Strategic Analysis on Advanced Chemical Industries (ACI) Limited

Asif Ahmed ACA Trainee Accountant KPMG in Bangladesh Rahman Rahman Huq Chartered Accountants 9 Mohakhali C/A Dhaka 1212 Bangladesh

ACA Student The Institute of Chartered Accountants of Bangladesh (ICAB) E-mail: asif.ahmed0001@yahoo.com

June 10, 2012.

(Disclaimer: This paper is prepared for academic purpose only. This has no professional linkage.)

Electronic copy available at: http://ssrn.com/abstract=2083424

Strategic Analysis on Advanced Chemical Industries (ACI) Limited

Asif Ahmed

EXECUTIVE SUMMARY
The first part of the report is mainly a general discussion about the ACI Limited, including a general overview, organizational structure, brief discussion of the units and subsidiaries, product lines, mission and vision of the organization, business environment analysis through PEST and SWOT analysis of the organization. The second and the core analytical part of the paper includes strategic analysis of the ACI Limited in four area, including management structure, financial analysis, marketing analysis and distribution analysis. These analyses are done by using a wide range of tools of strategic analysis. Management structure of the ACI Limited is analyzed according to the Mintzberg theory of organizational structure. Whole management structure is divided into five core blocks according to the theory and so their contribution to the organization. Financial analysis is mainly based on three tools, including - break-even point (BEP) analysis, margin of safety analysis and sensitivity analysis. As we do not have all the information required to make these analysis accurate, we based our analysis on some assumption. These are 1. 2. All the cost of goods sold is assumed to be variable. Expenses other than cost of goods sold are assumed to be fixed.

Marketing and product analysis of the ACI Limited also based on the three tools, including stakeholders mapping; power and interest analysis, BCG growth share matrix analysis and Ansoff model analysis. Stakeholders mapping analysis is there to find out the key players for the organization which have a very good impact in formulating marketing and distribution strategy. BCG growth matrix indentified the current market position of each product and indicates for whom the management should concentrate more. Ansoff model divided the products into four major categories and prescribed marketing strategies for each. Distribution system analysis are based on the distribution models which only demonstrate the distribution channel used to reach the product form producer to end user or consumer. All of these analyses find out some core advantage of the ACI Limited and some lacking which are summarized at the end of the analysis along with some recommendations.

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Electronic copy available at: http://ssrn.com/abstract=2083424

Strategic Analysis on Advanced Chemical Industries (ACI) Limited

Asif Ahmed

INTRODUUCTION
This chapter contains 1.1. Introduction; 1.2. Origin of Study; 1.3. Objectives of Study; 1.4. Scope of Study; 1.5. Methodology of Analysis; and 1.6. Limitations of Study.

CHAPTER 1

1.1. Introduction:
Bangladesh has made significant strides in its economic sector performance since its independence in 1971. Although the economy has improved vastly in the 1990s, Bangladesh still suffers in the area of foreign trade in South Asian region. Despite major impediments to growth like the inefficiency of state-owned enterprises, a rapidly growing labor force that cannot be absorbed by agriculture, inadequate power supplies, and slow implementation of economic reforms, Bangladesh has made some headway improving the climate for foreign investors. Despite of various political turmoil, disturbance and inefficiency in government owned enterprises various large Bangladeshi owned group of industries also doing very successful business in Bangladesh. Advanced Chemical Industries (ACI) Limited is a leading one among these large groups of companies.

1.3. Objectives of Study:

As the business of Bangladesh in expanding rapidly we should learn the way to analysis these business so that future plan can be settled for these businesses. One of the most effective steps of future planning is to analyze any business strategically. So the main objectives of this strategic analysis on ACI Limited include: 1. Build an overall understanding on the various aspects of the ACI Limited.

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2. Analysis the ACI Limiteds marketing, financial, management and distribution strategy. 3. Draw some conclusion on the on the finding and made some recommendation for future improvements.

1.4. Scope of Study:

This report gives us the opportunity build up an overall understanding on the management, marketing, financial and distribution strategy of ACI Limited. However this report holds study about 1. Some overall understanding on the products, management structure, business environment (PEST) and SWOT analysis on ACI Limited. 2. Management structure analysis, strategic financial analysis, marketing analysis and distribution analysis of ACI Limited. 3. Identification of core competencies and last five years changes of ACI Limited. 4. Make some conclusion and recommendation for ACI Limited based on the above mentioned analysis.

1.5. Methodology of Analysis:

Information for this paper is mainly collected from various secondary data sources. Information related to the company, ACI Limited, is collected from the annual report and official website. Theoretical discussions given in various analytical parts are mainly extracted from the various renowned books, journals and articles. The first part of the report is mainly a general discussion about the ACI Limited, including a general overview, organizational structure, brief discussion of the units and subsidiaries, product lines, mission and vision of the organization, business environment analysis through PEST and SWOT analysis of the organization. The 4 of 38

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organizational structures that are presented in the paper are extracted from the information given in the annual report and company website. The second and the core analytical part of the paper includes strategic analysis of the ACI Limited in four area, including management structure, financial analysis, marketing analysis and distribution analysis. These analyses are done by using a wide range of tools of strategic analysis. Management structure of the ACI Limited is analyzed according to the Mintzberg theory of organizational structure. Whole management structure is divided into five core blocks according to the theory and so their contribution to the organization. Financial analysis is mainly based on three tools, including - break-even point (BEP) analysis, margin of safety analysis and sensitivity analysis. As we do not have all the information required to make these analysis accurate, we based our analysis on some assumption. These are 3. 4. All the cost of goods sold is assumed to be variable. Expenses other than cost of goods sold are assumed to be fixed.

These assumptions may give misleading analysis, like - cost of goods sold may also include some fixed expense (depreciation of production equipments). Details of the calculations of BEP analysis and Margin of safety analysis are given at annexure 1. Marketing and product analysis of the ACI Limited also based on the three tools, including stakeholders mapping; power and interest analysis, BCG growth share matrix analysis and Ansoff model analysis. Stakeholders mapping analysis is there to find out the key players for the organization which have a very good impact in formulating marketing and distribution strategy. BCG growth matrix indentified the current market position of each product and indicates for whom the management should concentrate more. Ansoff model divided the products into four major categories and prescribed marketing strategies for each. Distribution system analysis are based on the distribution models which only demonstrate the distribution channel used to reach the product form producer to end user or consumer. All of these analyses find out some core advantage of the ACI Limited and some lacking which are summarized at the end of the analysis along with some recommendations.

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1.6. Limitations of Study:

As I had no excess to the internal data of the ACI Limited, out analysis is not full proof. The limitation which may downgrade the usefulness of this analysis includes: 1. Strategic analysis of various aspects of the ACI Limited, management, marking, finance or distribution, are perform based on the data provided in the annual report or website of the organization. No internal information can be used as we have no excess on it. 2. In case of break even analysis and sensitivity (in financial analysis) of ACI Limited, cost of goods sold (COGS) are considered as variable and other cost are considered as fixed, but in reality it most likely not possible. 3. This study does not include any comparison with the similar industry. 4. The conclusion drawn and recommendation made are for overall company, may and most probably not applicable for particular unit or products, unless it is specifically mentioned. 5. In segregating product line into various categories (BCG Matrix and Ansoff Matrix) personal perception is used more than the actual data. So actually classification may different.

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OVERVIEW OF ACI LIMITED WITH PEST AND SWOT

This chapter contains 2.1. Overview of the Organization; 2.2. Mission, Vision and Values; 2.3. Organizational Structure & Business Overview; 2.4. Product Line; 2.5. PEST Analysis; and 2.6. SWOT Analysis.

CHAPTER 2

2.1. Overview of the Organization:

ACI was established as the subsidiary of Imperial Chemical Industries (ICI) in the then East Pakistan in 1968. After independence the company has been incorporated in Bangladesh on the 24th of January 1973 as ICI Bangladesh Manufacturers Limited and also as Public Limited Company. This Company also obtained listing with Dhaka Stock Exchange on 28 December, 1976 and its first trading of shares took place on 9 March, 1994. Later on 5 May, 1992, ICI plc divested 70% of its shareholding to local management. Subsequently the company was registered in the name of Advanced Chemical Industries Limited. Listing with Chittagong Stock Exchange was made on 22 October 1995. Advanced Chemical Industries (ACI) Limited is one of the leading conglomerates in Bangladesh, with a multinational heritage. The company has diversified into three major businesses Pharmaceuticals, Consumer Brands & Commodity Products and Agribusinesses (Corporate profile - ACI web).

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2.2. Mission, Vision and Values:

Mission: ACIs mission is to enrich the quality of life of people through responsible application of knowledge, skills and technology. ACI is committed to the pursuit of excellence through world-class products, innovative processes and empowered employees to provide the highest level of satisfaction to its customers.

Vision: To realize the mission ACI will:

Endeavor to attain a position of leadership in each category of its businesses. Attain a high level of productivity in all its operations through effective and efficient use of resources, adoption of appropriate technology and alignment with our core competencies.

Develop its employees by encouraging empowerment and rewarding innovation.

Promote an environment for learning and personal growth of its employees. Provide products and services of high and consistent quality, ensuring value for money to its customers.

Encourage and assist in the qualitative improvement of the services of its suppliers and distributors.

Establish harmonious relationship with the community and promote greater environmental responsibility within its sphere of influence.

Values:

Quality Customer Focus Fairness Transparency Continuous Improvement Innovation

(Mission/vision and values - ACI web)

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2.2. Organizational Structure & Business Overview:

ACI Limited mainly follows a divisional structure for organization. It mainly consists of 3 (three) main product wise division under which various subsidiaries and joint venture consists. Some functions, like finance & planning, MIS, distribution, commercial and HR are provided under group supportive services. And all the subsidiaries has separate management to perform other organizational activities, like production. The organizational structure of ACI Limited is as follows:

Figure 1: Organizational Structure of ACI Limited

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2.2.1. Pharmaceuticals: ACI carries the legacy of ICI- world renowned British Multinational in providing the people of Bangladesh with quality medicines and healthcare products. Its state-of-the art pharmaceutical plant represents Bangladesh's quest for a truly world class manufacturing facility. ACI's rich heritage leads to innovative and higher value added formulations. The comprehensive product range of ACI pharmaceuticals include products from all major therapeutic classes and in various dosage forms like - tablet, capsule, dry powder, liquid, cream, gel, ointment, ophthalmic and injectable. ACI Pharma also has state of the art plant on Novel Drug Delivery System (NDDS). It produces world class Modified Release drug and medicine to cater the requirement of pharmaceutical manufacturer of domestic and international market. It exports high quality pharmaceuticals to a good number of countries of Asia, Africa & South America (Business Unit - ACI web). In 2011 health care business did not grow as rapidly as the previous years. Annual business volume has increased by 10% while IMS reported an industry growth of 18.5%. However, the cumulative aggregate growth rate of the business has been a remarkable 20.4% during the last five years (ACI Annual report 2011). ACI Pharmaceuticals has launched 61 new products in 2010, among them many are life saving products such as Tyrodin and Ramophos which are used for the treatment of kidney diseases while Stignal and Rapilax are used for critical care (ACI Annual report 2011).

2.2.2. Consumer Brands & Commodity Products: The Consumer Brands Division boasts in having an unequivocal presence in consumers' heart with the market leading brands like ACI Aerosol, ACI Mosquito Coil, Savlon. These are the persistent performers in keeping the household clean and free from germs and harmful insects. The necessity of pure food in the minds of Bangladeshi consumers especially in the commodity food business has pushed ACI to fill up the market gap by producing commodity products such as Salt, Flour and Spices. Now the customers of Bangladesh

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are ensured with 100% pure Salt, Spices products and Wheat products under the brand name of "ACI Pure". ACI also represents the world renowned product range of Colgate, Nivea, Tetley, Godrej & Dabur in Bangladesh through distribution and forming joint ventures (Business Unit - ACI web).

ACI Salt Limited: ACI Salt was launched in 2005. Within the very short period it has been enjoying the pride of the Brand Leader. The best in its kind, ACI Salt is vacuum evaporated, free flowing and properly iodized. It is also very porous and free flowing. Iodine is coated in every single grain which makes it an essential product for the children; the absence of right quantity of iodine in their food may cause mental disability to them. ACI Salt has won the "BEST BRAND OF BANGLADESH AWARD 2008" for unparallel customer loyalty beating all the brands in Foods & Beverages category (Business Unit - ACI web).

Apex Leather Crafts Limited: Apex Leather Craft Limited is a private limited company incorporated in 2007 with the registrar of Joint Stock Companies, Dhaka Bangladesh Under companies Act 1994 having 100 %shares by ACI limited (Business Unit - ACI web).

ACI Pure Flour Limited: ACI Pure Flour Ltd is the largest flour producing company in Bangladesh delivering cleanest, healthiest and most hygienic flour by adopting state of the art technology. Coupled with double digit growth and continuously producing pure product make 'Pure' brand a huge success & make it a household product overnight. In a very short time 'Pure' is able to become consumers' morning bell and snatched prestigious second position overtaking all other players in the market. 'Pure' flour is able to communicate to its consumers that ACI Pure is synonymous to Purity. Our plant stands by the bank of Sitalaksha River with most advanced European technology coupling with a wellequipped laboratory keeping in mind to provide the best quality flour to the consumers (Business Unit - ACI web).

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ACI Foods Limited: The necessity of pure food in the minds of Bangladesh consumers especially in the commodity food business has pushed ACI to fill up the market demand by producing food products such as spice, edible oil, snacks, confectionary etc. ACI is engaged in manufacturing, marketing, and distribution of various branded food products and condiment. Now the customers of Bangladesh are ensured with 100% pure food products under the brand name of 'Pure'. Within the very short period of its entrance this brand has been enjoying second leading position in the market. Fun Candy and Fun Chanachur produced from high quality imported raw materials with state of the art technology have attained enormous popularity among the consumers. ACI Foods Ltd. is focusing on improving the food habit of Bangladeshi Consumers through providing more ready to cook products and ready to eat as well. ACI is also exporting its Pure Brand products to Australia, UAE, Kuwait, Saudi Arabia, Bahrain, Qatar and many other countries to come into the list (Business Unit - ACI web).

Premiaflex Plastics Limited: Premiaflex Plastics Limited is a private Limited company incorporated in 2007 with the register of Joint Stock Companies, Dhaka, Bangladesh under Companies Act 1994 having 80% shares by ACI Limited. The principle activities of the company are manufacturing and marketing of plastic products, flexible printing and other ancillary business associated with plastic and flexible printing. The factory of the Company is located at Sreepur, Gazipur (Business Unit - ACI web).

ACI Logistics Limited: ACI Logistics Limited was formed in 2008 with a vision to setup nationwide retail outlets, named Shwapno, to utilize ACIs strong presence in Bangladesh through implementation of world-class supply chain mechanism (Business Unit - ACI web).

Tetley ACI (Bangladesh) Limited: ACI Ltd also has Joint Venture business with Tetley Tea of UK in the name of Tetley ACI (Bangladesh) Limited. Tetley produces one of the finest qualities Tea in various pack sizes, both in laminated pack and tea bags. Tetley tea has become a household name and demand of the product is very high (Business Unit - ACI web).

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Asian Consumer Care (Pvt.) Ltd.: ACI Ltd has Joint Venture with one of the leading companies of India, Dabur India as Asian Consumer Care Ltd. Dabur has a long range of food items which is distributed through the channels of ACI Consumer Brands. These products are very popular in Bangladesh Market (Business Unit - ACI web).

ACI Consumer Electronics: World renowned electronics company Panasonic and ACI Limited has joined together to bring the Panasonic Audio Visual products to Bangladeshi consumers. The association was formally announced on the 16th of April through the launching ceremony in Bangladesh China Friendship Conference Center. Under this arrangement with Panasonic regional office in Singapore, ACI Consumer Electronics, a newly formed division in ACI Consumer Brands SBU will market the Panasonic AV products in Bangladesh (Business Unit - ACI web).

2.2.3. Agribusinesses: ACI Agribusiness is the largest integrator in Bangladesh in Agriculture, Livestock and Fisheries and deals with Crop Protection, Seed, Fertilizer, Agrimachineries, and Animal Health products. These businesses have glorified presence in Bangladesh. CC & PH supplies crop protection chemicals, Seed supplies Hybrid Rice, vegetable and Maize seeds, Fertilizer Supplies Micronutrient and Foiler fertilizer, Agrimachineries supplies Tractors, Power Tiller and Harvester and Animal Health supplies high quality Nutritional, Veterinary and Poultry medicines and vaccines. ACI Agribusiness is having strong partnership with national and international R & D companies, universities and research institutions. Before introducing any product, it is elaborately tested in the laboratory and farmers field. ACI provides solution to the farmers through a large team of scientists & skilled professionals (Business Unit - ACI web).

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ACI Formulations Limited: ACI formulation Limited (ACI FL) is a subsidiary of ACI limited, located at Gazipur in the out skirt of Dhaka. ACI FL manufactures majority of the products of ACI Strategic Business Limited except for the Pharmaceutical Division. The factory is equipped with the state of the art facilities for product formulations and process innovation. These include modern computerized equipment like HPLC and GLC. The product range manufactured at ACI FL include Crop Protection Chemicals like Insecticides, herbicides and fungicides in granular, powder and liquid, mosquito pesticides in the forms of aerosols, vaporizers and coils house hold chemicals like toilet cleaners and hand wash (Business Unit - ACI web).

ACI Motors Limited: ACI Agribusinesses has launched a new subsidiary business, ACI Motors, from 6th November 2007 with an objective to market high quality farm machineries and light commercial vehicles. ACI Agribusinesses now ensures complete solution to the farmers with the introduction of the agrimachineries. ACI Motors are now marketing the various models of Sonalika tractor which is 3rd leading position in India as well as the fastest growing brand. It also has introduced high quality Bull Power brand power tiller and mini combine harvester, Hardy Sprayer from China (Business Unit - ACI web).

ACI Godrej Agrovet Private Limited: ACI Godrej Agrovet Private Limited is a joint venture company formed by a 50:50 stake of ACI Limited, Bangladesh and Godrej Agrovet Limited, India. The company started its business in Bangladesh at the end of the year 2004 with Poultry Feed. It started Hatchery and Breeding Farm Operations in February 2007. The Company launched and started selling Fish Feed at the same time. In July 2008, it diversified its product portfolio and introduced Shrimp Feed and Cattle Feed (Business Unit - ACI web).

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2.2.4. Group Supportive Functions:

Finance & Planning: ACI Finance and Planning function is the nerve centre of the conglomerate. Being the nature of the structure, ACI Finance and Planning plays the centralized role in all kinds of financial and accounting services. Meaning it handles financial and accounting matters of not only ACI Limited but also of all of its subsidiaries supporting the mission and vision of the Group. The major areas of its activities include:

Corporate Finance Treasury Insurance and risk management Costing Credit Management Accounts payable management General accounting Taxation New business management

ACI finance is pioneering in introducing and implementing state of the art financial tools like electronic banking, integrated accounting systems, better foreign exchange management through hedging, derivatives etc. To allow us to excel in our performance ACI Finance has strong rapport with all the international and major local banks, nonfinancial institution including leasing companies. Driving force of Finance is its motto which is "to become most value adding business partner". To drive this vision, ACI Finance proactively helps business in providing right and timely information, analysis, budgetary management and participating in cross-functional team. The Planning function not only compiles and coordinate the company plan of the conglomerate but also instrumental in feeding the CEO and top team different macro and micro economic situation of the country as well as world in large. These in-depth analyses help the company to make correct and pragmatic decision as a part of strategic initiative. The new business development area is one of the most exciting areas in

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ACI. Here we keep a track on potential areas of growth being envisaged in the country, these are followed by rigorous analysis and subsequently matching these with ACI's competence. This allows ACI's growth engine to get enough fuel to take its course forward (Supportive Functions ACI Web).

Human Resource (HR): ACI HR works with a vision for creating a work-environment to foster creativity, innovation and productivity for achieving business excellence through dynamic and dedicated people. They believe that Human Resources are the most important asset of the organization. They identify the training needs and provide trainings accordingly to develop the knowledge and skills of our human resources. Thought Leadership and Team Building meetings are conducted on a regular basis. They provide an enabling working environment to unleash the full potential of the employees and a performance based career progression. They have a value based culture where dignity of the individual is the highest priority. They believe in empowerment and delegation. ACI Limited organizes different social events like Family Day, Cricket Tournament, Badminton Tournament etc with an objective to strengthen the bondage among the employees. ACI Limited practice modern HR Policies and procedures for Recruitment & Selection, Manpower Planning and succession planning. They use a combination of qualitative aspects and Balanced Score Card for performance appraisal. They have attractive policies regarding car loan, gratuity, provident fund and hospitalization. The company also offers performance bonus, leave fare assistance, festival bonus and workers profit participation fund during different times within a year. ACI is a place to learn, grow and contribute for improving the quality of life of people (Supportive Functions ACI Web).

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Commercial Department: Commercial Department of ACI is one of the most vital functional departments of the Company which deals with the supply chain activities of ACI. In order to keep all the businesses running flawlessly, the dedicated and hard working employees of this department maintain a good liaison with the customers, both national and international. The Commercial Department is consistently achieving the best prices for the products that we purchase, ensuring enormous amount of cost savings for the company. It offers invincible professionalism and expertise in the entire commercial activities of ACI (Supportive Functions ACI Web).

Distribution Department: The company maintains strategically located sales centers in nineteen different locations across the country. It has developed an advanced distribution system through its more than 300 skilled and trained manpower and a large fleet over eighty vehicles. The distribution system is capable of handling continuing volume of diverse range of products from the various businesses. The company's distribution centers are highly streamlined, computerized and automated. We are capable of maintaining a cold chain for some specialized range of products such as vaccines and insulin. The combination of this advanced function and multidimensional capabilities made it possible to handle hundreds of products efficiently (Supportive Functions ACI Web).

MIS: MIS department of ACI ensures the overall IT related supports for the company. This department manages a smooth operation of software's, hardware trouble shooting and business databases related to sales and inventory. The MIS department consists of knowledgeable and skilled programmers and software developers. MIS provides customized report and data analysis to the management to facilitate effective decision making (Supportive Functions ACI Web).

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2.3. Product Lines:

ACI Limited has a wide range of products under each of its units. As the numbers of products are very huge in Pharmaceuticals and Agribusiness, they are not segregated in this study hence considered as single product.

Figure 2: Product lines of ACI Limited

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2.3. PEST Analysis:

Political Factors:

Relatively unstable political environment. Liberal government's policy in agribusiness and consumer market. Liberal regulatory framework. Lower chance of imposing strict laws in consumer, pharmaceuticals and agribusiness sector.

Liberal tax and fiscal policy. No trade restrictions and tariffs established.

Economic Factors:

Positive and relatively higher economic growth and market demand. Relatively higher inflation and unemployment rates. Unfavorable interest and exchange rates. Special consideration for agribusiness and pharmaceutical business.

Pharmaceuticals business also enjoying liberal copyright act until 2013 and government also trying to extend the opportunities.

Good long term economic outlook of the country.

Social factors:

Higher population growth rate. Family bonding is high, conservative lifestyle preferences and Islamic beliefs. Growing spending pattern with relatively less consciousness from the consumer.

Technological factors:

Huge investment into research and developments.

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2.4. SWOT Analysis:

Strength Well established brand image Diversified products & businesses Well thought of by buyers Acknowledged leader in market Well-conceived functional area strategies (production, marketing, finance) Access to economies of scale Technology advanced Innovation capabilities Proven & capable management Out of the copyright act in pharma.

Weeknesses: Much diversification casues complex strategy Weak market image for few products

SWOT Aanalysis

Opputunities Capture new national and international market Expand product line to meet broader range of customer needs Diversify into related products Vertical integration Ability to move to better strategic group Complacency among rival firms Faster market growth

Threats So much well established compititors. Rising sales of competitor products Slower market growth for some products Growing competitive pressures Increased inflation of the economy Growing bargaining power of customers or suppliers Changing needs & tastes of buyers

Figure- 3: SWOT analysis of ACI Limited

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STRATEGIC ANALYSIS & CORE COMPETENCIES

This chapter contains 3.1. ACI Limited Management Structure & Mintzberg Theory; 3.2. ACI Limited Strategic Financial Analysis; 3.3. ACI Limited Strategic Marketing and Communication Analysis; 3.4. ACI Limited Distribution Analysis & Hybrid Marketing; and 3.5. List of Core Competencies of ACI Limited

CHAPTER 3

3.1. ACI Limited Management Structure & Mintzberg Theory:

Mintzbergs theory of organizational configuration (sometimes called the structure of sixes) details the main feature by which both formal structure and power relationships are expressed in the organization. All the organization can be described by five distinct components that operate within the sixth, the ideology of the organization (Business strategy, 2009). Management structure of the ACI Limited according to the Mintzbergs theory is as follows:

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The operating core consists of those members who directly involved with the day-today productions. In ACI Limited these are the peoples who served the production departments of various business units, subsidiaries and joint ventures. The strategic apex has to ensure that the organization is able to perform its best to achieve the organizational mission and goals. In the ACI Limited these levels consists of group management who sets out the strategic goals for their business units, which consists of various subsidiaries and joint ventures.

The middle line is joined to the operating core with middle manager with formal authority from the top management. Here middle line managers are the managers of the business units and subsidiaries who are formally responsible for their units performance.

The technostruucture consists of the analysts who aim to affect certain forms of standardization in the organization. In the ACI Limited this groups consists of the departments who provides group support services, i.e.- finance & planning, MIS, HR, commercial department and distribution department.

Supportive staffs provide various supportive services to the staffs of the organization outside the normal workflow (like legal counsel, canteen and mail room).

The organization has a sixth essential component which Mintzberg called ideology, which consists mainly of the organizations culture.

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3.1.1. Configuration of ACI Limited Management Structure: According to his model Mintzberg propose five separate configurations for the organization. They are as follows: 1. Simple structure, characteristic of entrepreneurial organization, 2. Machine bureaucracy, 3. Professional bureaucracy, 4. Diversified form, and 5. Adhocracy or Innovative organization.

According to the management structure of the ACI Limited it can be conclude that they mainly follow machine bureaucracy in the organization which featuring: 1. Simple static environment, 2. Large old regulated internal factors, and 3. Standardization of works.

Technostructure plays the key role in the organization. But as the ACI Limited has a diversified products and business units it should have move from the machine bureaucracy structure to diversified form which featured by: 1. Simple static diverse environment, 2. Very large old divisible internal factors, 3. Standardization of outputs, and 4. Key middle line managers.

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3.2. ACI Limited Strategic Financial Analysis:

The financial analysis is based for three tools, i.e.- breakeven analysis, margin of safety analysis and sensitivity analysis. The breakeven and margin of safety analysis help us to find out the excess revenue or sales over the breakeven point. On their hand sensibility analysis helps us to determine the volatility of revenue and also helps us to find the point where the company can make loss. 3.2.1. Breakeven Analysis: The break-even point (BEP) is the point at which cost or expenses and revenue of the organization are equal: there is no net loss or gain, and one has "broken even". If we analyze the sales and cost of the ACI Limited form the year 2005 to 2010, we found that all of these years ACI limited has been successful to meet up the breakeven point. The calculation of BEP of ACI Limited is presented in the annexure 1.

9,000 8,000 7,000 7,365 7,228

7,915

7,107 6,000 5,000 4,000 3,000 2,000 1,000 2005 2006 2007 2008 2009 2010 2,920 3,519 3,089 3,286 4,490 4,917 6,181 6,121

Break-even Revenue

Actual Revenue

Figure 5: Comparison between actual and breakeven revenue.

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3.2.2. Margin of Safety Analysis: Margin of safety represents the strength of the business. It enables a business to know what the exact amount it has gained or lost is and whether they are over or below the breakeven point. This analysis is mainly based on the breakeven point. The main calculation of margin of safety is presented at annexure 1.

18.00% 16.00% 14.00% 12.00% 10.00% 10.21% 8.00% 6.00% 4.00% 2.00% 0.00% 2005 2006 2007 2008 2009 2010 5.47% 6.62% 8.68% 16.08% 15.32%

Margin of Safety

Figure 6: Margin of safety

From the above chart it is found that from the 2005 to 2007 the margin of safety is below 10%, which means that ACI Limited only managed to sales 5.47%, 6.62% and 8.68% in 2005, 2006 and 2007 respectively above breakeven in these years. In 2008 and 2009 the margin of safety was above 15% but it was dropped to 10.21% in 2010.

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3.2.3. Sensitivity Analysis: Sensitivity analysis (SA) is the study of how the uncertainty in the output of an entity (business) (numerical or otherwise) can be apportioned due to different sources of uncertainty in the input (revenue/sales unit). As the data sources of ACI Limited are limited to the annual reports and various external sources, it is impossible to perform sensitivity analysis based on wide range of input factors. Here sensitivity analysis is performed only on the change of revenue or sales.

Particulars

2010

5% increase In sales 8,311 (5,349) 2,962 (2,013) 949 17.46%

5% decrease In sales 7,520 (4,840) 2,680 (2,013) 667 -17.46%

28.63% decrease In sales 5,649 (3,636) 2,013 2,013 -

Revenue Cost of goods sold Gross Profit Other Fixed Cost Net Profit Increase/(decrease) in net profit

7,915 (5,094) 2,821 (2,013) 808

Above analysis shows that only 5% change (increase or decrease) in the revenue of the ACI Limited leads to 17.46% change (increase or decrease) in its net profit. Further analysis has shown that a decrease of 28.63% of revenue leads to 0 (zero) profit for ACI Limited which is unlikely to happen.

From our overall financial analysis it can be conclude that ACI Limited have a very steady revenue growth and revenue base. Its sale is well over breakeven. Although its revenue is little volatile but it has very low possibility to turn the company into loss making entity.

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3.3. ACI Limited Strategic Marketing & Communication Analysis:

Before going to the core analysis of marketing strategy we should map the stakeholders of the ACI Limited according to their importance to the company. This kind of mapping has a significant impact on formulating the marketing strategy.

3.3.1. Stakeholders of ACI Ltd. & Mendelow's Power-Interest Grid: Mendelows suggested that stakeholders may be positioned in a matrix whose axes are power held and the likelihood of showing interest in the organizations activities. These factors will help define the type of relationship the organization should seek with its stakeholders (Business Strategy, 2009). If we want to map the stakeholders of the ACI Limited in the Mendelow's Power-interest grid it will be as follows:

Low Interest (A) Low Power Social Representative Powerful researchers Potential customers (C) High Power Government Institutional Shareholders

High Interest (B) Shareholders Major Suppliers Lenders (D) Customer Tax Authority Employees Trade Unions

Figure 7: Stakeholders mapping of ACI Limited

Key players for the organization are segment D. For the ACI Limited segment D, which comprises of customer, tax authority, employees and trade unions, should be treated with highest priority and strategy should be formulated to satisfy them. Along with segment D, segment C also treated carefully but strategic focus should be on segment D.

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3.3.2. Product Line & Growth Share Matrix: BCG growth-share matrix is a portfolio-planning method that evaluates a company's strategic business units (SBUs) in terms of their market growth rate and relative market share. SMU & are classified as stars, cash cows, question marks or dogs (Kotler 1999). The products are categorized based information provided in the annual report. In case of pharmaceutical products and agricultural products, the whole segments are considered as a single product.

Figure 8: BCG Matrix of ACI Products Stars are high-growth, high-share businesses or products, including ACI Salt and ACI Pharmaceuticals. They often need heavy investment to finance their rapid growth. Eventually their growth will slow down, and they will turn into cash cows (Kotler, 2008). Specially for the Pharmaceuticals product they should go for extensive production and distribution, both nationally and international, as it out of some international regulation (copyright act).

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Cash cows are low-growth, high-share businesses or products, including ACI Aerosol, Savlon, Colgate, Dabur. These established and successful products need less investment to hold their market share. Thus they produce cash that the company uses to pay its bills and to support other SBUs that need investment (Kotler, 2008). Question marks are low-share business unit in high growth markets, including ACI Pure, Tately, SHOWPNO and Agribusiness. They require cash to hold their share, let alone increase it. Management has to think hard about question marks - which once they should bilk into stars and which ones they should phase out (Kotler, 2008). In case of the ACI Limited all the question mark products have high potentiality for future growth. So they can keep up investing in these products. Dogs are low-growth, low-share businesses and products. They may enough cash to maintain themselves, but do not promise to be large sources of cash (Kotler, 2008).

3.3.3. Product Line & Ansoff Matrix: The Ansoff Growth matrix is a tool that helps businesses decides their product and market growth strategy. Ansoffs product/market growth matrix suggests that a business attempts to grow depend on whether it markets new or existing products in new or existing markets. If we put the product line of ACI Limited in the Ansoff matrix it will be as follows:

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Existing Products (Market Penetration) ACI Salt ACI Aerosol SAVLON Colgate Dabur NEVIA ACI Mosquito Coil

New Products (Product Development) Pharmaceuticals ACI Pure Tately SHOWPNO Agribusiness

Existing Markets

New Markets

(Market Development)

(Diversification)

Figure 9: Ansoff Matrix

Market penetration Market penetration is the name given to a growth strategy where the business focuses on selling existing products into existing markets. As the ACI Limited has several products in this segment they should seeks to achieve following objectives: 1. Maintain or increase the market share of these products this can be achieved by a combination of competitive pricing strategies, advertising, sales promotion and perhaps more resources dedicated to personal selling. 2. Secure dominance of growth markets. 3. Restructure a mature market by driving out competitors; this would require a much more aggressive promotional campaign, supported by a pricing strategy designed to make the market unattractive for competitors. 4. Increase usage by existing customers for example by introducing loyalty schemes.

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Product development Product development is the name given to a growth strategy where a business aims to introduce new products into existing markets. As the ACI Limited has several products in this segment they should develop strategy to build up new competencies and requires the business to develop modified products which can appeal to existing markets.

3.4. ACI Limited Distribution Analysis & Hybrid Marketing:

Today, with the proliferation of customer segments and channel possibilities, more and more companies have adopted multichannel distribution systems - often called hybrid marketing channels. Such multichannel marketing occurs when a single firm sets up two or more marketing channels to reach one or more customer segments (Kotler, 2008). As the ACI Limited produces and markets different types of products to fulfill different customer needs, their distribution system is also hybrid. But before the inception of the super store SHOWPNO, ACI limited was follow conventional marketing systems and all of their products were sold to the customers through retailers and dealers.

ACI Limited

Distributors and Dealers

Retailers

Customers

Figure 10: Distribution channel before 2008

After the inception of superstore SHOWPNO, ACI Limited restricted it distribution channel into hybrid systems. Through the super shop they provide a wide range of products to the consumer directly.

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Selling through branded (SHOWPNO) outlet Customers

ACI Limited Distributors and Dealers

Retailers

Customers

Figure 11: Distribution channel after 2008

Hybrid channels offer many advantages to companies facing large and complex markets. With each new channel, the company expands its sales and market coverage, and gains opportunities to tailor its products and services to the specific needs of diverse customer segments. But at present ACI Limited use direct marketing only for SHOWPNO and the other products are selling through the dealers and retailers. For getting closer to the customer they can open some branded outlet where all their products will be available.

3.5. List of Core Competencies:

All of these analyses find out six (6) core competencies of ACI limited which are listed below: 1. Diversified product range with some world recognized brands. 2. Mechanistic organizational structures with strict control form the top management. With this structure, management is more able to concentrate on the strategic issues rather than silly routine works. 3. Strong revenue growth and revenue base. And also has very low possibility of making loss. 4. Distribution of various products is done under one umbrella which leads to more efficient use of distribution channel. 32 of 38

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5. Lots of market leading products and lots other with potential future growth, both nationally and internationally. 6. Strong financial strength with a higher margin of safety which ensures continuous profit and sustainability.

3.6. A Comparison Summary of Last Five Years:

A comparison between 2005 to 2010 will give us a more summarized picture about the changes in ACI Limited during that time.

SL 1

Matters ACI Salt/ ACI Pharmaceuticals

2005-2008 Question Mark Star.

2009-2010 ACI Pharma current at the 9th position in the industry (wiki).

SHOWPNO/ Agribusiness/ Tately/ ACI Pure

Didnt Exist

Some are in the leading positions, where others have future potentiality.

3 4

Distribution Channel Organization Structure

Simple Few subsidiaries

Hybrid So many subsidiaries and products.

Revenue

More than doubled in 2010 in comparison to 2005.

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Conclusion
Based on our analysis of the ACI Limiteds management structure, financial strength, marketing strategy and distribution channel we can conclude that ACI limited has a machine bureaucratic structure which is currently appropriate for this kind of business. Its financial strength is also very good along with well diversified product line. Most of the products have very potential future growth which ensures the sustainability of the company.

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Recommendation
Form our strategic analysis of the various aspects of ACI Limited, we have found out some room for improvement in the company. These includes For management structure: Should have move from the machine bureaucracy structure to diversified form which featured by: 1. Simple static diverse environment, 2. Very large old divisible internal factors, 3. Standardization of outputs, and 4. Key middle line managers.

For marketing: 1. Keep up investing in questioned mark products, including - ACI Pure, Tately, SHOWPNO and Agribusiness. Because these business has a large potentiality to growth in the future. 2. Searching for new market, both nationally and internationally, by developing new products or branding exiting product in the pharmaceuticals sector. 3. For market penetration (Ansoff matrix) restructure a mature market by driving out competitors; this would require a much more aggressive promotional campaign, supported by a pricing strategy designed to make the market unattractive for competitors. 4. For product development segment (Ansoff matrix) develop strategy to build up new competencies and requires the business to develop modified products which can appeal to existing markets.

For Distribution: 1. Open some branded outlet where all their products will be available.

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For Research & Development: As the most of the products of ACI Limited has a very high future potential growth, specially pharmaceuticals, agribusiness and SHOWPNO (super store), investment should be made in research and development in these areas to invent new products and capture new markets. Specially for the Pharmaceuticals product they should go for extensive research and development, as it has the potentiality to grow in national and international market.

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References:
1. ACI Limited website (www.aci-bd.com/) 2. ACI Limited, Annual Report 2010. 3. ACI Limited, Annual Report 2009. 4. ACI Limited, Annual Report 2005. 5. Principles of Marketing Philip Kotler, Gray Armstrong, Jhon Sunders, Veronica Wong, Second European Edition, 1999. 6. Principles of Marketing Philip Kotler, Gray Armstrong, 12th Edition, 200809. 7. Business Strategy, Study manual Professional Stage Application Level, The Institute of Chartered Accountants of Bangladesh (ICAB), March 2009. 8. Ansoff's product / market matrix Tutor2u, internet

(http://tutor2u.net/business/strategy/ansoff_matrix.htm). 9. Pharmaceutical industry in Bangladesh Wikipedia

(http://en.wikipedia.org/wiki/Pharmaceutical_industry_in_Bangladesh).

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Annexure 1: Calculation of break-even point.

Particulars Revenue Less: Net profit before tax Break Even Sales Margin of Safety

2005 a b c=a-b d=c/a 3,089 169 2,920 5.47%

2006 3,519 233 3,286 6.62%

2007 4,917 427 4,490 8.68%

2008 7,365 1,184 6,181 16.08%

2009 7,228 1,108 6,121 15.32%

2010 7,915 808 7,107 10.21%

All the figures are in million.

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