Choose a growth path for Faridabad fasteners
Before the decision
Existing buyers request related parts in the same tender, while prospects demand local reps. The sales head wants deeper relationships with current buyers. The inventory lead warns that each extra specification occupies working capital whether it appears on tenders or only in catalogues.
The problem
Should the team choose Adjacent product line or New account coverage for the next 12 months?
Decision owner: The business unit lead.
The adjacent line ties up stock in many slow-moving specifications.
Option economics
Scroll the table to see all figures.
| Option | Volume (orders) | ₹ per unit | Fixed cost | Net contribution |
|---|---|---|---|---|
| Adjacent product line | 36,000 | 480 | ₹115 lakh | ₹57.8 lakh |
| New account coverage | 41,000 | 370 | ₹86 lakh | ₹65.7 lakh |
Make the call
- Calculate net contribution for Adjacent product line and New account coverage. Which assumption makes the comparison most fragile?
- If the leading option delivers 10% fewer orders, does your recommendation change?
- What evidence would you ask for before the team makes an irreversible commitment?
Reveal the worked solution
Start by validating New account coverage. It contributes ₹65.7 lakh after fixed costs and leads by ₹7.9 lakh. Treat that gap as the amount of unmodelled cost or lost contribution the option can absorb before the ranking reverses.
- Frame the decision
Separate sales that are incremental from sales shifted out of an existing channel. Include the support and fulfilment needed to keep new customers.
- Calculate both options
Adjacent product line: 36,000 orders × ₹480 less ₹115 lakh in fixed costs gives ₹57.8 lakh. New account coverage: 41,000 orders × ₹370 less ₹86 lakh in fixed costs gives ₹65.7 lakh.
- Stress-test the forecast
New account coverage leads by ₹7.9 lakh in the base case. If New account coverage delivers 10% fewer orders (36,900) at the same margin and fixed cost, it contributes ₹50.53 lakh. Holding the other option constant, the stressed result falls behind. This isolates volume risk. Check whether both options would respond to the same change in demand.
- Set a decision threshold
Holding the other option’s result fixed, New account coverage needs at least 38,865 orders to match or beat it under the model. Measure order attachment and slow-moving inventory by part family.
The adjacent line ties up stock in many slow-moving specifications. Compare the cost of a limited test with the loss the business would face if the full commitment failed. Ask the team to agree the decision criterion before collecting more evidence.
Check whether your answer names the trade-off, cites a number from the exhibit and specifies a reversal condition.
What if the whole market moves?
The worked solution tests a change to one option at a time. Here, both options gain or lose the same percentage of volume. Unit contribution and fixed costs stay constant.
| Volume scenario | Adjacent product line | New account coverage | Higher contribution |
|---|---|---|---|
| Both lose 10% of volume | ₹40.52 lakh | ₹50.53 lakh | New account coverage |
| Base assumptions | ₹57.8 lakh | ₹65.7 lakh | New account coverage |
| Both gain 10% of volume | ₹75.08 lakh | ₹80.87 lakh | New account coverage |
Explain which option you would take forward. Check whether capacity, price or customer mix would also change as the market moves.
Practise this case as an interview