Entrepreneurship

Synopsis: The case “Sustaining a new small firm in Nepal” is about an entrepreneur who runs a small family business manufacturing soaps. The business was started with an initial investment of Rs.300000, with success but the success didn’t last long and had to face a string of problems. The business currently has been set back and the entrepreneur has downsized the business taking all the operations in his hands. He is now looking for solutions to revive from the problems and suceed in the competitive environment.

Problem: the two main problems faced by the entrepreneur is:

1. Shortage of palm oil, a primary raw material for his production of soaps which has disrupted his production and thus the business.

2. Long collection period due to which he had to face shortage of working capital and close the factory for 15 days a month.

Alternatives: To overcome the above mentioned problems, we have proposed two solutions:

1. He should continue with the prodution of detergent instead of soap so that he will not have to rely on palm oil. With his low cost production he will have advantage over Indian manufacturer whose target is higher income people. With the low cost production he can target lower income segment group around and within Bhairhawa. In the later future he can expand to other markets as well. (Excel File: Solution1)

2. Reduction of collection period from 30-days cycle to 15-days cycle will help him to overcome the problem of shortage of working capital and he can continue his production all days in a month. ( Excel file: Solution2)

Evaluation of alternative: We can see form the calculations so done that by continuing the production of detergent the entrepreneur will face negative cash flow only for the first year. Then he will have positive cash flow for in the long run. So, continuing with the production of detergent is a viable option.

By reducing the collection period from 30 days down to 15 days and evaluating from the business plan...