1 ACKNOWLEDGEMENT We would like to express our gratitude to all those who helped us during the whole of our project. We gratefully acknowledge the help of our course supervisor, Mr. Naveed Anwar who offered us invaluable advice throughout the project. He has spent time and energy to aid in the completion of this project and none of this would have been possible without his patient instructions, insightful criticisms and expert guidance. MBA-V Team Members: Altaf Hussain Khaskheli Yousif Altaf Jatoi Javed Ahmed Shaikh Muhabat Khan Junejo Strategic Management MBA-V
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1
ACKNOWLEDGEMENT
We would like to express our gratitude to all those who helped us during the whole of our
project. We gratefully acknowledge the help of our course supervisor, Mr. Naveed Anwar who
offered us invaluable advice throughout the project. He has spent time and energy to aid in the
completion of this project and none of this would have been possible without his patient
instructions, insightful criticisms and expert guidance.
MBA-V
Team Members:
Altaf Hussain Khaskheli
Yousif Altaf Jatoi
Javed Ahmed Shaikh
Muhabat Khan Junejo
Dated: 13-12-2013
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EXECUTIVE SUMMARY
Shezan International Limited was incorporated in 1964 as Pioneer in juices in Pakistan, having mission to produce
the largest food processing unit to meet the country’s local as well as export needs. Since then it
has continued to provide quality products to its customers with products and packaging
innovations. This report covers broad areas of marketing, finance, management and operations of
Shezan international limited.
An important part of this report comprises of financial analysis of Shezan international limited
with its two major competitors Nestle and Tops. The analysis of the company is done through
different measures and tools of analysis used by analysts in order to analyze companies. These
measures include the analysis financial statements, short-term liquidity analysis, capital structure
and solvency ratios, return on invested capital ratios, asset utilization ratios and analysis of profit
margin ratios etc. The study covers all the aspects usually considered by the stakeholders of the
company. The profits and losses, liquidity position, changes in owner’s equity, movements in
assets and liabilities, and all such factors will discussed later in the report.
Another important portion of the report comprises of the current operations of the company,
which is the strategic management. A comprehensive detail is provided about the company’s
strategies devised to maintain and develop the product line of juices. The results have been
interpreted and critically analyzed to propose new strategies for the improvement of Shezan
international.
These new strategies aim to build a better image for Shezan international. In addition to its
image, the proposed strategies will also help in achieving lower costs through better distribution,
efficiency in operations and revamped marketing plan to better position and sell Shezan juices.
The strategies will help Shezan juices to compete with firms like Nestle.
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Introduction:
Shezan International Limited is a Private Limited Company, with the main objective to set up an
industrial undertaking for manufacturing of juices, squashes, sherbets, jams, pickles and
preserves from fruits and vegetables. Shezan International Limited was conceived as a
joint venture by the Shah Nawaz Group of Pakistan and Alliance Industrial
Development Corporation of U.S.A. The agricultural background of the Pakistani sponsors
induced them to establish this agro-based industry. Taking advantage of abundance of fruits
available in Pakistan and the advanced technology provided by the American partners, Shezan
became a pioneer in the field of converting fruits into pulps, concentrates and juices. Today
Shezan is the largest food processing unit having developed and installed the capacity to meet
the country's local as well as export needs.
Brief History:
Shezan Company was incorporated on May 13, 1964 as a private limited company, with the
objectives as set out in the Memorandum of Association in general and in particular to set up an
industrial understanding for manufacture of juices, squashes, sherbets, jams pickles and
preserves from fruits and vegetables. Nature has blessed Pakistan with an ideal climate for a
wide range of delicious fruits. Over the centuries Pakistani experts have acquired and developed
unique strains of exotic fruit varieties, unmatched for their rich flavor and taste Shezan
International Limited was conceived as a joint venture by the Shah Nawaz Group of Pakistan and
Alliance Industrial Development Corporation of U.S.A in1964. The agriculture background of
the Pakistani sponsors induced them to establish this agro-based industry. Taking advantages of
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abundance of fruits available in Pakistan, and the advanced technology provided by the
American partners, Shezan became pioneers in the field of converting fruits into pulps,
concentrates and juices. Today Shezan is the largest food processing unit having developed and
installed the capacity to meet the country’s and export needs. In 1971 the Shah Nawaz Group
purchased all the shares of Alliance Industrial Development Corporation with the permission of
the Pakistan Government. The Company has since shown sustained growth in both the domestic
and exports fields. The Company has been steadily expanding its production capacity over the
years. In1980-81 a separate unit was installed in Karachi which now caters for Karachi, Sindh
and export demand. A new bottle filling plant was set up in1983 in Lahore unit increased the
capacity five-fold. An independent Tetra Brick Plant was commissioned in 1987 making us the
leading manufactures with comprehensive range of production in the fruit processing field in
Pakistan
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Vision:
“To be known as leader of quality products in the region. Dedication to quality is a way of life at
our company. In its activities the company will pursue goals aimed at the achievement
of profitable business .these results will be derived from the dedicated efforts of each employee
in conjunction with supportive participation from management at all levels of the company. To
pay its role in the economic development of the country and to enhance quality of life of
its people”
The vision statement should be brief and simple enough to understand by
the stake holders. It should be specific and depict the clear picture of the
company.
Mission statement:
“Our mission is to provide the highest quality fruit and vegetable related juices and products to
retail and food services customers.
We will accomplish this by maintaining a tradition of pride in our products, growth through
innovation, integrity in the management of our business and commitment to team management
and quality improvement process.”
The current mission statement of Shezan international is very market
oriented where as in recent perspective the use of customer oriented
mission statements are better to understand by the customers as well as
they are easy to attach with them emotionally.
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Values:
Integrity & Ethics
Shezan has an open disclosure policy and transparent processes. All business activities
transactions are carried out honestly and with fairness; results are achieved through
demonstration of honest and ethical behavior
People
Have passionate people with intelligent and firm approach towards business. To facilitate these
people Shezan gives them challenging opportunities, training, and fun loving environment,
necessary resources and facilities. Public recognition of talent is a priority.
Innovation
Innovation is the way of life at EFL. It is valued, encouraged and rewarded in all aspects of
operations.
Safety, Health & Environment
Shezan manages and utilizes resources and operations in such a way that the safety and health of
their people and neighbors.
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Squashes
Juices
Chutney
Ispaghol
Pickles (in vinegar)
Fruits (can)Vegetables (can)
Salt
Pickles (in oil)
Vinegar
Ketchup
Product Mix:
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Objectives:
Objectives are the steps which you take in practical to get or achieve short
term as well as long term goals. The objectives can be of three categories
depending upon the time frame attached or associated with that goal, it may
be short range, medium or intermediate range and long range.
As it has been so clear by the mission statement of Shezan international that
what are their major and prime objectives but let us list them here again to
make it quite clear, simple and easy to understand.
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To put it’s all efforts to become industry leader in the industry.
To keep focused and determined to provide best quality fruits and
vegetables product
To be committed to provide excellent and quality juices and nectars to
their consumers
To keep an eye on the fruitful investments and opportunities in new
projects
To achieve better production facilities
To manage the operations of the company in effective and efficient
way
To cope up with the technological advancement and keeping up to
date
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Industry Structure:
The beverage industry of Pakistan has seen many rise and fall but one can
say with full assurance that it has growing with the years. The industry
consists of the product categories such as soft drinks, juices, syrups, milk
and squashes, although Shezan international doesn’t have all these
mentioned categories yet it falls under the beverage industry. According to
the Stats there are currently 170 units operating and both upstream and
downstream industries have on rise and are growing significantly. There is
very high profit margin in the industry and has witnessed a significant
increase over the years.
The growth of this sector has been hit badly with the decrease in purchasing
power of the consumers. Inflation and conditions of Pakistan has caused the
growth a bit slow. Poverty has been increasing in Pakistan and thus the
purchasing power is decreasing with the years. The competition has also
increased in few years due to easy import of the products.
Research has also shown us that the term of health consciousness is
widening its arms very rapidly and just because of this consumer prefers to
have low calorie and diet juices or squashes rather than the regular ones.
Future growth of this sector and industry is more likely to rise on a slower
pace because of the intense competition between the local and imported
products. The more innovative products will come up in the market making
consumers to think twice to purchase a product.
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Distribution of the products is more likely to increase up to the far rural areas
with time and this factor is very important in the growth of this industry. It is
more logical to think in a way that people will get aware and aware about the
products and thus the increase in sales and revenues will occur which in turn
will make this industry grow.
The overall industry attractiveness and industry structure is better illustrated
by Porter’s five forces model:
Porter’s five forces model:
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Potential entrants
Low switching costs
economies of scale
favourable government policy
Suppliers
Large number of buyers
like nestle, tops,
country.
Low switching costs
Substituteraw material
Threat of forward
integration
Buyers
Large no. of buyers
Substitutes like nestle,
country available
Low switching costs
Threat of backward
integration
Substitutes
Similar tasting juice (country,
tops, nestle)
Same price
Same identity.
Degree of rivalry
Many competitors (nestle,
country, tops etc)
Low product
differentiation
Growing industry
Other stakeholders
Unions, government
etc.
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The juice industry is attractive for new market entrants. The reason being that due to high
demand it is easy to achieve economies of scale. The government policies are also favorable for
the industry and the exit barriers are not too high as well.
The buyer strength in the industry is however is high. Many substitutes are available and the
switching costs are low. The same is for supply side which is good for producers as it means less
bargaining power of suppliers. Supplier switching costs are low and firms can and do forward
integration.
As far as substitutes are concerned, there are number of substitutes available. These juices are
really close substitute offering the same benefit. The competing brands also have a similar
product identity or perception. The industry is growing as new entrants are continuously coming
in. This has increased the competition to a great deal.
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Product Positioning:
Positioning is the perception of a product or service in the mind of the people. Positioning of a
product allows it to be seen or perceived in a certain way by the target audience. To have a
successful strategy and product, effective positioning must be done. Without strong positioning
no matter what the product is, it’s going to fail.
Shezan international has positioned Shezan as a low quality affordable juice drink. The
perception has been created in the minds of consumers that Shezan is an affordable juice with
good taste. To support this positioning strategy, Shezan has been priced reasonably well below
the competing high quality juices like nestle.
The target market for Shezan is the middle income group and lower middle. The people Shezan
is targeting are mostly young adults and teenagers. The placement of the product has also
contributed to its low quality positioning. Mostly Shezan juices can be seen at small retail stores,
school cafe and canteens. The presence of Shezan in superstores and big markets is nonexistent.
This may be due to the placement strategy or due to the shelf space in stores.
The company has also created this perception through various advertisements showing young
teenagers drinking and getting refreshed by the juice. These school and college going students
also symbolize that it’s not expensive and is pretty affordable. The price of the juice is also one
of the lowest in the market hence making its perception of low quality juice.
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Another factor contributing to this perception is the taste. The juice is made from artificial
flavors and sweeteners thus making its taste give a perception of cheap low quality juice. The
packaging has also contributed to this type of positioning. The juice packs are very basic in
design and lack any creativity.
In today’s juice industry, companies have started increasing their fruit concentration as the
people are demanding it. The juices with high concentration of pulp are perceived as better
quality. In case of Shezan people associate it as low quality because of this low concentration of
fruit pulp.
Competitive strategy:
Shezan has the highest production capacity as compared to its competitors.
Shezan is very strong name and can afford to have super production
facilities.
Shezan international is using cost leadership strategy in which all of the
efforts are made to minimize the costs and to provide the masses with your
low cost product. Shezan with this strategy is quite successful in the market
and is able to cope up with the competition quite effectively and efficiently.
On the other hand Nestle uses the differentiation strategy. It attacks the
market with differentiated products but on high price thus providing room for
Shezan to sustain in the market with targeting low income segment
massively.
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The strategy of Shezan gives advantage as there are number of suppliers in
the market that supply material to the industry. But Shezan gets its raw
material from its on farms to get the advantage over its competitors and to
reduce the suppliers bargaining power (Backward integration). Shezan
provides the same product as its competitors are providing, as bargaining
EQUITY AND LIABILITIES Share capital and reserves share capital 50,000 60,000 60,000 60,000 60,000Reserves 425,000 500,000 583,449 653,022 723,293inappropriate profits 150,696 176,900 134,371 135,116 169,718Total Equity 625,412 736,700 777,820 848,138 953,011
Long term liabilities 57,281 51,858 45,962 91,121 71,747
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Current liabilities 437,654 519,497 530,603 680,194 920,811
Total liabilities 494,935 571,355 576,565 771,315 992,558Balance sheet is one of the three major financial statements of a company, the other two being
income statement and statement of cash flows. It shows the position of the company at a certain
point in time.
The Assets of the company have shown an increasing trend and so have the liabilities and equity.
To further look into the picture we can see that the company’s Assets have increased by 73 %,
liabilities by 100 % and Equity by 52.4%. The rise in assets was obviously partly financed by
liabilities and partly by equity but the major portion was the liability one. Liabilities from the
very beginning are the major proportion of the assets.
There is an overall a rising trend in almost every component of the balance sheet. Long term
finance has increased greatly. Trade debts, stock in trade and other stores are the major
proportion of current assets. The company needs to focus on rising trade debts. Moreover the
balance depicts a satisfactory picture of the company.
Scores of 3.17 & 3.04 show that Shezan is placed in the first quadrant, meaning that it is in a strong position to avail the external opportunities using its strengths and to minimize weaknesses and threats using a combination of strategies listed in the SFAS.
I-E matrix shows that Shezan is in a position to “grow and build”; It is recommended that Shezan consider backward integration, which would result in maximum utilization of the current position of the company and allow it to grow through concentric (linked) diversification in a way as to capitalize upon the current opportunities in the market through its strengths. [Further strategy planning is provided in the TOWS matrix]
New employee initiative, OJT, mentor programs and remuneration strategy
Technology DevelopmentContinuous research initiative, flavor development and automation change
ProcurementBackward integration allows, purchase of fruit
from self-owned farms
Profit Margi
n
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INBOUND
LOGISTICS
OPERATIONS
OUTBOUND
LOGISTICS
MARKETING & SALES
SERVICES
Mixing Retail promotions Customer Feedback
Packaging Packing Distribute juices
Sales training
Primary Activities
Activity Valuable? Rare? Substitutes? Difficulty of Imitation
Inbound Logistics Yes Yes Few High
Operations No No Many Medium
Outbound Logistics Yes No Few High
Marketing & Sales Yes No Many Low
Services No No Many Low
Identified Sources of Competitive Advantage: Inbound & Outbound Logistics
Grand Strategy Matrix:
Rapid Growth
Quadrant II Quadrant I
Shezan
WCP SCP
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Quadrant III Quadrant IV
Slow Growth
*WCP=weak competitive position; SCP=strong competitive position
The Grand Strategy Matrix, which is made by overviewing all the other matrices, shows that
although there is rapid market growth (local & abroad), Shezan is in a weak competitive position
when comparing it to market leader Nestle as well as other strong competitors like Olfrute. It is
suggested that Shezan utilize the previously mentioned strategies and reposition itself in such a
manner as to improve its competitive position in the minds of the consumers. This, it is felt is
necessary for survival and is the single biggest change that needs to be implemented.
Major issues and problems:
Their overall Distribution is not properly integrated. They are not sharing information with each
other. The logic behind identifying this problem is that they have their own farms and they are
getting most of their raw material for the production from their own suppliers. And sometime
when the raw material is reached at the warehouse for storage, the quality of fruits is not up to
the standard and therefore they have to reject the supply.
The point is, if they have their own supplier why can’t they check the quality of their raw material before dispatching it to the production plant. They are not sharing information and that’s why when the supply is rejected, they have to face loss of time and their production has to face lack of raw material.
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Recommendation:
First of all they have to improve their overall supply chain. They have main problems in their
supplying side and the distribution channel. The problem of their raw material can be solved if
they start inspecting their raw material for pulp formation at the farm before dispatching the
supply. And they should use better trucks in which the quality of the fruits is not damaged. And
when they temporary store their raw material in the warehouse, they must not store it for a long
time and they should keep it in a dry and safe place.
They should reduce their inventory of fruits to a minimum level and move towards the just in
time supplies. In this way they will be able to save the time which is wasted after rejection of raw
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material due to poor quality or poor handling or poor storage. Their major delays in their supply
chain are at the raw material incoming and in cold storage waiting for distribution.
They should make their relations with the salesman on long term basis, and not on short term
contract basis. Because then they are hired for short term, they do not give the productivity
which is needed in the full demand season. They are not able to deliver on time and that’s why
they lose their next orders from retailers. They should make long term relations with their
salesmen and they should be trained well so that they can deliver the products on time.
And for other distributers like in Faisalabad and Multan, they have to discourage them to not
give the product to smaller distributors for distribution. Because in this way they are facing two
main problems, one is that it takes more time for the product to reach to the retail shop and
secondly when the product is reaching the retailer after passing through two distribution channels
, the price of their product is increased as compare to Lahore city. When the customers have to
pay more for the same product, they will start switching to other brands.
Right now, they have a centralized distribution center in Lahore. They are distributing the
products from the production plant facility. They should focus on primary and secondary
distribution centers so that the On Shelf Availability of their products in the markets and shops is
increased and their existing customers do not switch to other brands.
Conclusion:
As according to what we observed from the Shezan’s Strategies we have found that Shezan is
sometimes proactive and some time it adopts reactive approach. Shezan is very much conscious
and careful about its sales and about the customer satisfaction level and since 1964 they tried to
maintain a same graph of satisfaction level and give customer a quality, fresh farm products
direct from their own farms. Shezan is very much concerned about its SWOT analysis and
keeping a closer eye on every action it can take for the better of its products.
Every SBU has its own strategies to make and to implement and here at SBU level business
strategy focus more narrowly on their own products. The MD plays an important and central role
for the strategic planning to be more effective not just as a MD but also as a strategic thinker and
corporate culture leader.
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Shezan’s management deals with developing a marketing mix to serve a designated market.
Their main focus is on the strategies at SBU level where Shezan make their strategies
considering three forces:
Customer
Competition
Corporation
And in addition to this internal and external factors also play an important role to develop
strategy.
Shezan is concerned about the external information pertains on social, economic, political and
technological trends and product/market environment. The information is analyzed to identify
the SBU’s strengths and weaknesses, which together with competition and customer define the
objective of SBU.
Shezan is also very concerned about the Corporate Appraisal and for this they keep a closer
interact with all the groups of corporate publics having a stake in the organization. In this context
Shezan is very much concerned about the Financial Position of the company. And they evaluate
this factor very closely for the further decision making of their products.