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Strategic Finance

In: Business and Management

Submitted By arijeet
Words 3373
Pages 14
Financial Management: Kota Fibres, Ltd.
Kota Fibres, Ltd. was founded in 1962 in Kota, India. Created to produce nylon Fibre,
Kota Fibres provided synthetic Fibre yarns to local textile weavers mainly to make the traditional women’s dress in India; the saris. Ms. Pundir was both the managing director and principal owner of the company. Kota Fibres used new technology and domestic raw materials to produce their quality product. The demand for saris amounted to 12 billion yards of fabric

The Case Papers
Kota Fibres, Ltd. was founded in 1962 in Kota, India. Created to produce nylon Fibre,
Kota Fibres provided synthetic Fibre yarns to local textile weavers mainly to make the traditional women’s dress in India; the saris. Ms. Pundir was both the managing director and principal owner of the company. Kota Fibres used new technology and domestic raw materials to produce their quality product. The demand for saris amounted to 12 billion yards of fabric, resulting in a stable and growing business. Demand fluctuated based on special Indian festivals and celebrations, and more specifically on the Diwali; a special celebration in mid-autumn. The unit growth forecast for Kota Fibres was 15% per year yet delivery of the yarn and several other small factors would soon play a part in their implausible success.
Consumers in the villages purchased the cloth from the cloth merchant. The cloth merchant granted credit in order to support sales. The suppliers were very competitive in order to keep the merchants. They were aggressive in price, service, and credit line. Due to the fact that profit margins were thin, Kota had policies which required a plan of seasonal production. Kota operated at peak capacity for two months and decrease capacity for the rest of the year. This caused continuous hiring and layoffs.
Kota had two distribution warehouses, but regardless,...

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