Report on Engro Foods
Submitted By: uhammad Abu M uhammad Baker aseem A zam W aseem Danish A ftab aas A ziz W aas ahad ! ari ari F ahad A"mas #mer
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L1F08MBAM2106 L1F08MBAM2141 L1F08MBAM2127 L1F07MBAM2179 L1S08MBAM2137 L1F08MBAM2071
Table of Contents Acknowledgement...........................................................................................................................2 Executive Summary.........................................................................................................................3 Introduction to Engro Pakistan........................................................................................................4 Mission Statement........................................................................................................................... !ision Statement.............................................................................................................................. "iversi#ied Port#olio o# Engro Pakistan..........................................................................................$ %ertili&er 'usiness.......................................................................................................................$ Engro Energy (imited.................................................................................................................$ Engro Innovative Automation (imited........................................................................................) Engro !o*ak !o*ak +erminal (imited.................................................................... ................................) Engro Asa,i Polymer -,emicals. (imited...............................................................................) Engro %ood (imited...................................................................................................................../ 'oard o# "irector............................................................................................................................./ 'oard com*ensation ommittee................................................................................................../ 'oard audit committee.................................................................................................................0 rgani&ational ,art......................................................................................................................11 'usiness Executives o# di##erent "ivisions...................................................................................12 %ood Industry In Pakistan..............................................................................................................13 Engro %oods...................................................................................................................................14 ur 'rands.................................................................................................................................14 ur A##iliates.............................................................................................................................14 2
ur !alues......................................................................................................................................1 !ision and Mission Statement o# Engro %oods.............................................................................1 !ision.........................................................................................................................................1 Mission......................................................................................................................................1$ ectives and oals.....................................................................................................................1$ A5A(6SIS % MISSI5............................................................................................................1) Market Segmentation.....................................................................................................................1/ "emogra*,ic Segmentation.......................................................................................................1/ Psyc,ogra*,ic Segmentation.....................................................................................................1/ 'e,avioral Segmentation...........................................................................................................1/ S+7A+EI Internal and external Audit......................................................................................10 S+EEP(E Analysis........................................................................................................................10 S 8 Social %actors.......................................................................................................................10 + 8 +ec,nological %actor............................................................................................................29 E 8 Economical %actor...............................................................................................................29 E 8 Environmental %actor...........................................................................................................29 P 8 Political %actor.....................................................................................................................21 ( 8 (egal %actor.........................................................................................................................21 E 8 Et,ical %actor.......................................................................................................................21 Porters %orces Model..................................................................................................................22 +,reat o# 5ew Entrant...................................................................................................................23 a*ital re:uirements..................................................................................................................23 Economy o# scale.......................................................................................................................23 'argaining Power o# Su**liers......................................................................................................24 5umer o# su**liers....................................................................... ............................ .................... ................ ............... ....... 24 3
Im*ortance o# volume to su**lier..............................................................................................24 'argaining Power o# 'uyers..........................................................................................................24 'ackward integration.................................................................................................................24 Availaility o# Sustitutes..............................................................................................................2 om*etitive 7ivalry.......................................................................................................................2 S;+ Analysis.............................................................................................................................2$ Strengt,s....................................................................................................................................2$ Engro
om*etition...........................................................................................................................31 I5">S+7IA( S;+ A5A(6SIS...............................................................................................32 Strengt,......................................................................................................................................32 ;eaknesses................................................................................................................................32 **ortunities.............................................................................................................................32 +,reats.......................................................................................................................................33 om*etitors Analysis.....................................................................................................................33 ;,at is S;+ matrix?..............................................................................................................3$ S;+ Matrix #or Engro #oods......................................................................................................3/ Internal %actor Evaluation Matrix.................................................................................................49 External %actor Evaluation Matrix................................................................................................42 om*etitive Pro#ile Matrix @PM................................................................................................44 7easons......................................................................................................................................4 7E MPE+E5IES - BE6 S>ESS %A+7S...........................................................4 Bey success #actors........................................................................................................................4$ 7esearc, - "evelo*ment..........................................................................................................4$ MPE+I+I!E A5A(6SIS............................................................................................. A5A(6SIS............................................................................................. ............4$ SPAE SPAE MA+7IC MA+7IC S+7A+EI S+7A+EI MA5AEME5+ ME+D".................................... ME+D"........................... ................. ................ ........ 4/ Engro %oods #actors #or SPAE SPAE MA+7IC............................................................ MA+7IC............................................................ ........................40 .................... ....40 7esult.........................................................................................................................................1 ' Matrix Model........................................................................................................................1 "ivision wise data #or Engro #oods ' Matrix..........................................................................3 Internal External @IEMatrix..........................................................................................................4 7esult.........................................................................................................................................4 rand Strategy Matrix #or Engro #oods.........................................................................................
7esults........................................................................................................................................$ =uantitative Strategic Planning Matrix or a =SPM......................................................................) =SPM % Engro %oods................................................................................................................./ %I5A5IA( 7A+I 7A+I A5A(6SIS................................................................................... A5A(6SIS................................................................................... .............. ........ ......$9 $9 (i:uidity 7atios.........................................................................................................................$9 7emarks.................................................................................................................................$1 (everage 7atios.........................................................................................................................$2 7emarks.................................................................................................................................$2 Activity 7atios..........................................................................................................................$3 7emarks.................................................................................................................................$3 Pro#itaility 7atios.....................................................................................................................$4 7emarks.................................................................................................................................$4 Ac,ievements................................................................................................................................$ Engro %oods ex*ansion on a igger scale......................................................................................$$ "airy science and +ec,nology in Pakistan....................................................................................$$ S>ES+I5S A5" 7EMME5"A+I5S.........................................................................$) 7E%E7E5ES..............................................................................................................................$/
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Acknowledgement In t,e name o# Alla,F +,e Most raciousF +,e most Merci#ul. %irst o# all we are t,ank#ul to Alla, Almig, Almig,ty ty #or giving us t,e Mind to t,inkF t,inkF Deart to #eel t,e conse:uences conse:uences o# our usiness ideaF strengt, strengt, to com*lete and Aility Aility to work success#ul success#ully ly on our *roect. All All memers memers o# our team are involved in making t,is *roect to groom it #rom conce*tual stage to t,e *oint w,ere one can ,old it in ,is ,ands. +o all t,ose grou* memersF w,o ,ave contriuted greatly to t,e use#ulness o# t,is *roect. Alt,oug, some o# w,at t,e *roect contains was designed t,roug, t,e ,ard way. +,ese are not ust t,e w,ite *a*ers t,at are necessary ut also t,e conversations wit, colleagues w,o *rovide answers to our :uestions and solutions to our *rolems discussed. ur team would also like to ex*ress gratitude towards our instructor Miss$ Rabiha %assan #or guidingF ,el*ing and *roviding us wit, t,e o**ortunity to make us ale to *roduce t,is *lan. +o all o# t,ese *eo*le and t,e many ot,ersF w,o ,el*ed us a lot and we did not rememer t,eir namesG we ,eartily give t,em ig t,anks. ur #inal t,anks go to our #amiliesF our teac,ers w,o ,ave always u*li#ted us t,roug, t,eir moralF *ro#essional and tec,nical su**ort.
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Executive Summary +,e re*ot at ,and *rovides use#ul insig,t aout Engro Pakistan (tdF a *rivate #ertili&er #irm t,at kee*s aout 22 H o# market s,are in t,e milk #ood industry Pakistan. Estalis,ed in 299F a 199H owned susidiary %irst investment o# dairy *lant Processed milk market is growing at a**rox. 29H *er annum l*er
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Introduction Introduction to Engro Pakistan Engro ,emical Pakistan (imited is t,e second largest *roducer o# >rea #ertili&er in Pakistan. +,e com*any was incor*orated in 10$ and was #ormerly Exxon ,emical Pakistan (imited until 1001F w,en Exxon decided to divest t,eir #ertili&er usiness on a gloal asis and sold o## its e:uity o# )H s,ares in existent com*any. +,e Em*loyees o# EngroF in *artners,i* wit, leading international and local #inancial institutions oug,t out Exxon
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Mission Statement Engro is *rogressing day y day ecause t,ey ,ave a vision and mission t,e kee*s t,e motivated and kee*s t,em going. +,eir mission as t,ey descrie as “Our mission is two fold, to !l" f#rm!rs m#$imi%! t!ir f#rm "rodu&! '( "ro)idin* +u#lit( "l#nt nutri!nts #nd t!&ni&#l s!r)i&!s u"on wi& t!( &#n &# n d!"!nd -o &r!#t! &r!#t! w!#lt '( 'uildin* n!w 'usin! 'usin!ss! ss!ss '#s!d '#s!d on &om"#n( &om"#n( #nd &ountr &ountr(( str!n* str!n*ts ts in "!tro "!tro&! &!mi& mi&#ls #ls,, inform inform#ti #tion on t!&nolo*(, infr#stru&tur!, infr#stru&tur!, food #nd #n d ot!r #*ri&ultur! s!&tors.
And #urt,er descriing t,e ado*tion #as,ion t,ey sayFK In *ursuing t,e mission we s,all at all times e guided in our conduct and decision making y our core values.K
Vision Statement “-o '! t! "r!mi!r /#ist#ni !nt!r"ris! wit # *lo'#l r!#&, "#ssion#t!l( "ursuin* )#lu! &r!#tion for #ll st#!old!rs.
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Diversified Portfolio of Engro Pakistan Fertilizer usiness Agriculture accounts #or 2H o# "P and 4H o# em*loyment in Pakistan Second largest >rea *roducer o# Pakistan .a*acity0) B+LA Market s,are29H Second ,ig,est *,os*,ates sales @499B+LA Market S,are 23H EP(rea s,ortage ex*ected to grow to 1.2 million tonsLannum y 2919. ;orldrea *lant o# 1.3 million tons eing setu* at a cost o# >SO 09 million. n commencement o# o*erations in mid 2919F cas, #ixed costs o# t,e new *lant will e a t,ird o# t,e existing *lantG scale - rown #ield synergies as consum*tion at t,e new *lant will e 1H less t,an t,e existing *lant. Engrorea *roduction siteG 2.2/ million tonsF 3 *lants.
Engro Energy !imited Estalis,ed in 299$8199H owned susidiary Pakistan is #acing growing energy de#icit Energy consum*tion ,as een growing at )H *er annum Setting u* a 229 M; gas ased *ower *lant at a cost o# O229 million wit, commercial o*eration in 2990 S,ort8listed along wit, 3 ot,er com*anies #or *rivati&ation o# Jams,oro Power om*any.
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Engro Innovative Automation !imited Ac:uir Ac:uired ed maori maority ty stake stake @1H @1H in a kno knowle wledge dge ased ased com*any com*any Innova Innovativ tivee Engine Engineeri ering ng Automa Automatio tion n (td in 2993 Market Market (eader (eader in dom domest estic ic Indust Industria riall Autom Automati ation on Doneyw Doneywell ell distriutor in Pakistan Ex*anding internationally to synergi&eF and ene#it #rom lower costs at ,ome and ,ig,er demand aroad 5ow o*erating in "uaiF >AE w,ic, contriutes 2H o# revenue and ,al# o# t,e *ro#it om*anyS in "ec. "ec. 299 299$G $G manda mandate ted d to devel develo* o* outsourcing o**ortunities.
Engro Vo"ak #erminal #erminal !imited !imite d
A 989 J! wit, 7oyal !o*ak o# DollandG estalis,ed 100) 7oyal !o*ak is t,e worldSO 39 499 million.
Engro Asa$i Polymer %&$emicals' !imited
Estalis,ed in 1000. /9829 J! wit, Mitsuis,i or*. Pakistan
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Engro Food !imited
Esta Estal lis is,e ,ed d in 299 299FF a 199H 199H owne owned d sus susid idia iary ry %ir %irst st investment o# dairy *lant Processed milk market is growing at a**rox. 29H *er annum l*ers ac,ieved *eak market s,ares o# 12.3H wit,in $ mont,s o# launc, t,er *roducts launc,ed 8l*ers reamF lwell Dig, alcium (ow %at Milk @Premium 'rand Plans to ex*and *roduct *ort#olio Milk *rocessing ca*acity to increase y 299H to 299 million liters annually ;ill ;ill ecome t,e only on ly com*any in Pakistan covering t,e entire milk catc,ments area Already ,as t,e second largest c,illed milk collection system in t,e country "istriution network to doule #rom / towns to 110 towns y t,e end o# 299)J! wit, gloal #ood maor in advanced stage o# negotiation.
oard of Director oard com"ensation &ommittee
+,e 'oard om*ensation ommittee meets at least once every :uarter to review and recommend all elements o# t,e com*ensationF organi&ation and develo*ment *olicies relating to t,e senior executives< remuneration and to a**rove all matters related to t,e remuneration o# executive dire direct ctor orss and and meme emers rs o# t,e t,e manag anagem emen entt comm commit itte tee. e. +, +,ee Pres Presid iden entt atte attend ndss 'oar 'oard d om*ensation ommittee meetings y invitation. +,e mandate o# t,e 'oard om*ensation ommittee is as #ollows
+o ensure ,uman resource *olicies e##ectively deliver roust talent management *rocess
across various Engro com*anies +o take decisio decisions ns on t,e *er#or *er#orman mance ce evaluat evaluation ionFF develo* develo*men mentt and succes successio sion n o#
com*any Es and or*orate enter Executives +o estalis, s*eci#ic standardsL*olicies #or asic alignment in #undamental elie#s across com*anies.
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S,air Das,mi
,airman
Ars,ad 5asar S,a,&ada "awood Ars,ad 5asar
Director Director
Director
S,air Das,mi Director Director
Director Director
+a,ir Jawaid
oard
(uman (uman
audit committee
+,e
VP
endorse
)esources
%inancial
Pu*lic Affairs ##icer re regularly at attends t, t,e 'o 'oard Au Audit o ommittee me meetings y y
and and
'oard Audit ommittee meets at least once every :uarter to t,e accounts *rior to t,eir a**roval y t,e 'oard. +,e ,ie#
invitation to *resent t,e accounts. +,e 'oard Audit ommittee is res*onsile #or assisting t,e 'oard in #ul#illing its oversig,t res*onsiilities in t,e #ollowing areas
+o assess t,e ade:uacy and e##ectiveness o# t,e system #or assessment and management
o# risk in t,e om*any and susidiariesLoint ventures under its management control +o review #inancial re*orting *rocessF system o# internal controlF audit *rocessF and *rocess #or monitoring com*liance y t,e om*any wit, Securities and Exc,ange
ommission o# Pakistan
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S$a**ir S$a **ir (as (as$mi $mi
,airman
5aveed Das,mi +eneral Manager
Isar A,med
Aliuddin Ansari
Director
Director
Adul Samad " awood Director
o*orate Audit
5aveed Das,mi +eneral
Manager
&or"orate Audit
Engro
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,rganizational &$art S,air Das,mi
,airman Asad Umar President
Isar Ahmad "irector
Khalid Siraj Subhani "irector
Abdul Samad Dawood "irector
Shahzada Dawood "irector
Muhammad Aliuddin Ansari "irector
Arshad Nasar "irector
Shabbir Hashmi "irector
Ruhail Mohammed "irector
Khalid Mansoor "irector
Asif Qadir "irector
Saad Raja 1$
"irector
usiness Executives of different Divisions Khalid Siraj Subhani
Senior !ice President Engro or*oration (imited &$ief
Executive
-Designate.
,fficer
Sarfaraz A. Rehman
Engro Fertilizers !imited President and &$ief Executive ,fficer Engro Foods !imited
Asif Qadir President and &$ief Executive ,fficer
Engro
Polymer
%
&$emicals !imited
Khalid Mansoor President and c$ief Executive ,fficer Engro Powergen !imited
Abdul Samad Khan President and &$ief Executive ,fficer Engro E/IMP Private !imited Sheikh Imran-ul-Haque President and &$ief Executive ,fficer Engro Vo"ak #erminal !imited 'ak,tiar ;ain President and &$ief Executive ,fficer Avanceon Avanceon !imited !imit ed
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Food Industry in Pakistan +,e #ood and its allied *roducts industry is considered Pakistan
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Engro Foods Engro %oods (imited is susidiary o# Engro ,emical Pakistan (td. w,ic, is one o# t,e most re*uted enter*rises in Pakistan wit, more t,an 49 years o# diversi#ied usiness o*erations in t,e areas o# #ertili&er and c,emicals. Engro %oods started its usiness o*erations in Marc, 299$ and wit, t,e success#ul launc, o# l*ers MilkF +arangF lwellF and l*ers creamF it ,as estalis,ed itsel# as a maor *layer in t,e #oods usiness. Engro %oods ,as already set u* two *rocessing *lants at Sukkur and Sa,iwal. ;it, ;it, t,e ever ex*anding milk collection co llection network and *rocessing #acilitiesF t,e Su**ly ,ain ,as geared us #or t,e growing sales o# our *roducts ;e elieve t,at our recent successes will take us to our goal +o e one o# t,e iggest *layers in t,e #ood usiness. ur aim is to dominate t,e #ood usinessF and to ac,ieve ac, ieve t,is we will settle #or not,ing less t,an t,e cream
,ur rands
,ur Affiliates
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,ur Values &ntegrity &ntegrity
;e ,ave an o*en disclosure *olicy and trans*arent *rocesses. All our usiness activities L transactions are carried out ,onestly and wit, #airness. #ur 'eop"e
Dave *assionate *eo*le wit, intelligent and #irm a**roac, towards usiness. +o #acilitate t,ese *eo*le we give t,ose c,allenging o**ortunitiesF trainingF #un loving environmentF necessary resources and #acilities. ;e *ulicly recogni&e our talent. &nno(ation &nno(ation
Innovation is t,e way o# li#e at E%(. It is valuedF encouraged and rewarded in all as*ects o# our o*erations. )SR
;e stand committed to sustainale usiness growt, and ensure 199H com*liance o# S7 y ensuring t,e sa#ety o# our *eo*leF assets and t,e community in w,ic, we o*erate. E%( takes signi#icant signi#icant strides strides in *overty *overty alleviatio alleviation n 8 ot, rural and uranF environmenta environmentall sa#ety sa#ety and uild u* o# #arming ex*ertise. )onsumer )entri*
onsumer is t,e reason #or our existence as a usiness.
Vision Vision and Mission Statement of Engro Foods Vision Aims #t tr#nsformin* t! &om"#n( witin t! n!$t fi)! (!#rs into first # n#tion#l food industr( *i#nt, t!n into # r!*ion#l for&! for&! #nd fin#ll( into # *lo'#l "l#(!r "l#(!r
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Mission Build Br#nd!d food 'usin!ss to im"ro)! +u#lit( + u#lit( of lif! '( off!rin* t#st(, #fford#'l! #nd i*l( nutrition#l "rodu&ts to our &onsum!rs wil! m#$imi%in* st#! old!rs )#lu!
,*0ectives and +oals Engro#oods main oectives are to su**ly everyone t,eir #avorite ol*er
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A1A!2SIS A1A!2SIS ,F MISSI,1
&om"onent of mission
Descri"tion
Addressed or not3
&ustomers Products or service
;,o are t,e #irm
6es 6es 6es
Markets
*roducts? eogra*,i eogra*,ically callyFF w,ere w,ere does t,e
6es 6es
#ec$nology
#irm com*ete? Is t,e t,e #irm #irm
tec, tec,n nolo ologica gicallly
5o
current? &oncer &oncern n for surviv survival4 al4 growt$ growt$ Is t,e #irm committed to growt,
6es 6es
and #inancial soundness? ;,at ,at are are t,e t,e asi asicc el elie#s ie#sFF
6es 6es
statement
and "rofita*ility P$iloso"$y
value valuesF sF as*ira as*irati tions onsFF and et,ica et,icall Self5&once"t
*riorities o# t,e #irm? #irm? ;,at is t,e #irm
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6es 6es
&oncern for "u*lic image
advantage? Is t,e #irm res*onsive to socialF
5o
community communityFF and environm environmental ental &oncern for em"loyees
concerns? Are em*loyees em*loyees a valuale valuale asset
5o
o# t,e #irm?
Market Segmentation Demogra"$ic Segmentation Engro %ood
Psyc$ogra"$ic Segmentation Engro %ood
e$avioral Segmentation Segmentation Engro %ood
S#)A#E+I& Internal and external Audit
S#EEP!E Analysis 5o organi&ation exists in a vacuumG t,e environment wit,in w,ic, t,e #irm ,as , as to o*erate will a##ect t,e way t,at strategy is ot, *lanned and carried out and c,anges in t,e environment is also t,e most likely likely reason #or making c,anges in t,e strategy. strategy. ,anges in t,e environment environment are also t,e most likely cause o# #ailure o# strategic *lans. +,e most care#ully calculated strategy would e ale to drive t,e market in t,e #avor o# t,e organi&ation and will maneuver t,e external environment in t,e est *ossile way. Engro %oods like all t,e organi&ations t,ey also ,ave to #ace suc, kind o# environment environment w,ic, is very dynamic. 'eing in t,e market market as a c,allenger t,ey ,ave to #ace all t,e external #actors and ,ave to co*e u* wit, t,em accordingly
S 5 Social Factors
Engro #ood ,as ,el*ed to ring aout a c,ange in li#e style o# t,e Pakistani Peo*le y introducing >D+ MilkF as t,e literacy rate is im*roving and it is resulting in a etter awareness o# t,e ol*ers and +arang >D+ treated milk and is ,el*ing t,em im*rove t,eir sales and Milk wit, its asic ene#its ,as , as ,el*ed im*rove t,e image and more usage ,as een e en seen in t,e *ast years. S*ecial S* ecial awareness am*aigns can also e launc,ed and can ,el* *ortray a etter image o# t,e *roduct in #ront o# t,e customers. +,e attitudes o# t,e *eo*le are also c,anging wit, t,e *assage o# time so as a result t,e usage o# o*en gawala milk is c,anging and *eo*le are o*ting out t,e usage o# standardi&ed *acked milk.
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# 5 #ec$nological Factor +,e ty*e o# t,e tec,nology availale wit,in t,e industry states t,e com*etitive environment ecause creative use o# new tec,nology is w,at o#ten gives #irm t,ere com*etitive advantage. +,is environment does not c,ange t,at muc, :uickly ut t,e c,anges t,at come are strong enoug, t,at can c,ange t,e way t,e industry is currently running. Dalee *roduction *rocess uses >D+ @>ltra Dig, +reatment tec,nology. Engro #ood administrators claim t,at t,eir *lant ado*ted t,e latest tec,nology #or milk *rocessing and t,us it ,ad an edge over ot,er around twenty *lants in com*etition including DaleeF Milk*ak as all ot,er *lants were ased on osolete Euro*ean tec,nology. +,e idea e,ind >D+ investment was to *rovide consumers wit, t,e est :uality o# *ackaged dairy and #ood *roducts t,at no ot,er com*any can *roduce.
E 5 Economical Factor Engro %oods is strongly a##ected y ot, t,e Economic and t,e "emogra*,ic environment around and ,ave to kee* on taking di##erent ste*s to res*ond accordingly. +,ere is no sales tax on t,e milk. Dence it is a real *lus *oint. Material su**ly and s,ortages are #aced y t,e com*any #or ot, Packaging and #or t,e *roduct itF as milk
E 5 Environmental Factor AsF t,e environment always e##ect t,e way strategies are eing carried out and im*lemented. Engro %oods like all t,e organi&ations t,ey also ,ave to #ace suc, kind o# environment w,ic, is very dynamic. dynamic. 'eing in t,e market as a c,allenger c,allenger t,ey ,ave to #ace all t,e external #actors #actors and 2
,ave to co*e u* wit, t,em accordingly. Dalee ,ave t,e strategies to *ositively engage t,e sta## in work and oost u* t,eir moral. Engro #ood ,as a #riendly environmental culture wit,in t,e organi&ation to make t,eir em*loyees com#ortale and to deal wit, t,e external *rolems. +,ere are #ew seasons in w,ic, t,e availaility o# milk reduces t,at e##ect t,e *roduction o# milk and le#t Engro #ood wit, #luctuated sales.
P 5 Political Factor Engro #ood also aides y t,e rules #ormed y t,e overnment and set t,eir strategies t,at are according to t,e laws and legislations o# t,e overnment t,ey are working under. +etra Pack @rick *ackF t,at was #or t,e #irst time t,at milk came in t,at #orm soon #ollowed y t,e 5estlUD+ Milk industry o# Pakistan. +,ey are not actually ound under any sort o# trade agreements. As #ar as t,e em*loyment laws are concerned Engro #ood aides to laws set y t,e government #or trade *oliciesF government *olicies and com*letes its res*onsiilities in a etter manner.
! 5 !egal Factor Engro #oods always stand y t,e rules and legal conditions im*osed y t,e overnment and set t,eir strategies t,at are according to t,e em*loyment laws and legislations o# t,e overnment t,ey t,ey are are work workin ing g und under er.. En Engr gro o #ood #ood alway alwayss kee*s kee*s its its de*ar de*artm tmen entt u*da u*date ted d aout aout w,at w,at is ,a**eni ,a**ening ng in t,e sector or milk milk indust industry ryFF and t,at will will ,el* ,el* t,em to make make t,eir t,eir strat strategi egies es accordingly. Engro #oods ,ave t,e legal laws likeF Minimum wageF working timeF %ood stu##sF Engr En gro o #ood #oodss don< donnde >nderr 1/ work workin ingF gF ccu ccu*a *ati tion onal alLL indu indust stri rial al +raini aining ngFF Environmental regulationsF onsumer *rotection Industry8s*eci#ic regulations etc.
E 5 Et$ical Factor Engro #oods are well renowned com*any o*erating in t,e milk industry since 2992. And t,e reason #or t,is is im*ortantly t,eir et,ical values. +,ey don
2$
Porters 6 Forces Model
2)
#$reat of 1ew Entrant +,e average entre*reneur canRt come along and start a large #ood com*any. +,e t,reat o# new entrants lies wit,in t,e #ood industry itsel#. Some com*anies ,ave carved out nic,e areas in w,ic, t,ey underwrite dairy su**ly. +,ese #ood com*anies are #ear#ul o# eing s:uee&ed out y t,e ig *layers. Anot,er t,reat #or many #ood com*anies is ot,er #ood services com*anies entering t,e market.
&a"ital re7uirements
om*eting in a new industry re:uires resources to invest. Production P roduction o# *acked *roducts re:uires ,uge investment o# #inancialF ,umanF tec,nicalF and marketing resources. At t,e moment Engro l*er
Economy of scale
Economy o# scale determines entry ecause t,ey #orce *otential com*etitors eit,er to enter on a large scale ases @a costly and *er,a*s risky move or to acce*t a cost disadvantage. MoreoverF new entrants in t,e *asteuri&ed milk usiness may encounter scale related arriers not ust in t,e *roductionF ut in t,e advertising marketingF distriutionF #inancingF and raw milk *urc,asing as wellF Engro#oods ac,ieved its reakeven in 2993
2/
argaining Power of Su""liers +,e su**liers o# #ood mig,t not *ose a ig t,reatF ecause o# t,e reasonsG
1um*er of su""liers 7aw milk is standard commodity and is availale in t,e o*en market #rom a large numer o# milkmen. I# anyone re#uses to sell its *roduct t,en com*any can uy it #rom ot,ers w,o are already willing to sell to com*any.
Im"ortance of volume to su""lier Su**liers also ,ave less leverage to argain over *rice ecause t,e com*any is *urc,asing t,e large volume o# t,eir milk and su**liers don
argaining Power of uyers +,e individual doesnRt *ose muc, o# a t,reat to t,e #ood industry. (arge clients ,ave a lot more argaining *ower wit, #ood com*anies. (arge cor*orate clients like airlines and retailers *ay mill millio ions ns o# dolla dollars rs a year year.. +, +,er eree are are larg largee num numer erss o# dist distri riut utor orsF sF w,o w,o are are uy uyin ing g and and distriuting t,e *roductF so t,eir argaining *ower is low and com*any ,ave leverage to dictate im*lement its terms and conditions cond itions to distriutors.
ackward integration Anot,er reason o# low argaining *ower is t,at no uyerLdistriutor ,as t,e resources to start involve in ackward integration.
20
Availa*ility of Su*stitutes +,is one is *retty straig,t #orwardF #or t,ere are *lenty o# sustitutes in t,e #ood industry. Most large #ood com*anies o##er similar suites o# services. om*anies #ocusing on nic,e areas usually ,ave a com*etitive advantageF ut t,is advantage de*ends entirely on t,e si&e o# t,e nic,e and on w,et,er t,ere are any arriers *reventing ot,er #irms #rom entering.
&om"etitive )ivalry +,e #ood industry is ecoming ,ig,ly com*etitive. +,e di##erence etween one %ood om*any and and anot, anot,er er is usua usuall lly y not t,at grea great. t. As a resu result ltFF #ood #ood indu indust stry ry ,as ,as ecom ecomee mo more re like like a commodity an area in w,ic, t,e #ood com*any wit, t,e low cost structureF greater e##iciency and and ette etterr cust custom omer er serv servic icee will will eat eat out out com* com*et etit itor ors. s. %ood %ood com*an com*anie iess also also use use ,ig,e ,ig,er r investment returns and a variety o# #ood investment *roducts to try to lure in customers. In t,e long runF weRre likely to see more consolidation in t,e #ood industry. (arger com*anies *re#er to take over or merge wit, ot,er com*anies rat,er t,an s*end t,e money to market and advertise to *eo*le. 5ot only local ut attem*ts y cross order com*etitors or com*anies to gain stronger #oot ,old in eac, ot,ers domestic market oosts t,e intensity o# rivalryF es*ecially w,en t,e #oreign rivals ,ave lower cost or very attractive *roducts. In case o# Engro #oods so #ar nestle and ,ale are t,e only diverse rival and anot,er *layers t,at ,as ust oined t,e >D+ Milk sector is goodmilkF no dout t,e com*etition etween Engro#oods and Dalee is :uite intense ot, are engaged in consistent ,omework ust to reak and attract t,e customer towards eac, ot,er ut goodmilk is adding to t,e com*etition etween t,e sector. 39
S8,# Analysis Strengt$s
Engro’s Back
l*er
PR with Farmers
Engro ,as een interacting wit, t,e #armers #or #ertili&ers and ,as gained :uite a good re*utation over t,e years. It ,as led to a strong ond and long term relations,i* wit, t,e #armers w,o are willing to su**ly milk to t,e com*any. +,is is an added advantage and strengt, #or t,e com*any ecause it will never e s,ort o# milk *roduction. * roduction. +,e #armers also won
31
Positive Response from Customers In #irst yearF E%( crossed 1.4 illion sales #igure w,ic, s,ows customers< satis#action u*on E%(
Strong consumer & prouct research l*er
Thir!"eneration Thir!"eneration Plant E%( onlyF ,as t,e t,ird8generation >D+ milk *lant in t,e country. E%( *lant is t,e only *lant in Pakistan t,at uses 'acto#uge tec,nology to virtually eliminate acteria and ensure *remium :uality and ,ygiene. MoreoverF it is also setting u* anot,er milk *rocessing *lant in entral Puna @Sa,iwal wit, an investment o# 7s. 2 illion @>S O 33 million.
32
;orldwide ;orldwide #ame o# o # Engro. E##icient milk collection system. Bee*ing ,ig, :uality standards. Integrated distriution and ware,ousing #acilities. Success#ul related diversi#ication. eneric rand name o# l*er
8eaknesses #lwell T$C lwell ad w,ic, is ased on ;estern li#e styleF E57 #oods rand management s,owed a man w,o *ut o## ,is clot,es - remain ust in ,is undergarmentsF or ,al# nude lady in a cat walk or men admiring t,e #igures o# a lady in mix gender ,ealt, clu. In t,is ad t,ey are creating associations wit, t,e rand t,roug, t,e stri*esF w,ic, is a ,ig,lig,t o# lwell *ackaging. Dal# naked *eo*le ,ave een s,own wit, tattoos o# t,e same stri*es in order to s,ow t,at t,ey are loyal consumers o# lwell. AlsoF t,e talentF situations and locations connects well wit, t,e ad to give lwell a *remium *ositioning. +,e rilliant marketing *eo*le at E57 %oods #ailed to analy&e is t,at t,e market t,ey are targeted t,e ad onF is PakistanF w,ere *racticing Muslims resideF w,o ,ave strong religious elie#s. ;,en making t,e adF t,e rand managers were #ocused onF making an ad t,at s,ould give t,e rand t,e most *remium look and #eel amongst t,e target consumers ut on t,e ot,er ,and t,ey were least ot,ered aout t,e et,icsF religious elie#s and cultural values.
#wning Re Color +,e com*any ,as not owned t,e color red like 5estle ,as a green Milk*akG Dalee ,as a lue carton etc. +,is may create *rolems ecause w,en a consumer enters a grocery s,o*F t,en ,eLs,e mig,t ,ave *rolems in recalling t,e rand ecause t,ere is no color association attac,ed to l*er
%ow ualit' (ilk E%( is not ,aving its own dairy #armsG it largely collects loose milk #rom #armers - gwalas t,roug, its 49 milk collection centersF w,ic, sometimes is o# low :uality and im*ure ecause t,ey add vegetale oil to milk to get ,ig,er *rices.
33
Packaging E%( is de*endent u*on +etra Pak #or t,e *ackaging o# its entire dairy *roducts. +etra Pak is t,e only o*tion availale to l*er
(ilk collection & istribution costs E%(
)arrow bran portfolio It ,as een more t,an a year nowF w,en E%( launc,ed its #irst dairy *roductF l*er
>nale to com*ete in *rice sensitive segment o# >D+ milk market. >nder8utili&ation o# t,e ca*acity. ca *acity. >nale to #ul#ill t,e demand o# local *owder milk market. 5ot yet IS certi#ied
,""ortunities *ncrease funing b' "overnment overnment ,as decided to increase #armers< #unding. +,is is an o**ortunity #or E57 #oods ecause *reviously due to weat,er conditions and ot,er reasons t,ere was lots o# wastage o# milk ut now t,at can e reduced as #armers will e etter ale to store milk #or longer time time *eriods.
*ncrease consumption of P%( om*etition may create o**ortunities #or t,e com*any ecause eac, com*etitor in t,e milk industry wants to increase *enetration o# *rocessed li:uid milk and so t,ey will create awareness #or consume consumers rs t,roug, t,roug, di##e di##eren rentt adverti advertisin sing g media. media. +,is +,is will will ensure ensure t,e increa increase se in t,e 34
consum*tion consum*tion o# *rocessed milk instead o# lose milk and so will in turn lead to increase in sales #or t,e com*any. +,ere#ore t,ere will e an o**ortunity #or accelerated growt,.
+wareness rowing dissatis#action wit, loose milk and increasing awareness aout ,ealt, and ,ygiene issues ,ave led to increased *rocessed milk consum*tion.
Thir largest proucer of milk Pakistan is t,e +,ird largest *roducer o# milk in t,e world wit, a total *roduction o# 32 illion liter o# milk a yearF w,ose value is more t,an t,at o# t,e comined value o# w,eat and cottonF #rom a total ,erd si&e o# 9 million milc, animals @u##aloes and cows. (ivestock accounts #or 4$./ *ercent o# agricultural value added and aout 19./ *ercent o# t,e "P. Milk is t,e largest commodity #rom t,e livestock sector accounting #or 1 *ercent o# t,e total value o# t,e sector. "ue to t,e ste*s taken y t,e government and *rivate sectorF country
3
Im*roving Economy Po*ulation growt, rate. Dig, urani&ation rate. Dig, literacy rate. %lexile government *olicies #or #ood industry. Dave signi#icant growt, o**ortunities Das su##icient ca*ital to ex*and. Das t,e *otential to innovate and di##erentiate t,e com*anyRs *roducts to sustain a com*etitive advantage May merge wit, ot,er gloal usinesses to eliminate com*etitors. Daving a*ale o# ex*anding into ot,er markets o# t,e world
#$reats
Competition om*etition may *ose a t,reat ecause t,e com*any will ,ave to maintain its leaders,i* in an ex*anding market so t,at it doesn
Perceptions an Price ,i-erentials
onsumers< *erce*tions and *rice di##erentials d i##erentials can cause a t,reat #or t,e com*any. It is im*ortant t,at l*er
3$
Dig, in#lation rate. (ow *urc,asing *ower. "ecrease in "P growt, rate. Increasing interest rates. "ecreasing investment. 7ecessionary *eriod in usiness cycle om*etition wit, 5estleF Engro %oods and t,e new entrants.
Engro #oods is currently #acing an increase in Sales +ax.
I1D9S#)IA! S8,# A1A!2SIS Strengt$
Endowed wit, t,e very good reed o# u##alos and cows. Dig,est *er ca*ita consum*tion co nsum*tion o# milk in Asia 7egular culling o# less *roductiveLun*roductive animals A ,ig, ratio o# agricultural land to agricultural ratio An emergence o# commercial dairy #arms on a large scale
8eaknesses
Small and scattered animal ,olding Prevalence o# traditional raw milk marketing system Poor :uality o# milkG lack o# remunerative *roducer *rice #or milk Milk *rocessing *redominantly de*endant on osolete >D+ tec,nology Mus,rooming growt, o# cattle colonies in suuran areasG Dig, cost o# milk ProductionG a long c,ain o# middle men Inade:uate in#rastructure and institutional #acilities and su**ort (ow utili&ation o# installed ca*acity o# dairy *lants Poor Poor :uali :uality ty o# anim animal al ,eal ,ealt, t, care care and ree reedi ding ng serv servic ices esGG lack lack o# *ro# *ro#es essi sion onal al management
,""ortunities
Duge unsatis#ied demand o# milk and milk *roducts. Sustantial sco*e #or increasing milk *roduction t,roug, im*rovement in t,e marketing system y ensuring a year round remunerative *rice to milk *roducers Increase consumer awareness o# ,ealt,y eating
#$reats
3)
>nregulated im*orts o# dairy *roducts at c,ea* *rices Inade:uate *ulic and *rivate investment in moderni&ation o# t,e sector !ested !ested interests in *er*etuating t,e de*endence on im*orts o# dairy commodities.
&om"etitors Analysis 'rands like Milk Pak @owned y 5estle and Dalee Milk @#rom Dalee %oods ,ad led t,e dairy market in t,e worldSO 1 million and in 299/F t,e rand ,as a market s,are o# close to 22 *ercentVsecond only to Milk Pak @estimated at 49 *ercent. +,e critics ,ad to grudgingly acce*t t,at t,e new entrant to t,e multi8illion ru*ee *ackaged milk category meant usiness. +,e *ackaged milk category was originated in 10/1 y @:uaintly named Milk PakF w,ic, *ioneered tetra *ack milk in Pakistan. +,e su**ly c,ain involved collecting milk #rom rural areas across PunaF *rocessing t,e milk t,roug, >D+ @>ltra8Dig, +em*erature +em*erature Processing treatmentF and selling it to consumers in uni:uely colored triangular and rectangular *acks designed to *rolong t,e milk
#amiliar #amiliarFF and widely widely res*ected res*ected randsF randsF t,e market*lac market*lacee a**eared a**eared com*letely com*letely im*ervious im*ervious to newcomers. l*er
our t,ird yearF and so #ar we ,ave ,ad close to 39F999 contactsFK ,e adds wit, *ride. +,e Ol"!rs 5onsum!r !l#tionsi" /#rt( is anot,er ongoing '+( ased *rogramF w,ic, intends to
create and maintain loyalty amongst t,e randD+ *lant wit,in t,ree mont,sFK ,e adds. +odayF Engro %oods aims to ecome t,e only com*any to utili&e all o# t,e milk collecting areas in Pakistan and also *lans on develo*ing t,e iggest dairy #arm in t,e country. +,e com*any
8$at is S8,# matrix3
+,e conce*t o# determining strengt,sF weaknessesF t,reatsF and o**ortunities is t,e #undamental idea e,ind t,e S;+ model. +o *resent t,e model in a more understandale wayF sc,olars 49
came u* wit, so8called S;+ matrix. S;+ matrix is only a gra*,ical re*resentation o# t,e S;+ #ramework .
The aboe is a s!hema of how S"#T wor$s. %ou %ou s&ar& a& &he &o' leel and (o down &o de&ails. "hen &his is )lled wi&h !on&en&* i& (e&s &he sha'e of a ma&ri+* su!h as ,+am'le below-
41
42
S8,# Matrix for Engro foods' Strengths
"orldwide fame of ,n(ro.
,!ien& mil$ !olle!&ion s/s&em.
Weaknesses Weaknesses Unable &o !om'e&e in 'ri!e sensi&ie se(men& of UHT mil$ mar$e&. Under0u&iliza&ion of &he !a'a!i&/. Unable &o ful)ll &he demand of
Kee'in( hi(h 1uali&/ s&andards.
lo!al 'owder mil$ mar$e&. In&e(ra&ed dis&ribu&ion and warehousin( fa!ili&ies. 2eneri! brand name of
No& /e& IS# !er&i)ed
#l'er3s 4ar(e mar$e& share of ,n(ro innoa&ie and !hemi!als. !hemi!als. Hain( 2ood re'u&a&ion in &he mar$e& b/ s&ron( brand name i.e.
#pportunities
,n(ro S&ron( R5D S# Strategies
W# Strategies
In!rease 'rodu!&ion of 1uali&/
Im*roving Economy
mil$ &o !a&er &he unsa&is)ed demand6S7*#7*#89 As 'er &he in!rease demand of
:o'ula&ion (row&h ra&e.
&he mil$ &he/ should ful)ll &he demand as ,;4 hae &he abili&/ &o e+'and.6"<*#89.
43
The/ should should (o in &he 'rodu!& 'rodu!&
Hi(h urbaniza&ion ra&e.
line of 'owdered mil$. 6S8*#7*#=9 The/ should ma$e a s&ron( s&ron( dis&ribu&ion dis&ribu&ion s/s&em &o !a&er &o
Hi(h li&era!/ ra&e.
aail &he full bene)& of &he (rowin( mar$e&.6"<*#7
;le+ible (oernmen& 'oli!ies
The/ should should in!rease in!rease &heir
for food indus&r/. Hae si(ni)!an& (row&h
e+'or&s. 6S>*#?*#@9
o''or&uni&ies The/ should should !a&er &he wide wide
Ma/ mer(e wi&h o&her (lobal
ran(e of
businesses &o elimina&e
unsa&is)ed demand b/
!om'e&i&ors.
im'roin( &heir dis&ribu&ion ne&wor$s6S*#899 The/ should should ado'& aCe!&ie aCe!&ie
Hain( Ba'able of e+'andin(
mar$e&in( s&ra&e(ies for &he
in&o o&her mar$e&s of &he
'romo&ion of &heir 'rodu!&.
world
6"7*#>9
!hreats
S! Strategies
W! Strategies
Ines& more on &he dair/ 'rodu!&
Hi(h ina&ion ra&e.
line as &here is s&ill a lar(e !hun$ of &he &he mar$ mar$e& e& whi! whi!h h
re1ui e1uire re
moderniza&ion 6S?*T=9 The !o0ordina&ion !o0ordina&ion be&ween diCeren& de'ar&men&s of ,;4 should be
4ow 'ur!hasin( 'ower.
im'roed i& will lessen &he bureau!ra&i! !os& and in!rease &he e!ien!/ of &he !om'an/ . In&ro In&rodu du!e !e new new &e!hn &e!hnolo olo(/ (/ for
De!rease in 2D: (row&h ra&e.
1uali&/ assuran!e and be&&er 'rodu!&ii&/ 6S*T@9
In!reasin( in&eres& ra&es. ,n(ro De!reasin( ines&men&.
mus&
(e&
&he
!er&i)!a&ion as &o bea& &heir !om'e&i&ors 6"*T89.
Re!essionar/ 'eriod in business !/!le Bom'e&i&ion wi&h Nes&le* ,n(ro ;oods and &he new
44
IS #
en&ran&s. ,n(rofoods is !urren&l/ fa!in( are in!rease in Sales Ta+ Ta+
4
Internal Factor Evaluation Matrix
+ey Strategi*
Weights
Ratings
Fa*tors
Weighted S*ores
Strengths 'rand Image rowing Sales Market S,are "istriution
9.9/ 9.93 9.9 9.9/
4 3 3 4
9.32 9.24 9.1 9.32
,annel Product =uality a*acity Innovation ustomer riented =uali#ied ;ork
9.9) 9.9/ 9.94 9.92 9.91
3 4 3 3 3
9.21 9.32 9.12 9.9$ 9.93
#orce 7-" 'usi 'usine ness ss
9.9 9.92
4 3
9.2 9.9$
9.9$
4
9.90
1 2
9.9 9.1/
wit, wit,o out
Interest Ex*orting
!#n!ss!s
(ocal om*any entrali&ed 4$
9.9 9.90
"ecisions 5o Sales on redit redit Dig, Price >ncertain Economic
9.9$ 9.9 9.93
2 2 1
9.12 9.1 9.93
onditions Market "emand Strike Strikerr +erm rmss And
9.9 9.93
2 1
9.1 9.93
onditions Promotion
9.9
2
9.1
-
Political
#otal
4)
:
;'<=
External Factor Evaluation Matrix
+ey Strategi*
Weights
Ratings
Fa*tors
Weighted S*ores
,""ortunities 7aw
Material
9.1
4
9.4
Availaility Market
9.9/
3
9.24
a*itali&ation "iversi#ication Ex*orts Dalee 'ottle redit Policy Joint !entures
9.9) 9.9) 9.94 9.9$ 9.9$
2 3 1 2 3
9.14 9.21 9.94 9.12 9.1/
3 2 3 3 2
9.24 9.1 9.1/ 9.21 9.1
#$reats 5ew Entrants Sales +ax ,anging Season Su**liers Economic 4/
9.9/ 9.9 9.9$ 9.9) 9.9
onditions Price Sensitive
9.9$
2
9.12
Peo*le awala Milk Small +arget Market #otal
9.1 9.9 :
4 2
9.4 9.1 ;'><
40
&om"etitive Profile Matrix -&PM.
&rit &ritiical cal Suc Succe cess ss Fac Factor tors 1
8eig$t ig$t )ating
7ese 7esear arc, c, - 9.9/
Score
)ating
Score
)ating Score
3
9.24
3
9 .2 4
4
9.32
"evelo*ment Advertisement 2
9.90
3
9.24
4
9.3$
3
9.2)
3
%inancial Position
9.90
3
9.2)
3
9 .2)
3
9.2)
4
Market S,are
9.9)
2
9.14
4
9 .2 /
3
9.21
Product =uality
9.9/
3
9.24
3
9 .24
3
9.24
$
Price om*etitiveness
9.11
3
9.33
3
9 .2 4
2
9.22
)
Management
9.19
3
9.39
4
9 .4 9
3
9.39
/
l loal Ex*ansion
9.9/
3
9.24
4
9 .3 2
3
9.24
0
ustomer service
9.9$
3
9.1/
3
9 .1 /
2
9.12
19
Sales And "istriution
9.90
3
9.2)
4
9 .3 $
3
9.2)
11
5etwork Pr Production a*acity
9.9)
2
9.14
3
9 .21
4
9.2/
12
Alliances
9.9/
3
9.24
4
9 .3 2
3
9.24
Total
9
./0
1/23
4/5.
1/67
)easons
+,e I%E matrix #or A%( is given aove. 5ote t,at t,e strengt, #or t,e com*any is 7esearc, and "evelo*mentF Pakistan ased and ,aving a ,ig,est *roduction ca*acity so got 4 rating. +,e maor weaknesses are Price com*etitiveness customer service and *lanning #or t,e #uture state o# t,e A%(. +,e total weig,ted score o# 2.)$ indicates t,is large milk Production om*any is aove average in its overall internal strengt,. 'ut it
&,)E &,MPE#E1&IES % ?E2 S9&&ESS FA&#,)S +,ere are several core com*etencies o# E%( given elowG
W E%( #oods Pvt. (td ,as een ale to uild a good rand name in a numer o# years. +,ere are several consumers w,o are loyal to t,e rand and do not s,i#t to ot,er rands. 'uilding a good rand name is not easy. It takes years to uild a rand image y *roviding t,e est :uality to its consumers w,ic, Dalee %oods ,ave done. +,ey ,ave consistently delivered w,ic, *rovides a com*etitive advantage to t,e com*any o# ,aving a good name in t,e market. W E%(. Is only t,e recogni&ale #ood com*any w,ic, is doing usiness wit,out interestF w,ic, means t,at t,ey do not take loan or take advantage o# t,e interest income w,ic, t,ey can easily do? I# t,ey want loan and t,ey cannot #ind anyway out t,ey go #or Islamic %inancing like mudara and mus,arka. It is t,eir strengt, as maority o# t,e *eo*le in Pakistan are Muslims and Muslims are advised to remain away #rom interest income. W E%( ,as one o# t,e most modern *lants w,ic, ,as t,e latest tec,nology and ,as a ,ig, *roduction ca*acity. +,ey *roduce /9F999 liters o# milk in a day w,ic, is not a small amount o# 1
milk. +,ey ,ave an advantage o# ,ig,er *roduction as *eo*le are demanding more and more *acked milk so t,ey can meet t,e increasing demand easily. D%( ,as one o# t,e most extensive distriution networks across t,e nation. It ,as one o# t,e est distriutions i# we com*are it wit, ot,er maor *layers like nestle and all ecause E%( ,as over $99 distriutors across Pakistan w,ic, enales t,em to deliver t,eir *roducts into #ar o# small towns as well as villages. It is t,eir maor strengt, w,ic, is driving t,eir revenues very :uickly.
?ey success factors )esearc$ % Develo"ment W %inancial Position W Market S,are W Product =uality W Price om*etitiveness W Management W loal Ex*ansion W ustomer service W 5etwork Sales S ales And "istriution W Production a*acity W Alliances
&,MPE#I#IVE A1A!2SIS A1A!2SIS +,e strategic *riorities o# 5estle Pakistan are claimed to e #ocused on delivering s,are,older value t,roug, t,e ac,ievement o# sustainaleF ca*ital e##icient and *ro#itale long8term growt,. Im*rovements in *ro#itaility would e ac,ieved wit, due res*ect to :uality and sa#ety standards at all times. 2
In line wit, t,e aove oectiveF 5estle Pakistan aims at growing into a numer one #ood com*any in Pakistan in t,e s,ortest *ossile time wit, t,e uni:ue aility to meet t,e needs o# consumers o# every age grou* 8 #rom in#ancy to old ageF #or nutrition and *leasureF t,roug, develo*ment o# a large variety o# #ood categories c ategories o# *roducts wit, ,ig,est :uality. 5estle Pakistan envisions t,at t,e com*any s,ould develo* an extremely motivated and *ro#essionally trained work #orceF w,ic, would wo uld drive growt, t,roug, innovation and renovation. S*ecial training *rograms ,ave een designed #or em*loyees at eac, level to kee* u* wit, and develo* t,is vision. +,e study concludes t,at 5estle ,as a signi#icantly ,ig, growt, rate @3$H and ,as grown and develo*ed at a ,ig, *ace in s,ort s*an o# time. n t,e ot,er ,and Dalee ,as a market s,are o# 2/H. And Engro#oods ,aving 21H t,e maor contriutor toward t,is growt, and develo*ment are ,uman resourceF marketing and sales de*artments. +,e maor contriutor is its a**ro*riate strategy *articularly its relations,i* wit, t,e social and environmental sectors. Per,a*s t,is is t,e reason t,at it in s*ite o# eing a multi8national ,as een well acce*ted in Pakistani culture. +,ere are am*le c,ances o# its survival in #uture. W Bee*ing new *layers suc, as l*er
3
SPA&E SPA&E MA#)I/ MA#)I/ S#)A#E+I& S#)A#E+I& MA1A+EME1# ME#(,D ME# (,D +,e SPA&E matrix is a management tool used to analy&e a com*any. It is used to determine w,at w,at ty*e ty*e o# a stra strate tegy gy a com*an com*any y s,oul s,ould d under underta take. ke. +,e Strategi Strategicc Position Position % Action Action Evaluat Evaluation ion matrix matrix or s,ort a SPAE matrix is a strategic management tool t,at #ocuses on
strategy #ormulation es*ecially as related to t,e com*etitive *osition o# an organi&ation. +,e SPA SPAE matrix matrix can e used used as a asis asis #or ot,er analyses analysesFF suc, suc, as t,e S8,# analysisF &+ matri ma trix x modelF industry analysisF or assessing strategic alternatives @ IE matrix.+,e SPAE
matrix calculates t,e im*ortance o# eac, o# o # t,ese dimensions and *laces t,em on a artesian gra*, wit, C and 6 coordinates.
The followin( are a few few model &e!hni!al assum'&ionsassum'&ions8 'y de#initionF t,e A and IS values in t,e SPAE matrix are *lotted on t,e C axis. 8A values can range #rom 81 to 8$. 8 IS values can take Q1 to Q$? 8+,e %S and ES dimensions d imensions o# t,e model are *lotted on t,e 6 axis. 8 ES values can e etween 81 and 8$. 8 %S values range #rom Q1 to Q$.
4
Engro Foods factors for SPA&E MA#)I/
$
)esult +,is *articular SPAE matrix tells us t,at our com*any s,ould *ursue an #**r!ssi)! str#t!*(. ur com*any ,as a strong strong com*etitive com*etitive *osition it t,e market market wit, ra*id growt,. growt,. It needs to use its internal strengt,s to develo* a market *enetration and market develo*ment strategy. +,is can include *roduct develo*mentF integration wit, ot,er com*aniesF ac:uisition o# com*etitorsF and so on.
&+ Matrix Model +,e &+ matrix or also called ' model relates to marketing. +,e ' model is a well8 known *ort#olio management tool used in *roduct li#e cycle t,eory. ' matrix is o#ten used to *rioriti&e w,ic, *roducts wit,in com*any *roduct mix get more #unding and attention. +,e B5 m#tri$ model is a "ortfolio "l#nnin* model develo*ed y 'ruce Denderson o# t,e 'oston onsulting rou* in t,e early 10)9Rs. +,e ' model is ased on classi#ication o# *roducts @and im*licitly also com*any usiness units into #our categories ased on cominations o# m#r!t *rowt and m#r!t s#r! relative to t,e largest com*etitor.
)
Percent Division #l'er3s #lwell
)evenues
)evenues
Percent Profits
Profits
Percent
Percent
Market
+rowt$
Value
)ate
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Division wise data for Engro foods &+ Matrix
0
Internal External -IE.Matrix +,e Interna anot,er strate strategic gic managem management ent tool tool used used to analy& analy&ee Internal5Ex l5Extern ternal al -IE. matrix is anot,er working conditions and strategic *osition o# a usiness. +,e nt!rn#l $t!rn#l M#tri$ or s,ort IE matrix is ased on an analysis o# internal and external usiness #actors w,ic, are comined into one suggestive model. +,e IE matrix is a continuation o# t,e E%E matrix and I%E matrix models
1. Score #rom t,e EFE matrix 82.)8 t,is score is *lotted on t,e y8axis 2. Score #rom t,e IFE matrix 82./38 *lotted on t,e x8axis $9
As lue lines indicate
)esult +,is IE matrix #or Engro %oods tells us t,at our com*any s,ould old #nd m#int#in its *osition. +,e com*any s,ould *ursue strategies #ocused on increasing market *enetration and *roduct develo*ment
+rand Strategy Matrix for Engro foods
$1
)esults +,e grand strategic Matrix #or E%( is s,ow t,at it lies in t,e #irst :uadrant w,ic, recommend t,at #or E%( continued concentration on t,e current Market @market *enetration and market develo*mentand *roducts@*roduct develo*mentis an a**ro*riate strategy.
$2
@uantitative Strategic Planning Matrix or a @SPM +,e =uantitative =uantitative Strategic Strategic Planning Planning Matrix Matrix or a @SPM a**roac, attem*ts to oectively select t,e est strategy using in*ut #rom ot,er management tec,ni:ues and some easy com*utations. In ot,er wordsF t,e =SPM met,od uses in*uts #rom stage 1 analysesF matc,es t,em wit, results #rom stage 2 analysesF and t,en decides d ecides oectively among alternative strategies. Stage 1 strategic management tools... +,e #irst ste* in t,e overall strategic management analysis is used to identi#y key strategic #actors. +,is can e done usingF #or exam*leF t,e E%E matrix and I%E matrix. Stage 2 strategic management tools... A#ter we identi#y and analy&e key strategic #actors as in*uts #or =SPMF we can #ormulate t,e ty*e o# t,e strategy we would like to *ursue. +,is can e done using t,e stage 2 strategic
management toolsF #or exam*le t,e S;+ analysis @or +;SF SPAE matrix analysisF ' matrix modelF or t,e IE matrix model. Stage 3 strategic management tools... +,e stage 1 strategic management met,ods *rovided us wit, key strategic #actors. 'ased on t,eir analysisF we #ormulated *ossile strategies in stage 2. 5owF t,e task is to com*are in =SPM alternative strategies and decide w,ic, one is t,e most suitale #or our goals.
+,e stage stage 2 strate strategic gic tools tools *rovid *rovidee t,e needed needed in#orm in#ormati ation on #or settin setting g u* t,e =uanti =uantitat tative ive Strate Strategic gic Planni Planning ng Matrix Matrix 8 =SPM. =SPM. +,e =SPM =SPM met,od met,od allows allows us to evaluat evaluatee altern alternati ative ve strategies oectively. once*tuallyF t,e =SPM in stage 3 determines t,e relative attractiveness o# various strategies ased on t,e extent to w,ic, key external and internal critical success #actors are ca*ita ca*itali li&ed &ed u*on or im*rov im*roved. ed. +,e relati relative ve attrac attracti tivene veness ss o# eac, eac, strate strategy gy is com*ut com*uted ed y determining t,e cumulative im*act o# eac, external ex ternal and internal critical success #actor. $3
@SPM ,F Engro Foods 'ase 'ased d on stra strate tegi gies es in t,e t,e stag stagee 1 @I%E @I%EFF E%E E%E and and stag stagee 2 @' @'FF SPA SPAEF EF IEF IEF com*an com*any y exec execut utiv ives es dete determ rmin ined ed t,at t,at En Engr gro# o#oo oods ds needs needs to *urs *ursue ue an aggr aimed d at aggress essi(e i(e strate strategy gy aime develo*ment o# new *roducts and #urt,er *enetration o# t,e market. +,ey also identi#ied t,at t,is strategy can e executed in two ways. ne strategy is #&+uirin* # &om"!tin* &om"#n(. +,e ot,er strategy is to !$"#nd int!rn#ll(. +,ey are now asking w,ic, o*tion is t,e etter one. @Attractiveness Score 1 X not acce*taleG 2 X *ossily acce*taleG 3 X *roaly acce*taleG 4 X most acce*taleG 9 X not relevant
$4
$
"oing some easy calculations in t,e =uantitative Strategic Planning Matrix =SPMF we came to a conclusion t,at Ex*ansion internally a is a etter o*tion. +,is is given y t,e Sum -ot#l Attr#&ti)!n!ss S&or! #igure. +,e ex*ansion strategy yields ,ig,er score t,an t,e ac:uiring o#
com*eting com*any. +,e ac:uisition strategy ,as a score o# 2.) in t,e =SPM s,own aove w,ereas t,e internal ex*ansion strategy ,as a smaller score o# 2.)/
FI1A1&IA! )A#I, A1A!2SIS
!i7uidity )atios
$$
Remarks
+,is ratio indicates to w,at extent cas, on ,and and dis*osale assets are enoug, to *ay o## s,ort term liailities. A current ratio o# assets to liailities o# 21 is usually considered to e acce*tale. Acce*tale current ratios vary #rom industry to industry. I# a com*anyRs current assets are in t,is rangeF t,en it is generally considered to ,ave good s,ort8term
#inancial strengt,. I# current liailities exceed current assets @t,e current ratio is elow 1F t,en t,e com*any may ,ave *rolems meeting its s,ort8term oligations. I# t,e current ratio is too ,ig,F
t,en t,e com*any may not e e##iciently using its current assets. In t,e t,e case case o# En Engr gro# o#ood oodss current ratio ,as increase #rom year 299/ to 2990 w,ic, indicates t,at it ,as im*roved to *ay s,ort term oligations as com*ared to t,e last year.
!everage )atios
$)
Remarks
+,e "et to Asset 7atio takes into account all dets o# all maturities to all creditors. A value o# less t,an 1 in t,is ratio means t,at t,e com*any could not cover all o# its det y selling all o# its assets. Engro#oods assets are mainly #inanced y outsiders or dets. +,is
ratio measures t,e *ercentage o# total #unds *rovided y creditors versus y owner . (ook #or a det to e:uity ratio in t,e range o# 11 to 41. "et8E:uity ratio indicates
t,atca*ital structure o# Engro#oods is mainly ased on det #inancing. +,is ratio #or Engro#oods is s,owing t,at out o# total #unds availale #or long termF maor *ortion is e:uity. e:uity. As com*ared com*ared to t,e last year t,e com*any
Activity )atios
Remarks It s,ows t,at in ,ow many days com*any sold t,e entire inventory. +,e ,ig,er t,e ratio t,e more is inventory eing managed e##iciently. 'ecause inventories are t,e least li:uid #orm o# assetF a $/
,ig, ratio is generally *ositive. +,is ratio measures ,ow *roductively t,e #irm is managing its #ixed assets to generate sales. %or every "ollar in Assets ,ow muc, sale we ,ave generated. Dig,er t,e ratio greater will e t,e resource utili&ations. It indicates t,at ,ow e##ectively Engro#oods is utili&ing its resources. +,is gives indication o# ,ow #ast we can sell *roduct. So we will see ,ow #ast we collect on t,ose sales. Engro#oods receivale turnover is im*roving. +,ere#ore on average Engro#oods collection *eriod is decreasingF so its recovery *er#ormance is im*roving im*roving day y day.
Profita*ility )atios
$0
Remarks
+,is ratio indicates t,e amount o# income t,at t,e com*any earns on eac, 7S o# sales. +,e gross *ro#it margin is related to t,e net *ro#it net *ro#it marginF marginF w,ic, assesses t,e *ro#itaility * ro#itaility o# an organi&ation a#ter including #ixed costs+,e trend in t,is ratio #rom mont, to mont, can s,ow ,ow well t,e com*any is managing t,eir o*erating or over,ead costs. +,e margin ,as not c,anged in t,e current year w,ic, s,ows t,at t,e com*any
,ig,er t,e ratio t,ere will e ,ig,er earning and dividend #or stock,olders. 7A measures *ro#it *er ru*ees o# assets. ;e can com*are t,is rate to t,e interest rate t,at t,e com*any *ays to orrow #unds. I# t,e return on assets is aove t,e orrowing
rateF t,e com*any is *ro#itale. 7E measures *ro#it *er ru*ees o# e:uity. +,is ratio indicates w,at return t,e com*any is generating genera ting on t,e dollars invested invested y its owner owners. s. Dig, values #or t,is ratio indic indicate ate t,at t,e com*any is less likely to re:uire det or additional e:uity investments. Engro#oods
return on e:uity is declining. +,is ratio s,ows t,e amount o# earning *er s,are and a com*any wit, earning *er s,are. +,is ratio indicates t,at t,e com*any wit, ,ig, earning *er s,are will e in a *osition to declare t,e ,ig, dividend. +,is ratio ,as im*roved t,is year.
Ac$ievements l*er
In a s&a&emen& issued here* &he mar$e&in( dire!&or of ,n(ro ;oods 4&d* Ali A$bar said* "e beliee we hae se& an all &ime re!ord as far as sales of a new mil$ brand are !on!erned and in a er/ shor& &ime #l'erLs has o'ened in oer =F &owns in :a$is&an* be!omin( a na&ional brand. )9
This is all the more remarkable since we entered a market with very strong existing players and our success has come primarily because the people of Pakistan clearly felt Olper's to be a higher quality product * * ,e added. added. l*erRs Milk is *roduced *roduced at t,e com*anyRs com*anyRs modern modern *roduction *roduction #acility #acility in Sukkur and goes t,roug, several stringent stringent :uality c,ecks starting starting #rom t,e milk milk collection collection *ointsF e#ore it reac,es t,e consumers. De saidF t,e demand #or l*erRs ,as come not only #rom #irst time users o# *ackaged milk ut also #rom users o# ot,er rands w,o ,ave s,i#ted to t,e l*erRs rand owing to its taste and :uality *ro*osition and its convenient Availaility all over t,e country. De saidF t,e com*any is now in t,e *rocess o# setting u* anot,er *roduction *lant in t,e central Puna region. Engro %oods ,ad also launc,ed l*erRs ream in Se*temer t,is year and is now *oised to #urt,er ex*and.
Engro Foods ex"ansion on a *igger scale Engro %oods (imited w,o ,ad recently set u* "airy industry in entral Sind, @>D+ Milk *lant y investing aout aou t 7s one illionF #urt,er *lans to set u* a similar set u* in entral Puna and also emerging as %ood iant #irstly on 5ational (evel and secondly as world class International %ood iant y adding a large numer o# ot,er #ood *roducts t,roug, investment o# O299 million *lusF *roaly envying to emerge as an international #ood com*any on similar lines as 5ES+(E did. +,e com*any *lans ex*orting its *roducts to central Asia Asia and Middle East.
Dairy science and #ec$nology in Pakistan "evelo*ment "evelo*ment and im*lementa im*lementation tion o# milk standards standards is also essential essential to de#ine milk milk *rice ased on :uality. "airy science and tec,nology education universities also need to su**ort industry in dairy dairy reedi reedingF ngF nutrit nutrition ionFF indust industria riall managem management ent and *roduct *roduct :uality :uality.. Presen Presently tly no under8 under8 graduate *rogram is availale in t,e country to su**ort t,is sector. PresentlyF Pakistan ,as only a )1
#ew sc,olars in *rime *rinci*les o# dairy science including animal reeding and geneticsF dairy nutritionF dairy managementF and dairy tec,nology to su**ort and develo* dairy industry. It is esse essent ntia iall eca ecaus usee t,e t,e e&er e&erina inaria rian n !ould !ould onl/ onl/ 'roi 'roide de su''or su''or&& &o &he animal animal
indus&r/ deelo'ed on &he animal 'rodu!&ion s!ien!e 'rin!i'les. Animal or dair dair/ / 'rod 'rodu! u!&i &ion on s! s!ie ien! n!e e is al&o al&o(e (e&h &her er a diCe diCerren& en& su subj bje! e!&& &han &han &ha& &ha& of e&eri e&erinar nar/ / edu!a& edu!a&ion ion.. In !on!lu !on!lusio sion* n* deelo deelo'me 'men& n& of dair/ dair/ !oo'er !oo'era&e a&es* s* res&ru!&urin( of e+&ension resear!h and edu!a&ional ins&i&u&ions !ould 'er$ u' rura rurall orie orien& n&ed ed dair dair/ / se!& se!&or or &o mar$ mar$e& e& orie orien& n&ed ed dair dair/ / indus& indus&r/ r/ &ha& &ha& (uaran&eed food se!uri&/ so!ial and e!onomi! (row&h in :a$is&an.
S9++ES#I,1S A1D )E&,MME1DA# )E&, MME1DA#I,1S I,1S %ollowing are t,e suggestions and recommendations #or E%(.
+,e co8ordination etween di##erent de*artments o# E%( s,ould e im*roved it will
lessen t,e ureaucratic cost and increase t,e e##iciency o# t,e com*any. +,e activities like customer satis#action day s,ould e *er#ormed on regular asis so t,e com*any s,ould know t,e #eedack and satis#action level o# customers regarding t,e
*roduct and t,e image o# t,e com*any. +,e s,o s,o*ke *kee*er e*er com*lai com*lains ns t,at t,at E%( is not *rovid *roviding ing re*lac re*laceme ement nt #or t,e ex*ired ex*ired *roductsF E%( s,ould *rovide *ro*er re*lacement to t,e s,o*kee*er to en,ance t,e image
o# t,e com*anyF and create etter working relations wit, suc, an im*ortant stake,olders. E%( ,as s,i#ted to randing conce*t ut it really ,as not ado*ted it #ullyF #or smoot,er working o# t,e di##erent randsF t,e sales teams s,ould merged wit, res*ective rand
management. There is no !he!$ on &he 'erforman!e of &he dis&ribu&or* and &his has
led &o hu(e 'roblems in &he delier/ of man/ 'rodu!&s in some areas of
&he !i&/ The/ should also s&ar& &o manufa!&ure manufa!&ure 'owder mil$ in order order &o mee& &he domes&i! demand and so &ha& i& !an be hel'ful in sain( &he forei(n
)2
e+!han(e &ha& is e+'ensed in im'or&in &he 'owder mil$ from forei(n
!oun&ries. The !om'an/ should e+'lore e+'lore &he mar$e& 'o&en&ial in a wa/* so &ha& i& !an u&ilize i&s full !a'a!i&/ in order &o (ain e!onomies of s!ale in &he
'rodu!&ion. A& &he momen& &he !om'an/ is usin( fo!us mar$e&in( a''roa!h &ha& onl/ onl/ &ha& &ha& se(m se(men en&& is a''r a''roa oa!h !hed ed whi! whi!h h hi(h hi(hl/ l/ a&&r a&&ra! a!&i &ie e for for &he &he !om' !om'an an/ / bu& bu& i& sh shou ould ld also also dee deelo lo' ' &he &he mar$ mar$e& e&in in( ( 'ro( 'ro(ra ram m &ha& &ha& dis&in(uis dis&in(uishes hes &he !hara!&er !hara!&eris&i is&i!s !s of e+is&in( e+is&in( aailable aailable subs&i&u&es subs&i&u&es &o
&heir hi(hl/ 1uali&/ 5 h/(iene orien&ed 'rodu!&. The !om'an/ should also deelo' an in&e(ra&ed awareness 'lan in orde orderr &o awar aware e &he &he 'eo' 'eo'le le abou abou&& &he &he 1ual 1uali& i&/ / of &he &he UHT UHT mil$ mil$ as !om'ared &o o&her 'as&eurized or loosefresh loosefresh mil$.
) EFE)E1&ES EFE)E1&ES :' Strategic Management conce"t and cases *y F)ED ) DAVID :;t$ edition' ;' Marketing Management *y ?otler ::t$ Edition' =' $tt"BBwww'maxi5"edia'com C' www'ol"ers'com'"k 6' www'engrofood'com'"k ' www'engroc$emicals'com >' www'Engrowe* searc$marketing5sales'as"x'$tm <' www'Engrowe* searc$a*out5us'as"x'$tm ' www'google'com :G' www'wiki"edia'com
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