Shan Foods

ACKNOWLEDGEMENT

First of all, we would thank Allah Almighty, the most Beneficent and Merciful for giving

us the opportunity and strength to work on this report.

We would like to thank our course instructor for his help, guidance, support and

cooperation.

We are especially thankful to Mr. Saad Ul Hasan, Brand Manager and Mr. Abdul Basit

Sr. Executive Shan Foods for taking out time from their busy schedules and addressing

our queries.

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TABLE OF CONTENTS

S.No. Contents Page No.     

Executive Summary I1 1.0 Overview of the Spice Industry of Pakistan 8

1.1 Driving Forces 9 1.2 Key Success Factors 10 1.3 Economies of Scale and Learning Curve Effects 10

  1.4 Branded Spice Industry 10  1.5 Industry Players 12

1.6 Unbranded Spice Industry  1.7 Unethical Practices in the Unbranded Spice Industry 14

2 2.0 Introduction  2.1 Organizational History

2.2 Organizational Hierarchy  2.3 Company Mission and Vision  2.4 Analysis of Company Mission and Vision  2.5 Target Market     3 3.0 Objectives 16  3.1 Business Objectives 16

3.2 Marketing Objectives 16 3.3 The World Of Shan Foods 17 3.4 Growth Rate 17

   4 4.0 Strategic and Marketing Analysis 19

4.1 Market Segmentation 19  4.1.1 Demographic Factors 19

4.1.2 Geographic Factors 20 4.1.3 Behavioral Factors 204.2 Positioning

5 5.0 Analysis of Product Portfolios 5.1 Portfolio Roles 5.2 Product Range of Shan Foods 5.3 Product Offering Within Spice Mix Category

6 6.0 Pricing Policies, Promotions and Distribution Plans 6.1 Pricing Policy

2

6.2 Promotion 6.3 Distribution 6.4 ATL Activities 6.5 BTL Activities 6.6 Success Story of Shan in Terms of Figures

7 7.0 SWOT Analysis of Shan Foods 7.1 Strengths 7.2 Weaknesses 7.3 Opportunities 7.4 Threats

8 8.0 Product and New Product Strategies in the Pipeline 8.1 Growth Strategy 8.2 Product Strategy 8.3 Possible Future Prospects

9 9.0 Cost Volume Profit Analysis

10 10.0 Cost Volume Profit Analysis 10.1 Management Control 10.2 Setting Standards 10.2.1 Annual Plan 10.2.1 Budgeting 10.2.1 Profitability 10.2.1 Efficiency Control 10.2.1 Monitoring Marketing Performance 10.2.1 Improving Marketing Effectiveness 10.3 Measuring Actual Performance 10.3.1 Ratios 10.3.2 Variance Analysis 10.2.1 Performance Appraisal 10.4 The Need For Taking Corrective Action 10.5 Taking Corrective Actions 10.6 Recommendations

   REFERENCES 39

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EXECUTIVE SUMMARY

Throughout the course of Strategic Marketing Management, the essence of strategy and

its application has been emphasized. For an organization, not only it’s immediate and

competitive, but also macro environment is important as it needs to survive and sustain

itself whilst operating in these environments. Spice industry all over the world can be

referred to as a subset of the food industry. Spices stand at prominent positions in

Pakistani imports and exports.. The spice industry of Pakistan annually grows at a rate

that is above 50%. Within this industry, 80% market share is with unbranded loose spices

and the rest with branded packed spices. Shan Foods and National Foods both are the

leaders in branded packed spice category each holding 40% share in 2006, while other

prominent players include Chef’s Pride, Ahmed Foods, Habib Foods and Zaiqa Foods.

Shan Foods was founded in 1981 in a single room as Shan Masala. Later, due to its

popularity, it went on to become Shan Foods. It has presence in 60 countries today and

deals in six broad categories of offerings. Shan Foods has capitalized on the changing

market trends and consumer tastes and through product trials, it has made sure to churn

out offerings that are best in line with consumer tastes. It maintains global presence

primarily through exports and follows more than one growth strategy simultaneously.

With fourteen departments and state of the art technology and customer focused

marketing strategies and campaigns; Shan Foods has become synonymous with authentic

traditional cuisine of good quality and taste.

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PAKISTAN FOOD INDUSTRY

Pakistan is the world’s ninth largest market with an estimated 170 million consumers. Experts believe that the food retail market in Pakistan is in the throes of landmark changes, with the total number of retail outlets expected to have grown by 15% in the 1990s, presently resting at 286,774 outlets. Share of food in household budget is 48.3% in Pakistan.

As indicated in Figure below, it is apparent that 48.3% of the monthly expenditure is on ‘food, beverage and tobacco’, followed by ‘rent’. This clearly depicts the consumption pattern of an average person living in a developing country like Pakistan.

There are two striking differences depicted in Figure below suggesting a clear division between rural and urban consumption patterns. Firstly, a resident of urban area pays considerably more on rent than a person living in rural area. Secondly, a person residing in rural area spends considerably more amount on ‘food, beverage and tobacco’ than an average person in the urban area.

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OVERVIEW OF THE SPICE INDUSTRY OF PAKISTAN

Food industry around the globe comprises a niche within itself, referred to as ‘spices’.

According to the American Spice Trade Association, “today spices have become known

as any dried plant product used primarily for seasoning purposes. This all-inclusive

definition seems to cover a wide range of plants like herbs, spice seeds and even

dehydrated vegetables and spice blends.”1

Putting spices in a Pakistani perspective, they also comprise the authentic recipe mixes

used in traditional cuisine. The Pakistani spice industry can be divided into branded and

unbranded industry. SMEDA found out that there are about 7000 spices and salt grinding

units operating in Pakistan, 60% of which are rural based2. But with the emergence of

modern industrial units, the share of these rural based units is decreasing.

1 American Spice Trade Association, [online] Available at: http://www.astaspice.org [Accessed 19 February 2009]

2 Based on the estimates of the existing spice business operators

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Spices form a substantial portion of Pakistan’s business in terms of imports and exports.

The values of food exports and imports of Pakistan for the year 2008-09 are as follows

(Foodtech):

Major Food Exports of Pakistan

Major Food Imports of Pakistan

S.No. COMMODITIES 2008-2009 VALUE

S.No. COMMODITIES2008-2009 VALUE

(US $ )

1 Rice1210.9

2 Fish and Fish Preparations165.9

3 Fruits 127.3

4 Spices 21.5

5 Meat & Meat Preparations41.2

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(US $ mn)

1 Milk and Milk Food63.6

2 Wheat Un-milled818.6

3 Dry Fruits 67.6

4 Tea 167.4

5 Spices 63.7

Like any industry and business to be successful, a setup can only achieve growth if some

key success factors are taken into account to ensure that the business is run properly.

Consistent quality check and high quality control standards are the two important factors

that are vital to succeed in the spice industry.

Since the last decade, there has been tremendous growth in the spices industry of

Pakistan. In the recent past, many new companies have been setup due to high growth

prospects in this industry. To be at par with local and international demands, these

companies have come up with secure packaging and branded packs, with technological

changes having quite an impact. However, growth in this industry revolves around

quality, promotion and distribution network.

“The following illustration gives an understanding of how work is routed in a

conventional spices processing, packing and marketing business:

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” (SMEDA)

There are many factors behind increased demand of spices in Pakistan; a major factor is

the changing lifestyles of people who now prefer ready to use ingredients over traditional

home made spices. Also, spices have always been in demand due to the sub-continental

style of cooking where quality spices are termed synonymous with good food. However,

according to SMEDA report 2006, sudden increase in demand for spices has never been

experienced implying that the growth has been steady and is dependent on:

“Population growth in both urban and rural area

Ratio of younger people in the population (according to 1998 census 64% belongs

to age group of between 15 to 34)

Increase in urban life phenomenon

Preferences shifting from popular home made curries to ready to use curries. ”

DRIVING FORCES

The spice industry of Pakistan is a very difficult industry to compete in. The two main

reasons of this difficulty are low price competition and involvement of many unbranded

suppliers. Brands, whether branded by a food company, retailer’s brand or unbranded and

open commodity merchants including indirect competitors in the business of providing

ready to cook, ready to eat, canned/ processed food directly and indirectly compete

against one another. Because the price sensitive buyers prefer to buy unbranded spices as

they provide a local touch, it becomes difficult for major players of the industry who deal

in branded spices, to attract more buyers. A major factor that creates competition in this

industry is brand loyalty because certain taste attitudes can only be satisfied with certain

brands. Apart from this, some of the major driving forces in the Pakistani spice industry

are changes in societal concerns, lifestyles and attitudes, product innovation and changes

in who buys the product and how they use it.

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KEY SUCCESS FACTORS

An organization’s key success factors (KSFs) can be related to any of the following six

categories: technology, manufacturing, distribution, marketing, skills and organizational

capability. Apart from these, there can also be other KSFs for a company. All the

aforementioned factors apply to the spice industry and their individual importance can

not be denied in making industry players successful over the long term.

ECONOMIES OF SCALE AND LEARNING CURVE EFFECTS

Learning curve plays a crucial part because this industry completely depends upon

consumer taste. For this purpose, a company has to constantly study the consumer

experiences of satisfaction. Major players in branded and unbranded categories have been

able to achieve economies of scale and enjoy major gains.

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BRANDED SPICE INDUSTRY

According to SMEDA market share of spice industry in Pakistan is as follows:

Brand Business Volume Estimated Market Share

Branded and packed Rs. 8 billion 40%

Loose spices Rs. 10 to 15 billion 60%

Some of the major players in this industry are Shan, National, Mehran, Chef’s Pride etc.

New players have also come up which includes Habib, Kitchen Secrets (with brand name

Rivaayat) etc. The prices of the branded packs are around 30 percent more than

unbranded ones.

Pakistan does not exist among the major spices exporters, and hence presents a great

opportunity and enormous potential for investors to invest in this sector.

MAJOR INDUSTRY PLAYERS

Major players of packed spices in the industry are:

Shan Foods

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National foods

Other players in the industry are:

Chef’s Pride

Mehran Foods

Ahmed Foods

Habib Foods

Zaiqa Foods

Kitchen Secrets

It sometimes becomes difficult for firms to compete and this is one of the main reasons

due to which many firms leave the industry. A noteworthy player Galaxy Masala was

there in the market in the last decade but has closed down its operations now. The vital

reasons due to which a firm might leave the industry are low consumer response to the

company’s offerings due to dissatisfaction, high brand loyalty already towards other

brand/player, not shifting to other brands, and monetary and trade concerns. Despite these

possible reasons, there are number of players who have survived the stiff competition and

come out successful.

Market share of branded packs, according to SMEDA are:

Brand Market Share In %

National Foods 40%

Shan Foods 40%

Chef’s Pride 15%

Others 5%

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These figures show Shan Foods and National Foods both as occupying first position as

far as market share is concerned. However, since their complete financial figures could

not be accessed at this preliminary stage of report, it is difficult to determine which player

currently holds more share when it comes to operating in both Pakistan and international

markets.

It is noteworthy that the above chart mentions Chef’s Pride as holding 15% market share

and occupying the second position in branded packs in Pakistan. It has however been

observed that this player is not available in majority leading stores across Karachi, which

forms quite a substantial market for all branded and unbranded spice dealers.

A region-wise breakup of the total curry based spice market shows the following pattern:

REGION %age SHARE

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Punjab 45

Sindh 45

NWFP & Baluchistan 10

(SMEDA)

UNBRANDED SPICE INDUSTRY

There unbranded players operating in spice market are self-owned independent

businesses that do not have affiliations with any brand in particular. A major problem

with such setups is that they are largely undocumented and unorganized, which precludes

to estimate the approximate market size. Due to such players, it is also difficult to

ascertain the taxation and the number of people employed in this industry. However,

PGA-Pakistan grocers association (SMEDA) quotes that in the last few years the trend

has been changing and market share of loose spices is gradually decreasing.

UNETHICAL PRACTICES IN THE UNBRANDED SPICE INDUSTRY

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People in Pakistan are mostly price conscious and turn towards open spices that they

purchase from kiryana stores. Consuming these spices has shown a number of

repercussions over the years like rise in the number of people suffering from different

ailments like stomach ache, gastroenteritis, diarrhea and others like rash and nausea. This

does not only happen after consuming food at open places (roadsides etc.) but also with

home cooked meals using open spices. Although there is no detailed study to show the

exact reason behind disorders such as those mentioned above, but contaminated spices

used in cooking appears to be a leading cause.

Open red chilli powder contains talcum powder, saw dust, brick powder, sand, dirt etc.

'Sudan-1', a dye used to give color to fabric and leather goods, is extensively being used

by chilli merchants across the country. Such contamination also takes place in turmeric,

black pepper, coriander, ginger etc. that can cause mental retardation, cancer and other

toxic effects on health, only increasing profits for the merchants.

Such practices are on the rise in open markets where profit making seems to be the only

reason to do business, regardless of the impact it creates. Police and price control

committees are given frequent bribes to act oblivious of such hideous acts to devastate

precious, innocent lives. (Ahmed, 2008)

INTRODUCTION TO SHAN FOODS

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ORGANIZATIONAL HISTORY

Shan Foods came into existence in 1981 when it began operations from a single room.

Shan Masala as it was back then, launched full range of spices to cater to local public,

due to its popularity. Shan started exporting after a few years due to increased

international popularity. But after sometime, the need to reposition the brand was felt. It

needed to be repositioned as a food brand rather than a spice brand. Re-imaging the

organization became necessary for re-positioning of the brand; it was a job well done and

led to continued success of Shan on national and international fronts. Now, Shan Foods is

well known as a brand of easy to cook mixes for Pakistani food. The name of Shan Foods

has become synonymous with highest quality and exquisite taste. It continues to carry on,

the tradition of authentic cuisine to farthest parts of the world. There are six broad

categories of varieties Shan deals in including recipe mixes, plain spices, dessert mixes,

basmati rice, pickles and salts.

Today, Shan Foods has presence in 60 countries. The brand is exported to UK, USA, and

Middle East and now to Far East regions as well.

COMPANY MISSION AND VISION

Shan Foods’ mission explains its success, “To continuously develop and produce

quality products that meet the customers and markets demands, compatible with

applicable regulatory requirements. To be a consumer oriented company with keen

insigne of food products ensuring quality panty consistency and authentic taste to

operate with state of the art technology to obtain optimum results and retain highest

quality standard thrived efficient and motivation human resource and inculcate in them

a sense of participation and proved for personal goals and development.” (Shan Foods,

2008)

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Shan Food’s vision is “to be a dominant global player in food products and socially

responsible company that attains its quality standards so that Shan stands for tradition,

trust and good taste.”

ANALYSIS OF MISSION AND VISION

Shan Foods through its mission and vision want to project their ambition to become a

‘global leader’ in food products while maintaining ‘quality standards’ so that its name

becomes synonymous with these two phrases. It intends doing this by maintaining its

focus on their customers and the applicable regulatory requirements of the markets it is

operating in, be it local or international. Along with these core values, it intends

preserving and upholding other values like purity, authenticity and consistency; which it

credits for the phenomenal growth it has seen over the past decade. The company intends

to grow on the back of cutting edge technology, with the proven best practice of CPI

(Continuous Process Improvement), and it realizes that a major portion of its past success

and the future drive towards its development and the achievement of its goals will be

hinged on the motivation level, the training, and ultimately the efficiency of its human

resource.

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Business Scope Shan Foos Pakistan

Where

• All across Pakistan / abroad (for export)

What Needs

• Nutritional and pleasure requirements.• Tastes of food

Whose Needs

• All segments of consumers.

Added Value

• Recipe of different dishes• Widely available almost everywhere.• Adapting and implementing latest technologies to offer a variety of food products

while maintaining quality and safety standards at all times.

Business we are not in Other than spices.

EXTERNAL ANALYSIS

Market Structure Spice Industry of Pakistan

The diagram below tells the Market structure of the Spices in Pakistan, spice industry includes:

Plain Spices Recipe Mixes Salts Export Institutions

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Salts

Nationl saltShan SaltLoose Salt

InstitutionNational

Shan

Loose

Key Analysis

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Plain Spices

Red Chilli PowderKhushbudaar Lehsan

Zaiqedaar Adrak

Khatta Khatai

Qasuri Methi

Karara Zeera

Taiz Laal Mirch

Taaza Dhaniya

Zaafrani Garam Masala.

Teekhi Kaali Mirch

Khaalis Haldee

Loose soices

Recipe MixesBiryani Mixes

Stir Fried Foods

Curry Spice Mixes

Deep Fried Foods

Barbeque

Vegetarian Foods

Instant Foods

Breakfast

LOOSE Spices

Exports

National Foods Products

Shan Foods Products

Retailer

Wholesaler

Distributor

Manufacturer

1. All segments are very well addressed by Shan foods.

2. The diagram tells other than the export segment all other segments are handled through the channel of wholesalers and retailers.

3. Shan foods is dependent on distributor for all the segments except exports which suggest the importance of distributors for the company .

Market Segment Shan Products

Recipe Mix Biryani Masala, karhai Gosht Masala etcPlain Mix Lal Mirchi, Haldi Powder, etcSalt Shan NamakInstitution All The Products of Shan Export All the Products of Shan

Market Share in

Volume (Rs.in billion)

All the segments of the spice industry have shown good growth in past 4 years.

The Recipe mix segment has shown good growth because of changing life styles of people as they prefer easiness in cooking.

Salt segment is also having a good growth despite having less proportion as compared to other segments

Market Segment 2006 2007 2008 2009

Recipe Mix 19% 29% 36% 42%

Plain Mix 22% 28% 33% 46%

Salt 3% 4% 5% 7%Institution 19% 24% 28% 38%Export 9% 10% 15% 25%

Market Segment 2006 2007 2008 2009

Branded 3 4.25 6 8

Unbranded 8 10 12 15

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The export market showed a phenomenal growth in throughout last four years.

GROWTH FUTURE 4 YEARS

The table below shows how Spice market would perform in next 4 years in each of the segment and also helps us in pointing the most attractive sector. This is very important exercising and helps people in identifying the segments they should look for and really aim on.

As the food industry is having a tremendous growth there is possibility that new

players will come and existing players will also intensify their efforts to meet the

demands,

The spice consumption is dependent on food consumption and wet know that

people consume about 50% of their income on food so his sector will have a good

opportunity.

Exports segment specially have a great potential and its size can be increased by

having more efforts to export spices and meet the international demand

MARKET SEGMENT

Segment Life CycleMarket / Product Segment Intro Growth Maturity Decline

Recipe Mix        Plain Mix        Salt        

Market Segment 2010 2011 2012 2013

Recipe Mix 42% 44% 50% 56%

Plain Mix 48% 51% 53% 55%

Salt 8% 9% 11% 13%Institution 39% 44% 49% 53%Export 28% 33% 40% 50%

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Institution        Export        

Shan Foods can easily pin point which segments to attack. The spice sector is expected to have tremendous growth for future years. Two key segments are falling in growth stage which means even now lot of investment can be made to take the upcoming market of these segments.

The Salt and Institutions are yet on its introductory stage, though Shan foods have started catering to these markets but still lot more efforts are required as figure shows this segment is expected to have lot of growth.

Even after so many years the segment like recipe mix spices is at its growth stage because

THERE IS NO as such strong substitute for this segment

SHAN’S PORTFOLIO LIFE CYCLE

Shan’s Portfolio life CycleMarket / Product Segment Intro Growth Maturity Decline

Recipe Mix        Plain Mix        Salt        Institution        Export        

Shan foods is in growth stage in three segments i.e Recipe Mix, Institution and Exports which suggest the growth possibilities for shan and giving an edge to Shan by earning more share than its competitors.

The industry is in introductory stage in Export segment while as we know shan has international presence and it is in growth phase so shan can further expand its presence and can make good return by focusing on exports.Companies & Competitors Market Share of Branded Spices

Company Market Share2006 2007 2008 2009 % Growth

Shan 1.2 1.68 2.352 3.3 40%National 1.2 1.5 2.5 3.2 40%Chef’s 0.45 0.63 0.882 1.2348 15%other 0.15 0.21 0.294 0.4116 5%

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The table describes the market share possessed by Shan Foods and its competitors. Shan Foods and National Foods are almost occupying the similar share in Volumes as well as in % but the growth of Shan Foods is Showing the steady increase while the National foods is Showing fluctuations in its market growth.

Shan Outlet Coverage and Market Reach

Shan Outlet Coverage

Outlets A B C D Total

Total Outlets 407 3020 30205 147344 180976Shan Outlets 360 2765 23995 22880 50000Outlet Coverage 89% 92% 80% 16% 28%Outlets Contribution 0.22% 1.67% 16.70% 81.40%  

Shan outlets coverage in A, B and C class outlets is excellent, where they really need to work hard are the D class outlet where there outlet coverage is less than 20%. These are basically the rural areas where people do not really know about branded items they just rely on loose spices.

Shan Market Reach

Outlet Coverage Market Reach

Shan Benchmark Shan Benchmark

28% 47%   42% 56% 

INTERNAL ANALYSIS

SWOT ANALYSIS SHAN FOODS

Strengths :

2004 Market ReachRetail Volume Sales

Shan Foods 3.3 billionIndustry 8 billion

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Shan food has a very strong heritage and legacy behind it which has given it a

strong goodwill in households.

Shan foods enjoys an approximately 50% market share in the recipes mixes

category.

Shan foods is a leading exporter of food items from Pakistan providing it an

opportunity to tap the large global market which helps it to expand at a rapid pace.

Shan has a wide range of products and SKU’s available consolidating its presence

in various niches and keeping its customers loyal to the brand.

Weaknesses :

Shan is not present in Jams and marmalades, Ketchups categories like National

foods thereby loosing an opportunity market. Many loyal Shan customers

purchase National products in these categories which is causing loss of potential

sales.

Shan has a low market share outside Karachi in the Punjab market where National

enjoys market leadership. This is due to weak distribution of Shan products in

Punjab market which is causing loss of potential sales.

Opportunities :

Shan can vertically integrate to produce its own raw materials which will not only

reduce costs but will also provide it more control over the quality of input.

Shan currently has a very low advertising spend in the FMCG industry. It can

deploy brand activations and other innovative campaigns to switch customers

from the loose/ unbranded segment to Shan products.

Shan can also horizontally expand its scope like national foods and enter the other

related food categories where it can tap its loyal customers with minimal extra

efforts.

Threats:

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The biggest threat to Shan is the high inflation in Pakistan coupled by a global

recession which is putting pressure on the profits and sales.

The prevalence of counterfeit products is also threat to Shan causing loss in

goodwill and potential sales.

The emergence of newer brand with deep pockets can also damage Shan’s

market share due to heavy advertisement while keeping the product quality

close to that of Shan.

RATING AGAINST CUSTOMER BUYING CRITERIA

The table below suggests what is the weight age customer gives to each of the non priced attributes and how is Shan and National performing against them

QUALITY & PRICE ShanNational

Non Price Attributes affecting Customer Choice

WEIGHTAGE%

Product-Related %

1. Quality 25 22 22

2. Packaging 10 10 10

3. Variety 18 16 14

5. Brand Name 15 14 12

Service- Related %

1. Recipe 20 18 15

2. Availability 12 8 10

Product/ Marketing Plan

Market segmentation and Product positioning objectives

Market Segment Size Growth Products

Existing

Profitability Objectives New Product

plan

Recipe Mix Biryani

25

Rs.25

billion

industry

40%

masala,

BBQ,

Qorma

Masala etc

10-15%

1.Include more

varieties in

portfolio

2.Capture

Market share

from branded

and un

branded

industry

Fish recipe

Italian recipe

Chinese recipe

Continental Recipe

Plain Mix

Tez lal Mirch,

Kaali Mirch,

etcIncrease usage

small towns

and suburbs

All varieties in

Sachet packing

Salt

Shan Namak Increase

awareness

among people

Institution

ALL

Products

Intensify

personal

selling efforts

Export All Products New markets

Action Plan

What How Who When

1.Include more varieties

in portfolio

Adding new variants

in recipe mix

Production Department By end of 2010

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2.Capture 30% Market

share from branded and

un branded industryBy Increasing selling

efforts and proper

management of trade

channel

Sales department

By 2012

Increase usage in small

towns and suburbs by

10%

By increasing awareness

By effectively managing

trade members

Marketing Manager

Sales Department

By end of 2010

Increase awareness

among people

By targeting health

conscious people and

making people aware

from hazardous effect of

loose salt

Marketing Department By 2011

Intensify personal

selling efforts

Selling efforts will be

intensified to build a

good client base with

institutions

Sales Department By 2010

New markets Taping new markets /

increasing share in

existing countries

Sales Department

(international)

By 2012

Product / Marketing Plan

Pricing

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Product Competitor Bench Mark Price Positioning

Recipe Mix

Ranges from Rs.30 to 40

Pricing charged by competitors

depends upon SKUs and it uses

Parity Pricing

Pricing charged by Shan depends

upon SKUs and it uses Parity

Pricing

Plain

Depends on SKUs

Like 50 grams red chili powder is

available at a price of Rs.20

and150 grams at Rs.115

Salt

Iodized salt is priced at Rs.17

(800 grams) and plain salt at

Rs.15 (800 grams)

Action Plan

What How Who When

As the pricing policy depends upon the raw material and Shan uses Parity pricing so marketing department just have to look for how much is it costing them and hen accordingly they set the prices keeping in view the prices of competitors.

Distribution

Channel Market This CompanyThis Year

2010 This Year

2010

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Distributor / Retail

60% 60%65% 60%

Distributor/ Wholesaler

20% 15%15% 10%

Institutional Sales

12% 15%5% 10%

Export 8% 10% 15% 20%

Action Plan

What How Who When

Distributor / Retail

By effectively

managing

distribution

network and

giving trade

incentives

Marketing and

Sales Department

By start of 2010

Distributor/ Wholesaler

Cutting some

proportion of

wholesaler and

diverting that

proportion to other

channels

Marketing and

sales Department By 2010

Institutional Sales

By making more

efforts in building

good clients to

generate more

institutional sales

Marketing and

sales Department

2010

Export

Taping new

markets &

increasing sales in

existing countries

Marketing and

sales Department

2010

IMC Plan

Shan Foods would follow an integrated marketing communication plan, which would include the different set of activities. Each activity would revolve around the products positioning statement.

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The estimated marketing budget for Shan is Rs.100 million for all their ATL and BTL

activities in the year 2009. The company does most of its marketing on seasonal basis

especially before and during Ramadan and near Eid. The breakdown for the budgeting is

80% for ATL activities and 20% for BTL activities. In the recent times Shan has put

more emphasis on its export and only comes up with new marketing campaign for new

products.

Shan does not advertise as a ritual and can be termed as quite conservative when it comes

to using mass media fro promoting itself. It does not believe in advertising rigorously.

The advertising is done seasonally only; however it does conduct certain promotional

campaigns and activities. Almost all of Shan’s promotions are addressed towards women.

The advertisements of Shan’s offerings focus entirely in the females of the family. The

marketing strategy is very customer oriented i.e. Shan emphasizes on marketing its

products keeping in mind its customers thus having a customer centric view. Such a

marketing strategy allows it to leverage on the goodwill already in the market.

It has started to reach out to a wider audience keeping in mind the changing lifestyle to

nuclear families and convenience seekers. Shan has recently realized that a potential part

of the population i.e. the teenagers are the ones that will become tomorrow’s decision

makers. Thus, it aims at informing, reminding and persuading teenagers through

innovative campaigns with proper information regarding the superior quality of Shan

products. This way, Shan will be their most preferred choice when they become the

decision makers in the kitchen.

More recently, the major marketing or promotional expenditure done by Shan Foods is on

making deals with television channels for their commercial air time. One of their most

recent deals was with Geo news and Geo entertainment in which they committed Rs. 12

million for one month of heavy advertisement in both prime and non prime time

advertisement. Few of the BTL activities that the company does and plans on continuing

is branding of shows in which the contestants can directly interact with the host of the

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cook. Along with that it also does mall activities which is direct marketing to educate the

potential consumers.

TARGET MARKET

Females aging from 18 to 45 years compose the main target market of Shan Foods. This

is because of the reason that in our part of the world, women are mostly related to the

food and cooking. Hence, Shan Foods develops products that are according the needs and

wants of these women no matter if they are stay-at-home or working, single or married

ones.

OBJECTIVES

Business objectives

Shan takes pride in its practices regarding client and customer interaction as derived from

Islam. Their strong connection and respect for Islam drives the company’s core values.

Therefore they have agreed upon not to accept anything but the best in raw material from

the suppliers as Islam teaches to entertain our Islamic brothern similarly as we would

treat ourselves.

Driving from the same concept of Islam Shan Foods also provides quality to its utmost

limits in the products that it offers. Its is the main reason for their how cost as Shan Foods

has the latest technology which is one of its kind in south east Asia. The V-look

technology and the coal grinding technology is only an example to their dedication to

provide nothing but the best to their consumers.

It’s the world class quality that brings the blind trust of the consumers on Shan products

that it will not only be hygienically prepared but would be secure from any harmful

ingredients that loose spices offer.

Value proposition of Shan Foods is to be receptive towards innovation and

experimentation in food and in life, while remaining a brand that will provide the highest

quality products to its customers and will never comprise on this idea.

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Shan food considers all major food brands, packed and loose, retailer’s brands, ready to

cook or raw food as its potential competitor. The direct competition is with National

Foods, Mehran, Shehzan, Ahmeds, Youngs and the like.

Marketing objectives

As the strong connection of the Shan Foods owners with Islam, the company does not

believe in advertisement heavily on any advertisement medium. Since the product

offerings are seasonal the company does advertise in Ramadan and come with its

advertising campaigns. Shan advertisement does not show any celebrity or prominent

figure to drive sales, rather it just compromises of show-reel showing hands with

background music and rotating dishes. The company also conducts BTL activities and

holds up demonstrations of cooking with its Spices and product offerings on different

venues. All the marketing strategies are customer centric or customer oriented so that it

can leverage on already well-developed consumer goodwill for the company.

Shan due to its consumer centric marketing strategies and with market intelligence has

started targeting teenagers as they are the future decision makers in households. Shan is

aiming to educate and persuade the teenage population with innovative campaigns and

with demonstrations to provide them complete information on not only Shan Foods but

also regarding the superior quality that if offers to them. This is a very strategic move as

when the time will be right, Shan usage will increase many folds because these teenagers

will then already be loyal to the Shan product offerings

With its proactive research and development department Shan is always on the move to

newer and better opportunities that it can cash upon. Regardless of this it has not filled

some basic gaps such as products for fisheries and the likewise cuisines

THE WORLD OF SHAN FOODS

The world of Shan Foods comprises 14 departments all together:

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1) Supply Chain

2) Information Technology

3) MIS

4) Procurement

5) Engineering & Services

6) Production

7) Communication

8) Human Resource

9) Export

10) Import

11) Quality Control

12) Research & Development

13) Sales

14) Marketing

Following is the organizational hierarchy of Shan Foods:

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In the above hierarchy:

CEO: Chief Operating Officer

GM: General Manager

Managing Director

CEO

General Manager Sales

Director GM (Production)

Director GM (Procurement)

Marketing & Exports

Director GMSales Office

Manager

Regional Sales Manager

Regional Sales Manager

Regional Sales Manager

Regional Sales Manager

Territory Sales Manager

Territory Sales Manager

Territory Sales Manager

Territory Sales Manager

Director /GM

BM (plain spices, instant mixes)

Category Owners

Category Owners

Category Owners

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BM: Brand Manager

Following gives a picture of what Shan Foods has achieved to date and some of its major

targets for the future:

Quality control since 1981

Quality assurance system since 2000

Food safety management system since of 2007

Total quality management target if 2010

Third party lab certification target of 2012

ISO 22000, the ISO version of HACCP (Hazard Analysis And Critical Control

Point)

GROWTH RATE

The food industry in Pakistan is a developing industry and is witnessing growth. The

main reason behind this is that buyers have started to shift from loose to packed spices,

thus changing the cooking and eating habits. The claimed growth rate of the entire

industry is more than 50% annually.

Shan Foods with a colossal annual growth of more than 50% was quick to respond to the

driving forces and key success factors of the industry and today, it proudly is the most

preferred spices company. It has become the industry giant holding almost 40% of the

market share belonging to the branded spice dealers. It has over the period of time,

managed to win the heart share of consumers that has translated into its brand loyalty and

true friendship with consumers.

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Strategic and Marketing analysis

Market Segmentation:

The market segmentation can be explained by defining demographic, geographic, and

behavioral factors that are most important for Shan Foods.

Demographic Factors:

The basic demographics that Shan caters to are the women of today belonging to

age group of 18 years and above with socio-economic class of middle lower of

above. Her martial status can be married or single, cooking for the household or

just trying out new things

Geographic Factors:

Shan food has not segmented itself on the basis of geographical segmentation.

Their distribution ranges from valleys of Quetta to the Khyber Pass and to the

seas of Karachi. It has more than 500 distributors in its supply arsenal. However

some recipes are more famous in particular areas of the country than others

because of sub-culture preferences. For e.g. the white Nihari, Sindhi Biryani, &

Qorma mix are in huge demand in Karachi and the demand in Lahore consists

mainly of Pulao, Murgh Choley & BBQ mix.

Behavioral Factors:

Being born Pakistani, loving food is in our blood. Spicy and delicious food is a

main part of our lives. Be it the celebrations of Eid or marriage ceremony of a

beloved, it’s the food that give colors to the events and that bring the relatives for

a quality time

Another behavioral factor is related to the double income phenomenon that is

growing everyday. Both the man and the woman of the house are earning to

support the family and they require ease and convenience when it comes to

cooking factor.

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The purchase behavior changes according to the seasons. If on one occasion Fruit

chart masala is in demand because of Holy Ramadan, BBQ mixes could be in

demand on Eids or in summers when families invite friends over on BBQ parties.

The Haleem & BBQ mix are in greater demand during the winter season while

Chana Chat mix is purchased more often in summers

Positioning:

Shan Foods position statement is “To the confident and convenience seeking

woman of today, our wide range of Shan spice mixes offer premium quality

products, made with the finest ingredients like no other.” It is just for the fact that

the consumers should be provided with solution of having a tasty meal in no time

with home made mixes of recipes and spices

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ANALYSIS OF PRODUCT PORTFOLIOS

It has been more than 25 glorious years that Shan Food Industries was established in

Pakistan, with its portfolio increasing by the day. It believes in research & development

and therefore, it is only after testing that new products are introduced in the market,

ensuring success. A company that started from spices only, kept extending its portfolio

range with pickle and salt added to the list. Finally, a wide range of desserts also became

the part of the portfolio.

Portfolio Roles

Different products of Shan Foods have different portfolio roles. Shan Plain Spices and

Pickle play the role of strategic brands because these two are expected to have high

future levels of profits and sales. Plain Spices can also be referred as Silver bullets

because ‘Tez Lal Mirch’, ‘Teekhi Kali Mirch’ and ‘Khushbudar Lehsan’ are themselves

separate brands and also add benefit to the umbrella of Shan Foods. The Garlic Pickle

prepared in olive oil is the first of its kind and because of its uniqueness, mostly it is short

in market and so the company representative classified it as a linchpin brand. Lastly,

since its Recipe Mixes have a large market share and a lot of brand loyalty has been

established for them over the decades, these are cash cows for Shan Foods.

Products Range of Shan Foods

The products of Shan can be broadly categorized into 6 categories, with multiple sub-

categories. The different product offerings of Shan Foods are:

• Recipe Mix

- Biryani Mixes

- Stir Fried Foods

- Curry Spice Mixes

- Deep Fried Foods

- Barbeque

- Vegetarian Foods

- Instant Foods

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- Breakfast

• Plain Spices

- Khushbudaar Lehsan

- Zaiqedaar Adrak

- Khatta Khatai

- Qasuri Methi

- Karara Zeera

- Taiz Laal Mirch

- Taaza Dhaniya

- Zaafrani Garam Masala.

- Teekhi Kaali Mirch

- Khaalis Haldee

• Dessert Mixes

• Basmati Rice

• Pickles

• Salts

Even after having more than just spices in the portfolio, Shan is considered the Recipe

Mix expert. Within Biryani alone it has nine different variants, two spicy and seven

milder ones. And it is the first one to come up with ‘Taaza Dhaniya’ in the Plain spice

category. Every single offering of Shan has its own identity.

Product Offerings within Spice Mix Category

The Spice mix division at Shan Food Industries happens to be the oldest product category

of the company. The category has a total of 67 different products, which are broadly

divided into 11 categories, some of these categories are

• Authentic Curries

• Traditional Stir Fries

• Tasty Instant Food

• Tempting Vegetables

• Delectable Biryani

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• Sumptuous BBQ

• Lavish Fried Food

• Yummy Chat

Looking at the product portfolio of Shan Foods, it is seen that Shan Foods has given is

consumers an offering for every occasion and every type of taste. Be it traditional cuisine

mixes like Biryani or an offering in the Dessert category; Shan has an offering to

complement all the good things in life associated with food. Out of all its categories, the

Spice Mix category is the oldest and is still used synonymous with the name Shan i.e.

Shan Foods is still referred to as Shan Masala by many. This shows how strong the spice

association is with Shan Foods. Other categories like Basmati Rice, Dessert Mixes,

Pickles and Salts were introduced later. It is seen that Shan itself promotes its Spice Mix

category most with minimal or no marketing expenditure on the rest of its categories.

Shan advertises its traditional recipe mixes and spices the most, because it wants to

remain top of the mind and top of the heart brand. Shan Foods is believed to be the leader

in the Spice Mix category and it takes utmost effort to ensure that the leadership crown is

not worn by anyone else but only Shan Foods. Following is what some offerings from

Shan’s product portfolio look like:

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PRICING POLICIES, PROMOTIONAL AND DISTRIBUTION PLANS

Shan Foods is present in 6 broad food categories which are as follows:

Recipe Mix

Plain Spices

Dessert Mixes

Basmati Rice

Pickles

Salts

Though there are many competitors in the Spice Food business, but the main competitor

or rival of Shan Foods is National Foods. Shan has a strong market share in the Recipe

mixes category from which it derives most of its revenue. Shan is most famous for its

Biryani Masala for which today it has nine different variants.

Pricing Policy

The pricing of all Shan offerings varies and depends on each Stock Keeping Unit (SKU).

However, the price ranges for five (out of six) categories of Shan product offerings are as

follows:

Recipe Mix:

The Recipe mixes range from Rs.30 to 40

Plain Spices:

Pricing of Plain spices varies SKU wise. For example, 50 grams red chilli powder

is available at a price of Rs.20 and150 grams at Rs.115

Dessert Mixes:

Desserts are all priced at Rs.35

Pickles:

Pickle pricing is Rs.170 for 1000 grams, pricing varies as per SKU

Salts:

Iodized salt is priced at Rs.17 (800 grams) and plain salt at Rs.15 (800 grams)

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It is seen that on a general note, Shan Foods’ offerings are based on parity pricing and are

similar to those of its rival National Foods. According to sources, this similar pricing is

not due to any price war that exists between both companies but is because the raw

materials of both are similar in nature for many offerings. If the cost of raw materials

increases, both have to increase their prices and again their prices show similar trend after

increase.

Promotion

The estimated marketing budget for Shan is Rs.100 million for all their ATL and BTL

activities in the year 2009. The company does most of its marketing on seasonal basis

especially before and during Ramadan and near Eid. The breakdown for the budgeting is

80% for ATL activities and 20% for BTL activities. In the recent times Shan has put

more emphasis on its export and only comes up with new marketing campaign for new

products.

Shan does not advertise as a ritual and can be termed as quite conservative when it comes

to using mass media fro promoting itself. It does not believe in advertising rigorously.

The advertising is done seasonally only; however it does conduct certain promotional

campaigns and activities. Almost all of Shan’s promotions are addressed towards women.

The advertisements of Shan’s offerings focus entirely in the females of the family. The

marketing strategy is very customer oriented i.e. Shan emphasizes on marketing its

products keeping in mind its customers thus having a customer centric view. Such a

marketing strategy allows it to leverage on the goodwill already in the market.

It has started to reach out to a wider audience keeping in mind the changing lifestyle to

nuclear families and convenience seekers. Shan has recently realized that a potential part

of the population i.e. the teenagers are the ones that will become tomorrow’s decision

makers. Thus, it aims at informing, reminding and persuading teenagers through

innovative campaigns with proper information regarding the superior quality of Shan

products. This way, Shan will be their most preferred choice when they become the

decision makers in the kitchen.

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More recently, the major marketing or promotional expenditure done by Shan Foods is on

making deals with television channels for their commercial air time. One of their most

recent deals was with Geo news and Geo entertainment in which they committed Rs. 12

million for one month of heavy advertisement in both prime and non prime time

advertisement. Few of the BTL activities that the company does and plans on continuing

is branding of shows in which the contestants can directly interact with the host of the

cook. Along with that it also does mall activities which is direct marketing to educate the

potential consumers.

Distribution

At Shan Foods, special care is placed upon meeting market and customer demands in a

fitting and timely manner. It is therefore, ensured by the Supply Chain team that goods or

shipments reach their destinations well in time to match market trends and customer

demands.

Shan makes sure that its authentic brands are distributed by efficient and top of the line

distributors. Shan has a separate Sales department focusing on International Modern

Trade (IMT) and Local Modern Trade (LMT). This department maintains direct

relationships with variety of shops to meet their customized requirements. This practice

helps Shan to keep a close and direct relation with high sales outlets which is pivotal for

its greater profits and market share.

Sales teams are totally monitored by Territory Sales Manager (TSM) and Regional Sales

Manager (RSM). Shan Foods helps by extending all possible marketing support to its

distributors in to create awareness of its quality products in the international market in

mutual sustainable business interest. Company’s TSMs and RSMs work on the basis of

area wise policy for distribution, be it local distribution or export. Products are distributed

on the basis of geographic segmentation. For instance, in posh areas no display of the

sachet packs will be seen in the stores whereas in underprivileged areas only sachets are

supplied.

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In Pakistan alone Shan has 500 distributors; from Karachi to Skardu. The sales force of

Shan supplies its products to these distributors and some direct distribution is also done

mainly in Karachi market.

The distribution channels of Shan Foods include:

Retail

Wholesale

Hyper Markets

(e.g.Macro)

International Chains

(e.g. Wal-Mart, Carrefour, Lulu Hypermarkets, Panda, Safeer, Mall of the

Emirate,, Reliance India)

Shan is the largest exporter of premium quality packaged spices, spice mixes, food mixes,

rice mixes to USA, Canada, UK, Germany, Holland, Malaysia, Middle east, South Asia,

Japan, Singapore, Australia, and many other countries of the world.

It also exports its products to the Far East, Bhutan, Japan, Malaysia, Singapore, Thailand

etc. In totality, it has its presence in almost 60 countries worldwide. It is the first

Pakistani brand that has been officially launched in India and Shan foods plans to extend

its availability in other lucrative markets around the world.

The Above The Line (ATL) activities of Shan foods include advertisements on television,

radio and print (magazines and newspapers). Following are some of its famous ATL

campaigns:

Expert

Ramadan ad

Radio ads with tara ra ra ra music

Backgrounds music with rotating dishes

Khanon mein shaan Shan Zindagi Asaan

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5 mins Qorma

Following is an ad of when Shan Foods launched its pouch pack for Achaar (pickle):

Some of the Below The Line (BTL) activities done by Shan Foods as part of its

promotion are as follows:

College Activities

Cooking Demonstration Programs

Activities/ Programs involving localities

(E.g. programs for Memon community in areas of Bahadurabad and Sindhi

Muslim Society – Memoni Biryani Masala)

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Participation on festivals on an international scale. For example, below is a

picture taken at Shan Foods participation in Pakistan’s Independence Day

celebrations in Los Angeles.

Independence Day event at Los Angeles-Shan Foods boot in the concert

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SUCCESS STORY OF SHAN FOODS IN TERMS OF FIGURES

During a time when it was very difficult to get a talented and educated pool to work for a

national company, Shan Foods prided itself in hiring the most talented people from the

country. As the competitive environment becomes more competitive with each passing

day, hiring and retention of positive people is critical, who contribute to the overall

growth of the company, country and the community at large. Shan Foods continuously

emphasizes the need of able human resource development through various Performance

Management Systems, Internship Induction Schemes and Employee of the Quarter

Achievement Award. In addition to these, there is a Training and Development plan run

on a regular basis at Shan, benefiting the workforce. (Shan Foods, 2008)

“Shan’s modern factory covering an estimated area of 100,000 sq. feet is also equipped

with latest in house lab facilities, which scrupulously tests and analyses each product

right from ingredient stage to finished form. At Shan, immaculate quality is a passion

and buyers’ satisfaction is the abiding commitment.”3 An estimated investment of

Rs.100 crores has been done in this facility.

Today, this organization has almost 1000 employees who work diligently day in day out

to make sure that the company’s vision and mission are achieved and it is more

successful than ever before. Over the years, success of Shan can be explained by the

awards and certifications it is been the recipient of like Export Performance Award

2003-2004 from KCCI, FPCCI Export Spices Mixes Trophy Winner etc.

Currently, Shan claims to earn annual sales worth Rs.2 billion with an annual growth rate

of more than 50%. Internationally, a test market has been established in Dubai, after

looking at its ethnic population of 1.4 million. Also, Shan is the first Pakistani company

to formally enter the Indian market and introduce its range in a more competitive market

than Pakistan’s.

3 “Profile: Shan Food Industries – The Culinary Craftsmen From Pakistan”, [online]. Available at:http://www.pakistaniexporters.com/Templates/Template1/?listing_id=579 [Accessed 19 February 2009]

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Product and new product strategies and pipeline

Growth Strategy:

Pakistan’s food industry is growing rapidly and is on the growth stage of its life cycle.

The prime reason for that is that consumer are becoming brand conscious these days and

are switching from unbranded looses spices to packed branded spices which in turn

indicates that cooking and eating habits are also changing. The growth rate of whole

industry currently is more than 50% annually, which is phenomenal opportunity for

company like Shan to capitalize by filling that gap.

Shan was vigilant and responded well enough to the market conditions. Today Shan’s

growth rate is more than 50% and it is industry giant having about 40% of the share of

branded spices industry. Shan has remained successful in achieving a soft corner in

people’s hearts which has resulted into a strong brand loyalty.

It’s very difficult to compete in spice industry with top-down or centralized

organizational structure because of the fact that different departments’ performances are

inter-dependent. Shan realized this and it now has decentralized structure. Every worker

is welcomed to participate in decision making and can come up with new ideas and

thoughts to improve the product or the production process. This helps the strategist in

understanding that what is attitude of an average employee about the company and that

feedback aids in forming better and improved strategies. By involving employees in

decision making process gives employees a sense of ownership and they feel right at

home where they have a say.

Product Strategy:

Shan in an entrepreneurial venture and it is following market development strategies,

product development strategies and penetration strategies as it is expanding its product

line to new customer base in various locations, setting up product lines such as spices,

pickles, etc and sustaining its global position mainly through exports. Shan has great

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range of vegetable mixes for country like India as the target market highly prefers

vegetable. Similarly in Pakistan Shan has wide range of meat mixes as people are meat

lovers and highly prefer meat diet. Shan is currently present in over 60 countries and is

performing to maximum of its potential to become the global leader. Therefore, based on

conceptual understanding form the Strategic Marketing Management course, it can be

called a ‘transnational’.

Shan Foods has the competitive edge of technology and innovation. Company develops

new methods and techniques to test its new products and generate trials in the market to

measure the market response before they formally launch any product. So we can say that

research is an integral part of the company and the new product is brought in keeping in

view the customer preferences and needs.

The spices mixes at Shan’s production plant are created with the exquisite and genuine

flavors having the cultural and traditional touch. Shan believes in the best as it never

compromises on standards of finest quality and engraves the old age recipes into modern

packaging keeping the freshness intact.

The raw material is an initial and important part of whole product strategy. Shan strongly

holds the belief that excellent quality is majorly dependent on the first-class quality raw

material processed with the help of state of the art technology. For this very reason the

purchase department at Shan Foods thoroughly selects the best quality spices from fields,

local bazaars and international markets. Raw material is also procured from number of

countries such as black pepper is imported from India, Africa, Thailand and various other

countries. Shan Foods pays special attention in obtaining raw material as different spices

are imported from the places where those spices are grown best.

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Possible Future Prospects:

Shan is currently in spice mixes and pickles but it can find niche market such as diet

conscious people and bring in the spices for that market. Shan also can diversify its

product offerings and can enter into jam and ketchup market as national is already

playing in that category.

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Cost Volume Profit Analysis

Annual Revenue 3.3 billion

AnnualFixed Cost 120,000,000

Annual Variable cost 300,000,000

Total Annual cost 420,000,000

Profit margin10-15 percent

Breakeven revenue = Annual Fixed Cost

C/S ratio

120,000,000 0.86 contribution ratio (C) =annual sales-variable cost

138947368.4

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Cost Volume Profit analysis

The values are based on best of estimate deduced after discussion with Shan Foods brand manager.

C/S ratio is annual revenue minus the annual variable cost divided by annual revenue.

Since there was no disclosed stats for the annual units sold so the cost volume and profit analysis had to be taken out from the annual revenue generated. According to this ratio the company to achieve breakeven must sell products of around 140 million rupees.

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Management control and process of corrective actions

Management Control

Control is one of the managerial functions like planning, organizing, staffing and

directing. Everything managers do in following-through on decisions taken to achieve

defined goals within an established timetable, is considered management control. It is

important because it helps to check the errors and to take the corrective action so that

deviation from standards are minimized and stated goals of the organization are achieved

in the desired manner. This constitutes three main activities:

Setting standards

Measuring actual performance

Taking corrective measures

An earlier view of control saw this concept in action only after errors were detected, but

in the modern view of management, control is a foreseeing action.

“Management control can be defined as a systematic effort by business

management to compare performance to predetermined standards, plans, or

objectives in order to determine whether performance is in line with these

standards and presumably in order to take any remedial action required to see

that human and other corporate resources are being used in the most effective

and efficient way possible in achieving corporate objectives” – Wikipedia.

SETTING STANDARDS:

Management control takes place at a number of levels within an organization namely:

strategic, operational and tactical levels. In effect, control variables at one level cascade

to the next level below and translate in nature and focus accordingly. For example, these

controls may predominantly be financial in nature at the strategic level but translate to

departmental activities at the operational level, and hence encompass both financial and

non-financial information. Further down to the tactical level, they translate into

productivity both for the groups and the individual. Therefore, the focus of this exercise

in any organization is on finance, performance appraisal and benchmarking.

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Marketing activities are inherently more volatile due to the constantly changing business

environment which is driven by the needs and wants of the market. Therefore, for

marketing performance to be measured correctly, the appropriate criterion for marketing

activity needs to be determined, namely: annual plan, profitability, efficiency and

strategy.

For Shan Foods, the criteria to measure marketing success should be evaluated from the

following factors:

Measurement of awareness (of the product range)

Feedback on customer satisfaction

Market share data – both in terms of levels of sales, and repeat business

Annual plan: Measures the extent of marketing success over a period of time. Shan

Foods should be on analyzing:

Sales

Market share

Expenses

Customer perception

Budgeting:

The process of developing any kind of strategy and its budgeting are intertwined.

Budgeting process translates marketing strategy into financial terms, and is the single

most common control mechanism. It serves not only to quantify plans but also to

coordinate activities, highlight areas of critical importance and assign individual

responsibilities. Difficulty, time, negotiation, and paperwork: all figure into the budgeting

process. Simply put, it is a tool for resource allocation and acquiring the approval for all

such allocations. Shan Foods’ managers preparing a budget should look into:

Budgeting guidelines – policy and procedure relating to budget formulation.

Includes assumptions, methods, and presentational requirements.

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Cost behavior – understanding the cost drivers within an area of responsibility and

how those costs are allocated.

Timescale – specific time and manageability considerations set for budgetary

periods, example financial year or a rolling budget, with forecasts over regular

intervals.

Objectives – specific aims and goals and how they will be assessed.

Though budget types can be historic, zero-based or activity related, it is recommended

that Shan Foods pursue activity related budgeting for their marketing pursuits since such

a budget would have calculation rules such as percentage of sales, or average industry

spending, and these precursors are used to determine the available funds for marketing.

Profitability: Creates a systematic basis for allocating cost and defining profit both in

terms of products or marketing activities. Ultimately it should help Shan Food’s decision

making in terms of:

Expansion

Reduction or elimination of product offerings

Resource allocation through various distribution channels.

Efficiency control: Gains optimum value from the marketing assets. Shan Food

managers should look for value for money by analyzing the impact of promotional

activities and setting controls on:

Sales

Advertising

Directing marketing

Monitoring marketing performance: When deciding on how to monitor marketing

performance, reasonable standards need to be allowed. Shan Foods’ emphasis should be

on monthly monitoring (or weekly in case of critical situations). The question in mind

should be,

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What is the time period that allows the most realistic and accurate picture of our

marketing performance?

Which KPIs need to be at the center of attention at the moment?

Is there a need to create new KPIs?

Improving marketing program and their effectiveness:

In order to establish a better marketing control system, the biggest obstacle at Shan Foods

may be the oft-repeated element of resistance. Being a ‘seth’ company, there might be a

lack of constructive and positive attitude at the top management. The basic objective of

any top management should be to make its sales and marketing people more effective.

Practicality and clarity should be addressed when implementing changes. This could be

done through a series of thought provoking questions:

What specific actions should be taken?

When should the actions be taken?

By whom should the actions be taken?

What could be realistic starting and completion dates?

Who shoulders the responsibility of implementing these corrective actions?

Strategic control: Reviews marketing strategy and its subsequent implementation, in

terms of the direction towards strategic organization goals. This exercise

comprehensively examines marketing activities and assesses their effectiveness and

makes recommendations to improve marketing performance. It is usually conducted in

the form of a:

Marketing audit

MEASURING ACTUAL PERFORMANCE:

Ratios: A simple and effective technique to measure performance is in terms of ratios.

However these should not be used in isolation but should rather be considered in relation

to trends and comparison with planned or standard ratios. Additionally, it is important to

acknowledge that though these ratios are a quick and effective way to establish

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performance, they are mere indicators and hardly identify the source of a pending

problem. It is also important to define the standards and be consistent with their use when

using ratios, for example, profit before or after tax is to be considered.

Many businesses operate with lower acceptable ratio; however a ratio that is too high

shows that the organization is not making optimum use of its financial resources by

holding too much cash. Shan Foods can use these ratios to analyze the level of asset

involvement in its marketing efforts.

Variance analysis: Used along with budgetary control, Shan Foods would be able to

examine the variation between the actual and planned results and this applicable to a

range of marketing activities. The comparison would be made against budget forecasts,

and the reasons for prevailing differences would be easily identified and examined within

the areas of concern and their component parts. More specifically, variance analysis

could be applied to sales price and sales volume and the values of variance can point to

either of the two reasons. The management of Shan Foods can thus examine why revenue

targets fell short of the intended volume or intended price. This technique can further be

used to analyze other factors such as profit, cost and market size.

Performance appraisal: In this form of management control, the focus is on achieving

better results from groups or individuals. Such a framework is based on planned

objectives, levels of achievement and competence. Management is required to have good

people skills and its attitude to be constructive in nature. This would involve them using

three specific managerial skills

Reviewing performance – though a normal management activity, Shan Foods

should emphasize the use of objective criteria to be used as the basis of such

reviews. Far too often our industry and business environments use personal

preferences and pre-conceived notions about employees to write performance

reviews. The result is a deteriorating workforce which lacks motivation and hence

a required level of commitment towards company vision, mission and objectives.

The review criteria should be communicated and all work and personal

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development plans should be considered in tandem with the communicated

criteria.

Giving feedback – related to performance in terms of actual results and observed

behavior. It is again important to mention here that Shan Foods does not just

focus on the negatives when giving feedback, since such practices are common in

the Pakistani business environment. It is pertinent to be specific yet descriptive

when referring to actions, behaviors and judging overall results. More

importantly, suggestions should focus on key aspects of improvements that

managers would like to see in their workforce.

Counseling – in order to overcome the observed weaknesses and build on the

noted strengths, performance appraisals should firstly be positive in nature, and

Shan Foods’ management should be ready to counsel staff so as to build a

workforce that is not only equipped and geared towards achievement but also

motivated and committed enough to go attain the company goals.

THE NEED FOR TAKING CORRECTIVE MEASURES:

If a planned marketing activity is not meeting its intended objectives, it calls for

corrective actions. Since there is a wide range of possible outcomes, it is obviously

prudent to have the corrective actions which are addressing the areas where the problem

exists. Following are a few broad categories where problems may exist, and the

corrective actions that may be taken to address them.

Unsuitable marketing objectives and strategies:

Usually the starting point for any organizational activity, it is quite possible to have

incorrect objectives which are the real problem. Not reading the organization

environment correctly may lead to this, and this ends in having objectives that are too

ambitious or unrealistic. Conversely, it is also possible that the resources an organization

holds are insufficient to meet the stated objectives. For example a sudden reduction in

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income which was not expected may shrink funding, and it would become difficult to

sustain a planned marketing activity under the new financial constraints.

Unsuitable marketing tactics:

This is where the marketing mix may not be having the required impact on target market

audience. The pricing levels may have been set too high which hindered participation, or

the message being sent out in an advertising campaign may have been incorrectly

perceived. Similarly it is also possible that the wrong audience may have been targeted at

the outset, or that the target audience did not have easy access to tickets. Another reason

could be that the sponsors were not impressed by the levels of corporate hospitality.

Insufficient marketing budget:

This is something that should be done at the beginning of a planned activity. The resource

availability should be verified and more importantly budgeted, so that hindrances from

cash constraints can be avoided later. The success of marketing tactics depend on this,

and if not handled earlier, the impact of marketing campaign will not be felt because of

the later need to cut corners.

Last but not the least, it is very important to do a gap analysis prior to taking corrective

actions. The discrepancies between planned and actual results must be pinpointed before

any such corrective actions can be implemented.

TAKING CORRECTIVE MEASURES:

A corrective action is a change implemented to address the weakness identified in a

management system. Normally corrective actions are instigated in response to:

Customer complaints

Abnormal levels of internal non-conformity

Non-conformities identified during an internal audit

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Business organizations do not have unlimited resources at their disposal. Management

control can therefore lead Shan Foods to a more effective and efficient use of its

resources, helping it to channel their efforts towards marketing initiatives and their

achievement. This in turn will help them achieve their financial objectives in a controlled

manner. Shan Foods’ marketing efforts should not only help management decision

making, but also give support and direction to the day-to-day marketing activities, since it

is the customer needs and the satisfaction of those needs that at the end of the day

become the judgment criteria for those efforts. Having a structured and rational approach

to conducting marketing initiatives may well be appreciated more within Shan Foods than

taking a piecemeal approach, as it would demonstrate action towards specific

organizational objectives and their marketing solutions.

Some recommended corrective actions for Shan Foods:

Obtain regular feedback from customers – continuously increasing customer

demands and the constantly competitive work environment calls for organization

wide learning as a continuous process rather than mere quality control. Shan

Foods should view its organization as an integrative system responsible for

customer service and satisfaction. Taking regular feedbacks would therefore help

transform any unsatisfied customers into satisfied ones.

Dedicated call centers – it is important to have synchronization between

company objectives, customer service standards and customer satisfaction levels.

Running and maintaining a dedicated call center (or outsourcing this function to a

reputable company), which gathers current customer perceptions continuously

will help compare and align Shan’s business service standards with its objectives

and the customer attitudes.

Monitoring marketing performance – The question to who should be

responsible for monitoring has three possible alternatives: top management,

marketing management, or the combination of the two. It is recommended that

Shan Foods goes for the combination alternative as this approach allows direct

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marketing management to take immediate and timely corrective actions, and

concurrently allows top management to have the necessary visibility but only

from a control perspective. Since Shan Foods is known to be a ‘seth’ company,

this combination approach would suit its operations better than the other two

alternatives.

o Regular marketing audits - conducting periodic, comprehensive,

systematic and independent investigation of Shan Foods’ marketing

activities, with the goal of identifying possible opportunities as well as

potential challenges will help the organization think pro-actively and

evaluate the success of the corrective actions. Marketing audit is one way

of helping organizations do the things they want to do, but moreover do it

right the first time..

Shan Foods does conduct yearly audits, but we feel that increasing the frequency will

improve the marketing function. These audits need to be carefully planned and

conducted so as to ensure that the time and resource expenditures are kept to a

minimum.

Extending use of ERP system - Organizations these days make extensive use of

MIS to help them achieve increased profitability through optimizing their

resources. Shan Foods’ has been aware to this, and their business savvy is

portrayed by the fact that it has been utilizing a customized ERP system to

achieve these very goals. They have running modules in:

o Inventory management – material resource planning

o Production planning

o Sales

o Accounts

o HR

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The use of these modules however is still in the nascent stage and needs to grow

into areas where management control can be brought about effectively. Shan

Foods needs to further explore their current ERP system to employ some of the

famous techniques such as kaizen or activity based costing.

From the perspective of marketing management it can also employs various

organizational controls through this ERP system such as

o Sales forecasting

o Sales force and reseller incentive programs

o Sales force management system

o Customer relationship management

Marketing dashboard – A tool used to simplify marketing reporting and

analysis. It continuously tracks marketing metrics, related information and trends

and presents everything on a one page report. It will help Shan Foods by

o Staying a step ahead and focused

o Providing a better insight into marketing related problems

o Communicating information to everyone involved

o Saving management valuable time

o Measuring marketing effectiveness

o Making smart decisions

o Continuously tracking marketing activities and metrics like

sales per customer, product, region, industry, etc

sales from new products / customers

Profit and margins per customer, product, region, industry, etc.

profit and margins from new products / customers

market share

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Recommendations

Apart from everything one of the growing sectors in food industry is of frozen foods,

though a news field for Shan foods but with the current performance in spices and the

quality it maintains, Shan has strong chances of making its marks in the frozen food

category as well which is currently led by K&N. Shan Foods existing distribution and

production facilities can help in this initiative.

Though the new generations are realizing the benefits of open spices to packaged branded

ones, but there still need to be developed effective marketing strategies after

understanding the trends in how people are using spices and for what reasons are they

using them. Convenience, environmental concerns, increasing acceptance of food as

having therapeutic value are some of dimensions organizations need to study and develop

new uses for their spices.

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REFERENCES

PRIMARY SOURCES

Mr. M. Saad-Ul-Hasan

Brand Manager

Shan Foods

Email: [email protected], [email protected]

SECONDARY SOURCES

Ahmed, Rutaba, 2008, “A Silent Killer”, Jang, [online]. 13th May, 2008

Available at: http://jang.com.pk/thenews/may2008-weekly/health-13-05-

2008/index.html

[Accessed 18 February 2009]

Foodtech, “Industry Overview, Pakistan- Steady Pace for Successful

Growth”, [online]. Pakistan.

Available at: http://www.foodtechpakistan.com/Indsutry%20Overview.htm

[Accessed 18 February 2009]

Small and Medium Enterprise Development Authority (SMEDA) Sindh,

2006, “Pre- Feasibility Study: Spices Processing, Packaging & Marketing”,

[pdf]. December 2006, Pages 3, 8-12, Document No. PREF-12, Pakistan.

Available at: http://www.smeda.org/business-development/pre-feasibility-

studies.html

[Accessed 18 February 2009]

Shan Foods, 2008, “Introduction, Company History and Mission Statement”

[online]

Available at: http://www.shanfood.com

[Accessed 18 February 2009]

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