Valjibhai Stones is an India-based supplier of quality stone chips. A multinational company tapped Valjibhai Stones with regards to supplying quality stone chips over the next eight years. It was faced with deciding whether to accept the order which would necessitate capacity expansion to serve the multinational company but earn great revenue and, at the same time, letting go of all of its existing business which would result in looking for new business after the lapse of the eight years.
Debashis Sanyal, Smita Mazumdar
Harvard Business Review (W14101-PDF-ENG)
April 17, 2014
Case questions answered:
Case study question answered in the first solution:
- Analyze the financial performance of Valjibhai Stones and conduct a presentation on it.
Case study questions answered in the second solution:
- a) Calculate the ROI and EVA for the relevant period, assuming the GCC offer is not accepted, and sales display a y-o-y growth of 5%.
b) How would you assess the performance of Valjibhai Stones on the basis of the above calculations?
- a) Calculate ROI and EVA for the relevant period, assuming the GCC offer is taken.
b) What are your suggestions for the offer?
- Calculate the incremental cash flows and assess the feasibility of the proposal, taking the time value of money in the account.
- Does the offer fit into the long-term strategy of the firm?
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Valjibhai Stones Case Answers
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Memo – Valjibhai Stones
Date: Sep 24, 2023
To: Jignesh Dedhia
From: Valjibhai Dedhia
Subject: Global Construction Company: Contract Feasibility
I hope this memo finds you well. The purpose of this memo is to see if you would be interested in taking over the family business, Valjibhai Stones.
I will assess the alternatives and provide guidance on whether to accept the contract from Global Construction Company (GCC). My research will include a comprehensive analysis of qualitative and quantitative factors.
I have also included key issues that will be determining factors in your decision to accept this project. Your opinions are greatly appreciated, and I hope that this analysis will assist you in making your final decision.
Mundra is a town located approximately 60 kilometers from Bhuj, in the district of Kachchh, Gujarat, India. In January 2001, Kachchh suffered an enormous earthquake that damaged much of the area. As a result, Mundra, which is located about 50 kilometers from the quake, experienced an industrial boom.
After 2001, the government approved the area as a special economic zone and offered companies tax incentives to bring their businesses to Mundra.
Many national and international companies flocked to the area, including GCC. GCC accepted a large contract to construct marine pilings in the Mundra Port. Their contract requires their stone chip supplier to make timely deliveries, and materials need to be of the utmost quality.
Valjibhai Stones is a stone chip supplier that is located in Mundra. The company has been in the stone chip business for the past 30 years.
The industrialization of the Mundra Port and the establishment of the Special Economic Zone (SEZ) benefited many small and medium businesses in the area, including Valjibhai Stones.
The company gained a reputation for its high-quality materials and their timely delivery. They are one of the three major companies in the area and have a 38% market share.
The owner, Valjibhai Dedhia, was approached by the general manager of Global Construction Company (GCC) regarding a large, 8-year contract to supply them with stone chips.
The issues with accepting this contract are as follows:
- Valjibhai Stones will be unable to…
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