Project Report On Engro Foods

Business Policy
Report on Engro Foods

Submitted To:
Prof. Rabiha Salman
Submitted By:
Muhammad Abu-Baker L1F08MBAM2106
Waseem Azam L1F08MBAM2141
Danish Aftab L1F08MBAM2127
Waqas Aziz L1F07MBAM2179
Fahad Tariq L1S08MBAM2137
Almas Omer L1F08MBAM2071
Submission date: 06-08-2010
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Table of Contents
Acknowledgement...........................................................................................................................2
Executive Summary.........................................................................................................................3
Introduction to Engro Pakistan........................................................................................................4
Mission Statement...........................................................................................................................5
Vision Statement..............................................................................................................................5
Diversified Portfolio of Engro Pakistan..........................................................................................6
Fertilizer Business.......................................................................................................................6
Engro Energy Limited.................................................................................................................6
Engro Innovative Automation Limited........................................................................................7
Engro Vopak Terminal Limited....................................................................................................7
Engro Asahi Polymer &Chemicals. Limited...............................................................................7
Engro Food Limited.....................................................................................................................8
Board of Director.............................................................................................................................8
Board compensation Committee..................................................................................................8
Board audit committee.................................................................................................................9
Organizational Chart......................................................................................................................11
Business Executives of different Divisions...................................................................................12
Food Industry In Pakistan..............................................................................................................13
Engro Foods...................................................................................................................................14
Our Brands.................................................................................................................................14
Our Affiliates.............................................................................................................................14
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Our Values......................................................................................................................................15
Vision and Mission Statement of Engro Foods.............................................................................15
Vision.........................................................................................................................................15
Mission......................................................................................................................................16
Objectives and Goals.....................................................................................................................16
ANALYSIS OF MISSION............................................................................................................17
Market Segmentation.....................................................................................................................18
Demographic Segmentation.......................................................................................................18
Psychographic Segmentation.....................................................................................................18
Behavioral Segmentation...........................................................................................................18
STRATEGIC Internal and external Audit......................................................................................19
STEEPLE Analysis........................................................................................................................19
S - Social Factors.......................................................................................................................19
T - Technological Factor............................................................................................................20
E - Economical Factor...............................................................................................................20
E - Environmental Factor...........................................................................................................20
P - Political Factor.....................................................................................................................21
L - Legal Factor.........................................................................................................................21
E - Ethical Factor.......................................................................................................................21
Porters 5 Forces Model..................................................................................................................22
Threat of New Entrant...................................................................................................................23
Capital requirements..................................................................................................................23
Economy of scale.......................................................................................................................23
Bargaining Power of Suppliers......................................................................................................24
Number of suppliers..................................................................................................................24
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Importance of volume to supplier..............................................................................................24
Bargaining Power of Buyers..........................................................................................................24
Backward integration.................................................................................................................24
Availability of Substitutes..............................................................................................................25
Competitive Rivalry.......................................................................................................................25
SWOT Analysis.............................................................................................................................26
Strengths....................................................................................................................................26
Engros Back..........................................................................................................................26
PR with Farmers....................................................................................................................26
Positive Response from Customers.......................................................................................27
Strong consumer & product research....................................................................................27
Third-Generation Plant..........................................................................................................27
Weaknesses................................................................................................................................28
Olwell TVC............................................................................................................................28
Owning Red Color.................................................................................................................28
Low Quality Milk..................................................................................................................28
Packaging...............................................................................................................................29
Milk collection & distribution costs......................................................................................29
Narrow brand portfolio..........................................................................................................29
Opportunities.............................................................................................................................29
Increased funding by Government.........................................................................................29
Increased consumption of PLM.............................................................................................29
Awareness..............................................................................................................................30
Third largest producer of milk...............................................................................................30
Threats.......................................................................................................................................31
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Competition...........................................................................................................................31
INDUSTRIAL SWOT ANALYSIS...............................................................................................32
Strength......................................................................................................................................32
Weaknesses................................................................................................................................32
Opportunities.............................................................................................................................32
Threats.......................................................................................................................................33
Competitors Analysis.....................................................................................................................33
What is SWOT matrix?..............................................................................................................36
SWOT Matrix for Engro foods......................................................................................................38
Internal Factor Evaluation Matrix.................................................................................................40
External Factor Evaluation Matrix................................................................................................42
Competitive Profile Matrix (CPM)................................................................................................44
Reasons......................................................................................................................................45
CORE COMPETENCIES & KEY SUCCESS FACTORS...........................................................45
Key success factors........................................................................................................................46
Research & Development..........................................................................................................46
COMPETITIVE ANALYSIS.........................................................................................................46
SPACE MATRIX STRATEGIC MANAGEMENT METHOD....................................................48
Engro Foods factors for SPACE MATRIX....................................................................................49
Result.........................................................................................................................................51
BCG Matrix Model........................................................................................................................51
Division wise data for Engro foods BCG Matrix..........................................................................53
Internal External (IE)Matrix..........................................................................................................54
Result.........................................................................................................................................54
Grand Strategy Matrix for Engro foods.........................................................................................55
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Results........................................................................................................................................56
Quantitative Strategic Planning Matrix or a QSPM......................................................................57
QSPM OF Engro Foods.................................................................................................................58
FINANCIAL RATIO ANALYSIS.................................................................................................60
Liquidity Ratios.........................................................................................................................60
Remarks.................................................................................................................................61
Leverage Ratios.........................................................................................................................62
Remarks.................................................................................................................................62
Activity Ratios:..........................................................................................................................63
Remarks.................................................................................................................................63
Profitability Ratios.....................................................................................................................64
Remarks.................................................................................................................................64
Achievements................................................................................................................................65
Engro Foods expansion on a bigger scale......................................................................................66
Dairy science and Technology in Pakistan....................................................................................66
SUGGESTIONS AND RECOMMENDATIONS.........................................................................67
REFERENCES..............................................................................................................................68
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Acknowledgement
In the name of Allah, The Most Gracious, The most Merciful. First of all we are thankful to
Allah Almighty for giving us the Mind to think, Heart to feel the consequences of our business
idea, strength to complete and Ability to work successfully on our project. All members of our
team are involved in making this project to groom it from conceptual stage to the point where
one can hold it in his hands. To all those group members, who have contributed greatly to the
usefulness of this project. Although some of what the project contains was designed through the
hard way. These are not just the white papers that are necessary but also the conversations with
colleagues who provide answers to our questions and solutions to our problems discussed.
Our team would also like to express gratitude towards our instructor Miss. Rabiha Hassan for
guiding, helping and providing us with the opportunity to make us able to produce this plan. To
all of these people and the many others, who helped us a lot and we did not remember their
names; we heartily give them big thanks. Our final thanks go to our families, our teachers who
have always uplifted us through their moral, professional and technical support.
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Executive Summary
The repot at hand provides useful insight about Engro Pakistan Ltd, a private fertilizer firm that
keeps about 22 % of market share in the milk food industry Pakistan. Established in 2005, a
100% owned subsidiary First investment of dairy plant Processed milk market is growing at
approx. 20% per annum Olpers achieved peak market shares of 12.3% within 6 months of
launch Other products launched Olpers Cream, OLwell High Calcium Low Fat Milk
(Premium Brand) Plans to expand product portfolio.
Milk processing capacity increased by 200% to 200 million liters annually, will become the only
company in Pakistan covering the entire milk catchments area. Already has the second largest
chilled milk collection system in the country Distribution network to double from 58 towns to
119 towns by the end of 2007JV with global food major in advanced stage of negotiation Forces
in the external environment that affect companys performance are, political, economic, social
and technological whereas company-specific external forces are Major Players in the food
Industry, which are ten in number; Nestle being the leader with 41 % market share. Typical
packed milk consumers are the children. Therefore, Engrofoods has a large number of consumers
throughout the country.
After the introduction The EFL mission and vision statement, External and internal audit steeple
analysis, situational analysis i.e., SWOT analysis IEF matrix .EFA Matrix BCG matrix, space
Matrix, PAQSM and at the end FINANCIAL RATIO ANALYSIS of the company has also been
done. The company core competencies also discussed. Finally, certain recommendations are also
given at the end of the report.
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Introduction to Engro Pakistan
Engro Chemical Pakistan Limited is the second largest producer of Urea fertilizer in Pakistan.
The company was incorporated in 1965 and was formerly Exxon Chemical Pakistan Limited
until 1991, when Exxon decided to divest their fertilizer business on a global basis and sold off
its equity of 75% shares in existent company. The Employees of Engro, in partnership with
leading international and local financial institutions bought out Exxons equity and the company
was renamed as Engro Chemical Pakistan Limited. Engro is a public limited company listed on
the Stock Exchanges of Karachi, Lahore and Islamabad.
The principal activity of the Company is manufacturing, purchasing and marketing of fertilizers.
The Company is also involved in the production and marketing of seeds and has invested in joint
ventures engaged in chemical related activities. As part of its diversification strategy, controlling
interest was acquired in a company offering industrial solutions in automation and control. A new
milk plant has been established at Sukkur the milk is branded as Olpers.
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Mission Statement
Engro is progressing day by day because they have a vision and mission the keeps the motivated
and keeps them going. Their mission as they describe as:
Our mission is two fold, to help farmers maximize their farm produce by providing quality
plant nutrients and technical services upon which they can depend. To create wealth by building
new businesses based on company and country strengths in petrochemicals, information
technology, infrastructure, food and other agriculture sectors.
And further describing the adoption fashion they say, In pursuing the mission we shall at all
times be guided in our conduct and decision making by our core values.
Vision Statement
To be the premier Pakistani enterprise with a global reach, passionately pursuing value
creation for all stakeholders.
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Diversified Portfolio of Engro Pakistan
Fertilizer Business
Agriculture accounts for 25% of GDP and 45% of employment in

Pakistan Second largest Urea producer of Pakistan .Capacity975 KT/A Market share20% Second
highest phosphates sales (~400KT/A) Market Share 23% ECPLs Margins are by far the best in
the industry. Zarkhez (NPK) Market leader -Capacity 160 KT/A Market Share 95% Urea
shortage expected to grow to 1.2 million tons/annum by 2010. Worlds largest single-train Urea
plant of 1.3 million tons being setup at a cost of US$ 950 million. On commencement of
operations in mid 2010, cash fixed costs of the new plant will be a third of the existing plant;
scale & brown field synergies Gas consumption at the new plant will be 15% less than the
existing plant. Engros Daharki complex will become the worlds fifth largest Urea production
site; 2.28 million tons, 3 plants.
Engro Energy Limited
Established in 2006-100% owned subsidiary Pakistan is facing growing energy deficit Energy
consumption has been growing at 7% per annum Setting up a 220 MW gas based power plant at
a cost of $220 million with commercial operation in 2009 Short-listed along with 3 other
companies for privatization of Jamshoro Power Company.
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Engro Innovative Automation Limited
Acquired majority stake (51%) in a knowledge based company Innovative Engineering &
Automation Ltd in 2003 Market Leader in domestic Industrial Automation Honeywell
distributor in Pakistan Expanding internationally to synergize, and benefit from lower costs at
home and higher demand abroad Now operating in Dubai, UAE which contributes 25% of
revenue and half of the profit Companys first IP product iboiler launched internationally in
2006 Acquired an automation company in the US in Dec. 2006; mandated to develop
outsourcing opportunities.
Engro Vopak Terminal Limited
A 50-50 JV with Royal Vopak of Holland; established 1997 Royal Vopak is the worlds largest
independent tank terminal operator Engro Vopak handles 70% of liquid chemical imports in
Pakistan .Setting up our countrys first Cryogenic facility for ethylene imports Well positioned
for setting up proposed LNG terminal under active consideration of the government; Cost US$
350 400 million.
Engro Asahi Polymer &Chemicals. Limited
Established in 1999. 80-20 JV with Mitsubishi Corp. Pakistans only PVC manufacturing plant;
facing buoyant domestic demand since 2006 Successfully placed 22% of sales in diverse export
markets from Australia to East Africa in prior years (2004 2005) Expansion and back
integration underway imported ethylene + new caustic soda plant; EDC/VCM/PVC.
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Engro Food Limited
Established in 2005, a 100% owned subsidiary First

investment of dairy plant Processed milk market is growing at approx. 20% per annum Olpers
achieved peak market shares of 12.3% within 6 months of launch Other products launched
-Olpers Cream, Olwell High Calcium Low Fat Milk (Premium Brand) Plans to expand product
portfolio Milk processing capacity to increase by 200% to 200 million liters annually Will
become the only company in Pakistan covering the entire milk catchments area Already has the
second largest chilled milk collection system in the country Distribution network to double from
58 towns to 119 towns by the end of 2007JV with global food major in advanced stage of
negotiation.
Board of Director
Board compensation Committee
The Board Compensation Committee meets at least once every quarter to review and recommend
all elements of the compensation, organization and development policies relating to the senior
executives remuneration and to approve all matters related to the remuneration of executive
directors and members of the management committee. The President attends Board
Compensation Committee meetings by invitation. The mandate of the Board Compensation
Committee is as follows:
To ensure human resource policies effectively deliver robust talent management process
across various Engro companies
To take decisions on the performance evaluation, development and succession of
company CEOs and Corporate Center Executives
To establish specific standards/policies for basic alignment in fundamental beliefs across
companies.
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Shabbir Hashmi
Chairman
Arshad Nasar
Shahzada Dawood
Shabbir Hashmi
Director
Director Arshad Nasar
Director
Director
Tahir Jawaid
Board audit committee
VP Human
The Board Audit Committee meets at least once every quarter to
Resources and
endorse the accounts prior to their approval by the Board. The Chief
Public Affairs Officer regularly attends the Board Audit Committee meetings by
Financial
invitation to present the accounts. The Board Audit Committee is responsible for assisting the
Board in fulfilling its oversight responsibilities in the following areas:
To assess the adequacy and effectiveness of the system for assessment and management
of risk in the Company and subsidiaries/joint ventures under its management control
To review financial reporting process, system of internal control, audit process, and
process for monitoring compliance by the Company with Securities and Exchange
Commission of Pakistans Code of Corporate Governance, and other laws and regulations
To ensure effectiveness of internal control measures, compliance with policies on
Corporate Governance and Business Conduct and applicable laws and regulations by the
subsidiaries/ joint ventures under management control of the Company
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Shabbir Hashmi
Chairman
Isar Ahmed Aliuddin Ansari Abdul Samad D

Naveed Hashmi awood
Director Director
General Manager Director
Coporate Audit
Naveed Hashmi
General Manager
Corporate Audit
Engros Board of Directors includes eight non-executive directors and five executive directors,
who share the collective responsibility of ensuring that the affairs of the organization are
managed competently and with integrity. The Board has been reconstituted as of April 2009,
supplementing the number of non-executive directors.
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Organizational Chart
Shabbir Hashmi
Chairman
Asad Umar
President
Isar Ahmad
Director
Khalid Siraj Subhani

Director
Abdul Samad Dawood

Director
Shahzada Dawood
Director
Muhammad Aliuddin Ansari

Director
Arshad Nasar
Director
Shabbir Hashmi
Director
Ruhail Mohammed
Director
Khalid Mansoor
Director
Asif Qadir
Director
Saad Raja
16 Director
Business Executives of different Divisions
Khalid Siraj Subhani
Senior Vice President
Engro Corporation Limited

Chief Executive Officer
(Designate)
Sarfaraz A. Rehman
Engro Fertilizers Limited President and Chief Executive
Officer Engro Foods Limited
Asif Qadir
President and Chief Executive
Officer Engro Polymer &
Chemicals Limited
Khalid Mansoor
President and chief Executive
Officer Engro Powergen Limited
Abdul Samad Khan

Officer Engro EXIMP Private
Limited
Sheikh Imran-ul-Haque
Officer Engro Vopak Terminal
Limited
Bakhtiar Wain

Officer Avanceon Limited
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Food Industry in Pakistan
The food and its allied products industry is considered Pakistans largest industry, and is believed
to account for 27 percent of its value-added production. Trade sources estimate the sector's total
value of production is over rs.46 billion (rs.85.00 equal us$ 1.00 at the current exchange rate).
Pakistans food industry produces cooking oils, hydrogenated vegetable oils, sugar, flour, dairy
products such as milk, butter, yogurt, cheese and ice-cream, biscuits, breads and confectionery,
fruit juices and fruit juice drinks, carbonated beverages, snack foods based on rice, potatoes, corn
and pulses, processed chicken, jams, jellies, squashes, sauces, pickles, and some cereals and
canned fruits. The fish, meat, fruit and vegetable sectors are underdeveloped partly for lack of
adequate infrastructure, including storage and transportation facilities. Government policies and
plans are expected to greatly increase the development of seafoods industry. Development and
implementation of milk standards is also essential to define milk price based on quality. Dairy
science and technology education universities also need to support industry in dairy breeding,
nutrition, industrial management and product quality.
Presently no under-graduate program is available in the country to support this sector. Presently,
Pakistan has only a few scholars in prime principles of dairy science including animal breeding
and genetics, dairy nutrition, dairy management, and dairy technology to support and develop
dairy industry. It is essential because the veterinarian could only provide support to the animal
industry developed on the animal production science principles. Animal or dairy production
science is altogether a different subject than that of veterinary education. In conclusion,
development of dairy cooperates, restructuring of Extension; research and educational
institutions could perk up rural oriented dairy sector to market oriented dairy industry that
guaranteed food security social and economic growth in Pakistan.
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Engro Foods
Engro Foods Limited is subsidiary of Engro Chemical Pakistan Ltd. which is one of the most
reputed enterprises in Pakistan with more than 40 years of diversified business operations in the
areas of fertilizer and chemicals. Engro Foods started its business operations in March 2006 and
with the successful launch of Olpers Milk, Tarang, Olwell, and Olpers cream, it has established
itself as a major player in the foods business. Engro Foods has already set up two processing
plants at Sukkur and Sahiwal. With the ever expanding milk collection network and processing
facilities, the Supply Chain has geared us for the growing sales of our products We believe that
our recent successes will take us to our goal: To be one of the biggest players in the food
business. Our aim is to dominate the food business, and to achieve this we will settle for nothing
less than the cream!
Our Brands
Our Affiliates
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Our Values
Integrity
We have an open disclosure policy and transparent processes. All our business activities /
transactions are carried out honestly and with fairness.
Our People
Have passionate people with intelligent and firm approach towards business. To facilitate these
people we give those challenging opportunities, training, fun loving environment, necessary
resources and facilities. We publicly recognize our talent.
Innovation
Innovation is the way of life at EFL. It is valued, encouraged and rewarded in all aspects of our
operations.
CSR
We stand committed to sustainable business growth and ensure 100% compliance of CSR by
ensuring the safety of our people, assets and the community in which we operate. EFL takes
significant strides in poverty alleviation - both rural and urban, environmental safety and build
up of farming expertise.
Consumer Centric
Consumer is the reason for our existence as a business.
Vision and Mission Statement of Engro Foods

Vision
Aims at transforming the company within the next five years into first a national food industry
giant, then into a regional force and finally into a global player.
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Mission
Build Branded food business to improve quality of life by offering tasty, affordable and highly
nutritional products to our consumers while maximizing stake holders' value.
Objectives and Goals
Engrofoods main objectives are to supply everyone their favorite olpers Milk and to satisfy the
consumer needs and wants. Engrofoods second main objectives are to provide profit to the
shareholders and increase the market share.
EFL dreams to be BIG. We want to be a major player in the food industry which is also evident
in our vision, "Elevating Consumer Delight Worldwide". EFL wants to challenge the industry
norms and surprise whoever has eyes on EFL.
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ANALYSIS OF MISSION
Component of mission Description Addressed or not?

statement
Customers Who are the firms customers? Yes
Products or service What are the firms major Yes
products?
Markets Geographically, where does the Yes
firm compete?
Technology Is the firm technologically No
current?
Concern for survival, growth Is the firm committed to growth Yes
and profitability and financial soundness?
Philosophy What are the basic beliefs, Yes
values, aspirations, and ethical
priorities of the firm?
Self-Concept What is the firms distinctive Yes
competence or major competitive
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advantage?
Concern for public image Is the firm responsive to social, No
community, and environmental
concerns?
Concern for employees Are employees a valuable asset No
of the firm?
Market Segmentation
Demographic Segmentation
Engro Foods products are not bounded to any particular age, gender or lifecycle stage. The
brand is meant for all the users in higher upper or middle class families.
Psychographic Segmentation
Engro Foods have segmented the market more towards achievers who are goal-oriented and
focused on their careers, and those who are seeking variety in the milk sector.
Behavioral Segmentation
Engro Foods products have been segmented on the basis of benefits that consumers seek in the
milk. People look for a brand that can be used for all purposes from drinking to, tea whiteners as
well to feed the animals.
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STRATEGIC Internal and external Audit
STEEPLE Analysis
No organization exists in a vacuum; the environment within which the firm has to operate will
affect the way that strategy is both planned and carried out and changes in the environment is
also the most likely reason for making changes in the strategy. Changes in the environment are
also the most likely cause of failure of strategic plans. The most carefully calculated strategy
would be able to drive the market in the favor of the organization and will maneuver the external
environment in the best possible way. Engro Foods like all the organizations they also have to
face such kind of environment which is very dynamic. Being in the market as a challenger they
have to face all the external factors and have to cope up with them accordingly
S - Social Factors
Engro food has helped to bring about a change in life style of the Pakistani People by introducing
UHT Milk, as the literacy rate is improving and it is resulting in a better awareness of the olpers
and Tarang UHT treated milk and is helping them improve their sales and Milk with its basic
benefits has helped improve the image and more usage has been seen in the past years. Special
awareness Campaigns can also be launched and can help portray a better image of the product in
front of the customers. The attitudes of the people are also changing with the passage of time so
as a result the usage of open gawala milk is changing and people are opting out the usage of
standardized packed milk.
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T - Technological Factor
The type of the technology available within the industry states the competitive environment
because creative use of new technology is what often gives firm there competitive advantage.
This environment does not change that much quickly but the changes that come are strong
enough that can change the way the industry is currently running. Haleeb production process
uses UHT (Ultra High Treatment) technology. Engro food administrators claim that their plant
adopted the latest technology for milk processing and thus it had an edge over other around
twenty plants in competition including Haleeb, Milkpak as all other plants were based on
obsolete European technology. The idea behind UHT investment was to provide consumers with
the best quality of packaged dairy and food products that no other company can produce.
E - Economical Factor
Engro Foods is strongly affected by both the Economic and the Demographic environment
around and have to keep on taking different steps to respond accordingly. There is no sales tax on
the milk. Hence it is a real plus point. Material supply and shortages are faced by the company
for both Packaging and for the product it, as milks production is seasonal and keeps fluctuating
and adequate steps are required to be taken in order to keep it working smoothly. Haleeb also
dont charge interest on its products which also makes a huge difference economically.
E - Environmental Factor
As, the environment always effect the way strategies are being carried out and implemented.
Engro Foods like all the organizations they also have to face such kind of environment which is
very dynamic. Being in the market as a challenger they have to face all the external factors and
25
have to cope up with them accordingly. Haleeb have the strategies to positively engage the staff
in work and boost up their moral. Engro food has a friendly environmental culture within the
organization to make their employees comfortable and to deal with the external problems. There
are few seasons in which the availability of milk reduces that effect the production of milk and
left Engro food with fluctuated sales.
P - Political Factor
Engro food also abides by the rules formed by the Government and set their strategies that are
according to the laws and legislations of the Government they are working under. Tetra Pack
(brick pack), that was for the first time that milk came in that form soon followed by the Nestls
Milk Pak which as a multinational rocked the UHT Milk industry of Pakistan. They are not
actually bound under any sort of trade agreements. As far as the employment laws are concerned
Engro food abides to laws set by the government for trade policies, government policies and
completes its responsibilities in a better manner.
L - Legal Factor
Engro foods always stand by the rules and legal conditions imposed by the Government and set
their strategies that are according to the employment laws and legislations of the Government
they are working under. Engro food always keeps its department updated about what is
happening in the sector or milk industry, and that will help them to make their strategies
accordingly. Engro foods have the legal laws like, Minimum wage, working time, Food stuffs,
Engro foods dont believe in Under 18 working, Occupational/ industrial Training,
Environmental regulations, Consumer protection Industry-specific regulations etc.
E - Ethical Factor
Engro foods are well renowned company operating in the milk industry since 2002. And the
reason for this is importantly their ethical values. They dont sale on credit or on interest because
they consider it unethical and not according to the law of our religion.
26
Porters 5 Forces Model
27
Threat of New Entrant
The average entrepreneur can't come along and start a large food company. The threat of new
entrants lies within the food industry itself. Some companies have carved out niche areas in
which they underwrite dairy supply. These food companies are fearful of being squeezed out by
the big players. Another threat for many food companies is other food services companies
entering the market.
Capital requirements
Competing in a new industry requires resources to invest. Production of packed products requires
huge investment of financial, human, technical, and marketing resources. At the moment Engro
Olpers have some threats like from new entrants goodmilk product of shskargang food.
Economy of scale
Economy of scale determines entry because they force potential competitors either to enter on a
large scale bases (a costly and perhaps risky move) or to accept a cost disadvantage. Moreover,
new entrants in the pasteurized milk business may encounter scale related barriers not just in the
production, but in the advertising marketing, distribution, financing, and raw milk purchasing as
well, Engrofoods achieved its breakeven in 2003
28
Bargaining Power of Suppliers
The suppliers of food might not pose a big threat, because of the reasons;
Number of suppliers
Raw milk is standard commodity and is available in the open market from a large number of
milkmen. If anyone refuses to sell its product then company can buy it from others who are
already willing to sell to company.
Importance of volume to supplier
Suppliers also have less leverage to bargain over price because the company is purchasing the
large volume of their milk and suppliers dont have much option to sell milk to others.
Bargaining Power of Buyers
The individual doesn't pose much of a threat to the food industry. Large clients have a lot more
bargaining power with food companies. Large corporate clients like airlines and retailers pay
millions of dollars a year. There are large numbers of distributors, who are buying and
distributing the product, so their bargaining power is low and company have leverage to dictate
implement its terms and conditions to distributors.
Backward integration
Another reason of low bargaining power is that no buyer/distributor has the resources to start
involve in backward integration.
29
Availability of Substitutes
This one is pretty straight forward, for there are plenty of substitutes in the food industry. Most
large food companies offer similar suites of services. Companies focusing on niche areas usually
have a competitive advantage, but this advantage depends entirely on the size of the niche and on
whether there are any barriers preventing other firms from entering.
Competitive Rivalry
The food industry is becoming highly competitive. The difference between one Food Company
and another is usually not that great. As a result, food industry has become more like a
commodity an area in which the food company with the low cost structure, greater efficiency
and better customer service will beat out competitors. Food companies also use higher
investment returns and a variety of food investment products to try to lure in customers. In the
long run, we're likely to see more consolidation in the food industry. Larger companies prefer to
take over or merge with other companies rather than spend the money to market and advertise to
people.
Not only local but attempts by cross border competitors or companies to gain stronger foot hold
in each others domestic market boosts the intensity of rivalry, especially when the foreign rivals
have lower cost or very attractive products. In case of Engro foods so far nestle and hale are the
only diverse rival and another players that has just joined the UHT Milk sector is goodmilk, no
doubt the competition between Engrofoods and Haleeb is quite intense both are engaged in
consistent homework just to break and attract the customer towards each other but goodmilk is
adding to the competition between the sector.
30
SWOT Analysis
Strengths
Engros Back
Olpers is a brand of ENGRO foods. This means that consumers can relate their former image of
engro foods to Olpers. Engro is a well established brand name in Fertilizer, IT and infrastructure
business. The brand is well known so customers will automatically have a brand association with
Olpers and see it as a premium quality product. ENGRO is world renowned so it can easily
attract foreign investors in backing it against other competitors such as Nestle. Engro foods can
easily afford research and development costs for Olpers have in order to introduce new
products. It can also distribute the brand through better channels because of its long term
relationship with distributors in the agriculture sector.
PR with Farmers
Engro has been interacting with the farmers for fertilizers and has gained quite a good reputation
over the years. It has led to a strong bond and long term relationship with the farmers who are
willing to supply milk to the company. This is an added advantage and strength for the company
because it will never be short of milk production. The farmers also wont have to look elsewhere
to sell their milk.
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Positive Response from Customers
In first year, EFL crossed 1.4 billion sales figure which shows customers satisfaction upon EFLs
products. 4. Its taste, quality proposition and world-class quality proposition system.
Strong consumer & product research

Olpers done a strong consumer & product research before and after launching the product. This
has provided them the perfect launching pad to eventually emerge as a global player in the food
industry. To develop its future portfolios, EFL has hired various global research partners like AC
Nielsen, Mindshare, JWT Asiatic and MARS marketing and advertising agencies.
Third-Generation Plant
EFL only, has the third-generation UHT milk plant in the country. EFL plant is the only plant in
Pakistan that uses Bactofuge technology to virtually eliminate bacteria and ensure premium
quality and hygiene. Moreover, it is also setting up another milk processing plant in Central
Punjab (Sahiwal) with an investment of Rs. 2 billion (US $ 33 million).
Worldwide fame of Engro.

Efficient milk collection system.
Keeping high quality standards.
Integrated distribution and warehousing facilities.
Successful related diversification.
Generic brand name of Olpers
Large market share of Engro innovative and chemicals.
Having Good reputation in the market by strong brand name i.e. Engro
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Weaknesses
Olwell TVC
Olwell ad which is based on Western life style, ENGRO foods brand management showed a man
who put off his clothes & remain just in his undergarments, or half nude lady in a cat walk or
men admiring the figures of a lady in mix gender health club. In this ad they are creating
associations with the brand through the stripes, which is a highlight of Olwell packaging. Half
naked people have been shown with tattoos of the same stripes in order to show that they are
loyal consumers of Olwell. Also, the talent, situations and locations connects well with the ad to
give Olwell a premium positioning. The brilliant marketing people at ENGRO Foods failed to
analyze is that the market they are targeted the ad on, is Pakistan, where practicing Muslims
reside, who have strong religious beliefs. When making the ad, the brand managers were focused
on, making an ad that should give the brand the most premium look and feel amongst the target
consumers but on the other hand they were least bothered about the ethics, religious beliefs and
cultural values.
Owning Red Color

The company has not owned the color red like Nestle has a green Milkpak; Haleeb has a blue
carton etc. This may create problems because when a consumer enters a grocery shop, then
he/she might have problems in recalling the brand because there is no color association attached
to Olpers. The company may need to find a suitable color in which to focus its upcoming
marketing strategies.
Low Quality Milk

EFL is not having its own dairy farms; it largely collects loose milk from farmers & gwalas
through its 40 milk collection centers, which sometimes is of low quality and impure because
they add vegetable oil to milk to get higher prices.
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Packaging
EFL is dependent upon Tetra Pak for the packaging of its entire dairy products. Tetra Pak is the
only option available to Olpers for packaging because it is having monopoly in the packaging
sector in Pakistan. Due to this reason, Tetra Pak can charge them higher and it could increase the
production costs.
Milk collection & distribution costs

EFLs 34 out of 40 milk-collection centers are located in Punjab, where as its only milk
processing facility is situated near Sukkur (Sindh). It increases the milk collection & distribution
costs; and also increases the chances of milk getting spoiled because of increased traveling time.
Narrow brand portfolio

It has been more than a year now, when EFL launched its first dairy product, Olpers Milk on
March 20, 2006. But EFLs brand portfolio still consists of just 3 products i.e. Olpers Milk,
Olwell Milk and Olpers Cream. Whereas its competitors like Nestle and Haleeb Foods have a
much diversified line of dairy products.
Unable to compete in price sensitive segment of UHT milk market.

Under-utilization of the capacity.
Unable to fulfill the demand of local powder milk market.
Not yet ISO certified
Opportunities
Increased funding by Government
Government has decided to increase farmers funding. This is an opportunity for ENGRO foods
because previously due to weather conditions and other reasons there was lots of wastage of milk
but now that can be reduced as farmers will be better able to store milk for longer time periods.
Increased consumption of PLM

Competition may create opportunities for the company because each competitor in the milk
industry wants to increase penetration of processed liquid milk and so they will create awareness
for consumers through different advertising media. This will ensure the increase in the
34
consumption of processed milk instead of lose milk and so will in turn lead to increase in sales
for the company. Therefore there will be an opportunity for accelerated growth.
Awareness
Growing dissatisfaction with loose milk and increasing awareness about health and hygiene
issues have led to increased processed milk consumption.
Third largest producer of milk

Pakistan is the Third largest producer of milk in the world with a total production of 32 billion
liter of milk a year, whose value is more than that of the combined value of wheat and cotton,
from a total herd size of 50 million milch animals (buffaloes and cows). Livestock accounts for
46.8 percent of agricultural value added and about 10.8 percent of the GDP. Milk is the largest
commodity from the livestock sector accounting for 51 percent of the total value of the sector.
Due to the steps taken by the government and private sector, countrys annual milk production is
expected to grow at an additional 3 billion liters in the next few years. This is quite an
opportunity for Engro foods as there is lot of growth in this part of the sector.
Improving Economy
Population growth rate.
High urbanization rate.
High literacy rate.
Flexible government policies for food industry.
Have significant growth opportunities
Has sufficient capital to expand.
Has the potential to innovate and differentiate the company's products to sustain a
competitive advantage
May merge with other global businesses to eliminate competitors.
Having Capable of expanding into other markets of the world
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Threats
Competition
Competition may pose a threat because the company will have to maintain its leadership in an
expanding market so that it doesnt lose its market share to its competitors. For Olpers it might
be difficult to penetrate in a market where the loyalties exist for such brands as Nestle and
Haleeb. These brands have been in the milk industry far too long and have left a mark in the
minds of consumers in terms of quality. Competition seems to be getting tougher as a result of
new players entering the dairy market.
Perceptions and Price Differentials
Consumers perceptions and price differentials can cause a threat for the company. It is important
that Olpers comes up to the expectations of the customers and fulfills its conformance quality
that is the company meets its promised specifications. Consumers preferences change with time
and prices might create certain barriers in terms of the profit margins for Olpers. For example,
lose milk is still cheaper than packaged milk and that is also one factor that people still prefer to
buy lose milk. Has many major global competitors with its main one being Nestle Pakistan,
Haleebfoods can be substituted by other milk producer made by its competitors. These
competitors may develop marketing strategies to eliminate The Engrofoods Olpers. There may
be an economic downturn in the business cycle.
High inflation rate.

Low purchasing power.
Decrease in GDP growth rate.
Increasing interest rates.
Decreasing investment.
Recessionary period in business cycle
Competition with Nestle, Engro Foods and the new entrants.
36
Engro foods is currently facing an increase in Sales Tax.
INDUSTRIAL SWOT ANALYSIS

Strength
Endowed with the very good breed of buffalos and cows.
Highest per capita consumption of milk in Asia
Regular culling of less productive/unproductive animals
A high ratio of agricultural land to agricultural ratio
An emergence of commercial dairy farms on a large scale
Weaknesses
Small and scattered animal holding

Prevalence of traditional raw milk marketing system
Poor quality of milk; lack of remunerative producer price for milk
Milk processing predominantly dependant on obsolete UHT technology
Mushrooming growth of cattle colonies in suburban areas; High cost of milk
Production; a long chain of middle men
Inadequate infrastructure and institutional facilities and support
Low utilization of installed capacity of dairy plants
Poor quality of animal health care and breeding services; lack of professional
management
Opportunities
Huge unsatisfied demand of milk and milk products.

Substantial scope for increasing milk production through improvement in the marketing
system by ensuring a year round remunerative price to milk producers
Increase consumer awareness of healthy eating
Threats
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Unregulated imports of dairy products at cheap prices
Inadequate public and private investment in modernization of the sector
Vested interests in perpetuating the dependence on imports of dairy commodities.
Competitors Analysis
Brands like Milk Pak (owned by Nestle) and Haleeb Milk (from Haleeb Foods) had led the dairy
market in the worlds fourth largest milk producing country for nearly two decadeswithout any
real sustained competition. Engro Foods, in contrast, had only recently been established by
Engroa traditional giant in Pakistan's chemical and fertilizer.
Branding experts could not imagine how Olpers could distance itself from its parent companys
incredibly unappetizing, chemical-laden, and non-edible roots. Yet, by the end of 2006, sales for
Olpers Milk had reached Rs.1 billion (approximately US$ 15 million) and in 2008, the brand
has a market share of close to 22 percentsecond only to Milk Pak (estimated at 40 percent).
The critics had to grudgingly accept that the new entrant to the multi-billion rupee packaged milk
category meant business.
The packaged milk category was originated in 1981 by (quaintly named) Milk Pak, which
pioneered tetra pack milk in Pakistan. The supply chain involved collecting milk from rural areas
across Punjab, processing the milk through UHT (Ultra-High Temperature Processing) treatment,
and selling it to consumers in uniquely colored triangular and rectangular packs designed to
prolong the milks quality. Milk Paks Milk Packs were very well-received and the brand soon
became synonymous with quality milk. Its first real competition came in the form of Haleeb,
which introduced distinctively blue tetra packs to the market in 1986.
Milk Pak, however, further grew in stature when Nestle used it to break into Pakistan's
marketplace. By 2006, the dairy milk category was growing at 20 percent annually, and Milk Pak
and Haleeb were well-entrenched brands with distinctive colors and brand promises of providing
high quality, natural and healthy milk. Milk Pak was identified by its green and white packaging
the colors of the countryand offered a brand backed with the strong equity of Nestle,
coupled with its own traditional heritage. Haleeb was recognized as the blue brand, and
professed to have the "naturally thickest" milk. With the market dominated by two strong,
38
familiar, and widely respected brands, the marketplace appeared completely impervious to
newcomers.
Olpers, however, stepped into the foray by launching a massive campaign that started off with
an introductory slice-of-life television commercial featuring some of the biggest stars in
Pakistan. Billboards went up at key locations in the major cities, and soon the brand had become
a voice above the media cluttera voice that differentiated Olper's brand from the others.
Rafey Nisar Zuberi, the marketing manager for Engro Foods, says, From the onset, we wanted
to introduce a true paradigm, bringing the dairy brand to the fore. The name itself made it sound
like a foreign brand, giving the perception of quality, and was unlike anything previously
experienced by Pakistani consumers. Rafey continues, We wanted consumers to consider
Olpers as a contemporary and modern brand, and all of our communication and brand attributes
were geared toward ensuring that end.
To a large extent, they were successful. It was certainly a campaign with its own unique
identity, says Farah Jamaluddin, a media professional. All of their communication was
aesthetically on the mark and had a sense of synergy about it, she explains.
The campaign highlighted and expanded upon the various occasions in which milk could, and
should, be enjoyedand kept driving home that message through its various promotions. Olpers
became the "All Purpose Milk" and could be consumed with breakfast or blended with tea
(arguably the most popular beverage for the masses in Pakistan), and appreciated by all members
of the family. Engro Foods utilized a dynamic campaign, and during Ramazan (the Muslim
month of fasting), molded its message to talk about the "All Purpose" nature of their brand
during both Iftaar (breaking of the fast at dusk) and Sehree (pre-dawn food before the fast). We
are aiming to own the religious month and our special edition packaging, Ramazan relevant ATL
(Above The Linetelevision, radio, etc.) and tailor-made iftaar activations, are aimed at
building the necessary association we want in consumers minds, Rafey points out.
Other avenues of BTL (Below The Linebrochures, flyers, etc.) have also contributed to the
brands success. The World of Olpers, for example, involves reaching out to the different
locations in various cities and having the housewives participate in learning and showcasing
milk-based recipes. The intention is to purely build trial experiences, says Rafey. We are in
39
our third year, and so far we have had close to 350,000 contacts, he adds with pride. The
Olpers Consumer Relationship Party is another ongoing BTL based program, which intends to
create and maintain loyalty amongst the brands users.
In its launch, Engro Foods has made a conscious and concerted effort to distance its milk brand
from its parent companys chemical and fertilizer roots to ensure that no negative connotations or
cross-pollination of brand identities were manifested in the minds of consumers. Interestingly
though, the company has been able to use Engros historical equity with rural farmers positively
toward growing its milk collection network in the province
Our milk collection network has grown exponentially post launch, says Rafey. So much so that
we reached our supply capacity within six months and had to begin using a second UHT plant
within three months, he adds. Today, Engro Foods aims to become the only company to utilize
all of the milk collecting areas in Pakistan and also plans on developing the biggest dairy farm in
the country. The companys reputation as a local giant actively involved with community welfare
in remote areas has also been a positive add-on for Engro Foods.
What is SWOT matrix?
The concept of determining strengths, weaknesses, threats, and opportunities is the fundamental
idea behind the SWOT model. To present the model in a more understandable way, scholars
40
came up with so-called SWOT matrix. SWOT matrix is only a graphical representation of the
SWOT framework.
The above is a schema of how SWOT works. You start at the top level and go
down to details. When this is filled with content, it gets the shape of a matrix,
such as Example below:
41
42
SWOT Matrix for Engro foods.
Strengths Weaknesses
Unable to compete in price
sensitive segment of UHT
Worldwide fame of Engro.
milk
market.
Efficient milk collection Under-utilization of the
system. capacity.
Unable to fulfill the demand
of
Keeping high quality
standards.
local powder milk market.

Integrated distribution and
Not yet ISO certified
warehousing facilities.
Generic brand name of
Olpers
Large market share of Engro
innovative and chemicals.
Having Good reputation in
the
market by strong brand
name i.e.
Engro
Strong R&D
Opportunities SO Strategies WO Strategies
Increase production of quality
milk to
Improving Economy
cater the unsatisfied
demand(S2,O2,O8)
As per the increase demand of
the milk they should fulfill the
Population growth rate.
demand as EFL have the ability
to expand.(W3,O8).
43
They should go in the product
High urbanization rate. line of
powdered milk. (S8,O2,O5)
They should make a strong
distribution system to cater to
High literacy rate.
avail the full benefit of the
growing market.(W3,O2
Flexible government policies They should increase their
for food industry. exports. (S1,O6,O7)
Have significant growth
opportunities
They should cater the wide
May merge with other global range of
businesses to eliminate unsatisfied demand by
competitors. improving their distribution
networks(S4,O8))
They should adopt affective
Having Capable of expanding
marketing strategies for the
into other markets of the
promotion of their product.
world
(W2,O1)
Threats ST Strategies WT Strategies
Invest more on the dairy product
line as there is still a large chunk
High inflation rate.
of the market which require
modernization (S6,T5)
The co-ordination between
different
departments of EFL should be
Low purchasing power. improved it will lessen the
bureaucratic cost and increase
the efficiency of the company.

Introduce new technology for
quality
Decrease in GDP growth rate.
assurance and better
productivity (S4,T7)
Increasing interest rates.
Engro must get the ISO
Decreasing investment. certification as to beat their
competitors (W4,T8).
Recessionary period in
business cycle
Competition with Nestle,
Engro Foods and the new
44
entrants.
Engrofoods is currently
facing
are increase in Sales Tax
45
Internal Factor Evaluation Matrix
Key Strategic Weights Ratings Weighted

Factors Scores
Strengths
Brand Image 0.08 4 0.32
Growing Sales 0.03 3 0.24
Market Share 0.05 3 0.15
Distribution 0.08 4 0.32
Channel
Product Quality 0.07 3 0.21
Capacity 0.08 4 0.32
Innovation 0.04 3 0.12
Customer Oriented 0.02 3 0.06
Qualified Work 0.01 3 0.03
force
R&D 0.05 4 0.2
Business without 0.02 3 0.06
Interest
Exporting 0.06 4 0.09
Weaknesses
Local Company 0.05 1 0.05
Centralized 0.09 2 0.18
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Decisions
No Sales on Credit 0.06 2 0.12
High Price 0.05 2 0.1
Uncertain Economic 0.03 1 0.03
& Political
Conditions
Market Demand 0.05 2 0.1
Striker Terms And 0.03 1 0.03
Conditions
Promotion 0.05 2 0.1
Total 1 2.83
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External Factor Evaluation Matrix
Key Strategic Weights Ratings Weighted

Factors Scores
Opportunities
Raw Material 0.1 4 0.4
Availability
Market 0.08 3 0.24
Capitalization
Diversification 0.07 2 0.14
Exports 0.07 3 0.21
Haleeb Bottle 0.04 1 0.04
Credit Policy 0.06 2 0.12
Joint Ventures 0.06 3 0.18
Threats
New Entrants 0.08 3 0.24
Sales Tax 0.05 2 0.1
Changing Season 0.06 3 0.18
Suppliers 0.07 3 0.21
Economic 0.05 2 0.1
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Conditions
Price Sensitive 0.06 2 0.12
People
Gawala Milk 0.1 4 0.4
Small Target Market 0.05 2 0.1
Total 1 2.78
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Competitive Profile Matrix (CPM)
Critical Success Factors Weight Rating Score Rating Score Rating Score
1 Research & 0.08 3 0.24 3 0.24 4 0.32
Development
2 Advertisement 0.09 3 0.24 4 0.36 3 0.27
3 Financial Position 0.09 3 0.27 3 0.27 3 0.27
4 Market Share 0.07 2 0.14 4 0.28 3 0.21
5 Product Quality 0.08 3 0.24 3 0.24 3 0.24
6 Price Competitiveness 0.11 3 0.33 3 0.24 2 0.22
7 Management 0.10 3 0.30 4 0.40 3 0.30
8 Global Expansion 0.08 3 0.24 4 0.32 3 0.24
9 Customer service 0.06 3 0.18 3 0.18 2 0.12
10 Sales And Distribution 0.09 3 0.27 4 0.36 3 0.27
Network
11 Production Capacity 0.07 2 0.14 3 0.21 4 0.28
12 Alliances 0.08 3 0.24 4 0.32 3 0.24
Total 1.0 2.76 3.51 2.98
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Reasons
The IFE matrix for AFL is given above. Note that the strength for the company is Research and
Development, Pakistan based and having a highest production capacity so got 4 rating. The
major weaknesses are Price competitiveness customer service and planning for the future state of
the AFL. The total weighted score of 2.76 indicates this large milk Production Company is above
average in its overall internal strength. But its very close to average limit as well. So it really
needs to improve its weaknesses and build its strength.
CORE COMPETENCIES & KEY SUCCESS FACTORS
There are several core competencies of EFL given below;
EFL foods Pvt. Ltd has been able to build a good brand name in a number of years. There are
several consumers who are loyal to the brand and do not shift to other brands. Building a good
brand name is not easy. It takes years to build a brand image by providing the best quality to its
consumers which Haleeb Foods have done. They have consistently delivered which provides a
competitive advantage to the company of having a good name in the market.
EFL. Is only the recognizable food company which is doing business without interest, which
means that they do not take loan or take advantage of the interest income which they can easily
do? If they want loan and they cannot find anyway out they go for Islamic Financing like
mudarba and musharka. It is their strength as majority of the people in Pakistan are Muslims and
Muslims are advised to remain away from interest income.
EFL has one of the most modern plants which has the latest technology and has a high
production capacity. They produce 80,000 liters of milk in a day which is not a small amount of
51
milk. They have an advantage of higher production as people are demanding more and more
packed milk so they can meet the increasing demand easily.
HFL has one of the most extensive distribution networks across the nation. It has one of the best
distributions if we compare it with other major players like nestle and all because EFL has over
600 distributors across Pakistan which enables them to deliver their products into far of small
towns as well as villages. It is their major strength which is driving their revenues very quickly.
Key success factors
Research & Development

Financial Position
Market Share
Product Quality
Price Competitiveness
Management
Global Expansion
Customer service
Network Sales And Distribution
Production Capacity
Alliances
COMPETITIVE ANALYSIS
The strategic priorities of Nestle Pakistan are claimed to be focused on delivering shareholder
value through the achievement of sustainable, capital efficient and profitable long-term growth.
Improvements in profitability would be achieved with due respect to quality and safety standards
at all times.
52
In line with the above objective, Nestle Pakistan aims at growing into a number one food
company in Pakistan in the shortest possible time with the unique ability to meet the needs of
consumers of every age group - from infancy to old age, for nutrition and pleasure, through
development of a large variety of food categories of products with highest quality.
Nestle Pakistan envisions that the company should develop an extremely motivated and
professionally trained work force, which would drive growth through innovation and renovation.
Special training programs have been designed for employees at each level to keep up with and
develop this vision.
The study concludes that Nestle has a significantly high growth rate (36%) and has grown and
developed at a high pace in short span of time. On the other hand Haleeb has a market share of
28%. And Engrofoods having 21% the major contributor toward this growth and development
are human resource, marketing and sales departments. The major contributor is its appropriate
strategy particularly its relationship with the social and environmental sectors. Perhaps this is the
reason that it in spite of being a multi-national has been well accepted in Pakistani culture. There
are ample chances of its survival in future.
Keeping new players such as Olpers, and the old ones like Haleeb, Nestle focused more on
advertising.
Nestle have been experiencing a constant increase in cost with raw material contributing the
larger part of this increase. Haleeb having their own suppliers so the raw material cost is bit low.
Nestle maintained its value of gross profit margin around or above 30% to ensure that it has a
strong control over its costs, and the efficiency of production. But on the other hand, Haleeb
faced a bit of down fall when Olpers introduced their campaign.
53
SPACE MATRIX STRATEGIC MANAGEMENT METHOD
The SPACE matrix is a management tool used to analyze a company. It is used to determine
what type of a strategy a company should undertake. The Strategic Position & Action
Evaluation matrix or short a SPACE matrix is a strategic management tool that focuses on
strategy formulation especially as related to the competitive position of an organization. The
SPACE matrix can be used as a basis for other analyses, such as the SWOT analysis, BCG
matrix model, industry analysis, or assessing strategic alternatives (IE matrix).The SPACE
matrix calculates the importance of each of these dimensions and places them on a
Cartesian graph with X and Y coordinates.
The following are a few model technical assumptions:
- By definition, the CA and IS values in the SPACE matrix are plotted on the X axis.
-CA values can range from -1 to -6.
- IS values can take +1 to +6?
-The FS and ES dimensions of the model are plotted on the Y axis.
- ES values can be between -1 and -6.
- FS values range from +1 to +6.
54
Engro Foods factors for SPACE MATRIX
55
56
Result
This particular SPACE matrix tells us that our company should pursue an aggressive strategy.
Our company has a strong competitive position it the market with rapid growth. It needs to use
its internal strengths to develop a market penetration and market development strategy. This can
include product development, integration with other companies, acquisition of competitors, and
so on.
BCG Matrix Model

The BCG matrix or also called BCG model relates to marketing. The BCG model is a well-
known portfolio management tool used in product life cycle theory. BCG matrix is often used to
prioritize which products within company product mix get more funding and attention.
The BCG matrix model is a portfolio planning model developed by Bruce Henderson of the
Boston Consulting Group in the early 1970's.
The BCG model is based on classification of products (and implicitly also company business
units) into four categories based on combinations of market growth and market share relative to
the largest competitor.
57
Percent Percent Percent Percent
Division Revenues Profits Market Growth
Revenues Profits
Value Rate
Olpers $4500 49.90% $2000 41.62% 60 +8
Olwell $2550 24.87% $1500 31.21% 25 -6
TVC
Tarang $3200 31.21% $1305 27.18% 35 +4
Total = $10250 100% 4805 100%
.. ..
58
Division wise data for Engro foods BCG Matrix
59
Internal External (IE)Matrix
The Internal-External (IE) matrix is another strategic management tool used to analyze
working conditions and strategic position of a business. The Internal External Matrix or short IE
matrix is based on an analysis of internal and external business factors which are combined into
one suggestive model.
The IE matrix is a continuation of the EFE matrix and IFE matrix models
1. Score from the EFE matrix -2.75- this score is plotted on the y-axis
2. Score from the IFE matrix -2.83- plotted on the x-axis
60
As blue lines indicate
Result
This IE matrix for Engro Foods tells us that our company should hold and maintain its position.
The company should pursue strategies focused on increasing market penetration and product
development
Grand Strategy Matrix for Engro foods
61
Results
The grand strategic Matrix for EFL is show that it lies in the first quadrant which recommend
that for EFL continued concentration on the current Market (market penetration and market
development)and products(product development)is an appropriate strategy.
62
Quantitative Strategic Planning Matrix or a QSPM
The Quantitative Strategic Planning Matrix or a QSPM approach attempts to objectively select
the best strategy using input from other management techniques and some easy computations. In
other words, the QSPM method uses inputs from stage 1 analyses, matches them with results
from stage 2 analyses, and then decides objectively among alternative strategies.
Stage 1 strategic management tools...
The first step in the overall strategic management analysis is used to identify key strategic
factors. This can be done using, for example, the EFE matrix and IFE matrix.
After we identify and analyze key strategic factors as inputs for QSPM, we can formulate the
type of the strategy we would like to pursue. This can be done using the stage 2 strategic
management tools, for example the SWOT analysis (or TOWS), SPACE matrix analysis, BCG
matrix model, or the IE matrix model.
The stage 1 strategic management methods provided us with key strategic factors. Based on their
analysis, we formulated possible strategies in stage 2. Now, the task is to compare in QSPM
alternative strategies and decide which one is the most suitable for our goals.
The stage 2 strategic tools provide the needed information for setting up the Quantitative
Strategic Planning Matrix - QSPM. The QSPM method allows us to evaluate alternative
strategies objectively.
Conceptually, the QSPM in stage 3 determines the relative attractiveness of various
strategies based on the extent to which key external and internal critical success factors are
capitalized upon or improved. The relative attractiveness of each strategy is computed by
determining the cumulative impact of each external and internal critical success factor.
63
QSPM OF Engro Foods
Based on strategies in the stage 1 (IFE, EFE) and stage 2 (BCG, SPACE, IE), company
executives determined that Engrofoods needs to pursue an aggressive strategy aimed at
development of new products and further penetration of the market. They also identified that this
strategy can be executed in two ways. One strategy is acquiring a competing company. The other
strategy is to expand internally. They are now asking which option is the better one.
(Attractiveness Score: 1 = not acceptable; 2 = possibly acceptable; 3 = probably acceptable; 4 =
most acceptable; 0 = not relevant)
64
65
Doing some easy calculations in the Quantitative Strategic Planning Matrix QSPM, we came to a
conclusion that Expansion internally a is a better option. This is given by the Sum Total
Attractiveness Score figure. The expansion strategy yields higher score than the acquiring of
competing company. The acquisition strategy has a score of 2.75 in the QSPM shown above
whereas the internal expansion strategy has a smaller score of 2.78
FINANCIAL RATIO ANALYSIS
Liquidity Ratios
66
Remarks
This ratio indicates to what extent cash on hand and disposable assets are enough to pay
off short term liabilities. A current ratio of assets to liabilities of 2:1 is usually considered
to be acceptable. Acceptable current ratios vary from industry to industry. If a company's
current assets are in this range, then it is generally considered to have good short-term
financial strength.
If current liabilities exceed current assets (the current ratio is below 1), then the company
may have problems meeting its short-term obligations. If the current ratio is too high,
then the company may not be efficiently using its current assets.
In the case of Engrofoods current ratio has increase from year 2008 to 2009 which
indicates that it has improved to pay short term obligations as compared to the last year.
Leverage Ratios
67
Remarks
The Debt to Asset Ratio takes into account all debts of all maturities to all creditors. A
value of less than 1 in this ratio means that the company could not cover all of its debt by
selling all of its assets. Engrofoods assets are mainly financed by outsiders or debts. This
ratio measures the percentage of total funds provided by creditors versus by owner.
Look for a debt to equity ratio in the range of 1:1 to 4:1. Debt-Equity ratio indicates
thatcapital structure of Engrofoods is mainly based on debt financing.
This ratio for Engrofoods is showing that out of total funds available for long term, major
portion is equity. As compared to the last year the companys position is improved as they
have made more investments.
Activity Ratios:
Remarks
It shows that in how many days company sold the entire inventory. The higher the ratio the more
is inventory being managed efficiently. Because inventories are the least liquid form of asset, a
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high ratio is generally positive. This ratio measures how productively the firm is managing its
fixed assets to generate sales.
For every Dollar in Assets how much sale we have generated. Higher the ratio greater will be the
resource utilizations. It indicates that how effectively Engrofoods is utilizing its resources. This
gives indication of how fast we can sell product. So we will see how fast we collect on those
sales. Engrofoods receivable turnover is improving. Therefore on average Engrofoods collection
period is decreasing, so its recovery performance is improving day by day.
Profitability Ratios
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Remarks
This ratio indicates the amount of income that the company earns on each RS of sales.
The gross profit margin is related to the net profit margin, which assesses the profitability
of an organization after including fixed costsThe trend in this ratio from month to month
can show how well the company is managing their operating or overhead costs. The
margin has not changed in the current year which shows that the companys operations
are stable. This shows the amount available to stockholders or owner of the company, so
higher the ratio there will be higher earning and dividend for stockholders.
ROA measures profit per rupees of assets. We can compare this rate to the interest rate
that the company pays to borrow funds. If the return on assets is above the borrowing
rate, the company is profitable.
ROE measures profit per rupees of equity. This ratio indicates what return the company is
generating on the dollars invested by its owners. High values for this ratio indicate that
the company is less likely to require debt or additional equity investments. Engrofoods
return on equity is declining.
This ratio shows the amount of earning per share and a company with earning per share.
This ratio indicates that the company with high earning per share will be in a position to
declare the high dividend. This ratio has improved this year.
Achievements
Olpers achieve a lot with in short span of time. In December2 006: Engro Foods Limited has
cross Rs 1 billion in sales for its Olper's Milk, launched in March this year. The Rs 1 billion
rupee was achieved at the end of October, in less than 8 months of the launch of the new pack
milk brand and by the end of 2007; the sales figure is expected to reach Rs 1.4 billion.
In a statement issued here, the marketing director of Engro Foods Ltd, Ali
Akbar said, "We believe we have set an all time record as far as sales of a
new milk brand are concerned and in a very short time Olper's has opened in
over 50 towns in Pakistan, becoming a national brand."
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"This is all the more remarkable since we entered a market with very strong
existing players and
our success has come primarily because the people of Pakistan clearly felt
Olper's to be a higher
quality product,"
he added. Olper's Milk is produced at the company's modern production facility in Sukkur and
goes through several stringent quality checks starting from the milk collection points, before it
reaches the consumers. He said, the demand for Olper's has come not only from first time users
of packaged milk but also from users of other brands who have shifted to the Olper's brand
owing to its taste and quality proposition and its convenient Availability all over the country. He
said, the company is now in the process of setting up another production plant in the central
Punjab region. Engro Foods had also launched Olper's Cream in September this year and is now
poised to further expand.
Engro Foods expansion on a bigger scale
Engro Foods Limited who had recently set up Dairy industry in Central Sindh (UHT Milk plant)
by investing about Rs one billion, further plans to set up a similar set up in Central Punjab and
also emerging as Food Giant firstly on National Level and secondly as world class International
Food Giant by adding a large number of other food products through investment of $200 million
plus, probably envying to emerge as an international food company on similar lines as NESTLE
did. The company plans exporting its products to central Asia and Middle East.
Dairy science and Technology in Pakistan
Development and implementation of milk standards is also essential to define milk price based
on quality. Dairy science and technology education universities also need to support industry in
dairy breeding, nutrition, industrial management and product quality. Presently no under-
graduate program is available in the country to support this sector. Presently, Pakistan has only a
71
few scholars in prime principles of dairy science including animal breeding and genetics, dairy
nutrition, dairy management, and dairy technology to support and develop dairy industry. It is
essential because the veterinarian could only provide support to the animal
industry developed on the animal production science principles. Animal or
dairy production science is altogether a different subject than that of
veterinary education. In conclusion, development of dairy cooperates,
restructuring of extension; research and educational institutions could perk
up rural oriented dairy sector to market oriented dairy industry that
guaranteed food security social and economic growth in Pakistan.
SUGGESTIONS AND RECOMMENDATIONS
Following are the suggestions and recommendations for EFL.
The co-ordination between different departments of EFL should be improved it will

lessen the bureaucratic cost and increase the efficiency of the company.
The activities like customer satisfaction day should be performed on regular basis so the
company should know the feedback and satisfaction level of customers regarding the
product and the image of the company.
The shopkeeper complains that EFL is not providing replacement for the expired
products, EFL should provide proper replacement to the shopkeeper to enhance the image
of the company, and create better working relations with such an important stakeholders.
EFL has shifted to branding concept but it really has not adopted it fully, for smoother
working of the different brands, the sales teams should merged with respective brand
management.
There is no check on the performance of the distributor, and this has
led to huge problems in the delivery of many products in some areas of
the city
They should also start to manufacture powder milk in order to meet the
domestic demand and so that it can be helpful in saving the foreign
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exchange that is expensed in importin the powder milk from foreign
countries.
The company should explore the market potential in a way, so that it
can utilize its full capacity in order to gain economies of scale in the
production.
At the moment the company is using focus marketing approach that
only that segment is approached which highly attractive for the
company but it should also develop the marketing program that
distinguishes the characteristics of existing available substitutes to
their highly quality & hygiene oriented product.
The company should also develop an integrated awareness plan in
order to aware the people about the quality of the UHT milk as
compared to other pasteurized or loose/fresh milk.
REFERENCES
1. Strategic Management concept and cases by FRED R DAVID 12th edition.

2. Marketing Management by Kotler 11th Edition.
3. http://www.maxi-pedia.com
4. www.olpers.com.pk
5. www.engrofood.com.pk
6. www.engrochemicals.com
7. www.Engro\web search\marketing-sales.aspx.htm
8. www.Engro\web search\about-us.aspx.htm
9. www.google.com
10. www.wikipedia.com
*************
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Business Policy

Report on Engro Foods

Submission date: 06-08-2010

Introduction to Engro Pakistan........................................................................................................4

Diversified Portfolio of Engro Pakistan..........................................................................................6

Engro Energy Limited.................................................................................................................6

Engro Innovative Automation Limited........................................................................................7

Engro Vopak Terminal Limited....................................................................................................7

Engro Asahi Polymer &Chemicals. Limited...............................................................................7

Engro Food Limited.....................................................................................................................8

Board compensation Committee..................................................................................................8

Board audit committee.................................................................................................................9

Business Executives of different Divisions...................................................................................12

Food Industry In Pakistan..............................................................................................................13

Vision and Mission Statement of Engro Foods.............................................................................15

Objectives and Goals.....................................................................................................................16

STRATEGIC Internal and external Audit......................................................................................19

Porters 5 Forces Model..................................................................................................................22

Threat of New Entrant...................................................................................................................23

Bargaining Power of Suppliers......................................................................................................24

Bargaining Power of Buyers..........................................................................................................24

Positive Response from Customers.......................................................................................27

Strong consumer & product research....................................................................................27

Owning Red Color.................................................................................................................28

Low Quality Milk..................................................................................................................28

Milk collection & distribution costs......................................................................................29

Narrow brand portfolio..........................................................................................................29

Increased funding by Government.........................................................................................29

Increased consumption of PLM.............................................................................................29

Third largest producer of milk...............................................................................................30

INDUSTRIAL SWOT ANALYSIS...............................................................................................32

What is SWOT matrix?..............................................................................................................36

SWOT Matrix for Engro foods......................................................................................................38

Internal Factor Evaluation Matrix.................................................................................................40

External Factor Evaluation Matrix................................................................................................42

Competitive Profile Matrix (CPM)................................................................................................44

CORE COMPETENCIES & KEY SUCCESS FACTORS...........................................................45

Key success factors........................................................................................................................46

Research & Development..........................................................................................................46

SPACE MATRIX STRATEGIC MANAGEMENT METHOD....................................................48

Engro Foods factors for SPACE MATRIX....................................................................................49

BCG Matrix Model........................................................................................................................51

Division wise data for Engro foods BCG Matrix..........................................................................53

Internal External (IE)Matrix..........................................................................................................54

Grand Strategy Matrix for Engro foods.........................................................................................55

Quantitative Strategic Planning Matrix or a QSPM......................................................................57

QSPM OF Engro Foods.................................................................................................................58

FINANCIAL RATIO ANALYSIS.................................................................................................60

Engro Foods expansion on a bigger scale......................................................................................66

Dairy science and Technology in Pakistan....................................................................................66

SUGGESTIONS AND RECOMMENDATIONS.........................................................................67

Agriculture accounts for 25% of GDP and 45% of employment in

Engro Energy Limited

Engro Vopak Terminal Limited

Engro Asahi Polymer &Chemicals. Limited

Established in 2005, a 100% owned subsidiary First

Isar Ahmed Aliuddin Ansari Abdul Samad D

Khalid Siraj Subhani

Abdul Samad Dawood

Muhammad Aliuddin Ansari

Khalid Siraj Subhani

Senior Vice President

Engro Corporation Limited