Analyzing Operational Efficiency Of Moser Baer India Ltd.

Background to the organization – Moser Baer India Ltd

The research project is based on the management of operation at Moser Baer India Ltd, which is a tech manufacturing company currently determined to make optical storage of media. The major purpose of the study is to manage and evaluate traverse all operational areas of the organization. According to Crane and Matten (2016), managing operation is an administrative practice of business which helps to create a great level of efficiency possible within the business and it is fundamentally concerned with converting materials into services as effectively as possible to enhance the profit of a business. Operation management teams seek to balance cost with revenue to achieve the maximum operating profit possible.

This report particularly analyses and demonstrates the operational strategy followed by Moser Baer. Besides this major area, report critically analyses operational performance with the focus on how the organization is using its resources to generate sales and cash. Likewise, some significant explanatory operational values such as gross margin and capital intensity of Moser Baer are considered and discussed. Moser Baer Solar Limited and Moser Baer are the subsidiaries of MBIL engaged in solar business internationally engaging the media.

It is identified that Moser Baer India Ltd is India’s leading technology firm which has successfully developed cutting edge technology to become world’s second biggest manufacturing storage media.  Furthermore, it is also identified that Moser Baer focuses on distinguishing itself as a significant player in global photovoltaic environment by leveraging its strategic partnership with large business firms. The organization has a diverse business model such as it has acquired the second largest position in optical media with its leadership in next generation of storage format Blue Ray, DVD and HD (Moserbaer.com 2018).

The firm has a large market share with the operation presently sustainable in more than 82 nations and the operation is controlled by six marketing offices in US, UK, Europe and Japan. In wide its variety of operation, it is particularly identified that in house developed. Moser Baer’s technology holds a high standard and helping its business to remain sustainable in the global market.

Although the organization has large base of operation supporting different business fields but the overall revenue of the firm has decreased and the business is not able to maintain a trade-off between cost, price and quality. According to Forbes report, Moser Baer is presently down for the count as its sales probably have stagnated and cash reverse are completely depleted and its market capitalisation remains at 5% of what it reported five years back (Moserbaer.com 2018). On the other side, Channegowda, Nejabati and Simeonidou (2013) commented that the organization is not able to service its massive domestic debt and the worse picture is that business debt is towering 3276 cores of 2017. According to business analysts, either the cash flow or the values of assets should support debt but in the case of Moser Baer both the variables are not adequate. Thus, this research project effectively analyses the business operation of Moser Baer considering its current operational scenario.

Examining the operational strategy

There is a significant and healthy relation between its operation in EU and India of Moser Baer and this relation helps the firm to gain success and remain profitable. Besides the domestic operation, Moser Baer delivers supreme quality of services while gaining the benefits of incurring low cost in human resource and production. Demeter, Szász and Rácz (2016) commented that European subsidiaries could help the business to deal and adjust with advanced trends and technologies. One significant approach that is often found in Moser Baer’s operational approach is that Moser Baer adds values to its products and approach by customizing them in accordance to customers’ needs. Another significant approach found in Moser Baer is that its significant emphasis on its diverse client requirements. Due to this fact, the firm has been described by its customers as the most the flexible, reactive as well as innovative supplier. Turner et al., (2014) in their management operation journal mentioned that the company serves 11 out of 12 largest OEM customers in the global market and it did not lose control over a single OEM customers till date. The organization has particularly implemented a comprehensive e-CRM programme which is helping to develop healthy and long-term relationship with the clients.  On the contrary, Yin and Kaynak (2015), the key of Moser Baer’s operation is that its deep insight of business cycle to create productive investment; thus, maximizing the return while creating a competitive edge.

Comprehensive logistic and supply chain system of Moser Baer is another significant path of its business success because the company through its large network of supply chain has been able to access to global clients. However, when getting into its operation, an in house- IT system further enables the wide network. Hence, this IT network is integrated with freight forwards as well as major chipping lines. Due to the implementation of this process, both customers and suppliers are kept at the back end. So, to utilize the strategy, Moser Baer leverages this integration to create changes in expectation and market conditions. Moreover, the reduction in the shipment lead time by 20% also helps to sustain the approaches used in the strategy. Moser Baer cut out the delays in shipment to less than 0.1% of the overall dispatches (Kaisler et al., 2013). The following framework shows the entire process and performance scenario of Moser Baer.

                                               

                                                               Figure 1: Corporate plans of Moser Baer

                                                                           (Source: Kaisler et al., 2013)

R&D: Bhasin (2015) mentioned that Moser Baer’s is always in favour of investing on its R&D as it helps them to launch new and innovative products in the market. It hires dedicated and skilled individuals. Moser Baer has built an effective R&D alliance with some international players to speed up the production process. Moreover, the in-house proprietary technology enables the firm to manufacture all its products.

Operational process and performance

Sales: Moser Baer uses a market based sales strategy in which it involves its unique selling points, identification of target market and suitable sales channels. This means sales strategy is based on the market culture and selling point. When Moser Baer is targeting its Asian market, sales strategy is aligned with the economic status and conditions. For example, in the domestic market, due to the increasing presence digital platforms, the firm uses its conventional offline sales channels (Turner et al., 2014). This focuses on the distributors of each selling point to distribute the products.

Marketing: Marketing strategy of Moser Baer is differentiated to reduce the risk and optimize the values offers to customers. Crane and Matten, (2016) mentioned that with growing competition in the domestic entertainment sector, Moser Baer, nonetheless, pays attention to sales and distribution system to hold its control in generating revenue and this also helps to sustain in the market. So, until it has diversified into entertainment business and it did not pay required attention to marketing because its official media business including CD and DVDs did not require any substantial marketing initiatives. Therefore, Sharda, Jain and Momaya, (2014) mentioned that Moser Baer adopted “Hindustan Unilever-type Pan 41” distribution network.

Finance: Due to diverse product categories and operation in different regions, Moser Baer is financially sustainable. According to annul report of 2017, gross revenue for the financial year and ended in March 2017 reached INR 5610 million and the tax margin reached INR 358 million (Moserbaer.com 2018). In addition, the company stipulates its investment in each sector. The firm has a strong cash generation from the operation of 284 cores during the quarter and overall income of quarter 4 increased by 14.5%. In addition to this, it has also been found that MBIL records EBITDA margin at 27.3%, which is slightly up from 15.5% for the same quarter (Moserbaer.com 2018).

Strategic Planning: Strategic planning of the company is widely aligned with its goals of expanding the business to global environment along with the focus on diverse client requirements.  The business of Moser Baer had a global perspective to its business as well as has entered each international market with long-term strategic planning. Consequently, along with the strategic presence in more than 80 nations, the company developed a global reputation for quality and sustainable relationship with its stakeholders such as customers. (Colledani et al., 2014) commented that with its supplies to large optical media brands, the organization has a market share of 16% in the international market.

Manufacturing: Moser Baer entered in optical media and established 150 million unit capacity manufacturing plant, which is helping them to produce recordable compact disk and digital versatile disks. Such functions complies with the international standards, technology and quality products. Thus, it is worth telling that business of Moser Baer is presently the biggest Indian manufacturer of magnetic and optical media storage products (Hill, 2017).

Operating performance ratio are the tools which measure the functions of particular core operations for a business (Dutt & Humphery-Jenner, 2013). Specially, these tend to reveal information regarding how effectively the business is utilizing resources to create a balance between sales and cash. Bekaert and Hodrick, (2017) arguably mentioned that a business with strong performance ratio is capable of utilizing resource pool to create a high degree of sales as well as a significant cash inflow. So, the performance ratio of Moser Baer is presented with three different rations such as fixed-asset turnover, sales/revenue per employee as well as operating cycle.

In order to understand the operational performance of company, it becomes very crucial for the organization to take into consideration the different operational ratios which are available as they contribute towards the understanding of the fact whether the particular firm is performing well or not (Bekaert & Hodrick, 2017).  Fixed-asset turnover ratio is generally used as the metric in manufacturing business that help to make substantial purchase to drive up output. Hence, in the following section, the different operational ratios of Moser Baer will be analysed. The three different ratios are as follows:

1. Fixed-asset turnover

The fixed asset turnover ratio provides an idea about the productivity of a company`s assets and their capability of generating adequate sales for the particular firm at large. It is greatly expected that in general, the firm will be generating adequate sales with the help of their different assets, but very often the different companies are not able to engage in adequate sales (Bekaert & Hodrick, 2017). The ratio of the Fixed Asset turnover can be calculated using the following formula:

= Revenue/ Capital assets

The higher the given ratio is the better it is for the organization. The calculation of this ratio for Moser Baer and for the year 2017 has been done as follows:

=5609817404/7019175118

=0.8

Hence, with respect to this ratio the company has not been performing considerably well as the ratio is less than one and Moser Baer needs to take considerable steps to improve this ratio.

1. Sales/revenue per employee

The particular ratio in the financial management helps in the understanding whether a company is able to make use of its different employees effectively in order to ensure considerable success at the workplace. The higher this particular ratio is for the organization, the better it is as it shows the efficiency of the management decisions as well. The formula to calculate the given ratio is very simple and has been stated as follows:

=Total sales/ Employees in the firm

The higher ratio is generally preferred for the different firms as it reflects upon the productivity of the different workplace members at large. In this aspect, it can also be stated that, to improve this ratio, the firm needs to engage in adequate employee motivation aspects. The ratio for Moser Baer is as follows:

=5609817404/2889

=1941785.187Rs. Per employee

Therefore, in this aspect it can be stated that Moser Baer has been performing considerably well and needs to ensure considerable success in the future as well.

1. Operating cycle

The operating cycle is the last kind of operational ratio which reflects a correct assessment of the operational performance of the workplace (Bekaert & Hodrick, 2017) .It is very similar to cash conversion cycle as it helps the firm in understanding how well is a company making use of its components like the capital assets rather than its impact on cash. The formula which is used to calculate the operational cycle of a firm has been given as follows:

Operating Cycle (Days) = DIO + DSO – DPO

DIO = Days Inventory Outstanding

= (Cost of sales/365)/Average inventory

For Moser Baer=

=1471202238/ (8,715,158,710/365)

=61

DSO = Days Sales Outstanding

=Average accounts receivable/ (net sales/ 365)

=4592740763/2804908702

=1.6 days

DPO = Days Payable Outstanding

=Average accounts payable/ (net sales/ 365)

=3736313095/2804908702

1.3 days

=Operational cycle

=DIO+DSO-DPO

=61+1.6-1.3

61.3 days

This figure can be taken to be considerably good for the firm at large.

As put forward by Powell et al., (2015), capital intensity is mainly considered as a representative of a business’s operating leverage but this degree of capital intensity could vary among different industries. It is identified that Gross margin is firm’s total sales revenue minus its cost of goods sold, which is divided by overall sales revenue, expressed as a percentage. The following data set presents the percent total sales revenue of Moser Baer in which the business retains after the direct cost associated with manufacturing goods and service it sells. The data set is presented by the following formula.

Gross Margin (%) = Revenue-cost of Goods sold/ Revenue

Gross Profit Margin (2018)
	(In billion)
Gross Profit	0.37
Sales	0.76
Ratio	48.68

Table 1: Gross Profit margin of Moser Baer

(Source: Morningstar 2018)

The above presented table shows that gross profit is turned up to be around 0.37 and sales is about 0.76. The ratio is found to be 48.68. Hence, the ratio indicates that Moser Baer is able to gain and generate the maximum profits from the sales, which secure business position in the market.

Capital Intensity Ratio
Total Assets	2.1
Sales	0.76
Ratio	2.763158

Table 1.2: Capital Intensity of Moser Baer

(Source: Morningstar 2018)

Table 1.2 helps to observe that total is found to be around 2.1 and sales is around calculated to be around 0.76, while the ratio is 2.761358. So, the data set indicates that sales are limited, in comparison to the overall assets invested in business. This figures indicate that market position or business sustainability is risky and questionable. So, in the case of Moser Baer, capital intensity is measured by calculating the amount of assets required to produce a dollar of sales, which is the total assets and it is divided by net or overall sales. The calculation is inverse of asset turnover ratio which remains as an indicator of the efficiency with which Moser Baer is deploying its assets in creating revenue. Hasan, Mitra and Sundaram (2013) mentioned that capital intensive business conventionally use a lot of financial leverage as it could use plant and equipment as collateral. In such case, having both high operating leverage as well as financial leverage could be risky as sales unexpectedly goes down. Thus, it can be mentioned that exploratory variable such as

Capital intensity has significant negative impact on the business as sales margin did not go up compared to the overall assets of Moser Baer. According to Bagger et al., (2014) capital intensity tends to have a higher range of operating leverage, which is the ratio of fixed costs to variable cost. Consequently, the author has mentioned capital intensive businesses always require a great volume of production to deliver an adequate return on investment. This means that minor changes in the sales of Moser Baer can lead to big changes in profits and returns on the invested capital.

Distribution ratio
Net Assets	2.1
Expenses	0.81
Ratio	2.592593

Table 1.3 Distribution ration of Moser Baer

(Source: Morningstar 2018)

Distribution ratio remains as a major of proportion of NET profit which a business can distribute to its shareholders instead of ploughing it back into the business (Hill & Munday, 2016). Table 1.3 implies that net asset is around 2.1 and expense is around 0.81, while the ratio is around 2.592593. This indicates that expensed is moderate compared to the overall value of assets. This means there a healthy balance between assets and overall expense for the business. On the basis of this figure, it can be mentioned that exploratory variable like distribution ratio has a moderate impact on Moser Baer’s business because the expense over the assets is not high compared to it.

Furthermore, it has been identified that organizations that require a large amount of upfront financing to buy assets and supplies required to start their enterprise are normally called capital-intensive business. However, it has been identified that in order to strengthen its financial position, Moser Baer is taking and implementing proactive measures to make sure that all financial costs are effectively reduced to positively influence the bottom line. Considering the capital intensity, Moser Baer has made some changes in its financial and investment planning. For example, the organization has shifted to work capital borrowing in foreign exchange, which helps them to reduce the interest cost.  

Conclusion: 

In conclusion, it can be mentioned that due to the diversified business approach and operation in different regions across the globe, Moser Baer is a step ahead because its integrated manufacturing enabling cost efficiencies. In addition, the approach of lower capital investment, manpower costs also enables cost leadership. However, it is worth stating that the business of Moser Baer needs to scale up to satisfy exponential growth opportunities. On the other side, it can also be mentioned that in a dynamic technology environment, Moser Baer’s business can be threatened from efficient emerging technologies. The growth of digital environment is a serious threat to Moser Baer.

References:

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