Lakson Tobacco Company Ltd

Lakson Tobacco Company

INTRODUCTIONINTRODUCTION

Tobacco business is a centuries old business. It has a very high growth rate

and has seen many ups and downs. It has also been controversial over the period

of time and has been subject to many types of criticisms. But apart from all these

things people do smoke and people want to keep on smoking. I start my discussion

with the history of tobacco.

HISTORY OF TOBACCOHISTORY OF TOBACCO

EARLY TOBACCO USEEARLY TOBACCO USE

1,000 BC Ancient temple carvings depict Mayan priests in Central America

smoking tobacco through a pipe. Tobacco leaves become widespread in

medicine for use on wounds as a means of reducing pain. Later the Aztecs

incorporate smoke inhalation into religious rituals. Two castes of smokers

emerge: the pipe smokers at the court of Montezuma and lesser Aztecs who

roll the leaves into crude cigars.

470 - 630AD Mayan tribes begin to scatter - and tobacco travels with them.

The leaf moves southwards to South America where it is wrapped in maize and

palm leaves and smoked - and north where it is introduced to the native

Americans in the Mississippi area. In North America pipes are made from clay,

marble or lobster claws. Some pipes, with two stems, are used for inhaling

through the nostrils. Tobacco chewing is common, especially in South America

where the leaf is mixed with lime.

1492 Arawak people in the Bahamas, on an island Christopher Columbus

christens San Salvador, offer the explorer-dried leaves. Not understanding their

significance, Columbus discards them. A month later Rodrigo de Jerez and

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Luis Torres – returning from a trip into the interior of Cuba - stumble on

villagers inhaling the smoke from burning dried tobacco leaves through a

hollow Y-shaped piece of cane called a tobago or tobaca. Jerez is thought to be

the first smoker outside the Americas. When Jerez returns to his home town of

Ayamonte, during the Spanish Inquisition, the holy inquisitors accuse him of

"consorting with the devil" when they see smoke coming from his mouth. He is

imprisoned for seven years. By the time he is released, smoking is a custom in

Spain. Jerez perhaps sets a precedent for the plant's controversial future.

1492: Arawak people in the Bahamans North America give Christopher

Columbus burning leaves, pipes are made from clay, marble or lobster claws.

USE OF TOBACCO IN 20th CENTURY

1900 The Anti Cigarette League publishes a pamphlet claiming links between

cigarette smoking and brain disease.

1902 The Imperial Tobacco Company of the United Kingdom and The

American Tobacco Company of the United States agree to end a trade war by

forming a joint venture, the 'British-American Tobacco Company LTD'. James

B. Duke, becomes the venture's first chairman.

1908 The New York City authority bans women from smoking in public. Two

weeks later Katie Mulcahey is arrested for violating the rule. As she is led

away she declares, "No man shall dictate to me". Cigarette smoking was often

seen as a symbol of women's emancipation.

1914Outbreak of World War I. General John J. Pershing, commander-in-chief

of the American forces in France in 1917 calls tobacco "indispensable to the

daily ration". In Europe troops use cigarettes to pass time and to try to calm

their nerves. The popularity of cigarettes in the armed forces associates tobacco

with patriotism.

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1925 Despite the bans, cigarette sales continue to increase. The American

Mercury reports, "The more violently it has been banned, the more popular it

has become."

1941 Roosevelt makes tobacco a protected crop as part of the World War II

war effort. His wife Eleanor was dubbed "the first lady to smoke in public".

1945 During World War II, smoking increases. By the middle of the next

decade, more than a quarter of American women and more than half of

American men smoked cigarettes.

1952 Two British researchers, Richard Doll and A. Bradford Hill report the

results of a four-year study comparing 1,465 lung cancer patients to an equal

number of patients with other diseases, matched for age, sex and region. They

conclude that lung cancer patients are considerably more likely to be smokers

and much more likely to be heavy smokers.

1960s Public health warnings emerge.

1964The American Surgeon General publishes a 387-page report stating,

"Cigarette smoking is a health hazard of sufficient importance in the United

States to warrant appropriate remedial action." For the first time smoking is

banned in the State Department auditorium

1980s The tobacco industry sees substantial annual duty increases which result

in cigarette taxation increasing by 85 per cent or more in several countries

including the UK.

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SEED TO STICK JOURNEYSEED TO STICK JOURNEY

SEEDSEED

The tobacco plant is a member of the same botanical family as tomatoes, potatoes,

peppers or eggplants. An adaptive species, it can be grown economically from 50°

Northern to 40° Southern latitude. More than 100 countries grow tobacco. China is

the largest producer, followed by the United States, Brazil, India, Zimbabwe and

Turkey.Tobacco thrives in poorer soils, providing farmers with a welcome

alternative crop. In many cases, it provides a higher income than any other

smallholder crop. As a crop, it integrates well into environmentally friendly

rotations, and its inclusion benefits subsequent crops like maize. A typical farmer

in rural Uganda, for example, with two to three hectares of land can earn a good

income from only a small part of that land being planted with tobacco. British

American Tobacco can help the farmer by providing seeds and fertilizer and by

giving advice on planting, growing, harvesting and curing tobacco and other crops.

There are some 13,000 seeds in a gram -looking rather like powdery instant

coffee. The seeds are so small that they must be nurtured in specially prepared and

protected seedbeds for 60 days before transplanting to the field. After a couple of

weeks, soil is banked up around the seedlings to protect them and to allow them to

develop a good root system. Two months later, the plants' flowers and some of the

upper leaves are 'topped' in order to concentrate growth in the remaining leaves (in

the same way that tomatoes are 'pinched out'). All the time, the farmer needs to

provide the appropriate nutrition for the plant and watch out for pests as the crop

grows towards the harvesting stage.

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HARVESTHARVEST

With the exception of some countries such as the United States (where the

crop is mechanically harvested), the farmer will typically harvest by hand,

sequentially taking off 2-4 leaves per plant as the leaves ripen from bottom to top,

which stretches the harvesting period from over 2 to 4 months. The typical

Ugandan farmer will harvest about 15,000 plants, each with 22 leaves.

TOBACCO TYPESTOBACCO TYPES

Virginia is named after the US state where it was first cultivated. It is also

called "bright tobacco" because of its yellow to orange color, achieved during the

flue-cure. This type grows particularly well in subtropical regions with light

rainfall, such as Georgia (USA), Southern Brazil and Zimbabwe. Classic English

brands like Benson & Hedges or Dunhill use exclusively Virginia tobacco.

Burley is slightly lighter green than Virginia is. After being air-cured, the

tobacco turns brown with virtually no sugar, giving it an almost cigar-like taste. It

requires heavier soils and more fertilizer than Virginia does. The best Burley is

grown in the USA, Central America, Malawi and Uganda. Together with Virginia

and Oriental tobacco, it makes up an American Blend, as used in brands like

Lucky Strike or Pall Mall.

Oriental is the smallest and hardiest of all tobacco types, grown into the

hot summer of the Balkans, Turkey and the Middle East. These conditions and a

high planting density create an aromatic flavor, enhanced by sun curing, as in a

traditional Turkish cigarette.

CURINGCURING

Curing is a carefully controlled process to achieve the texture, color and

overall quality of a specific tobacco type. During the cure, leaf starch is converted

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into sugar, the green color vanishes and the tobacco goes through color changes

from lemon to yellow to orange to brown like tree leaves in autumn.

There are four main curing methods.

1-Air-Curing

Air cured tobacco, for example Burley, is hung in unheated, ventilated

barns to dry naturally until the leaf reaches a light to medium brown color. At this

point, there are virtually no sugars left in the leaf.

2-Flue-Curing

Heat is introduced into a barn via pipes from an exterior furnace like

radiators connected to the central heating system. This controlled heat allows the

leaves to turn yellow/orange at which point they are fixed. These leaves now

contain a high amount of sugar. Virginia tobacco is flue-cured.

3-Sun-Curing

Leaves are strung out on racks and exposed to the sun. The whole process

takes from 12 to 30 days. The sun's direct heat fix the leaves at a yellow to orange

color with a high sugar content. Oriental is the most prominent among the sun-

cured tobaccos.

4-Fire-Curing

Fire curing follows the same principle as producing smoked ham.

Brushwood is burnt under the tobacco leaves, which dries the tobacco and

produces a Smokey fragrance. This type is principally used in some pipe tobaccos

such as Dunhill Morning Mixture, or roll-your-own brands like Samson or

Javanese Jongens.

After curing, the farmer grades the leaves into different leaf positions,

qualities and colors and packs his grades into what is known as a farmer bale of

30-50kg. He then takes his bales to a buying center or auction for sale.

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PROCESSINGPROCESSING

The cured leaf is then processed through a Green Leaf Threshing Plant. The

main purpose of the processing is to remove sand, dust, scraps and foreign matter.

Separate the lamina from the stem (threshing). Drive down the tobacco to a safe

'keeping moisture' content. Processed tobacco is packed into 200kg cardboard

boxes, for shipping to manufacturing sites.

MANUFACTURINGMANUFACTURING

At the factory, the matured tobacco is checked for quality and then

carefully blended with other ingredients which the brand recipe may call for, such

as flavorings or pre-processed tobacco. Keeping track of the various types of

tobacco and blend components is key and computers are increasingly used to track

production runs. Moisture content is crucial. Too dry and the tobacco leaf will

crumble; too moist and it may spoil during storage. The blended tobacco is treated

with just the right amount of steam and water to make it supple, and then cut into

the form in which it appears in the cigarette. Excess moisture is then removed so

that the cut tobacco can be given a final blending and quality check.

Cigarette making, once done entirely by hand, is today almost fully

automated with the cut tobacco, cigarette paper and filters continuously fed into

the cigarette-making machines. The technology has advanced dramatically over

the years, but quality is not forgotten; each cigarette is automatically quality

controlled to ensure that it meets every aspect of its specification. As packing

machines put them into the familiar brand packs, wrap the packs in protective film,

and group them into cartons and cases, further testing takes place at each stage to

make sure the cigarettes are properly protected. The completed cases, time-dated

to ensure the freshest product possible, are then ready for distribution.

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TRADE MARKETING & DISTRIBUTIONTRADE MARKETING & DISTRIBUTION

Finished products are distributed to more than 15 million retail outlets

throughout the world. As a leading consumer goods company, Company aims to

get our products to the retail outlets in the most efficient and cost-effective

manner, and in the best possible condition. Company constantly monitors and

evaluates global supply chain network to guarantee that brands are delivered by

the best distribution methods.

"As a leading consumer goods company, company aims to get our products to

the retail outlets in the most efficient and cost-effective manner, and in the

best possible condition."

The retail outlets include supermarkets, convenience stores, hotels,

restaurants, cafes, tobacconists and duty free shops. It's the job of trade marketing

to work with retailers, to enable adult consumers to buy brands where they want,

when they want and in sufficient quantity.

Company’s big goal is customer satisfaction. Its trade marketing and

distribution has earned Lakson Tobacco Company recognition in the retail trade in

several of its major markets, as a leading cigarette manufacturing company in

terms of professionalism, service levels and speed of response.

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INDUSTRY OVERVIEW INDUSTRY OVERVIEW

Tobacco production in Pakistan is forecast to increase to 98,500 metric tons (MT)

due to an expected increase in area and yield. Area is forecast to increase in

response to stronger demand and better prices from cigarette manufacturers.

Vegetables and sugarcane compete with tobacco and farmers have started inter-

cropping tobacco to increase returns.

Tobacco is grown mainly in the North West Frontier Province (NWFP) and

Punjab. Flue-cured and burley tobaccos are used primarily in higher-quality

cigarettes. Oriental varieties (known locally as White Patta) are used in low-

quality cigarettes and for chewing tobacco. Dark air-cured varieties are largely

used for filler,while light air-cured varieties are used primarily for traditional

Pakistani tobacco products.

Yields in Pakistan are about twice those for neighboring countries largely due to

the extension services provided by the industry. Quality, however, is improving

only slowly due to problems related to climate and soil.

In 2000 tobacco consumption is forecast to increase to 81,200 MT as a result of

increased demand for tobacco products. An estimated two-thirds of the tobacco

produced in Pakistan is utilized for cigarettes and the remainder for other tobacco

products.

About 24 companies manufacture cigarettes in Pakistan. Two of the largest--

Lakson Tobacco Company and Pakistan Tobacco Company--account for 52 and

41 percent of total cigarette production respectively.

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BRIEF INTRODUCTION OF LAKSON GROUP OFBRIEF INTRODUCTION OF LAKSON GROUP OF

COMPANIESCOMPANIES

Lakson group of companies is a national base group of companies. It comprises

of different companies. There are 29 companies in the Lakson group of

companies. Lakson group deals in garments, leather, cloth, paper, packaging,

textile, tobacco industry and many other areas of business in all over the country.

The board of directors consists on

Mr. Sultan Ali Lakhani

Iqbal Ali Lakhani

Amin Lakhani

Zulfiqar Ali Lakhani.

The chairman of the group is Mr. Sultan Ali Lakhani.

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BRIEF HISTORYBRIEF HISTORY

OF OF

LAKSON TOBACCO COMPANYLAKSON TOBACCO COMPANY

Lakson Tobacco Company is one of the largest tobacco companies in the tobacco

industry of Pakistan. In 1952, Mr., Abdul Samad, formed a cigarette company,

named premier tobacco industries. Miss Fatima Jinnah inaugurated it.

Mr. Abdul Samad was its first chairman.

The premier launched its first product in 1953. In 1957, the famous brand K-2 was

launched which dominated the industry for many years.

In 1958, Mr. Sadar-Ud-Din Hashwani purchased the PTI industries but could not

handle it due to lack of experience.

Lakson Tobacco Company was established in 1971 by Mr. Hassan Ali kara Bhai.

In September 1971, they launched their first brand Lakson King. In 1983, with

collaboration of Ruthman International, they launched Ruthman NT.

In 1983, Lakhani brothers purchased the main controlling shares of PTI. It was a

big merger indeed. In this way Lakson Premier group was established. In January

1997, by the decision of Sindh High court, they changed the name as Lakson

Tobacco Company.

Now Muhammad Iqbal Ali Lakhani is the chairman of the Lakson tobacco

company.

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MISSION STATEMENT OF THE COMPANYMISSION STATEMENT OF THE COMPANY

“To provide best quality products to our valued customers and consumers, and to

strengthen national economy by contributing with new business units which will

help to decrease unemployment to some extent and to generate more revenue for

the government for the sake of prosperous Pakistan”.

OBJECTIVES OF THE COMPANYOBJECTIVES OF THE COMPANY

“Lakson Tobacco Company got no. 1 position in cigarettes industry since 1996;

now the main objective of the company is to maintain its no.1 position and to

capture more market shares with planning, organizing and implementation of sales

and marketing activities”.

HEAD OFFICE OF THE COMPANYHEAD OFFICE OF THE COMPANY

The company’s head office is in Karachi. The head office controls all the activities

of the company.

PRODUCTION UNITSPRODUCTION UNITS

THE production of all the products of the lakson tobacco company takes place in

the five factories located in the districts of

karachi

Sahiwal

Dadu

Rawalpindi

Swabi

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GODOWNSGODOWNS

There are sixteen godowns, which are providing the company with the facility of

efficient distribution.

Karachi

Hyderabad

Rohri

Bahawalpur

Multan

D.G.Khan

Sahiwal

Bahawal Nagar

Faisal abad

Sargodha

Lahore

Jehlum

Islamabad

Rahim Yar khan

Bhakkar

Mardan

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DISTRICT OFFICESDISTRICT OFFICES

The company has efficient distribution network. There are fifteen district offices

situated in the following cities.

Karachi

Hyderabad

Bahawalpur

Multan

Sahiwal

Faisalabad

Lahore

Islamabad

Sukkur

Gujranwala

Peshawar

Lar kana

Quita

Sargodha

Jehlum

MARKET SHARES IN TOBACCO INDUSTRYMARKET SHARES IN TOBACCO INDUSTRY

Lakson Tobacco Company is the market leader with 51% share of the total market.

The market share of Pakistan Tobacco Company is 33%. Remaining part of

market is capture by the other tobacco companies of Mardan.

EMPLOYEES OF THE LAKSON TOBACCOEMPLOYEES OF THE LAKSON TOBACCO

COMPANYCOMPANY

There are more than 2500 employees are working. In this strength of the

employees, approximately 1700 employees are working in marketing and selling

department.

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COMPETITORSCOMPETITORS

In tobacco industry, there are too many brands including international ones

operating in Pakistani market but the company recognizes the following

companies as the close competitors of LTC.

Pakistan Tobacco Co.

Mardan Based Companies.

International Companies.

These are the competitors which the company feels “ are closely competing in the

market. The recognition of competitors is generally made on the following basis.

The statistical data, which shows that the sale of Lakson Tobacco and that of

its competitors is highly competitive.

Feedback from field force and personal judgment of the brand manager.

For the identification of competitors, all the information regarding competitors is

collected by the brand manager and then analyzed by the planning department to

have an overall view of the competitors.

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COMPETITORS BRANDSCOMPETITORS BRANDS

These are the following competitor brands.

GOLD LEAF

GOLD LEAF LGHTS

CAPSTON

INTERNATIONAL

CAPSTON FILTER

GOLD FLAKE

WILLS KINGS

WILLS NAVY CUT

EMBASSY FILETR

EMBASSY KINGS

3-CASTLE

MELBURN

FOLKS OWN

TIME SQUARE

WILSON

FLIGHT

MILD SEVEN

RANGER

CHIEF

DERBY

MARVI

HILTON

TANDER

STYLE

TICKET

MEMBER

HOLIDAY

ADVISOR

POWER

CITY

PARTY

WONDER

INTERNATIONAL BRANDS INTERNATIONAL BRANDS

DUNHILL

555

BENSON & HEDGES

MARLBRO

MORE

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NAME OF PACKINGNAME OF PACKING

BRAND PACKING

Premier Classic, Red & White, Diplomat,

Royals Etc.

HL

Lord, K-2, Hylite, Princeton Etc. SC

Embassy Filter, Capstan Filter (Of Ptc) SS

Dunhill (Imported) EP

* HL --- Hinge Lid

* SS ----- Shell & Slide

* SC ----- Soft Cup

* EP ----- Emperor Pack

CLASSIFICATION OF CIGARETTESCLASSIFICATION OF CIGARETTES

Some brands are classified according to length and sizes. Brands of LTC

classified according to size and length are as follows;

KSFT King size filter

RSFT Regular Size Filter

LSFT Long size filter

The Packing is also given different names according to their classification and

their variety.

HL Hinge Lid

SS Shell & Slide

SC Soft Cup

EP Emperor Pack

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CIGARETTE PARAMETERS THAT CAN AFFECTCIGARETTE PARAMETERS THAT CAN AFFECT

QUALITY QUALITY

1) Length

2) Circumferences

3) Moisture

4) Cigarette paper

5) Pressure drop

6) Tip leakage

7) End loss

8) Firmness

9) Blend chemistry

CIGARETTE COMPONENTS AND THEIRCIGARETTE COMPONENTS AND THEIR

FUNCTIONSFUNCTIONS

1. TOBACCO BLEND1. TOBACCO BLEND

Purpose

Delivering taste

Delivering psychological satisfaction

Composition

Fuel cured tobacco

Air cured tobacco

Burley tobacco

Stem

Top flavors

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2. CIGARETTE PAPER2. CIGARETTE PAPER

Purpose

To contain tobacco blend

To control air dilution

To control burning rate

Composition

Largely cellulose

Contain fiber such as calcium carbonate

3. FILTER3. FILTER

Purpose

Cigarette filter reduce tar/nicotine

Act as a mouth pipe keeping tobacco away from smoker’s mouth.

Composition

Mostly cellulose acetate

4. PLUG WRAP

Porous and non porous

5 Tipping Paper

Ventilated and non ventilated.

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BRANDS OF LTCBRANDS OF LTC

PREMIER CLASSIC 20HL

RED & WHITE 20HL

RED & WHITE 10HL

MORVEN GOLD 10 HL

MORVEN GOLD 20 HL

MORVEN GOLD 40 BOX

PRINCETON 20SC

DIPLOMAT 10HL

DIPLOMAT 20HL

DIPLOMAT40HL

K-2 FILTER 20SC

LORD KSF 20SC

HYLITE KSF 20SC

ROYALS FILTER 20HL

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STRUCTURESTRUCTURE

OF OF

MARKETING DEPARTMENTMARKETING DEPARTMENT

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Chairman

Executive Director

National Sales

Manager

Director Marketing And Sales

Regional Sales

Manager

District Sales Manager

Area Sales Manager

Sr.Area Sales Manager

Sr.District Sales Manager

General Manager

Marketing

Brand Executive

Brand Manager


ROLE OF MARKETING DEPARTMENTROLE OF MARKETING DEPARTMENT

Marketing is the delivery of right product to the right costumer at the right place at

the right time at the right place through the communication and promotion.

Sales and marketing department is go into the marketing and selling for the

company’s products that are cigarettes. Huge sales force is working in the field.

There are many district, area sales managers in the regions of the sales department.

The achievement of the targets is very necessary for this department.

Sales force of the company is very much skilled and motivated towards its tasks.

In Lakson tobacco company the marketing is defined as

“ Marketing is the backbone of the company, which plays a vital role in

company sales, building brands and company image”.

Introduction of marketing department

In Lakson Tobacco Company, marketing department consists of the following

heads.

General manager marketing

Marketing managers

Brand manager

Brand executives

ROLE OF MARKETING DEPARTMENT IN THE COMPANY

All functions of marketing department are very much important to the Lakson

tobacco company.

“TO CREATE THE FAVORABLE IMAGE OF THE BRANDS AND COMPANY

IN THE MINDS OF THE CUSTOMERS WHICH RESULTS IN SALES ON

WHICH COMPANY EXISTS”.

The marketing department of the Lakson Tobacco Company does the marketing,

sales, and research.

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LTC has divided the whole country into five regions to facilitate sales and

marketing activities. Following are the Regional Offices of the LTC.

Karachi

Lahore

Faisalabad

Islamabad

Hyderabad

LAHORE REGIONLAHORE REGION

In the head of Lahore region four districts are working these are

Lahore

Gujranwala

Sahiwal

Bahawalpur

FAISALABAD REGIONFAISALABAD REGION

Faisalabad region consist of the following districts

Faisalabad

Multan

Sargodha

Jehlum

ISLAMABAD REGIONISLAMABAD REGION

Islamabad region contains the district of Islamabad, Peshawar and quita.

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HYDERABAD REGIONHYDERABAD REGION

In the head of Hyderabad Region the district of Sukhar, Larkana & Hyderabad are

working.

AREASAREAS

Each district is further divided into four to five areas under the head of Area

Managers.

Faisalabad region is divided into following district and areas

Faisalabad (Regional Office)

Multan (D. Faisalabad (D.O) Jehlum (D.O Sargodha (D.O)

Muzafar garh T.T. Singh Chakwal Bhakar

D.G.Khan Jaranwala Gujrat Mianwali

Khanewall Faisalabad(a) Jehlum Sargodha

Multan Faisalabad(b)

Shekhu pura

AREA SALES MANAGERAREA SALES MANAGER

WORKING OF ASMWORKING OF ASM

Each district office has a team of area managers that is supervised by a senior

district manager. Their responsibilities include following.

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1- Go to the filed practically and keep a liaison with the distributors and with

the retailers on the behalf of the company.

2- To keep and eye on the working of distributor and to keep on checking the

distributors records.

3- To be present in the wholesale market and keep working of the whole sale

market smother and trouble free.

JOB PURPOSEJOB PURPOSE

To achieve area sales forecast, by planning organizing and implementation of

selling, merchandising distribution and field promotion activities in line with

action plan.

DUTIES AND RESPONSIBILITIESDUTIES AND RESPONSIBILITIES

Sales Forecast

To prepare with guideline/assumption by the divisional sales manager.

Monthly planning conference

To actively participate in monthly planning conference of the DSM for

implementation of area action plan or other related activities.

Statistics

Area demo graphs.

Training

To regularly conduct training briefs to all field force. Employees including D.D.

salesmen with on the job training and also to educate/motivate the distributors on

line with company policies.

Touring

To prepare annual tour plan

To carry out a minimum of 150/175 days tour in each year as per policy.

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Field activities

To ensure that the action plan is being implemented by random check of the staff.

To keep abreast of brands trends and market opportunities.

Selling arrangement

To prepare the distributor history card. To prepare and monitor distributors

monthly target. To carry out regular and random visit to

whole-sellers/retailers/local/outstation. To check D.D service and brand

availability. To review distributors financial investment periodically.

Administrative

To maintain divisional leave record of his staff members.

To verify all expense statements/ distributors claims or any other claims.

DISTRIBUTION SYSTEMDISTRIBUTION SYSTEM

From the factory, when the cigarette manufacturing process finished and then after

stocking period, then there is a stage when it is to be shipped and delivered to the

customers. In this whole system following parties are involved:

Area sales managers

District sales managers

Head office

Factory manager

Godown incharges

Transporters

Distributors

Whole sellers

Retailers

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PROCEDUREPROCEDURE

First of all it is the responsibility of the area sales managers to evaluate the

demand of the market of his own area and sets the targets of the distributors. He

sends this target report to the district manager who moves it next to the head office

Karachi. Then after the complete documentation the head office send requisition to

the factories. From the factories the stock is transferred to the company godowns

in all the district head quarters. Then godown in charge on the order of the

distributor make him delivery by the companies own transportation. Then finally

distributor delivers the stock to the wholesalers, retailers and direct to the

customers.

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PROMOTION OF THE BRANDSPROMOTION OF THE BRANDS

The next major function performed by the marketing department is the sales

promotions. For this purpose, a team of sales promoters goes practically to the

field and performs the sales promotion functions. The sales promoters help in

placing posters and other temporary merchandising materials. They have to go to

the every retailer of the area and have to decorate the shop not only with posters

but also buntings and other sales promotion stuff that is given to him, according to

the currently going on promotion activities.

LTC is very well aware of importance of promotion and for this purpose

different campaigns are run periodically. SDS/MDS has to participate / sponsor

various promotion events in order to implement the agreed sales promotion plan

by exploiting various promotional opportunities in the territory. Following steps

are taken by SDS/MDS.

Participate in all major Melas/Fairs in the territory.

Identify plan and organize special events like sports, tournaments,

exhibitions, sponsorship and musical concerts.

Maintain contacts with local authorities for organizing sales promotion

activities.

Devise/invent new methods and concepts for promotion.

Sales promotion is based on the marketing activities, other than personal selling,

advertising and publicity. This stimulates consumers to buy. The examples are the

displays, shows, exhibitions, demonstrations and various non-current selling

efforts not in the ordinary routine.

Lakson Tobacco Company in also involved in sales promotion activities. It offers

different schemes not only for retailers but for consumers as well. In these

schemes, the company offers different type of incentives to both retailers and

consumers.

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STRATEGIES FOR SALES PROMOTIONSTRATEGIES FOR SALES PROMOTION

Identify the brand to be promoted keeping in view the market and consumer

profile.

Operate joint consumer promotion with melas, circus and magic shows.

Consumer promotion like lucky draws and other gimmicks to be organized

melas through stalls.

Discount coupons scheme pertaining to different brands is introduced.

Scheme awareness is done through banners, posters, and through sales

promoters.

Head Office approves the budget for the merchandising and promotional

activities. The MSPO sends the proposal to Head Office. In the proposal all the

activities are listed related to the merchandising and promotion aids. After seeing

the proposals the Head Office sends a final budget then MSPO works out his

activities accordingly.

SALES PROMOTION TOOLS FOR CONSUMERSSALES PROMOTION TOOLS FOR CONSUMERS

Lakson Tobacco Company gives incentives to consumers as well. The purpose is

to make the consumer more familiar with the Company’s brands with the objective

of increasing the sale.

Here the sales force selects different spots to establish a direct contact with

consumers. The sales persons meet different consumers and have a talk with them

and then offer different gifts to make a strong relationship with the company and

the consumers.

Publicity

Publicity is any form of non-paid commercially significant news or editorial

comment about ideas, products or institutions.

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According to the Company, the following things are used for publicity purpose.

Posters

Shop banners

Road banners

Buntings

Mobiles

MARKETING OF CIGARETTESMARKETING OF CIGARETTES

As we now that by marketing a product can flow from producers to

consumers. All cigarette manufacturing organizations spending lot of money for

advertising and other promotional activities. Now a days in Pakistan cigarette

advertisement in TV is banned during prime time. So there are lot of difficulties

are being faced by tobacco companies for the promotion of their brands.

For this purpose they are heavily spending on merchandising and on other

promotional activities so that people should know about their brands. For these

purposes LTC spend money for Cricket events, arranges Meals in village’s etc.

This all is being done to create good will among the people about the LTC and its

brands.

TARGET MARKETTARGET MARKET

Target market for different products is different. Identification of target market in

tobacco industry is likely to be very difficult. People have misconception about

market segmentation on the basis of income. To segment the market just on the

basis of people’s income is not correct in all situations. Theoretically, people with

higher income are supposed to smoke high-priced cigarettes, yet it is not the case

in all contexts. For instance, many students who tend to smoke Gold Leaf have

little money.

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Actually, the isolation of target market is dependent upon the blend of tobacco.

Different people want different blends of tobacco in cigarettes. Each brand of

cigarette has its own distinct blend and each brand has its own target market. For

example, some people dislike K-2 or Royals due to their strong blend of tobacco.

Lakson Tobacco Company has launched a new brand of Diplomat for a segment

of people who like light blend of tobacco.

During the internship, I found out that people had the same liking for blend of

tobacco in one particular geographic area. For example, Royals Kings gives higher

sales in Muzafar Garh and Multan area than in any other area of Pakistan.

PERSONAL SELLINGPERSONAL SELLING

Lakson Tobacco Company. Of course, is using personal selling as a promotional

tool in its promotional mix. The company understands its need and considers it as

an important element in promotional mix. In personal selling, the Company’s

Merchandising Department plays an important role. Here the term merchandising

does not mean as it is used in Accounting, but this department that is concerned

with personal selling is called the merchandising department. The sales person

meets different retailers during their visit to make their relationship more strong

with them and in this way they make their salesmen convenient.

During their visit, salesmen give some gifts to retailers. These gifts are specially

prepared for the purpose of personal selling.

These gifts include liters, key rings, telephone directories, pens, and many other

things. On these gifts, the different brand names of the Lakson Tobacco Company.

are written to get more popularity not only among the customers but also among

retailers themselves.

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The sales persons are consistently doing the personal selling to retain their

customers. Area Sales Manager also helps his sales force by himself visiting

retailers and customers.

District Sales Manager is also involved in personal selling. He himself visits the

spots along with Area Sales Managers.

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MERCHANDISINGMERCHANDISING

As we know promotional activities play an important role in the failure or

success of any product. If these are designed in a perfect manner then it will not be

wrong to say that the product for which these activities have been designed, will

get good position in the mind of people and vice versa. LTC is aware of this fact

and for this purpose management designs periodical promotional campaigns in

which Tele advertisements print advertisements and merchandising, etc. are

included. Also LTC conduct certain shows, concerts and competitions.

In every district there is an MSPO which is responsible for all

merchandising and promotional activities. He also has to develop sales promotion

plans. The execution should be carried out in effective and efficient manner so as

to exploit the sales potential and image of brands of LTC consequently leading to

the overall profitability and long-term growth of company.

RESPONSIBILITIES OF MSPO.RESPONSIBILITIES OF MSPO.

Designs and implement merchandising and sales promotions plan.

Ensures the display of brands at every outlet with the help of its staff.

Checks the maintenance of merchandising material of outlets.

Prepares decentralized communication budget for the merchandising and

promotion activities.

Planning

Managing People

Merchandising

Promotion

Trade Offers

Public Relations

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MERCHANDISING ACTIVITIESMERCHANDISING ACTIVITIES

The merchandising installation is based on segmentation of brands volume,

e.g. if a specific markets highest selling brand is Morven Gold, then outlet in that

market will not be merchandised with K-2 or any other brand of LTC. Following

are the “types of merchandising”.

TEMPORARY MERCHANDISINGTEMPORARY MERCHANDISING

It includes posters, wobbles, stickers, mobiles etc.

PERMANENT MERCHANDISINGPERMANENT MERCHANDISING

It includes Fascia, Counter, and Wall Clock etc.

OUT DOOR

The material placed at streets, roads are outdoors merchandising. It includes

Hoarding Wall Painting, billboards etc.

IN STORE

The merchandising material placed in side of a shop is called in store

merchandising. It includes, modular tube, counters etc.

OUT STORE

The material, which is placed out of the outlet. It includes Fascia,

nameplate, Neo signs etc.

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MAINTENANCE OF MERCHANDISING MATERIALSMAINTENANCE OF MERCHANDISING MATERIALS

It is also ensured that all the merchandising material and fixtures are properly

maintained in top-notch condition. For this purpose retailers are encouraged to

clean their modular, tube shades, etc. regularly. In addition, MDS’s also take part

in cleaning exercises. If repair work is needed such as, changing of modular sheet,

or replacement of tube lights, MDS ensure that things are fixed up in no time.

MSPO periodically visits such retail shop and assess the merchandising and the

maintenance work. If need be, quick action is taken pertaining to maintenance

work.

DISTRIBUTORSDISTRIBUTORS

Lakson tobacco company has a wide distribution network to cover the whole

country. LTC has divided the whole country into five regions and there are about

more than 1000 distributors.

A person heaving the rights given by company for making the goods of company

available at wholesaler’s outlet and retailer’s outlet.

WORKING OF DISTRIBUTORSWORKING OF DISTRIBUTORS

The distributor is the cigarette agency called in general. The functions of

distributor includes following.

1- To purchase the stock from the company and to sell it to the whole sale and

retail market. There are following kinds of sales.

1. DD Trivans (tricycle) or Vans

2. S/S Shop Sale

3. VDD Village Sale

4. W/S Wholesale sale

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2- To keep all the sales record and maintain all the documents that are

required and asked by the company. These records include following

main categories.

1- Daily sales summary

2- Monthly record of sales in the register

3- Cash Memos

First week I was deputed at distribution to get knowledge about the basic terms of

the sale point of the company. I spent the second week of my internship program

with the salesmen.

There are four distributors in the Faisalabad town.

My first attachment was with the distributor for Faisalabad (a). The distributor

shop and godown is located at Allama Iqbal Road near Ghanta Ghar, Faisalabad.

The main functions of the distributors are

Visits to outlets periodically.

Making sure the availability of all the products.

Helps LTC in promotion campaign.

Introduce the retailers and wholesalers with schemes.

In the first week I was attached with the distributor of LTC here in Faisalabad

named Haji Muhammad Amin And Co.

The office staff at distribution office is

Md Haji Muhammad Naeem

Manager Mr. Umair

Casher Mr.Muhammad Raza

Sales Supervisors Mr Abdul Sattar

Mr Intakhab Alam

Godown Incharge Muhammad Riaz

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I also had a chance to observe the working in the distributor’s office. I was shown

different documents such as OCF, stock register form, retailer/wholesaler cash

memo, ledger and salesmen voucher.

OCF is the order control form; it gives information about when to place

orders. Usually the distributors keep the safety stock of three days then

place the order.

Stock register form, is the document in which daily stock statements were

fed into details.

Retailer/wholesaler cash memo is the document in which stock sold to the

retailers and wholesalers is kept and bill is charged.

Sales men voucher, is a document, which provide information about how

much stock was issued to sales men and how much stock was returned.

Also documents such as weekly sales report and monthly sales reports were

shown to me.

There were two sales supervisors in the distributor’s office. Their main job was to

make sure that salesmen supply stock at each shop properly on the specified day.

They also manage and control the sales men.

The job of the cashier was to deal with cash i.e. receive cash from salesmen,

deposit it in the bank, and note down the detail of cash in the financial book.

Manager was responsible to control all the activities and working of the staff.

Salesmen

A distributor has number of salespersons that supply the product from distributor’s

shop to the outlets.

My next attachment was with the salesmen.

There are 10 salesmen to supply stock in the Faisalabad (A) market. Salesmen use

van, motorcycle carriage and tricycle vans to distribute the product of LTC. Seven

39


salesmen use tricycle vans; two use motorcycles, and one use delivery van, each

sale man visits the shop twice in a week. Routes for salesmen are well defined and

planned. Every salesman visit his own territory.

Every salesman is issued stock in the morning and it is noted in the salesman’s

voucher. When salesman return godown keeper receives the unsold stock and he

again notes it in the salesman voucher. If salesman can sell all the stock and he

needs more stock, then it could be delivered on desired location on demand.

Salesman makes contact to the distributor on phone line and asks for the desired

stock.

I visit seven local areas with the salesmen during my attachment. These include all

the bazaars around Ghanta Ghar, GTS, bus stand, vegetable and grain market, and

timber market and Lal Mill Bazaar,Ghang road and Rehmania Chock. I got the

opportunity to visit these areas along with the experienced salesmen. I observed

the working off salesmen very keenly. Salesmen were very efficient in taking

orders, delivering stock and receiving cash. Salesmen spent 4 to 5 minutes in each

shop and then moved to the next shop.

WAREHOUSEWAREHOUSE

My next attachment was with Mr. Muhammad Anees, who is warehouse in-

charge.

Distributors fax or hand over the cash voucher or draft to warehouse along with

the order. LTC has account in all the branches of UBL in all over the country.

Distributors transfer cash to the LTC account and then send this receipt to the

warehouse in-charge. The company management for the company transport

vehicles that makes the supplies very systematic defines specific routes.

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INVENTORY SYSTEMINVENTORY SYSTEM

The distribution manager of the godown told me that they are using the perpetual

inventory system; it means that they record the transactions as they occurred.

FIFO(FIRST IN FIRST OUT METHOD)

Mr. Muhammad Anees told me that all the depots of the company are using FIFO

method for the sake of inventory management.

REASONS FOR USING FIFO

He told me following reasons for using this method for the record of inventory the

inventory that are cigarettes is perishable products. With the passage of time

inventory can loose its taste and quality so FIFO method is most favorable for the

company because in this method the production that first comes go out first.

The second reason of using the FIFO method is that cigarettes are the products that

are easily convertible into cash, we can say that these are cash products and prices

of the cigarettes always go for rising not falling so it is highly advisable for such

products to use FIFO methods to avail the opportunities which increase the

company's profits.

The third reason for using the FIFO is that in case of FIFO method for Tobacco

products, this method is helpful for reduction of taxes and excise duties.

COMPUTERIZATIONCOMPUTERIZATION

All of the godowns of the company are using computerized most advanced

systems for inventory management. The company itself develops all the software

that are using in the company. The separate department of the company is

working for serving this purpose that is computer division.

The software that is especially used for inventory management is “SMASH” that

is developed by the Lakson Group Of Companies itself.

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The whole procedures for the handling and managing the inventory were fully

computerized in 1995, 1st July.

The distribution manager is fully empowered for placing order at any time to any

factory of the company that is working in any part of the country of his desired

quantity.

He is also responsible for maintaining and minimizing for carrying, ordering and

storage costs of the inventory. The company set a fixed budget for distribution

expenses. the distribution manager has achieved his targets with in the limits of

his budget that is allocated by the head office.

The evaluation process of the godowns is continuously takes place by the head

office.

Transportation mode

There are three modes that are commonly used by the Lakson Tobacco Company

These are:

Twenty two wheeler container

Ten wheeler container

Four wheeler mazda

Some years back, the trucks were used for delivering and handling the stock.

But by using this transportation mode there were high chances of losses because of

rain and other mishaps and it was due to the nature of the products.

In case of rain, the whole truck was damaged and company has to face huge losses

in this regard.

But now, the company is using covered container for delivering the inventory.

This has decreased the chances of damages and decreases the transportation and

carrying cost.

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WITH SALES AND DISTRIBUTOR SUPERVISOR

My next attachment with SDS Intakhab Alam. During attachment with SDS I had

to spent a week in Jhang because of Mela. During Mela the job of SDS is to

supply stock to the temporary shops and also promote the LTC by offering

promotional schemes. We were also having a mobile film unit (MFU) with us.

Two movies were shown each night during the mela to the public. Also during the

mela I did posting of posters, bunting at the shops along with the SDS and MDS.

During posting I was told that the life of a poster is of few hours. Poster and

buntings were posted to create awareness about the promotional schemes offered

by Morven gold and Diplomat.

The basic responsibility of a SDS is to survey the market, including both the

consumer and retailer survey, and coordinate the relationship between the

company and distributor. If there is any consumer promotion plan then distributor

sends all the flappers to the company office. Then SDS counts them and makes

their claims. SDS visits to distributor, wholesaler, and retailer periodically. He

monitors the performance of distributor and salesman. Sales supervisor also

checks that distributor and supplies regularly. They report to AM about the trend

of their concerning market.

Distribution officer also informed about that types of sales- which are

DD Direct delivery

S|S Shop sale

VDD Village sale

W\S Wholesale

The sales promoters help in placing posters and other temporary merchandising

materials.

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WITH MERCHANDISING OFFICER

My next attachment was with merchandising officer Khawaja Muhammad

Kamran. The role profile of MSPO is that he is action man, he is mobile

personality. He is to be outgoing as he spends a lot of time in the market. He

should have one eye over market. He is to develop rapport with retailers. MSPO is

to identify outlets and get merchandised till due date.

The selection of an outlet for merchandising depends on factors such as traffic

flow, key location i.e. it is visible to smokers. MDS is under the MSPO. He is

responsible for checking that which shop should have modules, wall clock etc.

also in case of any breakage of merchandising material, he ensures the

maintenance, and where necessary recommend replacement.

MSPO places purchase orders and gives deadline for supplies after consulting with

merchandising coordinator. During my attachment I visited one of the suppliers of

LTC named “Chishty Advertisers” who supplied merchandising material. The

design was painted on hoarding by following the instructions in the design manual

provided by LTC. I was attached to the MSPO when he was making preparation

for Rahim Shah Music Night.

Most critical task of MSPO is to plan and execute and then evaluate

merchandising activities in his region. Merchandising activity has a tremendous

effect on the final point of sale bottle. MSPO always strives to improve the

existing merchandising material.

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DEPARTMENTS OF LAKSON TOBACCODEPARTMENTS OF LAKSON TOBACCO

COMPANYCOMPANY

There are many departments that are working in the Lakson tobacco company.

Some of them are as under.

Operation and administration department

Production department

Finance department

Product, research and development department

Sales and Marketing department

Leaf department

Data processing department. (Computer division)

Engineering department

Safety and environment department

Employees Relation department.

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BRIEF FUNCTIONS OF EACH DEPARTMENTBRIEF FUNCTIONS OF EACH DEPARTMENT

Safety and Environment Department

LTC management is very much concerned with safe operation and environment

that is why, there is a separate section named as Safe.

Operation & Environment department (SO&E) responsible for the safe operation

and maintenance activities and providing the timely help at a time of emergencies

like accidents, explosion and fire.

OBJECTIVES:

Safe Operation & Environment section is responsible for the safety of:

Equipment

Material

Persons

Environment

Operation and Administration Department

This department is responsible to carry the operations of the company

successfully. The integration of all the departments of the company is the

important task of this department.

Production Department

Production department is very important for the company. Because it is directly

related to the production of the company’s products.

This department is responsible to fulfill the needs of the distribution department.

This department is comprised on the five manufacturing units of the company that

are working in all over the country.

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The production department is divided into three sections.

Primary department

Making department

Packaging department

Primary Department

From the godown of the factory, the tobacco in the form of bails brings in the primary

department for starting production process.

Bail Slighter

This is a part of the primary department in which the workmen for the purpose of the

heat up of the tobacco bails put the bails of the tobacco.

Casing

After the bail slighter, the heated bails of tobacco come into the casing through pipeline

that linked the bail slighter to the casing. The main function that is performed by the

casing is that it at once crushes the bails that are already heated into the desired form of

the tobacco.

Reordering Vessels

After cutting the bails into small-required pieces, the tobacco come in the reordering

vessels. Reordering vessels are the very big containers that are used for the further

process of heating and provide required wet that is necessary for the further production

process.

Cutters

In this part, the tobacco is taking the ultimate shape of cigarettes that we find after

finishing the process.

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Making Department

This department is used for the storage purposes of the inventory that the making

department gets from the primary department that is very small pieces of tobacco. It is

called cut tobacco store. In this store tobacco is stored for some days.

It contains very big pots that have big caps for the covering of the tobacco. There are

eight pots for the production of different brand of cigarettes.

After the process of pots the inventory go into the big vessels of glass. In these glass

vessels ordering the cigarettes in the form that is helpful for further processing.

Packaging Department

Because the tobacco takes the form of cigarettes in the making department, so after the

completion of this process, the cigarettes come in the packaging department for the

packaging.

It consists of a computerized packaging machine. The making ordering vessels are

directly attached with the packaging machine. The production come in this machine and

take the for of packets of cigarettes that consist twenty cigarettes each. The packet

consists of three layers. First consist on seven cigarettes the second layer consist on six

cigarettes and the third and last one also consist on the line of seven cigarettes.

One part of this machine has the empty packet of the cigarettes.

After getting the shape of packets, the packets go to another machine in which they are

covered by a transparent paper and a s3al is also take place on the packets in the

machine.

PACKAGINGPACKAGING

Outer

It contains the ten packets of cigarettes that 200 cigarettes.

Carton

It contains 50 outers that are 10000 cigarettes.

Packet

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It consists of 20 cigarettes.

Product, Research & Development Department

Research and development provide improvement and innovative ideas emerge

which help in surviving in the competitive market. LTC’s research and

development help in coping with the new consumer taste and requirements. The

basic aim of the research and development is to produce highest quality cigarettes

that are not made for the sake of profit but to meet the requirements of the

smokers. R&D includes farmers suppliers of tobacco and how better grades of

tobacco can be produced and properly used for the right taste.

This department is responsible to manage the products and brands of the company

and it is also working for preparing new products for the company. Research and

development is the main task of this department. There are two-research labs in

the Lakson tobacco company for research and development purposes. Research

and development is the continuous process in the Lakson tobacco company for

competing in the tobacco industry in Pakistan.

Data Processing Department. (Computer Division)

This department is responsible for the operations of the business that are computer

technology- oriented. Development of new software, maintenance of existing

devises, communication within the offices and go downs and

Communication within the companies of the Lakson group is carrying on with the

help of this data processing department.

All the soft wares that area using by the company is it’s own and developed by this

department. Copyrights of these soft wares are a also reserved for Lakson groups

of companies.

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Engineering Department

This department is responsible for maintenance of equipments and plants of the

companies. Purchasing of new equipments and plant is also take place with the

consultation and assistance of the department.

ROLE OF ENGINEERING DEPARTMENT

To keep the plant in running condition by providing efficient and timely

maintenance and repair.

Do the preventive maintenance for avoiding any damage.

To repair the faults if is occurred.

To assess and arrange the requirements of materials, equipment, resources

and manpower for executing its maintenance activities.

To have close liaison with inventory management and commercial

department to maintain the necessary level of spares required.

QUALITY CONTROL DEPARTMENT

The objective of LTC quality control department is summarized asunder:

To produce high quality product, conforming to the standard specification.

Quality check of the purchased material helps in achieving the required

specification. Inspection of the various maintenance jobs help in gaining huge

saving by reducing the maintenance error cost Weight and packing check before

dispatching help in building the good image in customer mind.

THE SUCCESS STORY OF THE COMPANY

The heart of LTC is quality. It is the first company in the tobacco industry

of Pakistan to have achieved the highest Quality Award. The ISO registration,

which gives LTC. The international recognition as the producer of Red & White

and Premier Classic. Besides it, LTC was conferred the management excellence

award by the Management Association of Pakistan for demonstrating the best

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Corporate Performance on quality in the Engineering Sector of Pakistan for the

year 1993 and 1994.

In LTC quality is a dynamic state associated with the products, services,

people, processes and environment that meets or exceeds the expectations of their

customers and it is a strong edge on the basis of quality against the competitors.

There is well-established Quality Control department in the company that assures

quality by incorporating other departments.

TOTAL QUALITY MANAGEMENTTOTAL QUALITY MANAGEMENT

“Total Quality Management is an approach to doing business that attempts

to maximize the competitiveness of organization through the continual

improvement of the quality of its products, services, people, processes and

environment”.

In LTC management has been taking the following steps for Total Quality

Management.

EDUCATION AND TRAINING

The management has established a training center in the premises of the company

for training to the managers and workers to increase the performance at every

level. This improvement in performance is directed towards satisfying such cross-

functional goals as quality, schedule, and others activities. Before audit of ISO

implementation in the company all the employees who are concerned with quality

were given training so that all the employees could understand all the documented

procedures, authorities and responsibilities of each other in the company. Some

managers were sent to different seminars and workshops to learn about ISO.

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TEAMWORK

In LTC there is strong existence of teamwork. These are the managed group

of the employees doing their best competitive efforts to cope with the barriers,

rivalries and distrust among different departments to improve the quality of the

their products.

OBSESSION WITH QUALITY

For obsession with quality the employees are trained from time to time to learn

the philosophy “ how can we do better ” the suggestion given by the employees

about quality are appreciated in the company.

CONTINUAL IMPROVENENT OF SYSTEM

The management of LTC has taken many steps to improve their system in

order to continually improve the quality of products and services. Employees are

trained from time to time and new technologies are adopted.

Personnel Department/Corporate Affairs

This department deals with the affairs of the employees of the company. Selection

of the employees, firing of the workers is also the duty of this

Department. Other inter industry and intra industry affairs are also bring into the

account by this department.

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Sales and Marketing Department

Sales and marketing department is go into the marketing and selling for the

company’s products that are cigarettes. Huge sales force is working in the field.

There are many district, area sales managers in the regions of the sales department.

The achievement of the targets is very necessary for this department.

Sales force of the company is very much skilled and motivated towards its tasks.

In Lakson tobacco company the marketing is defined as

“ Marketing is the backbone of the company, which plays a vital role in

company sales, building brands and company image”.

Introduction of marketing department

In Lakson Tobacco Company, marketing department consists of the following

heads.

General manager marketing

Marketing managers

Brand manager

Brand executives

ROLE OF MARKETING DEPARTMENT IN THE COMPANY

All functions of marketing department are very much important to the Lakson

tobacco company.

“To Create the favorable image of the brands and company in the minds of the

customers which results in sales on which company exists”.

LEAF DEPARTMENT

Leaf is a natural product and the main ingredient of the cigarette. Because the

production of the natural product can vary due to climate and seasonal variation,

which can as a result affect the leaf requirement for manufacturing.

LTC does not own land for the cultivation of the leaf but fulfills its requirements

by contracting with the independent farmers. LTC provides the farmers with free

53


extension advice in agriculture skills and environmental support on the range of

crops and guarantee the purchase at the pre defined prices of all tobacco they

produce. For the sensitive smoker right leaf blending is very important to create

good taste. Leaf department makes sure that blends for each brand have a

consistent desirable taste, year on year.

FINANCE DEPARTEMENT

All firms raise money and control the financial aspects of their business. In the

finance department three cost accountants perform their jobs with the clerical staff,

then present the report to the director finance.

The cost accountants deal with the following sections

Wages and payroll system

Production expense system

Ledger section

Variable cost section

Cash and excise section

The following are the main functions of the finance department

To link all departments with each other financially

Arrange monitory resources at proper time

Allocate resources through out organization

Deal with banks investment firms, govt agencies and tax department.

Carry out final auditing and financial records prepared

Details of calculations of salaries, income tax and funds for loans

Calculate different expenses of the company

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EMPLOYEES RELATIONS DEPARTMENT

In LTC employees are considered a resource in the organization. For the

proper management of employees related issues “employee relation department”

functions under the departmental head Mr.Ikram-ul-Hq.

DUTIES AND RESPONSIBILITIES OF THE DEPARTMENT

1. Approve training agencies, which give the training to the personnel of LTC.

2. Ensure hygiene and housekeeping of the factories.

3. Approve job contract contractors.

4. Conducts and arranges training programs.

5. Implement measures that are helpful to motivate the personnel of the

company.

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GODOWN MANAGEMENT INFORMATIONGODOWN MANAGEMENT INFORMATION

SYSTEM (GMIS)SYSTEM (GMIS)

The logistics functions have been made very easy with the help of

computerized Godown management information system. It is a computerized

database that is centrally connected to head office and all the warehouses are

linked with each other. It is programmed in the FOX PRO. It performs following

functions.

Keeps a detailed record of stock receipts

Keeps and detailed account of the stock that has been shipped to the

distributors or have left the warehouse under any conditions

Have a complete record of all the orders that have been placed during a

year and have a complete record with their complete details.

Have a complete record of all the damages and claims that have been raised

through out the year.

It also generates the system reports and system queries that are required by

head office for the purpose of analysis. It includes following

Daily sales report

Zone wise Sales

Freight expenses Payable

Transit Duration Analysis

Monthly Stock reconciliation

Distributor wise sales

Godown Wise transfers

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COMPETITIVE EDGE OF THE COMPANYCOMPETITIVE EDGE OF THE COMPANY

The main product of the company is Morven Gold, which comes in competition

with Gold Flake. The other products of the company are also very popular in the

market. They have the competitive edge over their competitors on the following

grounds.

The company’s market coverage is better than its competitors.

Availability of the brands is made at each and every spot.

The company’s sales force is more efficient then its competitors.

The penetration of the company’s products in villages or remote areas,

where the 70% of the population lives, is very high.

COMPETITIVE EDGE OF THE COMPETITORSCOMPETITIVE EDGE OF THE COMPETITORS

Lakson’s close competitor is Pakistan Tobacco Company with its popular brand

Gold Leaf -one of the most successful “A” category brand in urban areas.

The secondary competitors are International brands, which are available at cheaper

prices in Pakistani markets.

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PRODUCT POSITIONINGPRODUCT POSITIONING

Positioning is to fit a product one or more segments of broad market to set it apart

from its competitors.

Lakson Tobacco Company has adopted two positioning strategies to position their

different brands of cigarettes. These two positioning strategies are:

Positioning by price

Positioning by competitors

POSITION BY PRICEPOSITION BY PRICE

Positioning by price means to communicate the product image by price. There are

four cigarettes of different brands of cigarettes with respect to price.

CATEGORY

LAKSON’S BRAND PTC’S BRAND

A NO BRAND GOLD LEAF

B PREMIER CLASSIC CAPSTON

C RED & WHITE WILLS KING

D MORVEN GOLD GOLD FLAKE

E ROYALS FILTER, LORDS, DIPLOMAT, K-2 EMBASSY

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POSITIONING BY COMPETITORSPOSITIONING BY COMPETITORS

Positioning by competitors means to communicate the product image with respect

to competitor. It is to create the image of the brand where competitors brand

exists.

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ADVERTISINGADVERTISING

Any paid form of non-personal persuasive communication by an identified

sponsor with predominant use of the media of mass communication.

Each brand is controlled by its Brands Manager who is fully responsible for the

decision of the advertisement of the brand.

Following are the different responsibilities of a Brand Manager regarding

advertisement of a particular brand.

DEVELOPMENT OF ADVERTISEMENTDEVELOPMENT OF ADVERTISEMENT

Message

For the development of new advertisement of different brands, the Brand Manager

uses different messages.

Here are the examples of different messages for different brands.

Name of Brand Message

RED & WHITE 21ST CENTURY STYLE

K-2 HAMAISHA KA SAATH

ROYALS FILTER JANBAZON KA INTEKHAB

HYLITE APNI REWAYAT PER QAIM

DIPLOMAT LUTF KE LAMHAT

MORVEN GOLD SHARE THE TASTE OF

ADVENTURE

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2. SELECTION OF MODEL2. SELECTION OF MODEL

Brand Manager has the authority to make a final decision on the selection of

model for the particular advertisement.

3.SELECTION OF LOCATION3.SELECTION OF LOCATION

Different locations are selected for the advertisement purposes. For example:

Brand name Location

RED & WHITE INDIA

MORVEN GOLD AUSTRALIA

ROYALS FILTER SCOTLAND

4. PLACEMENT OF ADVERTISEMENT4. PLACEMENT OF ADVERTISEMENT

Media selection

Lakson Tobacco Company has a large target market. Therefore, the following

electronic and print media are used to cover the target market.

Electronic Media

Television

Television has become the most popular media particularly in urban areas. Games

are sponsored through television.

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Radio

Although television has become the most popular media yet we can not ignore the

role of radio in advertisement particularly in rural areas.

Rural areas are a big market for cheaper brands. Usually, the population of rural

areas is not ready to buy expensive brands of cigarettes.

Radio is the best way to advertise cheaper brands in rural areas.

Some other media channels are as follow

Cinema advertisement

Print media

Magazines

FREQUENCYFREQUENCY

The frequency of advertisements of cigarettes on television is five to seven times a

day except national events.

EVENTS

The company also sponsors different events. It as recently sponsored a football

world cup 2002 held in Japan.

Different games are sponsored by different brands. The detail is as follows.

Brand Name Games

RED & WHITE POLO

RED & WHITE SNOOKER

K-2 HOCKEY

ROYALS FILTER WOLLY BALL

DIPLOMAT FOOTBALL

MORVEN GOLD CRICKET

K-2 KARATTE

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Timing

Besides sponsoring different events, the Company also advertises its products on

television before or after the Khabarnama or Dramas.

5. EVALUATION OF ADVERTISEMENT5. EVALUATION OF ADVERTISEMENT

The company evaluates the advertisement result by the sales volume and the

feedback from retailers and consumers. Other sources of evaluation of

advertisement are as follows.

Change in sale

Sales force information

Retailers and wholesalers

Customers response

OBJECTIVES OF ADVERTISEMENTOBJECTIVES OF ADVERTISEMENT

Different advertisements have their own objectives, which provide performance

standards of measurement of effective advertisement. Some objectives of ads are:

1. To increase awareness in public.

2. To increase sale.

3. To increase public relations.

If the particular objectives are not achieved by the ad then the ad campaign is

considered to be unsuccessful and it is the responsibility of the Brand Manger to

revise the whole campaign to make an effective ad.

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SELECTION OF ADVERTISINGSELECTION OF ADVERTISING

AGENCYAGENCY

Selection of advertising agency is based on many factors such as, how much

creativity is done by that agency. What is the previous reputation of agency?

What are the equipment and which agency using them? Which technology is

used? What is the reputation regarding timely delivery? All these factors are of

great importance to organization

The advertising agency, Lakson Tobacco Company is using is Star Sports. They

are using latest equipment for the development of promotional material.

ROLE OF ADVERTISING AGENCY

Role of advertising agency can be seen as it is the service that is providing the

development of literature while the initial point is only the raw information

available regarding the product.

It takes usually fifteen days to develop a literature and another fifteen days to

finalizing and printing the literature. Advertising agency also suggest the type and

the quality of the gifts for the product whose material is developed by them. The

process of developing literature is quite difficult but systematic.

Firstly, the organization just gives raw information about the product. Advertiser

gathers them and arranges them. Designing is also much important during

arrangement. Advertiser then makes dummy literature for the Company, which

afterwards is used for final changes and then finally is made available for printing

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TAXESTAXES

No tobacco product is traced more heavily then cigarettes. LTC is one of

the major tax paying organization of Pakistan, according to representative of LTC

the Morven Gold Pack price 12/= and from these 7/= RS is paid to government in

the form of different taxes, only 5/= RS are kept by the LTC.

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FINANCIAL ANALYSIS OF LAKSON TOBACCOFINANCIAL ANALYSIS OF LAKSON TOBACCO

COMPANYCOMPANY

SALES ANALYSISSALES ANALYSIS

During the year ended June of 2001, sales at Lakson Tobacco Company Limited

were 15.46 billion Pakistan Rupees (US$257.06 million). This is an increase of

4.9% versus 2000, when the company's sales were 14.73 billion Pakistan Rupees.

This was the fifth consecutive year of sales increases at Lakson Tobacco Company

Limited (and since 1996, sales have increased a total of 1,445%).

Recent Sales at Lakson Tobacco Company Limited

1.0 2.44.5 5.4

14.7 15.5

1996 1997 1998 1999 2000 2001

(Figures in Billions of Pakistan Rupees)

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SALES COMPARISONS (FISCAL YEAR ENDING 2001)SALES COMPARISONS (FISCAL YEAR ENDING 2001)

CompanyYear

Ended

Sales

(US$m)

Sales

GrowthLargest Region

Lakson Tobacco Company Limited Jun 2001 257.055 4.9% N/A

VST Industries Limited Mar 2001 66.305 3.2% India (100.0%)

Godfrey Phillips India Limited Mar 2001 112.000 7.3% India (100.0%)

Pakistan Tobacco Company Limited Dec 2001 330.601 N/A N/A

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RATIO ANALYSISRATIO ANALYSIS

Price / Earnings Ratio 4.91 Dividend Yield 18.36%

Price / Sales Ratio 0.14 Payout Ratio 90.17%

Price / Book Ratio 14.82% Held by

InsidersN/A


DIVIDEND ANALYSISDIVIDEND ANALYSIS

During the 12 months ending 12/31/01, Lakson Tobacco Company Limited paid

dividends totaling 10.83 Pakistan Rupees per share. Since the stock is currently

trading at 59.00 Pakistan Rupees, this implies a dividend yield of 18.4%. This

company's dividend yield is higher than the three comparable companies (which

are currently paying dividends between 0.0% and 4.2% of the stock price). The

company has paid a dividend for 6 straight years.

During the same 12 month period ended 12/31/01, the Company reported earnings

of 12.01 Pakistan Rupees per share. Thus, the company paid 90.2% of its profits as

dividends.

PROFITABILITY ANALYSISPROFITABILITY ANALYSIS

In 2001, earnings before extraordinary items at Lakson Tobacco Company Limited

were 394.71 million Pakistan Rupees, or 2.6% of sales. This profit margin is lower

than the level the company achieved in 2000, when the profit margin was 3.2% of

sales. The company's return on equity in 2001 was 43.7%. This was significantly

worse than the already high 66.2% return the company achieved in 2000.

(Extraordinary items have been excluded).

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FINANCIAL POSITIONFINANCIAL POSITION

As of June 2001, the company's long term debt was 185.59 million Pakistan

Rupees and total liabilities (i.e., all monies owed) were 1.82 billion Pakistan

Rupees. The long term debt to equity ratio of the company is 0.16.

As of June 2001, the accounts receivable for the company were 168.00 million

Pakistan Rupees, which is equivalent to 4 days of sales. This is an improvement

over the end of 2000, when Lakson Tobacco Company Limited had 4 days of sales

in accounts receivable.

Company YearLT Debt/

Equity

Lakson Tobacco Company Limited 2001 0.16

VST Industries Limited 2001 1.20

Godfrey Phillips India Limited 2001 0.04

Pakistan Tobacco Company Limited 2001 0.14

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LAKSON MEDICAL TRUSTLAKSON MEDICAL TRUST

Lakson Tobacco Company has greater contribution in the social welfare program.

The northwest frontier province for the social program has given a special award.

For the welfare of the community in general along with this social program, LTC

gives the mobile dispensaries in the remote areas.

LAKSON MEDICAL COMPLEX BUILDING

INAUGURATIONINAUGURATION

The foundation stone of Lakson Medical Trust Hospital (LMTH) was layed by

Mrs.Gul Bano Hasanali Chief Patron of the Lakson Medical Trust on March

13,1998,. The Hospital started its function on May 11, 2001. Equipped with 14

beds, it is the first specialized hospital for eye diseases in N.W.F.P. It is currently

deemed among the most developed hospitals in the region in terms of high

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medical technology with its diagnostic and surgical equipments, which covers all

requirements for examination diagnosis and treatment of different eye diseases.

BREIF ABOUT LAKSON MEDICAL TRUSTBREIF ABOUT LAKSON MEDICAL TRUST

Lakson Medical Trust has embarked upon an ambitious program to increase its

cataract surgeries. For permanent solution and to provide better treatment with

latest technology, the Trust decided to have a modern Hospital, having all

facilities, equipped with the following units:

The project has been completed with the cost of Rs.32.00 million. The Hospital

including an operation theatre, equipped with latest instruments, has started

operation from 11th May 2001 under the supervision of Trustees and qualified

Surgeons/Doctors with well-trained staff.

FREE EYE CAMPSFREE EYE CAMPS

LMT arranged 9 Free Eye Camps at various locations from November,1994 to

May,2001. During this period 65,035 OPD patients were treated and provided

medical aid, 3,973 persons were operated and 27,308 glasses were distributed to

the needed persons.

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STRENGTHSSTRENGTHS

WELL-ESTABLISHED BRANDS

Lakson Tobacco Company has strong portfolio of brands on its credit. The

brands of LTC are well established in the country. Most of the people are quite

familiar with these brands and these brands are in market for a number of years.

LTC has well-known brands in its portfolio such as

Red & White.

Morven Gold.

K-2.

Diplomat.

Royals Flt.

BRAND LOYAL CUSTOMERS

The customers of LTC are very much brand loyal and they do not switch

over to other brands for any reason like sales promotional campaign, price or any

other factor. For example if a person smokes and buys Morven Gold then it is

unlikely that he is going to switch over to any other brand.

WIDE DISTRIBUTION NETWORK

Lakson Tobacco Company has wide distribution network to cover the

whole country. LTC has divided the whole country into five regions and there are

more than 1000 distributors in the country.

STRONG COMMUNICATION

Lakson Tobacco Company maintains strong communication with its

employees, distributors and customers. Due to the fact that working environment

is very friendly and cooperative, any employee can give suggestion regarding

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improvements. Also due to strong communication employees have clear

understanding of their responsibilities and what is expected from them.

Similarly distributors and management of LTC work closely to solve the

problems being faced by any partner.

The promotional campaigns launch by LTC gain popularity among the

consumers and these campaigns are very much effective in creating awareness

among the customers.

LATEST TECHNOLOGY

The manufacturing factories are equipped with latest technology and

equipment available. The top management continuously seeks for new innovative

technology and plant equipment to remain cost effective and competitive in

market.

MARKETING KNOWLEDGE

Lakson Tobacco Company has been in business since 35 years. And due To

this reason LTC has in depth knowledge of every market that they are serving.

Also LTC uses new marketing techniques to promote its Products. LTC has set

many benchmarks in the field of marketing.

ACCESS TO FINANCIAL RESOURCES

Lakson Tobacco Company has ready access to financial resources due to

better credit rating and repute in the industry.

COMPETENT & MOTIVATED WORKFORCE

Lakson Tobacco Company has a well competent and motivated workforce.

LTC gives salary and fringe benefits to its employees, which are lucrative in

industry. Due to this fact LTC is able to attract competent people in its workforce

Lakson Tobacco Company also conducts training workshops to motivate and

teach new skills to its employees.

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MORE FOCUS ON MERCHANDISING

Lakson Tobacco Company is putting more efforts on merchandising as

compared to its main competitor Pakistan Tobacco. Lakson Tobacco Company has

been able to control the retailers due to the demand of its brands. Lakson Tobacco

is investing heavily on merchandising the retailer shops and is in position to

control the retailers.

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WEAKNESSESWEAKNESSES

FAILURE TO LAUNCH NEW BRANDS

Lakson Tobacco Company has been unable to launch new brands

successfully in recent past in the competition of Gold Leaf. LTC is generating its

significant proportion of revenues and profits from brands that are already

established and successfully in the market. LTC should launch new brands of a

class successfully to further diversify its portfolio of brands.

RELIANCE ON FEW BRANDS

Lakson Tobacco Company relies heavily on few strong brands for its

revenues and contribution margin. Especially LTC is relying heavily on Morven

gold.

OPPORTUNITIESOPPORTUNITIES

RELATED DIVERSIFICATION

Lakson Tobacco Company can diversify its products by offering cigars,

menthol cigarettes and pipe tobacco in Pakistani market for upper middle and

upper class.

UNRELATED DIVERSIFICATION

Lakson Tobacco Company can opt for unrelated diversification to reduce

risk associated with tobacco business due to social resistance and health hazards.

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THREATSTHREATS

FORGED PRODUCTS

Lakson Tobacco Company is trying its utmost to control forged products

but could not do so because of the state authorities and poor implementation of

laws and regulation. Forged products are threat for LTC because they destroy

product image and company repute.

Forged brands also cause irritation & dissatisfaction to customers and this can

result in lost customers and sales.

SOCIAL RESISTANCE

Generally smoking is not liked in our society, it is considered as a bad habit

because of the link between tobacco and drugs. Since smoking causes health

problems people have a negative view about cigarette manufacturers, as they

believe that they are selling devices for death. Recently cigarette- manufacturing

companied in USA had to suffer heavy losses due to lawsuits filed by different

people who suffered from smoking.

GOVT. REGULATIONS

Government regulations also pose a big threat to cigarette manufacturers as

these regulations encourage people not to smoke. These regulations include ban on

smoking at public places, ban on cigarette advertisements etc.

STRONG COMPETITION

Strong competition is also of concern to cigarette manufacturers as it

initiates the battle for survival. Due to strong competition, prices decrease and

profits are foregone. Only that cigarette manufacturer will survive who will be

efficient and effective.

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Lakson Tobacco Company Ltd

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