Lays (Frito lay Pepsi co) Pakistan

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Report on

Vertical & Horizontal marketing channel conflicts of Lays

Submitted To:
Sir Hammad Hassan

Submitted By:
Anum Sikandar 857 Zainab Munawwar 858 Saba Gull 1378 Muhammad Majid Rashid ag-595 3rd Semester Section E 20102010-ag2010-ag2010-ag-

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Institute Of Business & Management Sciences University OF Agriculture, FAISALABAD

Exordium

Praise the lord because nothing deserves to be praise expect Almighty Allah, the most Merciful, benevolent and complaisant. All praises for him because he is the creator of this enigmatic universe and guides us with the Holy Prophet Mohammed (Peace be upon him) and Holy Quran to explore it. We supplicate that Allah grant us serenity to accept the things we cannot change, courage to change the things we can, and wisdom to know the difference.

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Acknowledgement
The project of vertical and horizontal channel conflicts is the result of our day and night efforts which we have made to complete this considerable and informative project. Certainly we have been able to complete this project with the help of numerous factors, which played a key role in it.

We deem it with an honor and privilege to record sense of gratitude to the respected resource person Sir Hammad Hassan for his constructive style of teaching and maintaining very open and competitive atmosphere within the class. We really liked our respected resource person for his full command on the subject and unconventional style of teaching. This made the subject very comprehensive and understandable.

We hereby take this opportunity to thank all those people including our friends and colleagues who have helped us for the successful completion of this project.

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We express our gratitude's towards our parents for their encouraging support, incandescent sprit and endurance towards the making of this project. In the ends a special thanks to all members who are directly or indirectly associated with the project.

Table of Contents
Topics Executive Summary Report Objective .. Research Methodology Limitations Introduction . Lay's . History . Company Perspectives Key Dates Lays Pakistan. Company Profile . Production Suppliers .. Customers . Slogans . Flavors . New Arrivals Nutritional information Conspiracy about Pig Fat in lays . The code E631 . Level and Type of Competition .. Competitors . Competitors Products & Activities . Market share Nature of business . Key Objectives of Lays ..

Page # 08 10 10 10 10 10 11 11 12 12 12 13 13 13 13 14 14 14 15 15 15 16 16 16 17 17

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Marketing Objective of Lays Pakistan Marketing channels . The role of marketing Channel Channel Marketing Systems Vertical Marketing system Horizontal Marketing system Topics

17 18 18 19 19 19 Page # 20 20 20 20 20 20 21 21 22 22 22 22 22 23 23 24 24 24 24 24 25 25 25 26 26 26 26 27 27

Multi-channel Marketing System . Conflicts, Cooperation, and Competition . Types of conflicts Vertical Channel Conflicts Horizontal Channel Conflicts . Multi-channel Conflicts ... Causes of Channel Conflicts Marketing Intermediaries of Lays Pakistan Conflicts in marketing channels of Lays Region Distributors Vertical conflicts in marketing channels of Lays Pakistan Example # 1 Adreesia Enterprises The Best Departmental Store Vertical Conflicts . Very low margin Late delivery No extra incentives No proper action on customers complaints Shortage of some flavors Example # 2 Murshid G Drink Vertical conflicts Late delivery Shortage of some flavors Communication problems Conclusion Recommendations

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Horizontal conflicts in marketing channels of Lays Pakistan Example Adreesia Enterprises Metro Horizontal conflicts Topics Difference in profit margin Difference in number of wholesalers and retailers Communication preferences Difference in payment methods Special offers Conclusion Recommendations

28 28 28 29. 30 Page # 30 30 30 30 30 31 31 32 33

References Appendixes

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Executive Summary
Lays is the brand name for a number of potato chip varieties as well as the name of the company that founded the chip brand in1938.Lay's chips are marketed as a division of Frito-Lay, a company owned by PepsiCo Inc.since1965.Other brands in the Frito-Lay group include Fritos, Doritos, Ruffles, Cheetos and Kurkurre. The scope of this study is to discuss the marketing channels of lays Pakistan and to find out any conflict between these channels. The conflict can be vertical (with in a channel) and horizontal (outside the channel). Company has started its production at its New Plant at Raiwind road Lahore on 14th August, 2006. That improves the performance of the company. The time period of importing the product is eliminated. Raw material can be available in local market, so it would reduce the budget for raw material. In Pakistan lays is being manufactured in these flavors: Barbeque, Salted, French cheese, Magic Masala, Ketchup tango, Salt and vinegar. Some new arrivals are Wavy lays Cream and Onion and Salt and Black pepper. Lays Classic Potato chips are cooked in 100% pure sunflower oil (originally hydrogenated oil until January 1st, 2007). A one ounce serving has 150 calories, 90 of which are from fat, 10 grams of fat, and 1 gram of saturated fat. They have many flavors in the baked lays as well. Baked lays are produced in cheddar, barbecue, and original. Lays has faced a conspiracy about pig fats but they resolve the issue by giving proves. the Jamia Ashrafia, Pakistan has made sure that Lays produced by Pepsi Pakistan should use the E631 from Halal source. Lays marketing objective are very clear. Company wants to maximize its market share. The attraction towards the product is very important and without this phenomena company cant fulfill its target. Strong distribution channel is the foremost element Profit maximization is always prior magnitudes for every company for that purpose they reduce the cost of production to enhance the turnover of the company. Lays marketing channel is very strong. Distribution channels do not stand still. New wholesaling and retailing institution emerge, and new channel systems evolve. These new systems are as follow:
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Vertical Marketing System, Horizontal Marketing System, and Multi-channel Marketing System. All these system can face some conflicts too because of goals incompatibility, unclear roles and right, difference in perception, dependence on the Manufacturer. Vertical Channel Conflicts means conflicts between different levels within the same channel. Horizontal Channel Conflicts involves conflict between members at the same level with in the channel. It can between two wholesalers or in between two retailers. Multi-channel Conflicts exist when the producer has established two or more channels that sell to the same market. We design a list of questions to collect the whole data from the distributors, wholesalers and retailers. We select 1 or 2 major distributors, wholesalers and retailers of lays in Faisalabad and personally visit their premises to find out any conflict between them. An Adreesia enterprise is being selected as distributor, Murshid G drinks as wholesaler, The Best departmental store as retailer for the vertical channel conflicts. Adreesia enterprises and metro had been selected as another major wholesaler for the horizontal channel conflicts. We find out that vertically channels are facing the problem of shortage of some lays products and less profit margin. And horizontally they are facing the preferences problem. This study has enhanced our practical knowledge and clears the concepts. The time span for this report is very low. The channel members were not very cooperative at start. Our recourses were limited so we had to focus on1 product and on few channel members with in a small region.

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Report Objective:

Marketing channels of lays Pakistan

The horizontal and vertical conflicts in marketing channels

Research Methodology:
We design a list of questions to collect the whole data from the distributors, wholesalers and retailers. We select 1 or 2 major distributors, wholesalers and retailers of lays in Faisalabad and personally visit their premises to find out any conflict between them. (Appendix # 1)

Limitations:
Time duration for the report is very low. Resources are very limited that is why we can take a very small region under study. The channel members like Adreesia enterprises and others are not very cooperative at the start. Retailers were hesitating while discussing the conflicts and were taking it as threat with their relationship with distributor.

Introduction:

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Lay's:
It is the brand name for a number of potato chip varieties as well as the name of the company that founded the chip brand in1938.Lay's chips are marketed as a division of Frito-Lay, a company owned by PepsiCo Inc.since1965.Other brands in the Frito-Lay group include Fritos, Doritos, Ruffles, Cheetos and Rold Gold pretzels.

History:
Native American chef George Crum invented potato chips in1853 while working in a New York hotel. The snack food became popular during the1920sfollowing the mechanical potato peeler. As distribution increased, a number of small companies began manufacturing and selling the product. In 1932 salesman Herman W. Lay opened a snack food operation in Nashville, Tennessee and, in 1938; he purchased the Atlanta, Georgia potato chip manufacturer "Barrett Food Company," renaming it "H.W. Lay & Company." Lay criss-crossed the southern United States selling the product from the trunk of his car. In1942, Lay introduced the first continuous potato processor, resulting in the first largescale production of the product. The business shortened its name to "the Lay's Company" in 1944 and became the first snack food manufacturer to purchase television commercials, with Bert Lahr as a celebrity spokesman. His signature line, "so crisp you can hear the freshness," became the chips' first slogan along with "de-Lay-sious!" As the popular commercials aired duringthe1950s,Lay's went national in its marketing and was soon supplying product throughout the United States.In1961, the Frito Company founded by Elmer Doolin and Lay's merged to form Frito-Lay Inc., a snack food giant with combined sales of over $127 million annually, the largest of any manufacturer. Shortly thereafter, Lays introduced its best-known slogan betcha you can't eat just one." Sales of the chips became international, with marketing assisted by a number of celebrity endorsers.In1965, Frito-Lay merged with the Pepsi Cola Company to form Pepsico, Inc. and a barbecue version of the chips appeared on grocery shelves. A new formulation of chip was introduced in1991that was crisper and kept fresher longer. Shortly thereafter, the company introduced the "Wavy Lays" products to grocer shelves. In the mid to late1990s, Lay's modified its barbecue chips formula and rebranded it as "K.C. Master piece, named after a popular sauce, and introduced a lower calorie baked version and a variety that was completely fat-free (Lay's WOW chips containing the fat substitute olestra).In the2000s,kettle cooked brands appeared as did a processed version called Lay's Stax that was intended to compete with Pringles, and the company began introducing a variety of additional flavor variations. Frito-Lay products presently control 55% of the United States salty foods marketplace.

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Company Perspectives:
Our Mission Statement: To be the world's favorite snack and always within arm's reach.

Key Dates:
1932: Elmer Doolin founds the Frito Company in San Antonio, Texas, and begins making Fritos corn chips. 1938: Herman W. Lay buys Atlanta potato chip maker, changes name to H.W. Lay & Company, Inc., the following year. 1944: H.W. Lay begins marketing potato chips under the Lay's name. 1948: Frito Company introduces Chee-tos snacks. 1958: Frito Company acquires the rights to Ruffles brand potato chips. 1961: The Frito Company and H.W. Lay & Company are merged to form Frito-Lay, Inc. 1965: Frito-Lay, Inc. and the Pepsi-Cola Company merge to form PepsiCo, Inc., with Frito-Lay becoming a division of the new company. 1967: Doritos tortilla chips make their national debut. 1970: Frito Bandito advertising campaign is abandoned following complaints from Mexican American organizations. 1981: Company introduces Tostitos tortilla chips. 1991: Sunchips multigrain snacks are introduced. 1997: Company acquires the Cracker Jack brand. 1998: Wow! line of low-fat/no-fat chips debuts.

Lays Pakistan

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Company Profile:
Plot no 413, Sunder industrial Estate, Raiwind Road, Lahore

Production:
Company was importing KURKURE from China and Lays chips from Saudi Arab through its supplier Saudi Snack Food. Company has started its production at its New Plant at Raiwind road Lahore on 14th August, 2006. That improves the performance of the company. The time period of importing the product is eliminated. Raw material can be available in local market, so it would reduce the budget for raw material. The time span right from the production to distribution will squeeze and efficiency will be enhanced.

Suppliers
Company was importing Lays chips from Saudi Arab from 1st June 2005 through its supplier Saudi Snack Food and has a strong bond with them but now LAYS CHIPS is produced in Pakistan

Customers
The strategic focus of a business or a marketing plan of lays Company is that they are targeting Youth, Girls and housewives (opinion leaders).The company needs to study five types of customers like consumers, business, resellers, international and government. But in the case of lays only consumers are exist.

Slogans:
That's another reason to smile! Lay's Potato Chips (2007) Food for the fun of it! (2007) Lay's, get your smile on! (2006-) Lay's. Want some? Betcha can't eat just one (1960s-present)

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 Lays ka mazaa lo(Lay's Pakistan)meaning-Have fun with Lay's You can't eat just one....Lagi bet! (Lay's India)

Har programme ka main food (Lay's India)meaning- The main food for every programmme

No one can eat just one (Lay's India)

Flavors:
Except for barbecue-flavor potato chips, which were introduced no later than 1958, up until the last 20 years, the only flavor of potato chips had been the conventional one. Despite an explosion of new flavors, the unadorned original is still the selection of 81%of consumers. In the Pakistan, Lay's offers a number of flavor combinations, in addition to the classic chips. Flavored products in the traditional fried varieties include Barbeque Salted French cheese Magic Masala Ketchup tango Salt and Vinegar

New Arrivals:

Wavy Lays Salt and Black pepper Cream and Onion

(Appendix # 2) Nutritional information

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(1 Bag of Lays Baked Chips) As a snack food, the Lay's brands contain very few vitamins and minerals in any variety. At ten percent of the daily requirement per serving, vitamin C is the highest. Salt content is particularly high, with a serving containing as much as 380 mg of salt. A one ounce (28gram) serving of Lay's regular potato chips has 130caloriesandcontains ten grams of fat, with three grams of saturated fat. Kettle cooked brands have seven to eight grams of fat and one gram of saturated fat but are 140 calories. Lays Natural has nine grams of fat, two grams of saturated fat and 150 calories. Stax typically contain ten grams of fat, 2.5 grams saturated fat and are 160 calories per serving. Wavy Lays are identical to the regular brand except for a half-gram less of saturated fat in some combinations. The various brands do not contain any Trans fats. The baked variety feature 1.5 grams of fat per one ounce serving, and have no saturated fat. Each serving has 110 to 120 calories. Lay's Light servings are 75 calories per ounce and have no fat. Lays Classic Potato chips are cooked in 100% pure sunflower oil (originally hydrogenated oil until January 1st, 2007). A one ounce serving has 150 calories, 90 of which are from fat, 10 grams of fat, and 1 gram of saturated fat. They have many flavors in the baked lays as well. Baked lays are produced in cheddar, barbecue, and original.

Conspiracy about Pig Fat in lays

Research by Dr Amjad Khan (Medical Research Institute, United States) has proved that many products of multinational firms have PIG FATS in them as ingredients. Word PIG FAT is replaced by E-Codes because they decided to start a coding language, so that only their Departments of Food Administration should know what they are using, and the common man is left lurking in the dark. The code E631 Now, company was facing a severe drought of money because major portion of their income comes from selling their goods to Muslim Countries, and these earn BILLIONS OF DOLLARS of Profit from their exports to the MUSLIM WORLD. So this conspiracy should have to resolve. E631 can be generated in 3 different ways: It can be obtained from sardines (fish). It can be made from brewer yeast extract which is a by-product of beer making process.
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 It can be extracted from pig meat. If method #1 is used then it is Halal. If method #2 is used then it is not Haram but it is better to avoid it. However if method #3 is used then most certainly it is Haram. SO, the Jamia Ashrafia, Pakistan has made sure that Lays produced by Pepsi Pakistan should use the E631 from Halal source. (Appendix # 3)

Level and Type of Competition:

Their competition strategies are based on the competitors strategy. They dont follow the price war competitive strategy. They follow the standard of product and quality in competition. Their competition type is oligopoly.

Competitors:
One cant imagine about a business without competition. Lays has also some competitors. Major threats to Lays are Pringles Kolson Golden

Tripple Em (which has almost45% of the market share).

But as quality of the product play an important role that is not up to the standard by the competitors. So, Lays is outstanding in all ways to the competitors like quality, quantity, price and variety of the products etc.

Competitors Products & Activities:

Following Competitors products are being sold in the market but their product availability is not that good. The only reason for their presence is the Credit facility and high margins. Niralla
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 Smith Bunny Sherry Sadiq Dry Fruit PACE (Rancher) Golden Pak Food (Maxo) Market share: Lays = 45% Kolson = 15% Golden = 8% Smit = 5% Tripple Em = 15% Others = 12%

Nature of business:
Snacks are of two types: Potato Chips: Lays

Extruded: KURKURE lies in the extruded item which comes under FMCG Products (fast moving consumer goods).

Key Objectives of Lays:

Like every business the primary objective of LAYS Company is to be flourishing and earn more profits. But its possible only when the company understand the environment of the market, where:

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1. Different types of customer in this region who consider low price but still want for high quality. 2. Currently weak competition for a multinational company regarding quality with price. 3. A handsome share of the market is still vacant. 4. Companys own profit orientation by producing in bulk quantity and reducing cost. 5. Strong distribution channels are helpful to distribute and sale quickly and can generate high turn over. Therefore they pursue following objectives: Produce high quality product at reasonable low price. Facilitate as maximum share of market as they can. Customer satisfaction is the top priority. Acquire the strong distribution channel so the product is made available on the shelf.

Marketing Objective of Lays Pakistan:

Company is having very clear perception about the target market which is explained as follows:
1. Company wants to capture as many share of the market so that the company

maximize its market share.

2. Customer attraction towards the product is very important and without this

phenomena company cant fulfill its targets.

3. Strong distribution channel is the foremost element and is required more when the

need increases, so the company should also focus on them and will give then certain benefits as well as the retailers.
4. Profit maximization is always prior magnitudes for every company for that

purpose they reduce the cost of production to enhance the turnover of the company.

Marketing channels
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Most producers do not sell their goods directly to the final users; between them stands a set of intermediaries performing a variety of functions. These intermediaries constitute a Marketing Channel. Formally, Marketing Channel is sets of independent organization involved in the process of marketing a product or service available for use or consumption. They are the set of pathways a product or service follow after production, culminating in purchase and use by the final end user. Some intermediaries- such as wholesalers and retailers- buy, take title to, and resell the merchandise; they are called merchants. Others- brokers, manufacturer's representatives, and sales agents- search for customers and may negotiate on the producer's behalf but do not take title to the goods; they are called agents. Still others- transportation companies, independent warehouse, banks, and advertising agencies- assist in the distribution process but neither takes title to goods nor negotiates purchases or sales; they are called facilitators.

The role of marketing Channel

Producers have the several advantages by using the intermediaries: Many producers lack the financial resources to carry out direct marketing. Producer who do establish their own channels can often a greater return by increasing investment in their main business. Intermediaries share the risk factor. Gather information about potential and customer, competitors, and other actors and forces in the marketing environment. Develop and disseminate persuasive communications to stimulate purchasing.

Reach agreements on price and other terms so that transfer of ownership can be affected.

Acquire the funds to finance inventories at different levels in the marketing channel. In some cases direct marketing simply is not feasible Provide the successive shortage and movement of physical products.
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 Provide for buyers payment of their bills through banks and other financial institutions. Oversee actual transfer of ownership from one organization or person to another.

Channel Marketing Systems:

Distribution channels do not stand still. New wholesaling and retailing institution emerge, and new channel systems evolve. These new systems are as follow: Vertical Marketing System Horizontal Marketing System Multi-channel Marketing System

Vertical Marketing system:

A conventional marketing channel comprises an independent producer, wholesaler, and retailer. Each is a separate business seeking to maximize its own profits, even if this goal reduces profit for the system as a whole. NO channel member has complete or substantial control over other member. A vertical marketing system by contrast, comprises the producer, wholesalers, and retailers acting as a unified system. One channel member, the channel captain, owns the others or franchises them or has so much power that they all cooperate. The channel captain can be the producer, wholesaler, or the retailer.

Horizontal Marketing system:

Another channel development is the horizontal marketing system, in which two or more unrelated companies put together resources or programs to exploit an emerging marketing opportunity.

Multi-channel Marketing System:

Once , many companies sold to a single market through a single channel. Today, with the proliferation of consumer segments and channel possibilities, more companies have

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adopted multi-channel marketing. Multi-channel marketing occurs when a single firm uses two or more marketing channels to reach one or more customer segments.

Conflicts, Cooperation, and Competition:

No matter how well channels are designed and managed, there will be some conflicts. If for no other reason than that the interests of independent business entities do not always coincide. Channel conflict is generated when one channel member's actions prevent the channel from achieving its goal. Channel coordination occurs when channel members are brought together to advance the goals of the channel, as opposed to their own potentially incompatible goals.

Types of conflicts:
Vertical Channel Conflicts Horizontal Channel Conflicts Multi-channel Conflicts

Vertical Channel Conflicts:

Vertical Channel Conflicts means conflicts between different levels within the same channel. It can be between Producer and wholesaler or it can be between wholesaler and retailer etc.

Horizontal Channel Conflicts:

Horizontal Channel Conflicts involves conflict between members at the same level within the channel. It can between two wholesalers or in between two retailers.

Multi-channel Conflicts:
Multi-channel Conflicts exist when the producer has established two or more channels that sell to the same market. Multi-channel conflicts are likely to be especially intense when the members of one channel get a lower price or work with a low margin.

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Causes of Channel Conflicts:

It is important to identify the causes of Channel conflict. Some are easy to resolve, others are not. So some common causes are as below: Goals incompatibility Unclear roles and right Difference in perception Dependence on the Manufacturer

Marketing Intermediaries Of Lays Pakistan:

To execute an assortment of necessary functions to get the product to the final customers lays has one major distributor, Shahbaz brothers in Pakistan. Shahbaz brothers having maximum of their targets and maximum margins which is 14 % are their major distributors they are covering area of Gulberg, Defence, Cant, Sadar, Taj Bagh, Taj Pura and Jalo etc. Order placement to Main Depot which is situated at Gulberg II, Pepsi office is weekly based and within 48 hours supplies arrives from Main Depot to Distributors Depot from where they distribute them to different retailers. Distributors are covering 70 to 100 shops daily to fulfill their target in the end of the month period. For distribution available vehicles are vans, Suzuki and shahzors (only for Shahbaz Brothers).

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Conflicts in marketing channels of Lays

Region: Faisalabad

Distributors: 6 distributors

Vertical conflicts in marketing channels of Lays Pakistan

Example # 1:
Conflicts between distributor and retailer Distributor: Adreesia Enterprises

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Civil lines, Faisalabad Retailer: The Best Store Jail road, Faisalabad

Adreesia Enterprises:
We take into study Adresseia enterprises in Faisalabad. They are one of the biggest distributors of lays Pakistan. They directly purchased from manufacturer. They purchased in bulk almost 4 containers weekly and paid in advance. The company provides the transportation facility. After receiving from manufacturer, they distribute lays to lots of big stores and wholesalers in 8 bazars of Faisalabad, Sargodha road, Mansorabad. Adreesia Enterprises has fixed wholesalers. Their biggest wholesaler is in Jhang bazar Faisalabad and The Best Departmental Store on Jail road is one of the biggest retailers in Faisalabad. Transportation cost is bear by the Adressia enterpises and while delivering all the damages is bear by company. All the expiry products and sales returns send back to the company. Margin: They received 6% profit margin from the manufacturer and distribute at 4 % margin to some wholesalers and provide some extra incentives to those wholesaler on high sales. they distribute on very low profit margin to their retailers. (Appendix # 4)

The Best Departmental Store:

It is one of their retailers. All the big stores purchase directly from distributor without any wholesaler. The Beat store takes delivery of lays from Adreesia 2 times in a week. They replaced all the expired products with fresh products. They paid in cash on the time of delivery. Transportation cost is bear by the distributor. Margin: Adreesia enterprises give almost 1% profit margin on sale of lays to The Best store. (Appendix # 4)

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Vertical Conflicts:
Very low margin Late delivery No extra incentives

No proper action on customers complaints

Shortage of some flavors

1.

Very low margin:

The best store (jail road) claim that Adreesia enterprises give very low rate of margin which is less then 1 % on sales of 1 packet of lays 48g. The loss of 1 packet from a carton will consider as the loss of whole carton.

2. Late delivery:
The best store recently faced the problem of late delivery of lays SALT & BLACK PEPPER.

3. No extra incentives:
Adreesia enterprises told us that they provide extra incentives on high sales of lays but The Best Departmental store claim that they never give extra benefit on high sale.

4. No proper action on customer complaints:

Many customers complained about the change in taste of lays and the Best Store had conveyed complain to the Adreesia Enterprises but they never take any proper action.

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5. Shortage of some flavors:

There is a shortage of lays MASALA and Barbeque 48g packs in the best till Eid.

Example 2:
Conflicts between distributor and wholesaler: Distributor: Adreesia Enterprises Civil lines, Faisalabad Wholesaler: Murshid G Drinks Jhang Bazar, Faisalabad

Murshid G Drink:
Murshid G Drink in Jhang bazar is one of the wholesalers of Adreesia. Adreesia's agent delivers the order of 250 cartons daily or according to the requirements. Transportation charges are bear by Adreesia. Their retailers are not fixed. Many B class shops, street shops and Pan Shops purchased from them on daily basis. The expired and damage products are returned back to the distributor. They paid in cash on time of delivery. Margin: 3 % of sale. (Appendix # 5)

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Vertical conflicts:
Late delivery

Shortage of some flavors

Communication problems

1. Late delivery:
Murshid g drinks (the wholesaler) has faced the problem of late delivery of lays from thier distributer Adreesia Enterprises.

2. Shortage of some flavors:

Murshid G Drink is facing the shortage problem of Lays MASALA MGIC. The have to purchase it from METRO Lahore. And after adding transportation charges the cost per carton goes high.

3. Communication problem:
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In time of shortage the Adreesia Enterprises ignores Murshid G Drinks phone calls. `

Conclusion:
MASALA MAGIC lays is specially manufactured for Asian countries. It has a great consumption level in Faisalabad. Adreesia enterprises which is one of the biggest distributors of Lays in Faisalabad is facing the problem of shortage of product. Thats why its wholesalers and retailers are facing that problem too. The 2nd main cause of conflict is fewer profit margins. Adreesia Enterprises is not giving reasonable profit margin. They are keeping more margins and offering less. There wholesalers and retailers are quiet satisfied with there delivery system and dealing manners.

Recommendations:

1. Adreesia Enterprises should purchase more, so that they can distribute more.

2. They should purchase more MASALA lays from the manufacturer then other

flavors and resolve the shortage problem.

3. They should communicate the problems with retailers and distributors, instead of avoiding them.

4. Number of transports should be increased to resolve the late delivery problem.

5. Adreesia Enterprises should increase the profit margin up to some extent.

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6. Some incentives should be given to wholesalers and retailers on high sales.

Horizontal conflicts in marketing channels of Lays Pakistan

Example: Conflict between distributor and major wholesaler

Distributor: Adreesia Enterprises Civil lines, Faisalabad Major wholesaler: Metro Sargodha road, Faisalabad We take Metro and Adreesia enterprises into horizontal conflicts because they both have direct link with manufacturer and purchase lays in almost same quantity. There is very less difference in rate of margin which is offered to them by the lays Pakistan.

Adreesia Enterprises:
We take into study Adresseia enterprises in Faisalabad. They are one of the biggest distributors of lays Pakistan. They directly purchased from manufacturer. They purchased in bulk almost 4 containers weekly and paid in advance. The company provides the transportation facility. After receiving from manufacturer, they distribute lays to lots of big stores and wholesalers in 8 bazars of Faisalabad, Sargodha road, Mansorabad. Adreesia Enterprises has fixed wholesalers. Their biggest wholesaler is in Jhang bazar Faisalabad and The Best Departmental Store on Jail road is one of the biggest retailers in Faisalabad.

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Transportation cost is bear by the Adressia enterpises and while delivering all the damages is bear by company. All the expiry products and sales returns send back to the company. Margin: They received 6% profit margin from the manufacturer.

Metro:
Metro is a well known wholesaler brand of Pakistan. They purchase everything in bulk and sale it at wholesale rate on quantity demanded by the customer. Their customer can be a user, a retailer or even a wholesaler. They order lays according to market demand. So, metro does not face the shortage and expiry problem in lays. They purchase directly from manufacturer without any intermediary. They use credit bases of accounting. They have a very strong computerized system for managing the inventory. An OPL or Order Purposal List per day is generated which is used to estimate the average sale. Metro does not need to deliver the goods to buyer like other distributers of lays. Margin: They have competitively higher margin than distributors. (Appendix # 6)

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Horizontal conflicts:
Difference in profit margin: Difference in number of wholesalers and retailers: Communication preferences Difference in payment methods

Special offers

1. Difference in profit margin:

Adreesia enterprises claim that Metros profit margin is relatively higher then them. Whereas metro said that they receive less margin then the distributors.

2. Difference in number of wholesalers and retailers:

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Adreesia enterprises have fixed number of wholesalers and retailers. But the number of metros customer can be more or less every month. Thats why they can change the quantity of order.
3.

Communication preferences:

Adreesia enterprises claim that manufacture communicate with metro more affectively then them.

4. Difference in payment methods:

Metro can make credit payments but Adreesia make cash payments.

5. Special offers:
As manufacture deliver 1st to distributors and then to the metro, all the new offers has introduced by the distributor. And buyer purchased from them if their offer is better then any one else.

Conclusion:
Metro is a well known brand as compared to Adresia enterprises, thats why it is easy for the manufacturer to deal with them. Metro has much trained staff and latest technologies which make it really easy for manufacturer to deal with them. Adreesia has a fixed share of Faisalabad market because their number of wholesalers is fixed. But metros share is not fixed. It may be less or more.

Recommendations:
Adreesia enterprises should coordinate their problems with the manufacture more properly.

Adreesia enterprises should give more profit margin to their buyers then metro.

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Metro and Adreesia enterprises should not take each other as their competitors because they have very different market.

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References:
http://www.google.com.pk/search? hl=en&q=logo+of+agriculture+university+faisalabad&rlz http://www.google.com.pk/imgres?q=logo+of+lays+pakistan&hl http://www.google.com.pk/imgres?q=lays+and+pepsi+pakistan http://www.scribd.com/doc/25521847/Lays-Pakistan-Research-Project/ http://www.scribd.com/doc/14254508/project-report-on-lays-potatochips/ http://www.mesmarty.com/2009/04/02/why-pig-fat-is-notmentioned-but-codes-are-printedl/ http://halalist.wordpress.com/2008/05/12/why-pig-fat-is-notmentioned-but-codes-are-printed/ http://alaiwah.wordpress.com/2009/03/06/pig-fat-in-pakistani-chips/ (pics lays) http://www.pakfactor.com/lays-chips-e631-and-pig-fat-mysterysolved.html/ (certificate) http://www.pepsico.com/Company/Our-History.html/ Mansoor Khalid, Operarion Manager, METRO M. Rahell, Accountant, Adreesia Enterprises M. Usman, The Best Departmental Store M. Nadeem, Murshid. G Drinks

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Appendix # 1:
Questionnaire:
1. How much quantity of "Lays" you purchased? 2. Did you go directly to the manufacturer for purchasing or some agent do this work? 3. if your product get expire or any harm does due to unfavorable climate then who will be responsible for the loss? 4. How much margin do you get? 5. What is your mode of transportation? 6. Do you deliver the order to retailer by yourself? 7. How much retailer do you have? 8. Do you get delivery of order on time? 9. Do payments get clear on time? 10. What is your biggest retailer? 11. What kind of problems do you face normally? 12. Do you ever change your agent? 13. After what time period do you place order? 14. Do your retailers are fix? 15. How much warehouses do you have? 16. In case of natural loss do you have insurance? 17. Do your margin change according to order or is it fix? 18. What kind of clashes do you face normally?

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19. Did ever agent create any noise between you and manufacturer?

Appendix # 2

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Appendix # 3

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Appendix # 4:

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Appendix # 5

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Appendix # 6

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