Cold Storage vs Knitwear

652 Words3 Pages
The case Cold Storage vs. Knitwear talks about the conflicting interest of two friends Ajay and Durgesh who along with their fathers plan on starting a new business. Both the families have conflicting business ideas with one supporting Knitwear while the other supporting the idea of Cold Storage. Cold Storage * Profits from this business were assured as plant would operate at full capacity * High demand for the business * Not enough competition in the market * Higher profitability can be achieved by buying food in peak season and selling in the off season * Low managerial problems if facility rented out * Limited scope of expansion * More problems could emerge if entered trading business Knitwear * Lower investment in fixed assets * Intense competition in the industry would be great threat * Full capacity production would be achieved in the 3rd year of production * Huge promotional efforts would be required * Variations in raw material prices would affect the profitability of the business. As there is in intense competition, the bargaining power of the suppliers would also be high, which is bad for the business that is totally dependent on the raw materials * Ajay and Durgesh are the only two people who would be running the business and it would be hard for them to take care of both the production and the promotion side of the business At the first glance on the data, it can be seen that the Cold Storage business is way attractive that the Knitwear but nothing can be said for sure unless further analysis is done for each. Therefore, for analyzing the attractiveness of the two businesses, the following ratios were calculated. This would help in comparing the businesses and in deciding on the best option. The calculations are done assuming full plant capacity for both the businesses. | Cold Storage | Knitwear |

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