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Condemn us not
If we forget or fall
Into error; our Lord!
Lay not on us a burden
Like that which Thou
Didst lay on those before us;
Our Lord! Lay not on us
A burden greater than we
Have strength to bear.
Blot out our sins,
And grant us forgiveness.
Have mercy on us
Thou art our Protector;
Help us against those
Who stand against Faith”
(Surah-e-Bakarah 286)
Recommended Proverb
SUBMITTED TO:
SUBMITTED BY:
ZEESHAN SAEED ROLL NO.17
ADEELA AKHLAQ ROLL NO.48
MADEHA NAZZ ROLL NO.33
MSC 3rd SEMESTER AFTERNOON
THE ISLAMIA UNIVERSITY OF
BAHAWALPUR PAKISTAN
PREFACE
It is stated that the students of Department of Commerce presently in MSC 3rd has given a
project on “POTATO CHIPS MANUFACTHURING UNIT”. Department of
Commerce is being aware of the importance of practical training, requires every Msc
student to make a project Assignment. We have visit a local chips manufacturing unit in
Lahore City. We have tried our best to collect the knowledge and information. It has
broadened our knowledge and vision about the market. This Report is the Explanation of
all work done by project Team.
Up and above everything, we are thankful to ALMIGHTY ALLAH, the most Beneficent
and merciful, and His Holy Prophet (Peace be upon him) Who is forever a true torch of
guidance for whole humanity. We are greatly obliged to “ALLAH” by Whom grace we
have been able to complete this Project Report successfully.
We want to pay our thanks to Honorable Mr. Javaid Iqbal for providing us a chance to
work in such a Profitable Industrial Project. We also pay our thanks to loving Parents for
being supported us financially and mentally to complete our work
EXECUTIVE SUMMARY
Project Assignment:
Each student of MSC 3rd semester required to prepare a sold
Project Assignment. The Project assignment is given to Increase our knowledge about
“Project Management”.
Objectives:
Approach to Project:
The Team of project will, analyze, summarize, and interpret the data which is collected
different primary and secondary sources.
Data Collection:
Both primary and secondary means of data will be used to collect the Data. Like Books,
internet, personal visits, teacher guidance etc.
Market Analysis:
Introduction To Chips Industry:
Third world countries are very habitual to adopt the western culture therefore; Pakistan is
also in line with those countries. Big potential do exist for investment in this industry in
Pakistan as the Demand or growth rate is very high. Annual Growth Rate of snacks
industry is estimated at the rate of 20% to 30% per annum.
Children, teenagers and young people are the target market of the product and we have
the experience that the eating habits of the target market is rapidly changing and they like
to have snacks all the time. Future Potato and corn snacks are labeled as a meal
replacement and being a light fast food is becoming popular.
Another plus point for the investment in this industry is that the life style is improving
and going to be changed and also because of satellite invasion the demand is bound to
register a considerable boost.
According to the industry findings carried out the market mix in respect of the potato
chips is as follows:
Market Mix:
Age Group (Years) Market Mix
5 – 10 30 %
11 – 20 35 %
21 – 35 20 %
36 – above 15 %
The demand of the present market is met by the mix of Branded and Unbranded Chips
available in the Market. There is 60% of the population which is Brand Loyal. However
remaining 40% of the Un-branded Market can be attracted through heavy Advertisement
Campaign. The analysis is as follows:
Supplier Market
Branded 60 %
Unbranded 40 %
Market
70%
60%
Market share%
50%
40%
Market
30%
20%
10%
0%
Branded Unbranded
Brand Type
Leading Exporting Countries of Potato Chips in the World:
Export prospects for the next decade are very promising given the sustained and
continued expansion of the Fast Food Industry abroad. Further Tariff cuts under Trade
Agreements are anticipated. Low per Capita consumption of Fries in the overseas market
is a strong indication of future demand.
United States of America is a major exporting country of the Potato Chips in the World.
Supply Quantity Analysis:
Presently, Triple Em which produces major share that is about 58.33 % and is a market
leader. Good potential exists for a new brand to compete and fetch a market share
provided that:
• Having good quality of product
• Unique Packing
• A market Network
• Industry Understanding
• Financial Soundness
• Feed back of Information
• preferring the taste of the Market
Target Customers:
Children, teenagers and young people are the target market of the Potato Chips Line.
Home, rather than school, is the most popular destination for eating crisps and savory
snacks, with seven in ten children (70%) consuming them at home, against around half
(48%) who eat such snacks at school, After school, when children tend to choose their
own snacks, 70% select crisps and savory snacks compared to lunchboxes, which
mothers generally pack, where the most popular item is a savory sandwich or roll. Some
44% of consumers prefer to buy children’s snacks in multitasks while nearly half of all
consumers say they are price motivated in their snack purchasing.
SWOT Analysis:
Before making the decision, whether to invest in the Potato Chips Manufacturing or not,
one should carefully analyze the associated risk factors. A SWOT analysis can help in
analyzing these factors, which can play important role in making the decision.
Strengths:
• Strict controls over the Labor efficiency need to be observed to reduce the
Waste Production at the minimum level.
• Expected loss at the initial stages of the operation as a result of Sales return from
the distributors.
• In -experienced Technical Staff as compared to the Units currently in Operation.
• Low trade margin
• Strict discount policies
• No prize scheme for available for retailers and distributors
Opportunities:
Various Products and Services have high dependence on their commercialization timing
and delivery to the Customers but the Chips Manufacturing Unit can be started at any
time during the year due to the availability of Raw Material (Fresh Potatoes) throughout
the year.
Proposed Business Legal Status:
The said project can be a proprietorship or a partnership and even it can be registered
under the Companies Ordinance, 1984 with the Securities & Exchange Commission of
Pakistan. The selection totally depends upon the choice of the Entrepreneur. we selected
the proprietorship.
Pakistan is a large Potato producing Country yet it has very limited and adequate Storage
and Processing facilities. Due to the lack of adequate Storage facilities a substantial
proportion of Production is wasted. The combination of inadequate Storage facilities and
an under-developed Processing Industry leads to volatility in prices as not all excess
production can be Stored or Processed for consumption during the Off season. The
following Analysis will illustrate the current state of the Potato production in Pakistan
along with the potential that exists in both Farming and Processing of Potatoes.
Potato is grown in Pakistan on about 111,000 Hectares distributed over eight different
Agro-ecological Zones. About 70 - 80% of the production is concentrated in the Irrigated
Plains of the Central Punjab and Southeast North West Frontier Province (NWFP). There
are three seasons of Potato cultivation, Autumn, Spring and Summer.
20% of above Production Quantity is wasted against Post Harvest Loses primarily due to
improper handling and lack of proper Cold Storage facilities. Potatoes are improperly
stored at Temperatures negative 3-4 Celsius mainly for seed storage purpose. These
temperatures are maintained only to avoid sprouting since no humidity levels are
administered, which is a vital factor for proper storage of Potatoes for Table
Consumption and Processing. About 5% of Total Potato Production is being exported.
About 18% of the Production is stored for Potato Seeds.
Pakistan produces three Potato Crops per year. The major produce of the Potato Crop is
harvested in the autumn season.
Crop Seasons:
Diamante Oval Light Yellow Mealy Firm + French Fries Just Resistible
Cardinal Oval Light Yellow Mealy Firm + French Fries Quite Resistible
Desiree Long Oval Light Yellow Mealy Firm + French Fries Just Resistible
In the absence of adequate Storage facilities, at the time of harvest, there is a huge supply
of potatoes, which drives prices down. If Storage facilities are available price volatility
could be stabilized through consistent supply year around. The following Graph shows
prices begin to fall as Harvesting begins, which is January and continue to fall to the
lowest level until April after which they begin to rise again.
Sector Characteristics:
Potato and Other Corn Products are considered a part of Snack Food Industry. Although,
the concept of snacks particularly packed Snacks Meals is not old in Pakistan. Infact
these products consumption is a result of adoption to Western Culture and eating habits.
A research made in U.K and published by DATA MONITOR is an example of the
growth in the Snack Food Industry. The figures in this survey stood at £ 816.7 million in
1996 compared to £ 481.2 Millions in 1995 with break up as follows:
Description £ (Millions)
Chips 618.50
Snacks 148.20
Pop Corns 50.00
Total 816.70
£ (Millions)
900
Chips industry Graph
800
700
600
500
£ (Millions)
400
300
200
100
0
Chips Snacks Pop Total
Corns
Market share in Million
Market Research, Trend & Analysis:
Sales of crisps and snacks increased by 10.1% between 2000 and 2003 to peak at £2,386
million. A decline of 3.5% in 2004, however, took retail sales to £2,303 million. The key
factor currently impacting on the Crisps and Savory Snacks market is public
consideration towards health issues. The Crisps sector accounts for just over 56% of total
Crisps and Savory Snack Sales. Within the Crisps sector, sales of added value/premium
Crisps saw their share of sales increase from 20% in 2000 to 26% in 2004.4 In addition to
the local Market, Gulf and Central Asia are yet to be explored. It is estimated that 2,500
Tons of Chips can be exported to these countries if proper efforts are being made.
Technical Analysis
Production Process:
PRODUCTION PROCESS:
STEAM WASHING
FRYING
PACKING FLAVORING
TYPES OF PRODUCT
LUXURY
Level And Type Of Competition:
Their competition strategies are based on the competitor’s strategies. They don’t follow
the price war competitive strategy. They follow the standard of product and quality in
competition. Their competition type is oligopoly.
Competitors:
One can’t imagine about a business without competition. My choice potato chips Pvt
limited has also some competitor’s major threats to My choice potato chips are Lays,
Pringles, Kalson and Supper chips which has almost 45% of the market share. But as
quality of the product play an important role that is not up to the standard by the
competitors. So My choice is outstanding in all ways to the competitors like quality,
quality and price of the product and etc.
Following competitor’s product is being sold in the market but their product availability
is not that good. The only reason for their presence is the credit facility and margins
• Lays
• Nirrala
• Smith
• Bunny
• Sadiq dry fruits
• Sherry
• Pace
• Golden
• Pak food
• Supper chips
Competitors:
• Triple EM 45%
• Lays 15%
• Kalson 15%
• Golden 8%
• Smith 5%
• Others 12%
INDRODUCTION OF PRODUCT
TYPES OF PRODUCT
LUXURY
A-SWOT Analysis
B-Company profile
• 1-Name……………………………………………
• 2-Mission statement……………………………….
• 3-Scope of company………………………………..
• 4-Vision of company………………………………
• 5-Head office………………………………………
• 6-Branches………………………………………..
• 7-Location………………………………………..
• 8-Contact…………………………………………
• 9-Site……………………………………………..
• 10-Product……………………………………….
• 11-Board of directors……………………………
• 12-Banks……………………………………….
• 13- Certificates…………………………………
• 14-Estimated Statements……………………..
Cost and means of finance
Assumptions of project
Income statement
Profit & loss Account
Financial Analysis
Balance sheet
A-SWOT ANALYSIS
Strengths:
• Highly Technical Process of Production.
• Company is equipped with the New Technology.
• Economics of Scale.
• Registered as private. Company.
• Good Quality Products.
• Skilled Labour
• Good Management
Weaknesses:
• Company never compromise on the Quality aspects.
• Company has a fixed rate to sell product.
• Strict controls over the Labor efficiency need to be observed to reduce the Waste
Production at the minimum level.
• Expected loss at the initial stages of the operation as a result of Sales return from
the distributors.
Opportunities:
• Changes in the current eating habits of the People.
• Attraction amongst the Younger consumers to products identified with
Western Lifestyles and Tastes and general trend towards more Snacking
• Low per Capita consumption of Fries in overseas market is a strong indication
of future demand.
Threats:
o The political Conditions
o Monopoly of Multinationals currently in the business of Potato Chips
manufacturing.
Mission Statement:
“To be the best chips manufacture in the chips industry and all over the world”
Scope of company:
“To deals in a number of flavored snacks”
Vision of company:
“Best quality producer and exporter all over the world”
Head office:
“P.O. BOX. 1245 Small-Industries Bahawalpur”
Branches:
Rahim yar khan “ P.O.Box. 845 Defense Road Rahim yar khan”
Location:
“Bahawalpur Pakistan”
Site
“Small Industries”
Products:
Salted Snacks
Board of directors:
Zeeshan Saeed(chair person)
Adeela Akhlaq
Madeha Nazz
Banks:
HBL
MCB
Certificate:
Multan chamber of commerce
• Small- Industries Bahawalpur
My choice potato chips almost use all the Medias for advertisement and promotions of
their consumer products. The main advertising and promotional Medias used by the
packages are as under:
Different kinds of taxes are imposed by the Govt on different things. These taxes effect
the pricing of these goods and services. Supper chips being a product has to pay 15% a
Govt sales tax which is taken directly to the customers. These taxes are include in the
price of the product and different promotional offers of supper crisps. Other than this is a
deduction of 35% of net income is made as a tax deduction on income of the company
Problems:
Personal Analysis:
Requirement Of Staff:
axbx12
Factory staff(including managerial, Technical, Skilled and Un- Skilled)
Type Of Staff Nos Per Month Per year
Plant Manager 1 30000 360000
Supervisor 3 14000 504000
Shift in charge 3 10000 360000
Machine operator 3 8000 288000
Security guard 2 5000 120000
Driver 2 5000 120000
Sweeper 1 3000 36000
Total 1788000
Add fringe benefit 50% 894000
Total Salary of Factory Staff 2682000
Financial Analysis:
Office Equipment
Item Cost/ item Total
Office Computer 3 10000 30000
Office Printer 2 5000 10000
Computer table and Chair 3 5000 15000
Office table and Telephone 2 3000 6000
Total 61000
Income Statement
Sales 336375000 399625000 428375000
Cost of Goods sold:
Raw Material 138739500 149681000 149781000
Labour 2682000 2950200 3245220
Manufacturing Expenses 1416000 1486800 1561140
Depreciation 2987700 2987700 2987700
Cost of Goods sold: 145825200 157105700 157575060
Gross Profit 190549800 242519300 270799940
Operating Expenses:
General and Admin expenses 1026000 1128600 1241460
Selling expenses 702000 772200 849420
Total Operating expenses 1728000 1900800 2090880
Operating Profit 188821800 240618500 268709060
Non Operating Expenses
1,675,91 5,731,26 4,372,11
Financial expenses 7 7 7
Amortization of production expenses 385000 385000 385000
5,374,18
Workers welfare fund 2% 3776436 4812370 1
5,837,35 10,928,63 10,131,29
Total operating Expenses 3 7 8
182,984,44 229,689,86 258,577,76
Profit before Tax 7 3 2
73,193,77 91,875,94 103,431,10
less tax 40% 9 5 5
109,790,66 137,813,91 155,146,65
Net Profit after tax 8 8 7
Ratios: % % %
Gross Profit Margin: 57 61 63
Net Profit Margin: 33 34 36
axbx12
Factory staff(including managerial, Technical, Skilled and Un- Skilled)
Per
Type Of Staff Nos Month Per year
Plant Manager 1 30000 360000
Supervisor 3 14000 504000
Shift in charge 3 10000 360000
Machine operator 3 8000 288000
Security guard 2 5000 120000
Driver 2 5000 120000
Sweeper 1 3000 36000
Total 1788000
Add fringe benefit 50% 894000
Total Salary of Factory Staff 2682000
Depreciation Expenses:
1st 2nd 3rd
Building 4934000 5% 246700 246700 246700
Machinery 15500000 10% 1550000 1550000 1550000
Vehicle 11600000 10% 1160000 1160000 1160000
Furniture 166000 15% 24900 24900 24900
Office Equipment 61000 10% 6100 6100 6100
Total 2987700 2987700 2987700
Manufacturing Expenses:
65% 70% 75%
Electricity 400000 420000 441000
Generator 500000 525000 551250
Maintance Expenses 300000 315000 330750
Carriage in 8000 96000 100800 105840
Carriage out 10000 120000 126000 132300
Total 1416000 1486800 1561140
Sales:
Sales Revenue:
Export of salted snakes 80 128700000 152900000 163900000
Export of salt free snakes 60 140400000 166800000 178800000
Export rebate 25% 67275000 79925000 85675000
Total Sales 336375000 399625000 428375000
Cost OF Production:
Potatoes 2438000
Frying oils 1695000
Financial Charges:
Name of Bank The Bank Of Punjab
39,000,00
Amount of loan 0
Rate Of Interest 17% per Annual
Period Of Loan 5 Years 360
Repayment of Interest Quarterly Installment
Repayment of Installment Half Yearly
Date of Disbursement of Loan 3/31/2010
Completion of the Project 31/12/2010
Date of Commercial Production 31/3/2011
Date of Repayment of principle 30/6/2011 6 Installment
No of Principle Amount Total Outstanding
Due Dates Days Installment of Interest Installment Principle
3/31/2010 0 0 0 39,000,00
0
9 1,675,91 1,675,91 39,000,00
6/30/2010 1 0 7 7 0
9 1,694,33 1,694,33 39,000,00
9/30/2010 2 0 3 3 0
9 1,694,33 1,694,33 39,000,00
12/31/2010 2 0 3 3 0
9 1,657,50 1,657,50 39,000,00
3/31/2011 0 0 0 0 0
9 3,900,00 1,675,91 5,575,91 35,100,00
6/30/2011 1 0 7 7 0
9 1,524,90 1,524,90 35,100,00
9/30/2011 2 0 0 0
9 3,900,00 1,524,90 5,424,90 31,200,00
12/31/2011 2 0 0 0 0
9 1,340,73 1,340,73 31,200,00
3/31/2012 1 3 3 0
9 3,900,00 1,340,73 5,240,73 27,300,00
6/30/2012 1 0 3 3 0
9 1,186,03 1,186,03 27,300,00
9/30/2012 2 3 3 0
9 3,900,00 1,186,03 5,086,03 23,400,00
12/31/2012 2 0 3 3 0
9 994,50 994,50 23,400,00
3/31/2013 0 0 0 0
9 3,900,00 1,005,55 4,905,55 19,500,00
6/30/2013 1 0 0 0 0
9 847,16 847,16 19,500,00
9/30/2013 2 7 7 0
9 3,900,00 847,16 4,747,16 15,600,00
12/31/2013 2 0 7 7 0
9 663,00 663,00 15,600,00
3/31/2014 0 0 0 0
9 3,900,00 670,36 4,570,36 11,700,00
6/30/2014 1 0 7 7 0
9 508,30 508,30 11,700,00
9/30/2014 2 0 0 0
9 3,900,00 508,30 4,408,30 7,800,00
12/31/2014 2 0 0 0 0
9 331,50 331,50 7,800,00
3/31/2015 0 0 0 0
9 3,900,00 335,18 4,235,18 3,900,00
6/30/2015 1 0 3 3 0
9 169,43 169,43 3,900,00
9/30/2015 2 3 3 0
9 3,900,00 169,43 4,069,43
12/31/2015 2 0 3 3 -
23,551,23 62,551,23
Total 39000000 3 3
Balance Sheet:
Cons Year 1st 2nd 3rd
Owner Equity and Liability:
Capital and Reserves:
Capital 26000000 26000000 26000000 26000000
43,916,26 99,041,83 161,100,49
Retained Earning 0 7 5 7
69,916,26 125,041,83 187,100,49
Sub total 26000000 7 5 7
Long term Liabilities:
31,200,00 23,400,00 15,600,00
Habib Bank limited loan 39000000 0 0 0
31,200,00 23,400,00 15,600,00
Sub total 39000000 0 0 0
Current liabilities:
3,900,00 3,900,00 3,900,00
current maturity of l term Loan 0 0 0
Account payables
Workers welfare fund 0
Acuured expenses 0
Tax payables 0 0 0 0
3,900,00 3,900,00 3,900,00
Sub total 0 0 0 0
105,016,26 152,341,83 206,600,49
Total Equity and Liability: 65000000 7 5 7
Assets:
Fixed Assets:
Fixed Assets 43106000 43106000 40118300 37130600
Less Accumulated Depreciation 0 2987700 2987700 2987700
Net fixed assets 43106000 40118300 37130600 34142900
Pre-Production expense 1925000 1925000 1540000 1155000
Less Amortized 0 385000 385000 385000
Net pre-production expense 1925000 1540000 1155000 770000
Sub total 45031000 41658300 38285600 34912900
Current Assets:
Debtors 0
Stores and Spares 0
Advance deposits 0
Short term investment 0
63,357,96 114,056,23 171,687,59
Cash and bank balance 19969000 7 5 7
63,357,96 114,056,23 171,687,59
Sub total 19969000 7 5 7
105,016,26 152,341,83 206,600,49
Total Assets 65000000 7 5 7
Ratios:
Current Ratio: 16.2 29.2 44.0
Cash Flow:
Cons Year 1st 2nd 3rd
Sources
182,984,44 229,689,86 258,577,76
Operating Profit 0 7 3 2
Add:Dep. & Amort. 0 3372700 3372700 3372700
26,000,00
Equity 0
Other Sources
39,000,00
Long Term Loans 0
65,000,00 186,357,14 233,062,56
Total 0 7 3 261950462.1
Uses
43,106,00
Fixed Asset 0
1,925,00
Pre-Production Exp. 0
3,900,00 7,800,00 7,800,00
Long Term Loans 0 0 0 0
Re-Payment of:.
Financial Exp. 0
73,193,77 91,875,94 103,431,10
Tax Paid 0 9 5 5
65,874,40 82,688,35 93,087,99
Profit Distribute 1 1 4
Inc/(dec) in Current asset 0
45,031,00 142,968,18 182,364,29 204,319,09
Total 0 0 6 9
19,969,00 43,388,96 50,698,26 57,631,36
Net Cash Inflow/(Outflow) 0 7 7 3
19,969,00 63,357,96 114,056,23
Balance Opening 0 0 7 5
19,969,00 63,357,96 114,056,23 171,687,59
Balance Closing 0 7 5 7
Conclusion
Current Ratio
The current ratio for chips manufacturing is 1.51 the end of the year 1st and 1.79
at the end of the 2nd year and 1.82 at the end of 3rd year. It is increasing and shows
the strength of the company. Current ratio determines the short term debt paying
ability of the company.
.
Operating profit
56.13 in 1st year, 60.21 in 2nd year,62.72 in 3rd year it shows significant increase during
three year period. It is better for company.
Debt to equity
The bebt to equity ratio is 20.73% in the 1st year it is12.97% in the 2nd year and 7.93% in
the 3rd year. It shows the creditor is protected in case of insolvency.
We conclude on the basis of field work and survey of chips manufacturing unit that the
demand of chips increase day by day and it is profit motive business. We can earn money
by very low investment. We would like to suggest that investor invest in chips
manufacturing unit that contribute in growing economy of the country.