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Quantitative Techniques in Business, project

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Consumer Goods (FMCG) Company touching the lives of every two out of

three Indians. HUL mission is to “Add vitality to life” through its presence in

over 20 districts in home, personal care products, food and beverages. HUL

is a 51% owned subsidiary of the Anglo-Dutch giant Unilever. The product

portfolio of the company includes household and personal care products like

soaps, detergents, shampoos, skin care products, color cosmetics,

deodorants and fragrance. It is also the market leader in tea, processed

coffee, branded wheat flour, tomato products, ice cream, Jams and squashes.

Company growth strategy had

been guided by two primary considerations. First HUL prioritized opportunity

which built upon existing Assets and Capabilities. Second they avoided

spreading their management talent to thinly. HUL always had a focus on

innovations, and was proud of many of their accomplishments. Many have

increased living standards in India. As per results declared on 31 July 2008,

HUL has a Market Cap of 522.2 Billion.

(In Billions)

Industry Analysis

The Indian FMCG sector is the fourth largest Fast Moving Consumer

Goods in the economy with a total market size in excess of US$ 13.1

billion. The FMCG market is set to treble from US$ 11.6 billion in 2003 to

US$ 33.4 billion in 2015. Penetration level as well as Per Capita

Consumption in most product categories like jams, toothpaste, skin

care, hair wash etc in India is low indicating the untapped market

potential. With 200 million people expected to shift to processed and

packaged food by 2010, India needs around US$ 28 billion of investment

in the food processing industry.

An average Indian spends around 40% of his

income on grocery and 8% on personal care products. The large share of

FMCG products in total individual spending along with the large

population base is another factor that makes India one of the largest

FMCG markets.

Year to CY CY CY CY CY CAGR

December 03 04 05 06 07 (%)

(CY05-07

Net Sales 11546 12388 13889 16345 18724 16.1%

2 7 1 4 4

Adj. 14181 15898 18800 19461 22020 8.2%

Net Profit 13559 18905 19149 19123 21664 6.4%

Margins (%)

EBITDA 12.3% 12.8% 13.5% 11.9% 11.8%

NPM 11.7% 15.3% 13.8% 11.7% 11.6%

Per Share

Data

Adj. EPS 6.2 8.7 8.8 8.8 8.9

1.Mean

2.Standard Deviation

3. Co-efficient of Variance

4. Correlation

5.Regression

HUL

Year Income X=(X-Mean X) X2

Mean =92400/5

=18480

Standard Deviation

Mean=∑x/N

=92400/5

=18480

S.D. = (35395732 /5) ½

S.D. =2660.66

C.V= S.D./Mean*100

C.V. =2660.66/18480*100

C.V. = 14.39%

P&G

Year Income X=(X-Mean X) X2

2003 39951 2892.4 8365977.76

Mean=214217/5

=42843.4

S.D. = (∑x2 / N) ½

S.D. = (101729741.2/5) ½

S.D. = 4510.64

C.V. = S.D./Mean*100

C.V. = 10.53%

Correlation

(

In Billions)

sales(X) X) Profit(Y) Y)

115.5 -30.3 918.09 13.6 -4.9 24 148.5

187.3 41.5 1722.2 21.7 3.2 10.2 132.8

5 4

∑x=729.1 ∑y =92.5 ∑x

y=278.5

r= 278.5/ (729.1*92.5) ½

r= 0.79

Regression

Year Profit(Y) X XY X2

2005 19149 0 0 0

∑y /N= a

= 92400/5

=18480

∑x y/∑x2= b

=16428/10

=1642.8

Y= a+ b x

So the regression line is in the form of =18480+1642.8(x)

We are calculating profit for the year 2008, so we will be calculating it with

the help of above regression line, so the profit for the year 2008 will be,

For the x= 3

Y= 18480+1642.8(3)

Y=18480+4928.4

Y= 23408.4

1. Mean- One of the powerful tools of analysis is to calculate the single

average value that represents the entire mass of data. The objective of

calculating the mean is:

a) To get one single value that describes the characteristics of the

entire data.

b) To facilitate the comparison.

Here we are calculating the mean of profits of the last five years so

that we can get the average of the profits of the P&G earned during

these years.

2. Standard Deviation - The standard deviation measures absolute

variation of distribution of profits. The distribution that has the smallest

standard deviation has the more representative mean. Hence, it is

extremely useful in judging representativeness of mean

3. Variance-Here we are calculating the standard deviation two

companies of same nature and same goods P&G and HUL in terms of

income earned during the period of five years. The coefficient of

variance is being calculated in order to know the variability of the two

companies.

Net Sales and Net Profit. It means that with an increase in Net sales the

increase in Net Profit proportionatelymore. It shows the relationship

between net sales and net profit

5. Regression- With the help regression technique, a company can

estimates their future sales and thus the profit that will be generated

in the future based on their past data.

Conclusion

The field of FMCG market is opening up and the competition is

increasing day by day. Many players like ITC, Nestle etc. are expanding

their business at a large scale. And the use of statistical tools is

becoming very popular in the organization. There are various officers

being appointed in the organizations. Companies are finding various

ways to cope up with the competition within the market. The continuous

research on quantitative scale will help the HUL to review their past

Performance in quantitative terms and helps them to make further important

Decisions.

• The sales of the company are increasing for the past five years so

is the net profits. So the company will follow the same policy

which was followed earlier.

• How much more capital is more to be invested? The solution for

this is the regression lines. We can easily find out the amount

required for earning of any desired revenue.

• By computing correlation we can say that the company is earning

profit at increasing rate. So it is good method of judging the

company before investing.

Than k you

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