Sickness Industry
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Transcript of Sickness Industry
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Sickness Industry / Sick firm
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Sick industry
Sick industry refers to the Sick units in a
particular industry as a whole.
Example
Sickness in Textile industry ( say the factories /
units in the industry as a whole are Sick ) .
Refers to the general phenomena and does not
refer to any particular unit in the industry.
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Remedies The Industrial units can do nothing of the
happenings for which it has no control but canequip themselves prepared to protect to face
such unfavorable happenings.
In the example given, the people of thatcommunity can use Mosquito nets to protect
themselves from Mosquitoes.
In the example given , the Industrial units can
consider constructing the sheds well above thefloor level at the time of construction to avoid
water entering the shed during rainy season.
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Unit Protecting from the influences
of external environment Normally entrepreneurs conduct
environmental scanning to know and to
implement suitable strategies for managing
macro environment which influences theoperations of the business in all the following
stages of business to avoid unit becoming Sick,
Project Identification
Project planning
Project implementation
Project management
Project development
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Sick firm
Sick firm refers to the Sick unit in a particularindustry .
Reserve Bank of India ( RBI ) defines Sick firm as
the firm incurring cash loss for two consecutivefinancial years and erosion of net worth of theassets of the firm to the extent of 50%.
Example
Sickness happening in a Textile firm ( say Binny Mills) .
Refers to sickness happening in a firm and thus referto a particular unit in the industry.
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Causes for Sickness
Causes for Sickness in Industry could be termed asIndustry Sickness and the Causes for Sickness of theFirm could be termed as Sick Firm.
The Sickness in Industry may result in Firm Sickness but
Sickness in any one firm may not make the IndustrySick.
The Industry Sickness is viewed from the Macro anglebut the Firm Sickness is viewed from the Micro angle.
Nothing could be done by the Firms to change theMacro environment. They can do something to someextent adjust themselves and find ways to survive inthe environment.
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Causes for Industry Sickness
The causes for Sickness in the industry may bebecause of external reasons.
EXTERNAL REASONS Political and legal ( LPG )
Socio cultural preferences ( using Computers)
Natural calamities ( tsunami )
Competition ( Substitute, Industry, Form )
Technology ( State of the Technology )
Economy ( boom, recession, depression )
The industrial sickness may lead to sickness of the unitsof the industry.
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Remedial measure for Industry
Sickness
If the Industry as a whole is Sick and there
exists a need to revive the Industry by taking
appropriate steps at the Macro level.
In the example given earlier , burning a
Mosquito coil to kill all the Mosquitoes to
avoid malaria. Association of the Industry
asking for Tax relief from Govt throughLobbying.
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contd
When there is no Industry Sickness and if
some units are Sick in the industry then we
can come to a conclusion that there are some
problems in the management of those units
which need to be attended to avoid the units
becoming Sick further and also to revive the
Sick unit if feasible.
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Causes for Firm Sickness
The causes for Sickness in the industry may alsohappen due internal reasons of the firm also.
The reasons for Sickness of the firms can happen at anyone or more of the following stages while performingthe business functions viz Marketing, Production,Finance and Human Resource Management
1) Project Identification
2) Project Planning stage
3) Project implementation stage
4) Project Maintenance stage
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Factors causing Sickness during Project
Identification Stage - 1
Not performing the activity of Scanning theenvironment properly to know the Opportunitiesand Threats that exist in the environment,
Not performing the activity of matching theStrengths and Weakness of the Promoters withthe required Strengths to manage the Projectefficiently and effectively ( in terms of
Management personnel, Government formalities,Marketing , Production, Finance and HumanResource Management )
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Factors causing Sickness during Project
Planning Stage 2 ( at Planning stage )
Marketing not estimating the quantity of
Sales properly and the Product mix
In Planning the Branding strategy wrongly
Not Understanding the competitors strengths
and weakness properly
Not Understanding consumer preferences in
deciding the Product mix
Assuming the price of the Product at a very
high rate without obtaining the feedback from
the Pros ective Customers of the Product.
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Technical ( at Planning stage )
Technical not choosing the right technology,going wrong in the Installed capacity,
not ensuring availability of Raw material,
labor, accessories, packing material, etc
Not ensuring availability of Utilities
requirement properly
not ensuring equipments and man power toimplement Quality control measures and
taking steps to add in the facility proposed
Not locating the project in the suitable area
for the Pro ect
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Government Supports ( at Planning stage ) Not verifying from the concerned Government departments
on the objections / un favorable policies that exist to the
business projects of the nature proposed like, whether there will be delay in obtaining licenses from the
Govt authorities like Production license, Sales Tax
registration, etc.
Objection from Pollution control Board
availability of Infra structure facilities to be provided to the
proposed business projects from the Government
Authorities
availability of Term loan from the State FinancialInstitutions and Banks
Whether there will be any delay in disbursing Investment
subsidy given Government
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Financial aspects ( at Planning
stage )
Not arriving at the correct requirement of thefunds for starting / establishing the business /
project.
Not making adequate reserve under the HeadContingency provision for cost escalation and
un foreseen expenses in the Cost of the
Project
Not making adequate reserve under the Head
Preliminary and Pre operative expenses ( start
up expenses and initial expenses )in the Cost
of the Pro ect
td
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contd Not making proper arrangement for initial
Working capital funds with the commercial
Bankers. Not maintaining the required Promoters
capital funds in the readily available form to
be broughtin stages towardsimplementation of the Project.
Not foreseeing and considering alternative
arrangements in case of any delay in therelease of the Govt financial support like
Investment subsidy, Seed capital, etc. ( for this
Bridge loan is provided by Banks as a stop gap
arran ement
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contd Not assuming reasonable Selling price of the
Product in the cost of Production andProfitability statement prepared for 5 years
Not assuming reasonable Cost of the items
which goes into the Production in the cost of
Production and Profitability statement.
Not arriving at the appropriate Debt Equity
ratio for the means of finance
Borrowing term loan at a very high rate of
interest.
Not calculating Profit After Tax to know the
F i Si k
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Factors causing Sickness
Project Implementation stage
Delayed implementation compared to scheduledprogram
Improper implementation compared to the designed
program
Cost escalation very much above the estimated cost
of the program resulting in heavy financial strain for
the Project at the initial stage itself.
If the Project has not been implemented as per theset Plan it will become Born Sick Project and the
Sickness will continue even after the project come
into existence.
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Factors causing Sickness
Project Management stage
Mal function of Marketing Function, Due to change in the external environment
Marketing ,
Political and legal ( LPG ) - Ban on the Product by Govt Socio cultural preferences ( dressing style )
Natural calamities ( tsunami )
Competition ( Substitute, Industry, Form )
Technology ( State of the Technology ) land line phone tomobile
Economy ( boom, recession, depression ) demand for
real estate
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Factors causing Sickness
Project Management stage Mal function of Production Function, Due to change in the external environment Production ,
Political and legal ( LPG ) Restriction on usage of
Technology
Socio cultural preferences ( Organic food )
Natural calamities ( climatic conditions )
Competition ( Substitute, Industry, Form )
Technology ( State of the Technology ) land line phone tomobile
Economy ( boom, recession, depression ) demand for
real estate during Boom period of the economy
Supplier - inadequate supply of quality raw material andother materials
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Factors causing Sickness
Project Management stage Mal function of Finance Function, Due to change in the external environment Finance ,
Political and legal ( LPG ) increase in Income Tax for the
companies
Socio cultural preferences - change in the attitude of the
people towards saving from investing in business ventures
Natural calamities ( need to carry more inventory due to
heavy rains )
Competition ( Substitute, Industry, Form ) cost of capital
Technology ( State of the Technology ) Collection of Bill
through electronic media
economy ( boom, recession, depression ) demand for
money in the economy
Supplier increasing cost of raw material ,other materials
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Factors causing Sickness
Project Management stage Mal function of H.R.Function,
Due to change in the external environment Human ResourceManagement,
Political and legal ( LPG ) change in the Reservation policy
in the employee rolls of the company.
Socio cultural preferences - change in the attitude of thewomen to go for employment
Natural calamities (absenteeism of employees may be very
high due to continuous heavy rains affecting production)
Competition ( Substitute, Industry, Form ) when humanresource prefers to start business of their own posing a
challenge for the H.R department in mobilizing Man power
resulting non availability of Man power.
No rain situation for agriculture activity will result in laborforce shifting to building construction activity
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contd
Technology ( State of the Technology ) for the fast
changing technology companies may find difficult to get
Man power resulting in non availability of right work force
economy ( boom, recession, depression ) demand for
Man power becomes a major problem
Supplier non availability of contracting work force may
result in high labor cost for the company.
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Factors causing Sickness
Project Management stage
Mal function of Marketing Function,
Due to change in the internal environment
Marketing ,
Due to internal reasons
Lack of professionalism
Shortage of funds for Marketing activity
Product Quality problem
Non cooperation of Distributors / Marketing
middlemen
Non cooperation of Sales personnel
F t i Si k
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Factors causing Sickness
Project Management stage Mal function of Production Function,
Due to change in the internal environment production ,
Due to internal reasons
Lack of professionalism
Shortage of funds for Production activity
Product Quality problem
Non cooperation of suppliers / service providers /
middlemen
Non cooperation of Production department
personnel
Machinery break down,
Non availability of utilities, infra structure, etc
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Factors causing Sickness
Project Management stage
Mal function of Finance Function,
Due to change in the internal environment
Finance ,
Due to internal reasons
Lack of professionalism
Shortage of funds for Finance activity
Product Quality problem sales revenue and
collection of Bills
Non cooperation of suppliers in extending credit
facility
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contd
Non cooperation of Banks in extending credit
facility to the company towards working capital
Non cooperation of Finance department
personnel
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Factors causing Sickness
Project Management stage
Mal function of Human Resource
Management Function,
Due to change in the internal environment
H.R. Management ,
Due to internal reasons
Lack of professionalism
Shortage of funds for H.R.D activity
Non cooperation of Consultancy companies, etc
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Remedial measure for Sick unit
If the Unit is Sick and there exists a need to
revive the Industry by taking appropriate steps
at the Micro level / studying the unit
individually from all the angles of business, bytaking up Case study research of the unit to
find out what exactly went wrong in the unit
and finding ways on how to overcome fromthe problems.
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contd
In the example given earlier , to protect from
the Mosquito bite people can use Mosquito
net. Similarly Sick units can consider
introducing new designs or new products tocater to the changing demand of the
Customers when the Industry is facing the
problem of Change in Customer preference inthe Macro environment.