Beruflich Dokumente
Kultur Dokumente
on EngroFoods
Table of Contents
Table of Contents........................................................................................................ 1
Dedication.................................................................................................................. 3
Acknowledgement...................................................................................................... 3
Executive Summary.................................................................................................... 4
PEST Analysis.......................................................................................................... 5
PEST Conclusion...................................................................................................... 7
Porter Five Forces Model............................................................................................. 8
Threat of New Entrants:.......................................................................................... 8
Impact.................................................................................................................. 9
Bargaining Power of Suppliers.................................................................................9
Impact................................................................................................................ 10
Bargaining Power of Customers.............................................................................11
Impact................................................................................................................ 12
Threat of Substitute............................................................................................... 12
Impact................................................................................................................ 12
Competitive Rivalry............................................................................................... 13
Accumulating results.......................................................................................... 14
Critical Success Factors Analysis..............................................................................14
CSFs positioning Map.............................................................................................. 15
Competitive Profile Matrix (CPM)..............................................................................16
Company Introduction: Engro Foods.........................................................................17
Company profile.................................................................................................... 17
1
The group.............................................................................................................. 17
Shareholding structure.......................................................................................... 17
Company Value Chain Analysis................................................................................. 18
Primary Activities.................................................................................................. 18
Inbound Logistics............................................................................................... 18
Manufacturing.................................................................................................... 19
Outbound Logistics............................................................................................. 19
Sales & Marketing.............................................................................................. 20
Services.............................................................................................................. 21
Supporting Activities............................................................................................. 21
Efoods Value Chain: A Bigger Picture........................................................................23
SWOT Analysis.......................................................................................................... 23
TOWS Analysis.......................................................................................................... 24
Internal Factor Evaluation (IFE) Matrix......................................................................25
External Factor Evaluation (EFE) Matrix....................................................................26
General Electric Matrix............................................................................................. 27
Conclusion & Recommendations...........................................................................28
SPACE Matrix............................................................................................................ 28
Financial Strength.................................................................................................. 28
Competitive Advantage......................................................................................... 28
Environment Stability............................................................................................ 29
Industry Strength.................................................................................................. 29
Recommendations................................................................................................. 30
BCG Matrix............................................................................................................... 31
Recommendations:................................................................................................ 32
Current Perceptual Mapping..................................................................................... 33
For Dairy Products................................................................................................. 33
For Frozen Deserts................................................................................................. 34
Perceptual Map of Efoods Brand on the Basis of Quality & Price...........................35
Target Market Analysis.............................................................................................. 36
Product Wise Target Market................................................................................... 36
Strategic Fit.............................................................................................................. 37
Conclusion & Recommendations..............................................................................39
Dedication
THIS STUDY IS DEVOTED TO OUR RESPECTED PARENTS AND FAMILY WHOSE
PARAMOUNT LOVE, CARE AND STRUGGLE AGAINST ALL ODDS BROUGHT US TO THIS
HEIGHT OF KNOWLEDGE AND ENCOURAGED ME TO COMPLETE THIS DEGREE AND
WERE MAJOR DRIVING FORCE BEHIND MY ALL EFFORTS WITH THE BLESSINGS OF
ALMIGHTY ALLAH
Acknowledgement
e would thank Allah for giving us the opportunity and the resources to be
able to do something productive with our lives. Without His blessings we
would not have been able to come as far as we have.
We would like to thanks our Professor Mr. Syed Ali Bukhari, the most respectful
teacher & mentor, who gave this Project to us to. He helped us a lot in the making
of this Project.
Then our sincere thanks to the below people for helping us throughout this project.
Mr. Shahid Ata Nagi - Late (Pioneer of Dairy Products and Technology in
Pakistan) in Dairy
Mr. Omair Shahid (HR Lead, NBS),
Mr. Nabeel Ahmad Sheikh (Senior Brand Manager, Nestle),
Ms. Summayya Umer (Ex. Marketing Manager, Engro)
Their guidelines have been very useful for us in preparing this report. We feel great
pleasure in expressing our gratitude to them for providing all possible help and
encouragement in carrying out this Project. Last but not the least we would like to
thank our families for their incessant support and approval.
Executive Summary
Despite being one of the largest milk producing country of the world, Pakistan
seems to be unable in utilizing it excessive supply of milk. However, the major
barrier is the development of this sector is the fact that the major portion of this
sector is controlled by informal authorities or entities. Just to add into the problem,
government non serious attitude towards sector, lack of awareness lack of
integration between farmers and dairy value chains are among rest of the issues.
This disuse of one of the best blessing of Allah has led to many other issues and
among them are very huge untapped market and unfulfilled needs of a very huge
consumer market. This situation presents a wonderful opportunity for processed
dairy sector to come and play. Efoods, exploited this opportunity and now is one of
the biggest player in the processed milk market. But the market has grown more,
and companies cannot rely on just one product for a long period of time due to
changing need of the consumers.
The report aims to figure out the required strategies for the success in the market
through strategic marketing analysis tools. This report starts with the introduction of
milk industry of Pakistan and reveal the competitive attractiveness of the market
through Quantitative PEST Analysis and Porter Forces Model.
Next, the report tries to reveal the required value addition throughout the supply
chain in order to remain ahead of the competitors by achieving competitive
advantages. The report, then maps out the strategic position of Efoods through
SWOT/TOWS, GE Matrix and SPAVE Matrix and then compares it with the existing
strategies.
Efoods is on the right direction, this can be concluded at the end of this report using
Strategic Fit model. But there is always a room for improvement and Efoods can still
improve many things. Find out recommendations and conclusion at the end of this
report.
PEST Analysis
Dimension
Factor
Opportunity /
Threat
Probability of
sales tax rate to
be increased from
10% to 17%
Profit margin on
the product will be
impacted
Dairy sector is
neglected by
governments
Political
No laws
governing and
regulating sale of
the unprocessed
milk
Laws and
regulations
related to the
production of
processed foods
(dietary
regulations and
foods safety)
Farmers are
ignorant of
methods for
increase in
production,
preservation and
supply chain
Quality of the raw
milk varies on
daily basis
increasing
processing cost
Vender Partner
Program to
provide farmers
with vital
information about
milk production
and preservation.
Need state of the
art quality control
and assurance
system
Have to follow
regulations for
food safety and
others
Strengthen R&D
activities along
with quality
assurance and
control initiatives.
Economic
Rise of price due
to imposition of
sales tax
Households (more
than 93%) raising
cattle and
buffaloes in the
country are
smallholders (less
than10 animals)
Strategic Initiative
/ Response
Company will need
to gain economies
of scale in order to
compensate for
the increase in tax
rate
Cost passing on to
the consumer will
result in
decreased sales
Small scale farmer
do not have
financial and
technological
support to
preserve quality
ad better means of
supply chain as
having them may
require investment
Need to gain
economies of scale
in order to cut the
effect of tax while
maintaining profit
margin
Need to have
sharp focus of inbound supply
chain while
assisting and
supporting
farmers and
vendors for milk
preservation. This
would be an
5
or it may reduce
their profitability
Milk produced
(around 70%) in
the country is
consumed at
home. The
remaining 30% is
marketed through
various marketing
channels. Only 3
to 3.5% of milk is
processed in the
country
Availability of
Capital
Funding
opportunities are
available through
loans and existing
and potential
shareholders
Stable local
demand
Buying power of
consumers
Buying power of
the consumers is
towards increase
Saving vs.
Spending
Vendors
perception about
dairy sector of
Decline in farmer
confidence leading
to exit from
Social
integral part of
vendor partner
program and
company may
need to invest
capital to provide
chillers to the
vendors.
There would be a
competition for
Procurement of
quality raw milk.
To work on
corporate social
responsibility to
provide general
public with the
benefits of using
processed milk will
be beneficial and
will make the
situation much
better.
The product would
not be necessarily
for the elites but
for the middle
class as well,
increasing the size
of market. As a
strategic
initiatives,
company will have
to monitor supplydemand in an
efficient matter.
Revitalize
community
confidence in
6
Pakistan
industry. Nearly
200 farmers are
reported to be
exited from the
market
Favorable
demographics
Market size is
huge with 80%
percent of
population
belonging to 0-50
years of age
Consumption
Pattern of the
consumers
The consumption
of processed milk
and related
products is
growing at the
rate of 12% per
year
High staff
turnover and
availability of
labor
Loss of labor
and/or skills to
other industries
Consumption of
Cheese and other
dairy products
Technologi
cal
Technological
support available
to farmers
In Pakistan 5000
tons cheese is
consumed
annually whereas
its production is
2500 tons per
annum.
Consumptions of
other products is
on high trend as
well
They also lack
technological
support. They
cant deliver milk
themselves to the
milk processing
plants and they
Dairy by becoming
a partner with
vendors and
providing them
financial and
technological
support
Need to focus
more on brand
positioning and
winning the trust
of consumers by
providing
consistent quality
products
Understand
industry workforce
needs, support
education
programs, and
assist the farmer
with HR
management.
There is a larger
market with high
demand that need
to be tapped.
Need to
aggressively tap
market with a
vision of being a
market leader.
Have to develop
milk collection
centers in
different areas
equipped with
chillers. This
maintains quality
7
Availability of
machinery for
product
manufacturing
Reliable funding
and investment
sources are to be
identified and
selected
PEST Conclusion
Although Pakistan is among the top five milk producing countries in the world but
yet the introduction of value added dairy products of milk is limited due to lack of
knowledge and expertise for the production of cheese and other products. No
serious efforts have been made to transfer milk into value added products
especially cheese production. However, small work has been started for establishing
cheese manufacturing units in dairy industries for pizza and other fast food
industries.
In Pakistan 5000 tons cheese is consumed annually whereas its production is 2500
tons per annum. The production of Mozzarella in Pakistan is only 90100 tons. With
increasing the popularity of pizza, the use of Mozzarella cheese is increasing day by
day due to the opening of multinational pizza restaurants. The quality of locally
Mozzarella produce is not compatible with the imported cheese. Though import of
Mozzarella in Pakistan is not known exactly but statistics collected from large
multinational pizza restaurants shows that its import is more than 760 ton per
annum (PDDC, 2006).1
With such huge market and huge supply demand gap, it would be relatively easier
to penetrate in the market but that would be totally dependent on the quality and
the price. Things will get in pretty good shape in near future as the perception of
dairy product is changing and the imports reveals the increasing demand of quality
cheese as 1,215 tons of cheese was imported in year 2011 and the quantity is
increasing.
The statistics further provide an insight into the fact that much of domestic demand
is not met from the domestic dairy product supplies. This is either due to incapacity
to fully cater to the domestic requirements or that the country does not specialize in
1 Retrieved from: http://prr.hec.gov.pk/Chapters/146S-1.pdf
8
production of dairy products. There is one other reason and that is the high cost of
establishing dairy products manufacturing plants and their viability from a
sustainability point of view.
The trends also reflect that the gap would further widen due to increasing demand
for milk and insufficient domestic supplies to meet the requirements of a growing
population. In addition to this, other dairy value added products such as cream
powder, cheese, milk cream and butter are imported though these could easily be
prepared locally had the dairy industry been diversified to produce variety of value
added products.
Question
Is startup cost or
capital cost of
establishment high
or low???
Product
Uniqueness
Is the product
unique?
Switching cost to
buyers
Is switching easy
of difficult?
Production process
Is production
process is complex
or easy?
Suppliers
Proximity
Economies of scale
Are economies of
scale required or
not?
Explanation
Startup cost is high in
terms of machinery and
other capital
expenditures
The product is unique in
the regions as there is
no such product. This
might become an issue
in future if some foreign
brand becomes
available in the market
The product is unique
and there are other
types of dairy products
available in the market
both local and foreign
brands, so switching is
relatively easy
Production process is
difficult rather complex
as it requires skills labor
and knowledge
There are huge number
of suppliers but they are
scattered and with very
less financial and
technical support
Economies of scale are
required as there may
come tax imposition in
near future.
Scale
Warehouse
Requirements
Percentage Score
40%
Impact
Threat of New Entrants is low due to above mentioned reasons. In the industry,
there are many dairy products brands and it would require differentiation in
products and strategy in order to stand in the market. This thing shows the
oligopolistic structure of this industry. So there are few firms, producing very little
differentiated products and fighting for the market share. The rivalry is based on the
non-price competition, which focuses on the strategies for gaining or increasing
market share, marketing is main features of this competition.
Question
Is number of
supplier high or
low?
Explanation
Suppliers are
greater in number
but they are
scattered and do
not have financial
Scale
10
Portion of supplier
business
Do business
represents a
greater portion of
supplier business?
Product
Uniqueness
Is product unique
or not?
Is switching easy?
Threat of forward
integration by the
supplier
Is there a
possibility that
supplier can
become their own
distributor
and technical
capital and
companies will
have to support
them to create a
better relation
Business
represents a
greater portion of
supplier business.
There are other
products that can
be made but they
need extensive
skills and capital
The product is not
unique and
supplier must have
to follow
guidelines
provided by the
buyer as buyer
have invested for
the development
of suppliers
Switching is not
easy because the
manufacturer has
developed an
expensive
collection system
in the area of
supplier(s) and
made investment
in terms of
technological and
knowledge support
Threat is there,
suppliers can go
for manufacturing
of other milk
products or they
may supply raw
milk for household
use but it would
need investment
and a proper setup
11
Percentage Score
64%
Impact
As calculated, this force is moderate in strength but still it exerts a tremendous
amount of pressure on the manufacturer of the processed milk. Though Pakistan is
4th largest milk producer in the world but it lacks technical expertise in the loose
milk segment. Because of this a huge amount of milk goes waste. The suppliers in
this segment are not qualified and they also lack quality standards and education,
so there is a quality issue too. Besides these two big issues, they arent financially
so strong to supply milk to milk processing units.
So companies have to develop a collection center in different areas and suppliers of
raw milk supply milk to those centers. These collection centers increase the cost.
To cope with the quality issue, companies have to impart some quality standards,
they have to create awareness. So managing suppliers perfectly supplier
relationship is the key to success.
Question
concentration
Buyers
information
Do buyers have
information about
suppliers and their
prices?
Explanation
The buyers are greater
in numbers both in
household and
commercial segment.
The size of consumer is
greater with small
purchases so cost of
losing one customer
would not be so high.
Buyers do not have
direct approach to the
suppliers as they are
dispersed and based in
the rural areas of the
Scale
12
Price of product
Product
Uniqueness
Market info
Switching
60%
Impact
The people in Pakistan arent brand loyal and they can switch easily to other brands.
An excerpt from a research study shows that consumers while making purchase
intention are not highly involved in the brand itself and are more concerned with
the products usage, this situation go in favor of the company as the product to
be launched is totally unique in terms of needs to be served and the usage of the
product. As compared to the normal cheese with high fat, the low fat cheese will
definitely gain its market.
People arent brand loyal and awareness of brand doesnt guarantee repeat
purchase, this is almost a situation where push strategy is required and to be
successful in push strategy, economies of scale is required. There are high fixed
13
costs and economies of scale are required to reduce it. Moreover this makes
availability and quality as the key to success.
Threat of Substitute
Element
Switching
Market share
Question
Explanation
Switching is easy as
Is switching to
there are many other
substitute product
brands available in the
easy or not?
market.
Market share of
Is market share of
substitute product is high
substitute product as the substitute
is high or low?
products are available
since a very long time.
Percentage Score
Scale
80%
Impact
This would be unique product so brand positioning will play a very key role from the
product acceptance to the product maturity. Difference and the superior features of
the products must be transfer to the consumers through media plans and
advertisements and this should be reinforced. Reinforcement would be required to
enable repeat purchase as there are high threats from the substitutes and alternate
products.
Competitive Rivalry
Element
Question
Number of
competitors
Explanation
There are very few
competitor with
UHT Milk
manufacturing
abilities. The
important thing is
that they do not
have the ability
innovate
Scale
14
Industry Growth
rate
Product
Differentiation
Exit barriers
Is industry growing
at higher rate?
Are products
offered by
competitors
differentiated?
Is exit from the
market is easy or
there are high
strategic stakes?
Percentage Score
Industry is growing
but at a low pace.
97% of the raw
milk is being
consumed as it is
and only 3% is
being converted in
to value added
products
60%
Competitive rivalry in the dairy industry in Pakistan is moderate due to the following
factors:
1. There are only few dominant brands trying to become market leader and they
experience intense rivalry
2. The firms cannot grow their market by taking the market share from their
competitors
3. The fixed cost of production is high
4. Product is homogeneous as all the companies are offering approximately the
same product
5. Customer can easily switch to other companys product
6. the cost of exit from the market is high
15
Accumulating results
Bargainin
g Power of
Buyers :
Moderat
e
Threat of
Substitute
:
High
Rivalry
amont
competito
rs:
Moderat
e
Threat of
New
Entrants:
Low
Bargainin
g Power of
Suppliers:
Moderat
e
17
Company position against the identified CSF is strong but still it needs to
work on few like ability to innovate and bring up new products range.
Introducing new products will not be necessary since the very beginning but
it will be a key factor in order to stand the competition. The case with CSF
economies of scale is little different. The business impact of gaining
economies of scale is very significant and will have greater impact on
business since beginning. So company needs to be doing effective planning
well ahead for making it a competitive advantage over other competitors.
For other CSF, company is able to invest huge amount both for production
facility and positioning, advertisement and creating awareness. Company is
already working in the milk industry and it already have relation with
suppliers. Current brands of the company have good reputation in the
market and this will have a very positive impact on new brands.
Critical Success
Factors
Brand Image /
Reputation
Ability to Position the
new brand
Economies of Scale
Supply Chain
Integration (relations
with suppliers and
distributors)
Ability to
innovate/introduce new
Weight
Foreign
Brands
Rat
Score
e*
Local Brands
Efoods
Rate
*
Score
Rat
e*
Score
0.05
0.15
0.1
0.15
0.15
0.3
0.3
0.45
0.15
0.45
0.3
0.3
0.1
0.2
0.2
0.2
0.05
0.2
0.05
0.1
18
product ranges
6
7
8
9
10
Becoming Own
Suppliers (Backward
Integration)
Ability to spend huge
on advertising
(awareness)
Ability to maintain
quality
Ability to retain
consumers
Huge Investment
Total
0.03
0.03
0.03
0.06
0.12
0.12
0.24
0.36
0.1
0.2
0.3
0.3
0.15
0.3
0.45
0.45
0.1
1
2
22
0.2
2.15
1
19
0.1
2.07
3
26
0.3
2.67
19
from confectionary to culinary, infant foods and ready-to-cook meals. Efoods intends
to become the premier food company in Pakistan.
Efoods began in CY06, and in the short time since has achieved clear leadership in
the Pakistan UHT industry, with a market share of 44% at the end of 2011. It has
launched an array of new products such as ice cream and flavored milk which have
significant growth potential. We expect Efoods to report strong earnings growth in
CY12 and beyond, as the company taps into the 92% loose milk market and
ventures into other high-margin products.
The group
Engro Corporation (Engro), which owns 89% of Efoods, is a publicly listed company
and its shares are quoted on all three Pakistani stock exchanges. Engro is a
diversified conglomerate with interests in fertilizer, foods, PVC resin manufacturing,
energy and petrochemicals. It has also set up joint ventures in the chemical
terminal and energy businesses. Engro has over 3,200 employees and is one of the
largest investors in Pakistan, having invested US$1.7bn over the past five years.
Shareholding structure
Engro
Foods
Limited
currently has 752m shares
outstanding, 89% of which
are held by Engro Corp. It is
listed on all the Pakistani
stock
exchanges.
Engro
offered 27m shares to the
public
and
institutional
investors through an offerfor sale arrangement in
CY11, at the time of listing.
Efoods had earlier sold 48m
shares through a private
placement to fund different projects prior to its listing.
Inbound Logistic
Manufacturing
Outbound Logistics
Sales & Marketing
Services
Inbound Logistics
Functions
Required Value
Addition
Milk collection from
farmers and
intermediaries along with
quality testing
Procurement of
packaging material
including R&D
Procurement of other raw
materials to be used in
the manufacturing
process
Procurement of indirect
materials
Management of
transportation for
incoming materials
especially raw milk
Management of raw
materials inventory and
planning for demand and
supply
Vendor Management
(contracts, risk
management, credits,
support to suppliers etc.)
Expertise and
financial/technical
support for farmers
Manufacturing
Functions
Manufacturing of different
dairy products
Planning and deciding for
proportionate allocation of
Required Value
Addition
Conversion of raw
materials to value added
products
Making production more
balanced on the basis of
Packaging of finished
goods
Required Value
Addition
Identifying and adapting
efficient ways to transport
finished goods to
warehouse. Warehouse
management to reduce
inventory and to adopt
effective ways to reduce
wastage in terms of
product expiry
Hunting for cost effective
Outbound Logistics
Functions
Transportation of finished
goods to warehouse and
inventory management.
Transportation of finished
1. Availability of the
product is maximized
through using proper
channels and delivery
methods
2. Internal operation
related to product
handling, warehousing
is optimized by
reducing wastages
22
Vendor Management
(contracts, risk
management, credits,
support to distributors
etc.)
ways to transport
products. Identification of
vehicles and related
equipment for safe and
timely delivery
Distribution strategy to be
devised in order to ensure
full availability of the
product in the market
(place utility)
To do more cost effective
route planning with the
intention developing time
and place utility to tap
maximum market.
Identify more cost and
quality effective ways to
handle finished products
and to define bulk
packaging requirements
(cartons, pallets, lifters,
conveyers etc.)
Developing relationship
with distributors while
providing product
information and benefits
so they can become a
branding partner
3. Strengthened
relationship with
distributors who
ultimately work as
marketer to promote
brand
4. Access to real-time
market information by
developing
relationship with
distributors to get an
insight about the
market drivers
5. Competitive
advantage of Cost and
Differentiation
achieved
Market Research
Branding
Marketing and Branding
strategy formulation
Required Value
Addition
Identification of the gaps
in dairy sector of the
market through market
research. Getting
customer feedback
through different sources
in order to improve the
product(s)
Position of company
products to differentiate
products from other
products available in the
market. Marketing and
branding strategy is to be
23
Competitor Analysis
Trend Analysis
Customer Relationships
devised to better
understand market and its
needs and how to fulfill
that needs. Deciding the
media to use for
Using
business and bring
advertisements
intelligence techniques to
gain insight about the
competitors and their
future plans and
strategies in order to
remain ahead of them.
To identify the latest
trends both local and
international related to
products, consumers,
market needs, marketing,
branding and selling.
Formulation of
appropriate selling and
pricing strategy to attract
consumers and increase
sales of the company
products resulting in high
revenues and profitability.
Developing Promotion
strategy to promote
company products.
Develop good relation
with consumers by
approaching directly to
them in order to better
understand their needs,
requirements and whether
company is targeting the
right consumer segment
or not.
customer satisfaction
and customer
retention
4. Revenue generation
for the company and
increased
sustainability
5. Ability to remain
ahead of competitors
through competitor
analysis and business
intelligence
6. Come up with
innovative ideas to
market/position the
product to create a
good brand image.
7. Competitive
advantage of Cost and
Differentiation
achieved
Services
Functions
Required Value
Addition
24
Listening to consumers
(retailers, distributors and
other) queries and
complaints and providing
optimal solution to resolve
them. Coordination with
other departments in
order to use case of
replacements and other
issues.
1. Better relationship
with consumer
2. Decreased in cases of
replacements through
better coordination
with departments
Supporting Activities
Supporting activities are as follows:
1.
2.
3.
4.
5.
Activity
Required Value
Addition
Human resource
management
Information technology
Bringing technology
Procurement
Firm Infrastructure
Develop a learning
organization with close
coordination among
departments and smooth
flow of information.
Farms and
suppliers
development
Strategi
c
Respons
e/
Initiativ
e
Expertise and
support for
farmers
Manufacturi
ng and
Processing
Providing R&D
and Expertise
to milk
suppliers
Investing in
local
manufacturing
plants
Products &
Consumers
Building brands
through
responsible
marketing
Increasing
value and sales
volume
26
Value
for
Efoods
Securing
supplies and
raw material
(milk) of high
quality
Improving
quality,
community
relationship and
developing
industry
Lowering
manufacturing
and distribution
costs
Entering new
and emerging
markets with
extraordinary
products
Achieving
competitive
position, market
share and
sustainability
Value
for
Society
Improving
production and
income level
Improving
quality and
consumption of
natural
resource
Creation of jobs
and raise in the
standard of
living
Ease in access
to nutritional
and safe
products
Generation of
local
investment and
economic
growth
SWOT Analysis
The following table shows the SWOT Analysis for Efoods:
Strengths
1) Strong and well-established brand
2) Proactive management
3) Strong distribution network
4) Latest technology for production
5) 2 milk processing plant with
capacity of processing 1.4 million
liters of milk per day
6) Dedicated research & development
(R&D) facility
7) Extensive milk collection chain
8) Ability to create skilled workforce
Opportunities
1) Huge potential in dairy products
(only few companies in Pakistan)
2) Opportunity to go for related
diversification in future
3) Export of dairy products to other
countries
4) Backward integration (may go for
becoming its own supplier of raw
milk)
5) Westernization of Pakistani foods
with increased usage of dairy
products
6) Growing awareness towards dairy
products
7) Excessive supply of raw milk
Weakness
1) Less experience in dairy sector, as
other competitors has been present
in this sector for one to many
decades
2) Needs significant investment in
research and development of
products, unlike Nestle which mainly
relies on parent company for
research (parent company product
portfolio)
3) Penetration in rural areas would be
difficult
4) Complexity of manufacturing
operations and HR skill gap
5) Diversified portfolio at time make
decision process difficult
Threats
1) Competing with world class
companies like Happy Cow and Kraft
2) Risk of price war in dairy products as
others are may be enjoying higher
economies of scale
3) Due to high return prospects, other
players may try to enter this
segment
4) Commercialization of the product
can be difficult due to high price and
current preference of foreign brands
and/or bad perceived quality of local
brands
5) Rate of changes in dietary trends
and consumer preferences is slow
27
TOWS Analysis
TOWN Analysis
External Opportunities
Internal Strengths
Internal Weaknesses
SO Strategies
WO Strategies
External Threats
ST Strategies
WT Strategies
1) Focus on quality of
28
2)
3)
4)
5)
products in order to
compete with foreign
brands (S1, S4, S5, S6,
T1, T4)
2) Achieve economies of
scale in order to
compete with other
producer in terms of
costs and revenue (S4,
S5, S2, S3)
3) Introduce diversified
product range in order
to aggressively
penetrate in the market
and reduce the threat of
slow commercialization
(S1, S2, S4, S5, S6, O4)
4) Proactively study
market behavior and
trends and create
flexible strategies to the
possible extent in order
to cope with the
changing trends of the
market (S2, S6, O5, O2)
Internal Factors
Strengths
1
Strong and wellestablished brand
2
Proactive management
3
Strong distribution
network
4
Latest technology for
production
5
2 milk processing plant
with capacity of
processing 1.4 million
liters of milk per day
6
Dedicated research &
development (R&D)
facility
7
Extensive milk collection
chain
8
Ability to create Skilled
Rating (R)
Weight (W)
Weighted
Score
(R x W)
13
52
21
21
10
30
10
10
30
15
20
29
workforce
Weakness
1
Less experience in dairy
sector, as other
competitors has been
present in this sector for
one to many decades
2
Needs significant
investment in research
and development of
products, unlike Nestle
which mainly relies on
parent company for
research (parent
company product
portfolio)
3
Penetration in rural areas
would be difficult
4
Complexity of
manufacturing operations
and HR skill gap
5
Diversified portfolio at
time make decision
process difficult
Total
IFE Score
10
16
10
10
10
100
280
280 / 100 = 2.80
External Factors
Opportunities
Huge potential in dairy
1
products (only few
companies in Pakistan
Opportunity to go for
2
related diversification in
future
Export of dairy products
3
to other countries
Backward integration
(may go for becoming
4
its own supplier of raw
milk)
5
Westernization of
Pakistani foods with
Rating (R)
Weight (W)
Weighted
Score
(R x W)
10
40
20
15
10
30
10
30
30
10
40
15
60
10
20
10
10
10
10
30
100
310
310 / 100 = 3.10
31
32
SPACE Matrix
Financial Strength
Scale: 1 = Low | 5 = High
Factor
Return on Investment
Return on Equity
Inventory Turnover
Return on Capital
Cash Flow
Debt to Equity (Long
Term)
Ease of Exit from Market
Huge growth in Net Profit
Rating
Actual Value
1
1
1
1
1
2
2
2
2
2
3
3
3
3
3
4
4
4
4
4
5
5
5
5
5
1
1
2
2
3
3
4
4
5
5
Total
28 / 8 =
12%
21%
11.3
18.40%
Negative
17.50%
Difficult
256%
3.5
Competitive Advantage
Scale: 1 = High | 5 = Low
Factor
Market Share
Product Quality
Product Shelf Life
Backward Integration
Relationship with
Suppliers
Technological Skills
Control over suppliers
Rating
Actual Value
-1
-1
-1
-1
-2
-2
-2
-2
-3
-3
-3
-3
-4
-4
-4
-4
-5
-5
-5
-5
-1
-2
-3
-4
-5
-1
-2
-3
-4
-5
-1
-2
-3
-4
-5
Total
-13 / 7 =
-1.86
Environment Stability
Scale: 1 = High | 5 = Low
Factor
Technological Changes
Demand variability
Barriers to entry in Market
Rating
Actual Value
-1
-1
-2
-2
-3
-3
-4
-4
-5
-5
-1
-2
-3
-4
-5
-1
-2
-3
-4
-5
Competitive Pressure
-1
-2
-3
-4
-5
Total
-10 /5 = -2
33
Industry Strength
Scale: 1 = Low | 5 = High
Factor
Growth Potential
Profit
Rating
Actual Value
20 / 5 =
Financial Stability
SPACE Matrix
6
-6
-4
-2
-2
-4
-6
34
Recommendations
It is very evident from the above analysis that current position of the company is in
the first quadrant which suggest to be an aggressive player in the market.
Aggressive in product development, product positioning, R&D, competitor analysis,
backward integration, tapping untapped markets, product diversification and any
other strategy to remain ahead of the competitors in each and every area of
competition. SPACE Analysis recommends that businesses in such a strong position
take the following actions:
1. Constant focus and investment on R&D in areas like product formulation,
product development, market research, technology, supply chain in order to
attain sustainable competitive advantage
2. Keep an eye on competitors, their strategies and their moves through
business and competitor intelligence, real-time market analysis to formulate
alternative competitive advantage strategies.
3. Regularly study market behavior and trends, identify untapped needs and
gaps and close off every appropriate opportunity to a differentiated value
proposition resulting in improved brand image.
4. Achieve economies of scale by increasing level of production in order to
reduce costs and price, ultimately, and make it difficult for competitors to
match the price.
5. Alternatively, keep on innovating and introducing different products of
different price levels for different markets to make it difficult for competitors
to come up with same horizontal of innovation and product diversification.
This will result in increased market share and penetration for the company.
6. Go for backward integration to get high quality raw milk at relatively lower
price compared to other manufacturer resulting in increased margins and
profitability.
7. Aggressively tap the related markets with high quality products and top-rated
brand image which will ultimately complement the existing position of the
company. This strategy will help in product and market development.
BCG Matrix
BCG matrix is being drawn here by dividing Efoods products into two categories.
These are:
1. Dairy Products (Brands included: Olpers, Dairy Omung, Omung Dobala,
Olpers Lassi & Cream)
2. Frozen Products (Omore)
The market Share and growth rate are as follows:
No.
Category
1
2
Dairy Products
Frozen Products
Market Growth
Rate
12%
14%
35
No.
Category
1
2
Dairy Products
Frozen Products
Largest
Competitor
Market Share
Nestle 40%
Walls 58%
Efoods
Market Share
Relative
Market Share
50%
29%
1
0.5
Recommendations:
It is crystal clear from the above quantitative analysis of BCG that both categories of
Efoods are in the starts category of BCG matrix. But the point to be noted is that the
market share of the frozen products of Efoods is quite low and this category lies on
the edge of Stars and Question Mark. Efoods needs to consistently work on the
market share of the frozen products. Quality of the brand must be improved through
innovative marketing strategies and improving quality of the product. Efoods needs
to aggressively market the product through advertisement because, as compared to
competitors, Efoods lacks advertisement and campaign focused on the targeted
audience. Though Efoods have second largest player in the market but as compared
to the largest rival, it market share is very low. Following strategic option are
available in order to keep the frozen products in stars category while increasing
market share:
1. Product Development: Focus on product quality, coming up with new
products/flavors, or redesigning the product in response to the market
conditions
2. Market Penetration: Aggressively advertise the product and enter into new
markets in order to penetrate and increase market share
36
3.
37
Brand Image
Perceived Quality
Nutrition values
Social Acceptance
Taste
Social Map
Current Perceptual
Acceptance
Nutritional
Value
Taste
Perception
Brand Image
Perceived
Quality
Nutritional
Value
Social
Acceptance
Taste
Perception
38
Brand Image
Pleasure
Healthfulness
Taste
Quality
Brand Image
Pleasure
Healthfulness
Available
Flavors
Brand Image
Pleasure
Healthfulness
Recommended Perceptual Map
Taste
Available
Flavors
39
Olpers Milk
Olpers Cream
Tarang
Dairy Omung
Olpers Lassi
Icecreams Cups
Icecreams Sticks
Icecreams Cones
Business Consumers
Direct
Restaurants, Hotels, Fast Food Chains
Consumer
Indirect
Retailers, Wholesalers, Grocery Stores, Bakeries
Consumers
Influential
Cooking TV Channels
Groups
End Consumers
Age
5 60 Years
Gender
Both Male & Female
Income / Social
Different Products for all social classes and income groups
Class
Geographic
Major Cities of Pakistan
Tarang
Y Juice
Ice-cream
Target Market
Business: Wholesalers, retailers, bakeries
Social Class: Upper and Upper Middle Class
Target Audience: Youngsters, Children, Families Mothers &
House Wives
Geographic: Major cities of Pakistan
Age: 5 60+
Business: Wholesalers, retailers
Social Class: Lower, Lower Middle and Middle class
Target Audience: Tea Lovers, Youngsters, Aged Person, House
Wives
Geographic: Major cities of Pakistan
Age: 20 60+
Business: Wholesalers, retailers
Social Class: Lower Middle and Middle class
Target Audience: Tea Lovers, Youngsters, Children, Aged
Person, House Wives
Geographic: Major cities of Pakistan
Age: 5 60+
Business: Wholesalers, retailers
Social Class: Lower Middle and Middle class
Target Audience: Youngsters, Children, Mothers
Geographic: Major cities of Pakistan
Age: 10 20+
Business: Wholesalers, retailers, Restaurants
Social Class: Lower Middle, Middle class, Upper Middle and
High
Target Audience: Youngsters, Children, Mothers
Geographic: Major cities of Pakistan
Age: 10 20+
41
Strategic Fit
Through the analysis done in this project, some factors have been identified that are
very critical in the success in the dairy industry. The success depends upon the level
of accuracy of the formulated strategies based on those factors, it means any gap
will take company away from achieving the potential the market promises. But there
is no apparent gap in the recommended and actual strategies of Engro Foods.
Heres how:
Note: Actual Strategic response is taken from Engro Foods financial
statement of year 2015 and from company corporate website
(www.engrofoods.com)
No
1
Factor
Relation with
Suppliers
Required Strategic
Response
1. Provide them financial
and technological
support
2. Backward Integration in
order to reduce risks
associated with raw
milk supply
3. Get engaged with
suppliers and spread
awareness to improve
milk quality
42
Research &
Development
Product
Diversification
Spreading
Awareness
Innovation &
Risk Taking
1. Create a culture of
learning and open
communication with
smooth coordination
and flow of information
among different teams
throughout the
milk collection
1. EFL has a dedicated research
facility on the premises of its
Sahiwal plant. The Research &
Development team has played a
key part in cracking various new
recipes that have enabled EFL to
provide consumers with a steady
stream of innovative products.
Adhering strictly to high quality
standards, products in the pipeline,
go through several rounds of
tasting and testing before getting
the final seal of approval.
2. The scale of production at Engros
plants continued to reflect an
upwards trend for 2015 with key
areas of focus being research and
development to bring efficiency in
the system to reduce costs.
1. The Company continued its
aggressive business strategy of
growth and diversification and
achieved market share of 55% in
2015. Building on its promise of
elevating consumer delight, the
business diversified into popularly
priced, high quality product
category with the launch of Dairy
Omung - a nutritious and
affordable dairy product for lower
income consumers. Innovation
remained at the core of the
business's product expansion
strategies this year and we also
introduced Olper's variants of
Badam Zafran and Rose flavors
which were well received by the
market.
EFL has launched many awareness
campaigns through different channels.
The invited media to their plant to give
them a glimpse of the quality of Engro
Milk and other products. They also
visited schools and other institution to
spread awareness and Engro thirst for
awareness in never-ending.
1. Success requires us to continually
strive to produce breakthrough
ideas that result in improved
solutions and services. We
encourage challenges to the status
quo and seek organizational
environments in which ideas are
43
company.
2. Encourage new ideas
and bring innovation in
the following:
Product Offering
(features, formula,
packaging)
Brand positioning
Product
Development
Understanding
Markets
Product
Differentiation
44
But still there is a large untapped market and Efoods is aggressive in its strategies
and will avail any chance and opportunity to become a leader of Pakistan Processed
milk industry.
45