans get entertained effectively. The sustainability practice by the SG is effective and this makes the much competitive in the industry. This will help them remain operational for long time as they get to attract and retain more loyal customers.
This paper has effectively investigated and presented a study report on the Sanspareils Greenlands (SG) business. It has shown four key areas of the Sanspareils Greenlands (SG) including SG business and its business environment, production cost and sales, macro business environment and sustainability practice.
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