PQR Ltd. is benchmarking its operational and financial performance against the best-in-class competitor XYZ Ltd. The following data is available: Particulars PQR Ltd. XYZ Ltd. Sales (₹ crore) 50 50 Operating Cost (₹ cror

Answer 2(d) (i) Efficiency & Profitability Gaps Gap in Operating Cost = ₹40 - ₹32 = ₹8 crore (Higher cost) Gap in Operating Profit = ₹18 - ₹10 = ₹8 crore (Lower profit) Gap in Inventory Turnover = 4 times vs. 8 times (Slow inventory movement) Customer Complaint rate = 5% vs. 1% (Less satisfaction among customers/quality issue) Employee Utilization = 60% vs. 85% (Underutilization) (ii) Operating Margin Analysis Operating Margin = Operating Profit/ Sales x 100 Operating Margin of PQR Ltd. = (₹10 / ₹50) × 100 = 20% Industry requirement = 30% PQR Ltd. doesn't meet industry standards in terms of operating margin. (iii) Expected benefit from Improvement Program Current operating cost = ₹40 crore Cost reduction potential = 15% of ₹40 crore = ₹6 crore Cost of Improvement programme = ₹3 crore Expected benefit from Improvement Program = ₹6 - ₹3 = ₹3 crore (iv) Recommended Strategic Actions based on Benchmarking Cost Efficiency: Adopt lean systems to reduce the gap in operating cost of ₹8 crore Inventory Management: Implement Just in Time (JIT) or Economic Order Quantity (EOQ) model to improve turnover Quality Improvement: Reduce complaints via Total Quality Management (TQM)/Six Sigma HR Utilization: Improve workforce productivity Process Re-engineering: Align operations with best practices