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Challenges of Growth and Continuity in a Co-operative Organization*

CASELET, STRATEGY
ET Cases - GSMC, 8 Pages
AUTHOR(S) : Dr. Monoshree Mahanta, Assistant Professor, Department of Business Administration, Gauhati University

Case Preview

Challenges of Growth and Continuity in a Co-operative Organization

 

An initiative was taken in 1980s by the State Government to develop textile industry base in Assam. A number of textile mills for production of yarn and fabric were set up. But due to various problems including poor-management, non-competitiveness of the mills, all the units had been closed except one. Assam Polyester Co-operative Society Limited (APOL) is the only unit now functioning in this region, thanks to the government’s drive to boost textile industry. It started as a textile composite mill for production of grey & dyed yarn and fabric in its spinning, weaving and processing units. The spinning mill was commissioned on 24th June, 1988. But this pioneering unit in the textile industry of Assam too had seen difficult days and has been still struggling to survive. In fact, the mill stopped production in December 2003 and was completely shut down for not being able to withstand the internal problems and external challenges. However, it started again in June 2006 to focus exclusively on yarn production......................

The Golden Years

A few zealous engineering students who earned Post Graduate degrees in Fiber Science came together to create APOL which was incorporated under the Assam Co-operative Societies Act 1969 as a manufacturing concern in September, 1981. Pioneering yarn manufacturing in the North Eastern region of India, this public sector state enterprise had gone through a roller-coaster ride during its 30 odd years of existence. Primary motto of APOL was to generate rural entrepreneurship and was registered as a co-operative society. One of its objectives was to promote the economic interest of its members by undertaking spinning, dyeing, sizing, weaving and manufacturing of textile materials and supply of yarn to the weaver members............

Crisis

By the early 2000s, the organization was in a crisis situation. In fact, challenges crept in soon after 1995. The liberalization policy adopted by the Central Government saw the entry of cheap fabrics from Taiwan and Singapore into the local market. Market demand for its fabrics fell and the organization lost its stronghold in the market................

Post-Revival Period

After the closure of the unit for three years, a revival strategy was worked out. Aided by one of the developmental institutions of the region, the mill started its spinning unit in 2006 at 50% capacity utilization. The other two units viz., the dyeing and weaving unit covering an approximate area of 7800 square feet remained unutilized. Around 300 workers were engaged in the dyeing and weaving units.............

Organization Structure

The organization structure is given in Exhibit I.

The Board has 13 members including the Chairman and the Managing Director (MD). The Board constituted by the state government is responsible for all the policy level decisions. The organization is headed by the MD, who is the Chief Executive Officer (CEO) of the Corporation. He is assisted by Chief of Operations who in turn is assisted by two Managers viz., Manager (Technical) and Manager (General).............

About the Product

The mill produced yarn from Polyester Staple Fiber (PSF) and Acrylic Staple Fiber (ASF). The main supplier of these fibers was Reliance Industries Ltd............

Current Performance

The utilization of its resources in terms of physical assets, financial resources and the human resources are discussed and details are given in the Exhibit II...........

Physical Performance

The overhead cost was high comprising mainly of manpower cost. Capacity utilization hovered around 50% of installed capacity. Since most of the machinery were very old (Exhibit III), breakdown was high leading to low efficiency level. Post revival, production saw a steep jump in 2007-08, but it had declined in the next year and thereafter there was no improvement in the production quantity.............

Financial Performance

Revenue had grown mainly due to the increase in selling price. It had grown from INR1253 lakh in 2007-08 to INR1885 lakh in FY 2013-14. The Net Profit had been low in the past few years. In fact, the organization had reported losses for the past two years (FY 2012-14). As reported by a senior official of the organization, the earnings from the mill operations were used for payment of salary and statutory obligations................

Human Resource Management

On the people front, the organization was facing problems. Employees are highly underpaid, much lesser than other State Corporations/State Enterprises where average annual salary comes around INR2.7 lakh. There was excessive staff due to closure of the dyeing and weaving units. Currently, there are around 322 workers. Altogether, 380 people are regular employees. There is high absenteeism and low morale amongst the work force. Absenteeism is very high (27% to 30%)...........

Technological Scenario

New technologies have been developed in spinning industry with an objective to eliminate a few steps/ processes involved in the traditional technology. There are three main spinning systems used commercially to produce cotton and other short staple yarns: i) Ring Spinning adopted by APOL (old technology) ii) Rotor Spinning (open-end spinning) iii) Air-jet Spinning including Vortex Spinning (latest technology)............

Problem Identification

Lack of working capital was the main hindrance in implementation of plans for revival as well as expansion. Lack of infrastructure facilities such as erratic power supply, old machineries were the major problems faced by the unit. Due to poor financial condition/ dearth of working capital, the raw yarn from Reliance Industries Ltd. and other producers were being procured and financed through a third party..............

Prospects and Challenges

North East India is inhabited by a number of tribes. They adorn traditional attire. The dresses are woven by the local people. Most of the women folk of the region know weaving and are self-sufficient in meeting their household needs for clothes. The vibrant colourful motifs of these woven materials had been in great demand since past and continues to be so from people across the country. As a result, handloom units have come up in the region to cater to this demand.................

Assignment Questions

I. What factors are responsible for suspension of operations of the organization in 2003?
II. Assess the post-revival performance of APOL.
III. Conduct a SWOT analysis for the organization.
IV. ......................

Exhibits

Exhibit I: Organisation Structure of APOL

Exhibit II: Performance Indicators

Exhibit III: Production Capacity of Processes

Exhibit IV: Machine Disposal

Exhibit V: Manpower Cost

Teaching Note Preview

Challenges of Growth and Continuity in a Co-operative Organization

 

Synopsis

This caselet depicts the evolution of a textile manufacturing unit in the co-operative sector. Established way back in September 1981, Assam Polyester Co-operative Society Limited (APOL) commissioned production of yarn with a capacity of 6000 kg per day in 1988. It’s primary motto was to generate rural entrepreneurship and was registered as a co-operative society. APOL was created out of an initiative of the state government to boost textile industry in Assam. A few engineering graduates, with their mentor, a fiber technology expert, came together to create this textile unit. Initially it was an integrated textile unit engaged in yarn production, dyeing and garment making. In a few years, it expanded its activities to include retailing of its garments. APOL fabrics became popular and gained market acceptance amongst the middle income segment. However, the good days did not last long. Wrought by internal problems and external challenges, the organization saw itself in a crisis situation after being in operation for a decade and a half. The revival of the unit after being closed down for 3 years came about with the support of government machinery.

The first part of the case reviews APOL’s efforts to become a successful player in the local textile industry. The case goes on to identify the challenges met during its journey prior to closure. The second part of the case highlights the utilization of the resources viz., physical, financial and human resource. Problem areas in its various functions have been focused upon.

Pedagogical Objectives

This case is appropriate for strategy course. Discussion can be focused on identification of strengths, weaknesses, opportunities and threats for the unit, turnaround strategies for continuity and growth of the organization. The case can also be discussed in a session devoted to entrepreneurship. Specifically, the objectives of this caselet are to:

  • • Highlight the factors that made an enterprise go through a decline phase after experiencing a growth phase
  • • Discuss how the internal resources of an organization can be used to turnaround an organization
  • • Analyze organization’s internal environment as well as external environment to achieve a fit between the two

 

Case Positioning and Setting

This case study is relevant for MBA or Executive MBA programs and can be used for Strategic Management classes. It deals with strategic issues in production, HR and marketing areas.

Assignment Questions

  • I. What factors are responsible for suspension of operations of the organization in 2003?
  • II. Assess the post-revival performance of APOL.
  • III. Conduct a SWOT analysis for the organization.
  • IV. ...........

...............................

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Abstract

This caselet examines an organization which saw various phases of a business cycle such as growth, downslide, closure and revival. Registered as a co-operative  society, the organization started operations in 1988 with the activities of spinning, dyeing and weaving. It’s finished products got wide acceptance in the market and the  unit performed well during its first 10 years of existence. However, the good years were not to last long. Unable to tackle the internal problems and withstand the external challenges, the unit had to be closed. It started again in June 2006 to focus exclusively on yarn production. However, financial and physical performance remained very  poor. With low employee morale, low productivity, frequent machine breakdown, excess manpower, fund crisis, the Managing Director (MD) had to decide on a course of  action that would improve the current status of the unit and arrest further deterioration of its financial status. He was sure that a sound production strategy had to be  worked out and implemented at the earliest in order to turn around the unit and bring its long lost glory. But he also knew that there would be other softer management  issues needed to be addressed. The MD was wondering which approach would be appropriate; or were there some other options too.



Pedagogical Objectives

  • Highlight the factors that made an enterprise go through a decline phase after experiencing a growth phase
  • Discuss how the internal resources of an organization can be used to turnaround an organization
  • Analyze an organization’s internal environment and the external environment to achieve a fit between the two

Case Positioning and Setting
This caselet is relevant for MBA or Executive MBA programs and can be used for Strategic Management course. It deals with strategic issues in production, HR and marketing areas


* GSMC 2016, IIM Raipur

This Case Pack Includes:
- Abstract
- Caselet
- Teaching Note (**ONLY for Academicians)
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