Shan Foods Corporate Performance and planning report
Submitted To : Sir Zameer Ahmed
11/21/2012
Submitted by: ZoyaHaider (68)
HamizaNizam (17)
MunizaUmoodi (42)
NoureenGul (46)
Amna Khalid (05)
[SHAN FOODS]
1
ACKNOWLEGMENT
First of all, we would thank Allah Almighty, the most Beneficent and Merciful for giving us the
opportunity and strength to work on this report.
We would like to thank our course instructor for his help, guidance, support and cooperation.
We are especially thankful to Mr. Amir Subhan, Manager Compensation and benefits& Mr.ZeeshanAbro
Former Manager HR at Shan Foods for taking out time from their busy schedules and addressing our
queries.
[SHAN FOODS]
2
LETTER OF TRANSMITTAL
November, 21th,2013
Sir Zameer Ahmed,
Lecturer of Corporate performance and planning,
Karachi University Business School
University Road, Karachi
Dear teacher,
A person is not a perfect in all the contexts of his life, He has a limited mind and thinking approaches.
With prayers of our parents and your support, it became possible for us to formulate this report. We pay
high regards to you and our parents. We are also thankful to all our friends and class fellows who provided
us support to complete corporate performance and planning course report.
This report has given us insights of corporate planning and performance practices carried out in corporate
world, particularly Shan foods Pvt. ltd. We had a comprehensive learning experience with the report
formulation. With our knowledge at this level, we have put all the efforts to summarize our knowledge and
experience in this report, to make it comprehensive and meet your expectations.
Regards,
ZoyaHaider (68)
MunizaUmoodi (42)
HamizaNizam (17)
NoureenGul (46)
Amna Khalid (05)
[SHAN FOODS]
3
TABLE OF CONTENTS
S.# Topics Pg.#
1. Introduction to Pakistan Food Industry 05-06
2. Overview of the spice industry in Pakistan
2.1. Major Food Exports of Pakistan
2.2. Major Food Imports of Pakistan
2.3. Driving forces
2.4.Key success factors
2.5.Branded spice industry
2.6.Major industry players
2.7.Unbranded spice industry
2.8.UnEthical practices in the unbranded spice industry
06-13
07
07-08
08-09
09
09-10
10-12
12
12-13
3. Introduction to Shan foods
3.1.Organizational history
3.2.Core values of Shan
3.3.Company’s Mission and Vision
3.4.Analysis of Mission and Vision Statement
14-16
14
14-15
15
16
4. Formulation Strategies of Shan Foods
4.11. Charts and its analysis
17-47
18-47
5. Implementation Strategies of Shan Foods 48-62
6. Evaluation Strategies of Shan Foods 63-69
7. Conclusion 70
8. Recommendations 71
9. Glossary 72
10. Bibliography 73
11 Signature of all group members 74
12. Appendix 75-76
[SHAN FOODS]
4
EXECUTIVE SUMMARY
Throughout the course of Strategic Management, the essence of strategy andits application has been emphasized. For an organization, not only it’s immediate and competitive, but also macro environment is important as it needs to survive and sustain itself during operating in these environments. Spice industry all over the world can be referred to as a subset of the food industry. Spices stand at prominent positions in Pakistani imports and exports. The spice industry of Pakistan annually grows at a rate that is above 50%. Within this industry, 40% market share is with unbranded loose spices and the rest with branded packed spices. Shan Foods and National Foods both are the leaders in branded packed spice category each holding 50% and 45%share respectivelyin 2011, while other prominent players include Mehran, Chef’s Pride, and Habib Foods. Shan Foods was founded in 1981 in a single room as Shan Masala. Later, due to itspopularity, it went on to become Shan Foods. It has presence in 62 countries today and deals in six broad categories of offerings. Shan Foods has capitalized on the changing market trends and consumer tastes and through product trials, it has made sure to churn out offerings that are best in line with consumer tastes. It maintains global presence primarily through exports and follows more than one growth strategy simultaneously. With fourteen departments and state of the art technology and customer focused marketing strategies and campaigns; Shan Foods has become synonymous with authentic traditional cuisine of good quality and taste.
Our work is divided into 3 major sections. 1. Strategy Formulation 2. Strategy Implementation 3. Strategy Evaluation
In strategic formulation we have basically focused on how the various strategies at Shan Foods are developed.
In Strategy Implementation and evaluation we have gone through the different strategies that are used by Shan Foods for the accomplishment of its annual as well as long term objectives and ultimately leading Shan Foods toward its vision statement.
Fact sheet for Shan Foods has been included in
the appendix. It is an important part of the report
which we recommend to review before reading
the whole report.
[SHAN FOODS]
5
1. INTRODUCTION TO PAKISTAN FOOD INDUSTRY
Pakistan is the world’s ninth largest market with an estimated 180 million consumers. Experts believe
that the food retail market in Pakistan is in the throes of landmark changes, with the total number of
retail outlets expected to have grown by 15% in the 1990s, presently resting at 286,774 outlets. Share of
food in household budget is 48.3% in Pakistan.
As indicated in Figure below, it is apparent that 48.3% of the monthly expenditure is on ‘food, beverage
and tobacco’, followed by ‘rent’. This clearly depicts the consumption pattern of an average person
living in a developing country like Pakistan.
There are two striking differences depicted in Figure below suggesting a clear division between rural and
urban consumption patterns. Firstly, a resident of urban area pays considerably more on rent than a
person living in rural area. Secondly, a person residing in rural area spends considerably more amount
on ‘food, beverage and tobacco’ than an average person in the urban area.
[SHAN FOODS]
6
2.OVERVIEW OF THE SPICE INDUSTRY OF PAKISTAN
Food industry around the globe comprises a niche within itself, referred to as ‘spices’.
According to the American Spice Trade Association, “today spices have become known as
any dried plant product used primarily for seasoning purposes. This all-inclusive definition
seems to cover a wide range of plants like herbs, spice seeds and even dehydrated
vegetables and spice blends.”1
Putting spices in a Pakistani perspective, they also comprise the authentic recipe mixes used in
traditional cuisine. The Pakistani spice industry can be divided into branded and unbranded industry.
SMEDA found out that there are about 7000 spices and salt grinding units operating in Pakistan, 60% of
1 American Spice Trade Association, [online] Available at: http://www.astaspice.org.
[SHAN FOODS]
7
which are rural based2. But with the emergence of modern industrial units, the share of these rural
based units is decreasing.
Spices form a substantial portion of Pakistan’s business in terms of imports
and exports.
2.1. Major Food Exports of Pakistan
2.2. Major Food Imports of Pakistan
S.No. COMMODITIES FY2011 VALUE
(in Million PKR)
1 Animal or Vegetable Oil/fats 20,165.7
2 Wheat Un-milled 7367.4
3 Food and Live animals 13,835.6
4 Tea 15030
5 Spices 5733
2Based on the estimates of the existing spice business operators.
S.No
COMMODITIES
FY2011 VALUE
(in Million PKR )
1 Rice 11,821.0
2 Fish and Fish Preparations 2,482.0
3 Fruits 2287.4
4 Spices 1935.0
[SHAN FOODS]
8
Since the last decade, there has been tremendous growth in the spices industry of Pakistan. In the
recent past, many new companies have been setup due to high growth prospects in this industry. To be
at par with local and international demands, these companies have come up with secure packaging and
branded packs, with technological changes having quite an impact. However, growth in this industry
revolves around quality, promotion and distribution network.
“The following illustration gives an understanding of how work is routed in a conventional spices
processing, packing and marketing business:
(SMEDA)”
There are many factors behind increased demand of spices in Pakistan; a major factor is the changing
lifestyles of people who now prefer ready to use ingredients over traditional home made spices. Also,
spices have always been in demand due to the sub-continental style of cooking where quality spices are
termed synonymous with good food. However, according to SMEDA report 2006, sudden increase in
demand for spices has never been experienced implying that the growth has been steady and is
dependent on:
“Population growth in both urban and rural area.
Ratio of younger people in the population (according to 1998 census 64% belongs to age group
of 15 to 34).
Increase in urban life phenomenon.
Preferences shifting from popular homemade curries to ready to use curries. ”
2.3. DRIVING FORCES
The spice industry of Pakistan is a very difficult industry to compete in. The two main reasons of this
difficulty are low price competition and involvement of many unbranded suppliers. Brands, whether
branded by a food company, retailer’s brand or unbranded and open commodity merchants including
indirect competitors in the business of providing ready to cook, ready to eat, canned/ processed food
directly and indirectly compete against one another.Because the price sensitive buyers prefer to buy
[SHAN FOODS]
9
40%
60%
Market Share
Branded and packed Rs. 8billion
Loose spices Rs. 10 to 15billion
unbranded spices as they provide a local touch, it becomes difficult for major players of the industry
who deal in branded spices, to attract more buyers. A major factor that creates competition in this
industry is brand loyalty because certain taste attitudes can only be satisfied with certain brands. Apart
from this, some of the major driving forces in the Pakistani spice industry are changes in societal
concerns, lifestyles and attitudes, product innovation and changes in who buy the product and how they
use it.
2.4. KEY SUCCESS FACTORS
An organization’s key success factors (KSFs) can be related to any of the following six categories:
technology, manufacturing, distribution, marketing, skills and organizational capability. Apart from
these, there can also be other KSFs for a company. All the aforementioned factors apply to the spice
industry and their individual importance cannot be denied in making industry players successful over the
long term.
2.5. BRANDED SPICE INDUSTRY
According to SMEDA market share of spice industry in Pakistan is as follows:
Brand Business Volume Estimated Market Share
Branded and packed Rs. 8 billion 40%
Loose spices Rs. 10 to 15 billion 60%
[SHAN FOODS]
10
Some of the major players in this industry are Shan, National, Mehran, and Chef’s Pride etc. New players
have also come up which includes Habib, Kitchen Secrets (with brand name Rivaayat) etc. The prices of
the branded packs are around 30% more than unbranded ones.
Pakistan does not exist among the major spices exporters, and hence presents a great opportunity and
enormous potential for investors to invest in this sector
2.6. MAJOR INDUSTRY PLAYERS
Major players of packed spices in the industry are:
Shan Foods
National foods
Other players in the industry are:
Chef’s Pride
Mehran Foods
Ahmed Foods
Habib Foods
Zaiqa Foods
Kitchen Secrets
It sometimes becomes difficult for firms to compete and this is one of the main reasons due to which
many firms leave the industry. A noteworthy players were there in the market in the last decade but
has closed down it operations now.The vital reasons due to which the firms might leave the industry are
low consumer response to the company’s offerings due to dissatisfaction, high brand loyalty already
towards other brand/player, not shifting to other brands, and monetary and trade concerns. Despite
these possible reasons, there are number of players who have survived the stiff competition and have
come out successful.
Market share of branded packs, according to SMEDA are:
Brand Market Share In %
Shan Foods 50%
National Foods 35%
Chef’s Pride 10%
Others 5%
[SHAN FOODS]
11
These figures show Shan Foods and National Foods both as occupying first and second position
respectively as far as market share is concerned. Shan Foods currently holds more shares when it comes
to operating in both Pakistan and international markets.
It is noteworthy that the above chart mentions Chef’s Pride as holding 10% market share and occupying
the third position in branded packs in Pakistan. It has however been observed that this player is not
available in majority leading stores across Karachi, which forms quite a substantial market for all
branded and unbranded spice dealers.
A region-wise breakup of the total curry based spice market shows the following pattern:
REGION %age SHARE
Punjab 45%
Sindh 45%
NWFP & Baluchistan 10%
(SMEDA)
Market Share In %, National Foods, 35%,
35% Market Share In %, Shan Foods,
50%, 50%
Market Share In %, Chef’s Pride,
10%, 10%
Market Share In %
Others 5% 5%
Market Share In %
National Foods
Shan Foods
Chef’s Pride
Others
[SHAN FOODS]
12
%age SHARE Punjab
45 45%
%age SHARE Sindh
45 45%
%age SHARE NWFP &
Baluchistan 10
10%
%age SHARE
Punjab
Sindh
NWFP & Baluchistan
2.7.UNBRANDED SPICE INDUSTRY
There unbranded players operating in spice market are self-owned independent businesses that do not
have affiliations with any brand in particular. A major problem with such setups is that they are largely
undocumented and unorganized, which precludes to estimate the approximate market size. Due to such
players, it is also difficult to ascertain the taxation and the number of people employed in this industry.
However, PGA-Pakistan grocers association (SMEDA) quotes that in the last few years the trend has
been changing and market share of loose spices is gradually decreasing.
2.8. UNETHICAL PRACTICES IN THE UNBRANDED SPICE
INDUSTRY
As Pakistan is included in the developing countries and because of this people in Pakistan are mostly
price conscious and turn towards open spices that they purchase from nearby stores. Consuming these
spices has shown a number of repercussions over the years like rise in the number of people suffering
from different ailments like stomach ache, diarrhea etc. This does not only happen after consuming food
at open places (roadsides etc.) but also with home cooked meals using open spices. Although there is no
[SHAN FOODS]
13
detailed study to show the exact reason behind disorders such as those mentioned above, but
contaminated spices used in cooking appears to be a leading cause.
Such practices are on the rise in open markets where profit making seems to be the only reason to do
business, regardless of the impact it creates.
[SHAN FOODS]
14
3. INTRODUCTION TO SHAN FOODS
3.1. ORGANIZATIONAL HISTORY
Shan Foods came into existence in 1981 when it began
operations from a single room. Shan Masala as it was back
then, launched full range of spices to cater to local public,
due to its popularity. Shan started exporting after a few
years due to increased international popularity. But after
sometime, the need to reposition the brand was felt. It
needed to be repositioned as a food brand rather than a
spice brand. Re-imaging the organization became
necessary for re-positioning of the brand; it was a job well done and led to continued success of Shan on
national and international fronts. Now, Shan Foods is well known as a brand of easy to cook mixes for
Pakistani food. The name of Shan Foods has become synonymous with highest quality and exquisite
taste. It continues to carry on, the tradition of authentic cuisine to farthest parts of the world. There are
six broad categories of varieties Shan deals in including recipe mixes, plain spices, dessert mixes, basmati
rice, pickles and salts.
Today, Shan Foods has presence in 62 countries. The brand is exported to UK, USA, and
Middle East and now to Far East regions as well. Shan has now enhanced its production
capacity even further and is all set to lend you’re cooking more great taste and your family
more good times.
3.2. CORE VALUES OF SHAN:
Shan’s success is based on a dedicated team of professionals who collectively embrace a unique combination of the following strong core values:
1. IMPECCABLE INTEGRITY Honest, fair and ethical with all stakeholders.
[SHAN FOODS]
15
2. CARING FOR COMMUNITY
We care and actively contribute to the community in which we operate.
3. WORKING WITH PASSION
They believe in truth, trust and team work. Promote a creative environment, where people have
the opportunity to grow, dare to take risks and work with passion.
4. COMMITMENT AND THE DRIVE TO GO EXTRA MILE
We Honor our commitment. We set new benchmarks for the industry by going the extra mile
and delivering superior value to our consumers and stakeholders.
5. DELIGHTING CONSUMERS
Wedelight our consumers by offering innovative and exciting food solutions by reaching out to
them wherever they are, to meet their current and emerging need.
6. CELEBRATING SUCCESS
We actively seek opportunities to reward & recognize our winning teams and celebrate our
success.
7. SHARIAH COMPLIANCE
At Shan foods, shariah laws are strictly followed and it is ensured that these principles are
followed at every level of the organization.
3.3. COMPANY’S MISSION AND VISION
Shan Foods’ mission explains its success, “To continuously develop and produce quality products that
meet the customers and markets demands, compatible with applicable regulatory requirements. To
be a consumer oriented company with keen insigne of food products ensuring quality panty
consistency and authentic taste to operate with state of the art technology to obtain optimum
results and retain highest quality standard thrived efficient and motivation human resource and
inculcate in them a sense of participation and proved for personal goals and development.” (Shan
Foods, 2011
Shan Food’s vision is “tobe a dominant global player in food products and socially responsible
company that attains its quality standards so that Shan stands for tradition, trust and good taste.”
[SHAN FOODS]
16
3.4. ANALYSIS OF MISSION AND VISION
Shan Foods through its mission and vision want to project their ambition to become a ‘global leader’ in
food products while maintaining ‘quality standards’ so that its name becomes synonymous with these
two phrases. It intends doing this by maintaining its focus on their customers and the applicable
regulatory requirements of the markets it is operating in, be it local or international. Along with these
core values, it intends preserving and upholding other values like purity, authenticity and consistency;
which it credits for the phenomenal growth it has seen over the past decade. The company intends to
grow on the back of cutting edge technology, with the proven best practice of CPI (Continuous Process
Improvement), and it realizes that a major portion of its past success and the future drive towards its
development and the achievement of its goals will be hinged on the motivation level, the training, and
ultimately the efficiency of its human resource.
[SHAN FOODS]
17
Strategy formulation of Shan Foods:
Strategy formulation is the first step of strategic
management process. Strategy formulation is
positioning before action and it shows the effectiveness
of an organization. Strategy formulation is a process in
which organization performs its internal and external
audit develops the appropriate strategies then those
strategies implemented then evaluate. In short term for
achieving organization annual goals and in long run
achieving its mission and vision statement.
Targets are defined from top then come to the bottom.
Shan Foods makes their strategies under its core values.
The most prominent point in Shan Foods is that it is
working in equity base model. Shan does not go for
bank loans do not give ODI’s.
Shan’s financial year starts from July to June (next
year). Goals are defined in KRI (key result
indicators) and KPI (key performance
indicator).Shan use balance score card for
strategy formulation because company need to
grow in four prospective (Financial, Internal
business processes, Learning and growth,
Costumer) from mid of April every department
makes its target discuss with higher then lock at
the end of July, then targets lock in performance management. Strategies come from top and
achievements come from bottom.
Shan foods are export based company its products are not customized but packaging are customized
according to the needs and demands of the people living worldwide. Shan is ISO 14000; ISO 9000
certified and are going for ISO 2000 certification, so it needs to maintain its quality all over the world.
Shan’s primary key motivator is that it is successfully working in equity base model.
Our findings analysis and interpretations related to strategy formulation in Shan foods are as follows:
[SHAN FOODS]
18
SWOT ANALYSIS
WEEKNESSES STRENGTHS
1. Shan is not present in Jams and marmalades,
Ketchups categories like National foods thereby
loosing an opportunity market. Many loyal Shan
customers purchase National products in these
categories which is causing loss of potential sales.
2. Shan has a low market share outside Karachi in
the Punjab market where National enjoys market
leadership. This is due to weak distribution of
Shan products in Punjab market which is causing
loss of potential sales.
1. Shan food has a very strong heritage and legacy
behind it which has given it a strong goodwill in
households.
2. Shan foods enjoys an approximately 50%
market share in the recipes mixes category.
3. Shan foods is a leading exporter of food items
from Pakistan providing it an opportunity to tap
the large global market which helps it to expand at
a rapid pace.
4. Shan has a wide range of products and SKU’s
available consolidating its presence in various
niches and keeping its customers loyal to the
brand.
OPPORTUNITIES THREATS
1. The biggest threat to Shan is the high inflation in
Pakistan coupled by a global recession which is
putting pressure on the profits and sales.
2. The prevalence of counterfeit products is also
threat to Shan causing loss in goodwill and
potential sales.
3. The emergence of newer brand with deep
pockets can also damage Shan’s market share due
to heavy advertisement while keeping the product
quality close to that of Shan.
1. Shan can vertically integrate to produce its own
raw materials which will not only reduce costs but
will also provide it more control over the quality of
input.
2. Shan currently has a very low advertising spend
in the FMCG industry. It can deploy brand
activations and other innovative campaigns to
switch customers from the loose/ unbranded
segment to Shan products.
3. Shan can also horizontally expand its scope like
national foods and enter the other related food
categories where it can tap its loyal customers
with minimal extra efforts.
[SHAN FOODS]
19
ANALYSIS OF SWOT
One of the major strength of Shan Foods is that they are famous in masses, now the families have brand
loyalty with Shan. They are very much confident that at least one of their products are using in every
household.
Shan foods accept that their advertising is weaker than National so they can also minimize this weakness
by improving its advertising.
SHAN has a wide range of distribution channel their containers has also sent to Fiji and Ireland. Shan
needs to improve its distribution in Punjab and they can also do market penetration to capture masses
of consumer which will boast up their sales as well.
New entrance is always a big threat of Shan foods. Recently launched Ronaq Masala to penetrate into
Karachi but it didn’t work out.
INTERPRETATION
Shan’s bigger strength is their technology .There grinding and aroma of Masala create a differentiation
from other competitors.
Shan is not present in Jams, marmalades and Ketchups categories, HereShan’s food can do related
diversification and turn this weakness into opportunity.
Shan can vertically integrate to produce its own raw materials which will not only reduce costs but will
also provide it more control over the quality of input.Similarly Integration Strategies can be very viable
to accelerate growth of the company. However markets for agricultural products in Pakistan are not
efficient. Supply shortages often occur and prices fluctuate causing increase in Cost of Goods.
If Shan Foods integrate backward it can give competition to vendors who sell spices in lose packing and
it will be able to control costs of raw material.
Shan Foods now face competition from Makro and Metro who are selling spices under their own brand
name. If Shan Foods can integrate forward it will be able to face the competition even better.
[SHAN FOODS]
20
Pest Analysis
Political factors
Social factors
Techonological factors
Economic factors
PEST ANALYSIS CHART
[SHAN FOODS]
21
ANALYSIS OF PEST ANALYSIS
POLITICAL FACTORS Economic changes, Strikes, Security issues, terrorist activity and political unrest may result in business interruption, inflation, deflation or decreased demand for Shan Foods products. The success will depend in part on the company's ability to manage continued global political and/or economic uncertainty, especially in significant geographical markets, as well as any political or economic disruption due to terrorist and other hostile activities.
SOCIAL FACTORS/ CONDITIONS The fluctuations or changes in social /cultural activities in the areas of operations may also affect the Shan Foods business activities. Socio cultural issues are also shaping the industry. The tastes and preferences of the consumers are changing and now people are going for convenient food items. In recent years more women have joined the workforce; apart from handling family responsibilities they work to support their families financially. To cope with dual responsibilities women now prefer foods and dishes that take less time to cook. That is why Shan has introduced ready to cook meals for catering the need of people who have less time for cooking.
TECHNOLOGICAL ANALYSIS It is the most important factor for Shan Foods. Shan produces 8 Lack, satchels daily. German technology is used in grinding units for locking the aroma of spices; they freeze it and then grind it. Shan has four grinding units in Karachi, one in Lahore, one in Makah and one frozen unit in U.S.A (Chicago). The innovation and making of new products is a proof that Shan Foods is equipped with latest technology and committed employees that has enabled it to earn a good reputation in the global market.
ECONOMIC ANALYSIS Foods Industry, too, has been badly hit by the ever-rising cost of inputs, including electricity tariffs that are now the highest in the world. As a consequence, industries in Pakistan are suffering. The government has promised to deal with this shortage of electricity problem in the near future, only then it can be assured that the high electricity tariffs will be reduced. Currently recession has been observed in almost every economy of the world and hence impacting all the industries with a number of problems. The high prices and inflation is also affected the industry with people actually not using readymade Masala or else using it on special occasions. Shan Foods is focusing on tight control of capital spending, improved inventory control, and lower product and manufacturing costs through standardized manufacturing platforms etc.
INTERPRETATION
These four factors (Political, Economic, Social and Technological factors) affect every organization and
sometimes it causes a big loss to the company. Shan is adaptive to change and introduces products
according to the requirements of their customers. Their main strength is there technology which makes
Shan different from its competitors
[SHAN FOODS]
22
Threat of new entrans
Mehran Foods in Middle East
Bargaining power of buyers
Its an on going proccess
Threat of substitute Products or Services
When Shan Foods launched its dessert range DELVE,
Rafhan increased it advertiment
Bargaining Process of Suppliers
It is based on seasonal products
PORTERS FIVE FORCES MODEL
Rivalry
Among
Existing
Competitors
[SHAN FOODS]
23
ANALYSIS OF PORTER’S FIVE FORCES MODEL FOLLOWED BY SHAN FOODS
According to Porter, strategies allow organizations to gain competitive advantage from three different
bases; cost leadership, differentiation and focus. Porter calls these bases generic strategies
In our quest for Shan’s generic strategies, we came to know the following:
THREAT OF NEW ENTRANTS The Mehran Spices Company is a threat to Shan foods because they have recently entered into Pakistani
and international markets.
BARGAINING POWER OF BUYERS The power of buyers is the impact that customers have on a producing industry. In general, when buyer
power is strong, the relationship to the producing industry is near to what an economist terms a
monophony- a market which has many suppliers and one buyer.
BARGAINING POWER OF SUPPLIERS The prices of raw materials required for production process depend upon the season whether they are
available or not. If the required materials are out of season, the suppliers demand high price. The price
also depends upon influence of inflation in the country.
THREAT OF SUBSTITUTE PRODUCT OR SERVICES Different companies offer similar range of products like Shan. When Shan launched their new range of
Delve Desserts, Rafhan, and another FMCG company started a strong advertising campaign to grab the
attention of consumers.
RIVALRY AMONG EXISTING COMPETITORS There is always a chance of business rivalry among competitors. For e.g. other companies make
advertisement in which they degrade other similar products. Shan’s major rivals are National foods,
Rafhan foods and Mehran spices.
INTERPRETATION
In the light of Porter’s five forces model we can extract that these five forces influence the existence and
operations of a business. As far as Shan foods are concerned, the threat from new entrants exists
although Shan foods have a very good market share in Pakistan. Mehran foods (recipe mix) is a new
entrant and it is giving competition to Shan foods. Shan foods have to device a strong strategy against its
new rivals because Mehran foods can capture the market share.
[SHAN FOODS]
24
The company has to focus on customers and facilitate them in every way in order to gain profit because
the buyers have bargaining power to influence the buying behavior of products.
The suppliers demand high prices for raw materials when these are out of season. The food items used
as raw materials cannot be stored for a very long period of time because the nature of these items is
perishable. So, the supplier’s power has great influence on the manufacturing cost of the purchaser
firm; i.e., Shan foods.
As there are many substitute products available in the market, the firm has to focus on quality as well as
competitive prices because the customers may switch to other brands if they experience any noticeable
change in the quality and/or in price of the product.
The chance of business rivalry always exists. For example, many companies use advertising techniques
that directly hit the sale offers of other firms.
[SHAN FOODS]
25
EFE (EXTERNAL FACTOR EVALUATION)
Key External Factors Weight Rating Weighted
Score Comments
Opportunities
Growth potential in Rural
areas 0.1 3 0.30
Untapped markets in rural
areas.
High Growth Rate Of Urban
Pakistan 0.1 3 0.30
Population in urban areas
growing faster.
Fast Lifestyle (less available
time for cooking) 0.1 2 0.20
Increasing working women
ratios.
Quality Raw Materials
Available in country 0.15 3 0.45
Best chili and other high
quality raw material.
Untapped Asian
Communities Living Aboard 0.1 2 0.20
Opportunity to go in global
markets by catering Asian
markets.
Threats
High Domestic Inflation
Rates 0.8 3 0.16 Inflation impacting cost and
buying power of consumers.
Agriculture marketing
mechanism of the country 0.1 3 0.30
Inefficient agricultural
systems caused supply
shortages.
Emerging national/
International competitors 0.7 3 201 National,Habib,Mehran and
other increasing Competition
Private/ Local Brands 0.1 3 0.30
In Metro and Macro other
brands are taking market
share.
Low Price Competition From
Loose/ Open Spices 0.1 3 0.30
Local traders or retailers
provide low cost loose spices.
Total 1 2.72
[SHAN FOODS]
26
ANALYSIS OF EFE MATRIX
OPPORTUNITY FOR SHAN FOODS
Shan foods received a score of 2.72 in the external factor evaluation. This means that their
performance is slightly above average.
Of the key external factors, Shan food sees the great potential in rural areas as the major
opportunity.
Other opportunities that are significant for Shan foods are high growth rate of urban centers in
Pakistan and changing life styles of families.
Penetration into international markets is another opportunity that can accelerate the growth of
Shan foods and improve the bottom line.
Franchising and licensing options can be exercised to expand globally.
THREATS FOR SHAN FOODS
Major threats to Shan food are inefficient agriculture system in Pakistan, energy crises, rising
inflation and political influences.
As 100% raw materials are procured locally and almost all of them are agricultural products, it
poses a big threat.
INTERPRETATION
ADVANTAGES OF OPPORTUNITIES
The score of Shan foods in the external factor evaluation is slightly above average. It shows that Shan
food is doing an average job in taking advantage of opportunities in the external environment, and
defending against most potential threats. They can access to rural market as access to rural areas
become more and more convenient and with the reach and popularity of satellite television these
markets would become increasingly viable to target. Due to changing life styles of families there has
been a high influx of working women in economy and this trend is taking up speed. This opens up and
opportunity for Shan foods to increase its sales by targeting and designing its products offers for
working women e.g. they introduced Ginger and Garlic pastes in their product line. They can penetrate
in the international market as Millions of Pakistani and Indians live across the Globe. Thousand of
Pakistani and Indian communities exist in Europe, North America, Australia, and Middle East. Shan foods
sells its spice products in more than 60 countries and their production plants are located in U.K, Mecca,
Chicago and Dubai. Independent distributors carry the products and Shan foods only fulfill the orders.
[SHAN FOODS]
27
AVIODANCE OF THREATS Due to inefficient control mechanism and lackluster government bureaucracy frequent supply shortages occur and price fluctuation is a great deal and rapidly increasing inflation. As 100% raw materials are procured locally and almost all of them are agricultural products, it poses a big threat. Shan foods in order to mitigate the threat of purchase most of the raw materials during the season and store in powdered form and are mixed with other ingredients when orders are placed. By adopting these strategies they are possibly minimizing or even avoiding some threats in front of them.
[SHAN FOODS]
28
CPM (COMPETITIVE PROFILE MATRIX)
The CPM for Shan foods in comparison with National foods is as follows:
VS
Critical success factor
Weight
Rating
Weighted score
Rating
Weighted score
1.Advertising 2.Product Quality 3.Price 4.Unique Features 5.Competitiveness 6.Management 7.Financial Position 8.Customer loyalty 9.Global expansion 10.Marketi share 11.Technology
0.10
0.25
0.05
0.10
0.05
0.02
0.10
0.06
0.09
0.08
0.10
1
4
2
3
3
3
3
3
3
4
4
0.10
1.00
0.10
0.30
0.15
0.06
0.30
0.18
0,27
0.32
0.40
3
3
2
3
3
3
3
3
2
3
3
0.3
0.75
0.10
0.30
0.15
0.06
0.30
0.18
0.18
0.24
0.30
Total 1
3.18
2.86
[SHAN FOODS]
29
ANALYSIS OF CPM MATRIX
Result of Competitive Profile Matrix shows that Shan Foods is in the lead among the competition. Shan Foods has scored 3.18 which is above the average where as National Foods scored 2.86 which is also above average but is significantly lower than Shan Foods. Our studies showed that an unorganized sector on the other hand has scored below average.
INTERPRETATION
On the basis of above analysis we interpret that Shan Foods is the leading company if we compare it in recipe mix and the main factors that give Shan Foods Edge over its competitors are its remarkable technology, strong nationwide distribution network and Diversified business. Shan Foods markets their different range of production the local market and around 50 products are sold exclusively in International markets. Shan Foods is truly a national company as its brand is recognized all over Pakistan. This brand recognition has been achieved because of their unmatched technology and strong distribution network. Shan foods reach is far greater than that of National Foods and enjoys market leader position in Pakistan. Unorganized sector along with other brands lack brand strength, technology integration, distribution capability and financial soundness. Their market share is around 5% in recipe Masala mix products. Due to this unorganized sector is below average.
[SHAN FOODS]
30
IFE (INTERNAL FACTOR EVALUATION
Key Internal Factors Weight Rating
Weighted
Score Comments
Strengths
Country’s Major Brand 0.1 4 0.40 Common brand loyalty is high.
Market leader with 55%
share 0.1 4 0.40 Leading spice manufacturing
in Pakistan.
R & D and Product
Development 0.05 3 0.15
Brings new products on
consumer preferences.
Strong distribution network 0.2 4 0.80 In towns, all over Pakistan
Integrated ERP (SAP) 0.05 3 0.50 Pioneer in food industry
Implemented ERP.
Book Value improving 0.1 4 0.40 15.11-2009
22.11-2011
Diversified Bushiness 0.1 4 0.40 Major player in food industry
with more than 200 products
Weaknesses
Marketing Strategy
formulation and execution 0.1 1 0.10
Failure of some products due
to unsuccessful promotional
campaign.
ROE in decline 0.1 1 0.15 42.05% -2007
23.8%-2009
Weak Position In Karachi
(Trailing behind Shan) 0.1 2 0.20 Trailing behind National
Total 1 3.5
[SHAN FOODS]
31
ANALYSIS OF IFE MATRIX
Shan Foods secured a total score of 3.15 in the internal factor evaluation. This signifies that the company has a strong internal system and is able to manage effectively all of their strengths in a meaningful manner.
Major strength of the company is its Nationwide recognized Brand. Shan foods markets more than 100 products in local markets and is a major player in food
industry. Another important strength of Shan Foods is Shariah Compliance therefore they don’t have the
burden of debt payment as well as interest; they fulfill all entire capital requirements by their own.
Shan food by its technology adoption has got first position in Karachi and has become the market leader.
In order to enhance customer loyalty Shan Foods has launched different products to lure the customers away from National Masalas and other competitors.
INTERPRETATION
Shan foods has above average and a good score in internal factor evaluation which means that they are able to convert their weaknesses into strengths more effectively and are able to manage their strengths in a meaningful manner. Shan foods markets more than 100 products in local markets and is a major player in food industry. This gives them edge over other foods companies like National Foods which only competes with Shan Foods in few product categories and in few areas such as Punjab province. Shan Foods is the pioneer in Branded Spices and Recipe Masala Mix products. It enjoys market leader position in this category. It has been able to keep its leader position because of its continuous innovation and technology integration. Recently Shan Foods launched Delve (desert range) to grab some market share in different areas. Whereas, National foods recently launched Ronaq Masala to grab some market share in Karachi. To promote it the company hired Film Actor Shan for the advertisements. This campaign that was intended to take away market share from Shan Foods was failed. This Ad campaign confused viewers and confused the message and in some incidents people thought it as the campaign of Shan Masala. But still Shan needs to come up with the strong campaign in order to strengthen its weak position in Punjab. They also have the need to penetrate in the international market to increase their market share in the foreign countries.
[SHAN FOODS]
32
SWOT MATRIX
Strengths Weaknesses
1. Shan food has a very strong heritage and
legacy behind it which has given it a strong
goodwill in households.
1. Shan is not present in Jams and marmalades,
Ketchups categories like National foods thereby
loosing an opportunity market. Many loyal Shan
customers purchase National products in these
categories which is causing loss of potential sales.
2. Shan foods enjoys an approximately 50%
market share in the recipes mixes category.
2. Shan has a low market share outside Karachi in the
Punjab market where National enjoys market
leadership. This is due to weak distribution of Shan
products in Punjab market which is causing loss of
potential sales.
3. Shan foods is a leading exporter of food items
from Pakistan providing it an opportunity to tap
the large global market which helps it to expand
at a rapid pace.
4. Shan has a wide range of products and SKU’s
available consolidating its presence in various
niches and keeping its customers loyal to the
brand.
[SHAN FOODS]
33
Threats ST Strategies WT Strategies
1. The biggest threat to Shan is the high inflation in Pakistan coupled by a global recession which is putting pressure on the profits and sales.
1. The biggest threat to Shan foods is the high inflation in Pakistan so it can expand operations in foreign countries and grab this opportunity.(S3,T1)
1. Shan is not present in Jams and
marmalades, Ketchups categories
The prevalence of counterfeit
products is also threat to Shan
causing loss in goodwill and
potential sales.(W1,T2)
Opportunities SO Strategies WO Strategies 1. Shan can vertically integrate to
produce its own raw materials
which will not only reduce costs
but will also provide it more
control over the quality of input.
1. Shan food has a very strong heritage and legacy behind it which has given it a strong goodwill in households. Shan can enter into other related food categories where it can tap its loyal customers with minimal extra efforts.(S1, O3)
1. Shan Foods can horizontally
expand its business and enter into
related product category like
ketchup, jams, marmalades.(W1,
O3)
2. Shan currently has a very low advertising spend in the FMCG industry. It can deploy brand activations and other innovative campaigns to switch customers from the loose/ unbranded segment to Shan products
2. Shan Foods can vertically integrate to produce its own raw materials which will not only reduce costs but will also provide it more control over the quality of input. It’s an opportunity to tap the large global market which helps it to expand at a rapid pace(S3, O1)
2. Shan Foods has huge market in
Punjab. Shan can produce its own
raw material which will reduce
cost and improve quality, so Shan
can expand its market.(W2,O1)
[SHAN FOODS]
34
ANALYSIS OF SWOT MATRIX
From the analysis of SWOT matrix various kinds of strategies have stood out. Shan Foods can go for related diversification by entering into other related food categories where it can tap its loyal customers with minimal extra efforts. It can also adopt the strategy of vertical integration by producing its own raw materials which will not only reduce costs but will also provide it more control over the quality of input. Shan Foods can also do horizontally expansion and enter into related product category like ketchup, jams, marmalades etc. It can also adopt the strategy of market penetration in Punjab as there is vast scope exists in the market to go through with this strategy. Shan foods can also go for expansion in foreign countries and Shan foods have goodwill among household so it’s a big threat for new entrants in the market.
Shan Foods can also adopt the strategy of related diversification. And also should try to do effective distribution in Punjab to tap that market.
INTERPRETATION
From the above analysis of SWOT Matrix we can interpret that Shan Foods can follow the variety of strategies like backward and forward integration, national and international market penetration related diversification etc. Shan Foods is a very strong brand and has potential to increase its share in Urban and Rural markets of the country especially in Punjab region which is a large domestic market, where National Foods has more intensely penetrated than Shan Foods and Shan is trailing behind National Foods. Shan Foods therefore needs to formulate a good action plan to penetrate into Punjab and other markets. Penetration in local markets is very viable strategy keeping in mind the strong distribution network of Shan Foods and its Brand strength. Similarly Integration Strategies can be very viable to accelerate growth of the company. Company procures 95% of raw material for its Spice Products and Recipe Masala locally. However markets for agricultural products in Pakistan are not efficient. Supply shortages often occur and prices fluctuation causing increase in Cost of Goods. If Shan Foods integrate backward it can give competition to vendors who sell spices in lose packing and it will be able to control costs of raw material. Shan Foods is also facing competition from Makro and Metro who are selling spices under their own brand name. If Shan Foods can integrate with them it will be able to face the competition even better. As Shan foods have good market reputation so it can easily go for related diversification and add more categories into its product range like National Foods.
[SHAN FOODS]
35
SPACE MATRIX
Internal strategic position External strategic position
Financial Position (FP) Stability Position (SP) +7 best,+1worst Working Capital +7 Return on Investment +5 Return on Assets +5 Leverage (Nil) Liquidity +6 Net Income +5 Inventory Turnover +5 Cash Flow +4 Earnings Per Share (Nil) Price Earnings Ratio (Nil)
-7worst, -1best Technological Changes -1 Competitive Pressure -2 Inflation Rates -6 Ease of Exit -7 Price Elasticity of Demand -6 Demand Variability -6 Risk Involved In Business -6
Total x-axis score = 10
Competitive Position (CP) Industry Position (IP)
+7best, +1worst Market Share +6 Brand Image +6 Technological Knowhow +7 Customer Loyalty +6 Product Life Cycle +6 Control over Supplier +6
-7worst,-1best Growth Potential -2 Resource Utilization -1 Financial Stability-1 Profit Potential -2 Ease of Entry -7
Total y-axis score = 24
Conservative
Defensive Competitive
Aggressive
24
10
[SHAN FOODS]
36
ANALYSIS OF SPACE MATRIX
Thescores in financial position and stability position of Shan Foods are 5.2 and -4.8 respectively so the
total score at X-axis is 0.40 whereas the scores of competitive position and industry position are 6.1 and
-2.6 respectively so the total score at Y-axis is 3.5.
Therefore, we have analyzed by observing the above graph that Shan Foods directional vector appears
in the Aggressive Quadrant.
INTERPRETATION
On the basis of above analysis we interpret that Shan Foods has positioned in the Aggressive area and
therefore should follow aggressive strategy ahead. It operates in a highly competitive industry
where firms continuously need to innovate and come up with competitive products for
the users. Aggressive competitive strategies need to be emp loyed to survive in the
market where cut throat competition exists between Shan and National Foods. Shan Foods
is in excellent position to use its internal strengths to take advantage of external opportunities,
overcome internal weaknesses and avoid external threats.
The company can pursue/use the following options:
market penetration
market development
product development
backward, forward and horizontal integration
Related, Unrelated or horizontal diversification
The above options can be feasible to Shan Foods depending on the specific circumstances it is facing.
[SHAN FOODS]
37
BCG MATRIX:
Shan Foods includes the following products in it BCG MATRIX:
High
StarQuestion Mark
Recipe MixDelve (Dessert Range)
Market
Growth
Cash cowDog
s
Low
High Market ShareLow
Ginger Garlic Paste Salt &
Pickles
[SHAN FOODS]
38
ANALYSIS OF BCG MATRIX
Recipe has grabbed more than 50% of the market share. They categorized recipe as their stars for their
company, Ginger and Garlic pastes are considered as cash cows for the company and they are investing
more in them to facilitate their customers, pickles are considered as dogs for the company because as
per their description they require high investments but low returns and they also introduced a new
products range i.e. delve (desert range) which according to them is growing and will increase the
consumers’ demand by more investment.
INTERPRETATION
Recipeshave proved to be the Starsfor Shan foods as the growth and market share both are
high of this product range. It has been the most productive product for Shan foods since their
operations as individual spices which they converted into recipe mix. But they must invest more
in it to make it more profitable as tough competitors like National Foods and Mehran are still in
competition and trying to grab a handsome portion.
Ginger and Garlic Pastes have proved to the Cash cows for the company as their market
share is high but the growth is slow. They should invest more in it to sustain or even increase their
market share in this product range.
Salt and Pickles have proved to be theDogs for the company as they require heavy
investments but the growth is slow as well as low market share giving less to the
company.
The newly introduced product range i.e. Delve (Desert Range) has proved to be the
CashCows for the company which has low market share but the growth for this product
line is high and through more investments customers’ demand can be increased.
[SHAN FOODS]
39
THE INTERNAL FACTOR (IE) MATRIX
The IFE Total Weighted Score
Strong
3.0 to 4.0
Average
2.0 to 2.99
Weak
1.0 to 1.99
High
3.0 to 4.0
Medium
2.0 to 2.99
Low
1.0 to 1.99
4.0
3.0
2.0
1.0
3.0 2.0 1.0
I II III
IV V VI
VII VIII IX
Harvest or Divest
Retrenchment
Divestiture
Holed and Maintain
Market Penetration
Market Development
Backward, forward or
Horizontal integration
Market Penetration
Market Development
Product development
Grow and Build
Shan Foods IFE
and EFE scores
lies in Cell IV
[SHAN FOODS]
40
ANALYSIS OF IE MATRIX
IE matrix positions an organization’s various divisions in a nine cell display total IFE weighted scores on
x-axis and total EFE scores on y-axis, an IFE total weighted score of 1.0 to 1.99 represents a weak
internal position, a score of 2.0 to 2.99 is considered average and a score of 3.0 to 4.0 is strong. Similarly
an EFE total weighted score of 1.0 to 1.99 is considered low, a score of 2.0 to 2.99 is medium and a score
of 3.0 to 4.0 is high. Shan IFE score is 3.5 and EFE score is 2.72 which show that Shan lies in cell IV.
INTERPRETATION
Shan Foods IE matrix falls in the division IV which recommends the firm to grow and build. Intensive
(market penetration, market and product development) or integrative (backward, forward or horizontal
integration) strategies are most appropriate for this division.
[SHAN FOODS]
41
GSM (GRAND STRATEGY MATRIX)
Rapid Market Growth
Slow Market Growth
Weak
Competitive
Position
Strong
Competitive
Position
Quadrant II Quadrant I
Quadrant III Quadrant IV
[SHAN FOODS]
42
ANALYSIS OF GRAND STRATEGY MATRIX
Shan Foods enjoys not only a relatively strong competitive position in the market but operates
in a rapidly growing market too. Shan Foods has given tough competition to National Foods and
other less known brands. It is one of the oldest companies in Pakistan.. The food industry and
Masala industry in particular is also growing at a rapid pace and provides ample opportunities
for the firm to cash on it. Shan Foods is positioned in Quadrant I.
INTERPRETATION
Shan Foods lays in Quadrant I, which shows that the firm is in good strategic position. It should
continue concentration on current markets (market penetration and market development) and
products (product development). It would be wiser for Shan Foods to either improve its
national market share or concentrate on International Markets. Integration, forward or
backward is another viable option as company has a strong distributor network across Pakistan
and its brand has nationwide acceptance.
[SHAN FOODS]
43
QSPM MATRIX
Key factors Weight AS TAS AS TAS
Opportunities
1.Growth potential in Rural areas
0.10
3
0.30
-
-
2.High Growth Rate Of Urban Pakistan
0.10
4
0.40
-
-
3.Fast Lifestyle (less available time for cooking)
0.10
3
0.30
2
0.20
4.Quality Raw Materials Available in country
0.15
3
0.45
4
0.60
5.Untapped Asian Communities Living Aboard
0.05
-
-
4
0.20
Threats
1. High Domestic Inflation Rates
0.10
4
0.40
3
0.30
2.Agriculture marketing mechanism of the
country
0.10
3
0.30
3
0.30
3 Emerging national/ International competitors
0.10
3
0.30
3
0.30
4. Private/ Local Brands
0.10
2
0.20
-
-
5. Low Price Competition From Loose/ Open Spices
0.10
4
0.40
-
-
Strategic Alternatives
Local (Urban) Market International Market
[SHAN FOODS]
44
Strengths
1.Country’s Major Brand
0.10
4
0.40
4
0.40
2 Market leader with 55% share
010
4
0.40
3
0.30
3. R & D and Product Development
0.05
2
0.10
4
0.20
4. Strong distribution network
0.20
3
0.60
4
0.80
5. Integrated ERP (SAP)
0.05
3
0.15
3
0.15
6. Book Value improving
0.10
2
0.20
3
0.30
7. Diversified Bushiness
0.10
4
0.40
3
0.30
Weaknesses
1. Marketing Strategy formulation and execution
0.10
3
0.30
3
0.30
2 ROE in decline
0.10
3
0.30
3
0.30
3. Weak Position In Punjab (Trailing behind Shan)
0.10
4
0.40
-
-
Key factors Weight AS TAS AS TAS
Strategic Alternatives
Local Market International Market
[SHAN FOODS]
45
ANALYSIS OF QSPM
The above QSPM Matrix shows the comparative strategic evaluation for Shan foods.
The total average score for the evaluation to penetrate in the local market is 6.3 for the
strategy to penetrate in the local (Urban) market.
The total average score for the evaluation to penetrate in the international market is 4.95
which is less than the average score for the local market.
INTERPRETATION
From our Strategic Alternatives evaluation, we see that it is more attractive for Shan Foods to implement Product Penetration Strategy by concentrating their efforts on increasing share in local (urban) markets. This is in line with their current strategic direction of seeking increased sales by increasing their market share in Punjab and other urban centers of Pakistan. This strategy will allow National Foods to fortify its position in the market and capture more market shares from its major competitor National Foods.
[SHAN FOODS]
46
PRODUCT /MARKET EXPANSION GRID
Existing Products New Products
Existing
Markets
New
Markets
Market Penetration
Penetrated its market to
Punjab.
Product Development
Expanded its portfolio in
Oriental Recipes
Market Development
Developed its market in
Tajikistan.
Diversification
Diversified products are
Pink salt
Delve dessert
Noodles
Vermicelli’s
[SHAN FOODS]
47
ANALYSIS OF MARKET/EXPANSION GRID
MARKET PENETRATION: Shan spices need penetration in Punjab markets
because it is not very popular in these markets.
MARKET DEVELOPMENT: Shan is soon going to launch its existing products in
Tajikistan which is anew market
PRODUCT DEVELOPMENT: Recently launched Oriental recipes, which is a new
range of recipes in Pakistani markets.
Shan always thinks “Global” and acts “Local”. It offers customized recipe mix according to
the country where it operates.
For e.g. it offers Malay Pulao recipe mix in Malaysia.
DIVERSIFICATION: The Company plans to diversify its salt range which
includes normal and pink salt & delve dessert range.
INTERPRETATION
The HR manager of Shan foods told us that Shan had not reached the Punjab markets till 2005. In their
strategic planning at that time, they made decision to launch their products in Punjab province. Still in
2012, Shan focuses to penetrate more deep into the Punjab markets, also the rural areas of Punjab
province.
Recently, Shan launched Oriental recipes In Pakistan that are estimated to give profitable returns in the
upcoming years.
As far as new markets are concerned, Shan is already operating in more than 60 countries and it plans
for global expansion as mentioned in their vision. Shan will soon be launching its product range in
Tajikistan.
There are certain areas in which Shan needs diversification to attract and facilitate more and more
customers. Shan plans to introduce Pink salt in its salt range and new pickles in pickles range.
[SHAN FOODS]
48
Strategy Implementation process of Shan Foods: The strategic management process does not end
when the firm decides what strategy or strategies to pursue. There must be a translation of strategic thoughts into strategic action. This translation is much easier if managers and employees of the firm understand the business and feel themselves as a part of the company. Through their involvement, strategies can be effectively implemented, helping the organization succeed. Implementing strategy effects the organization from top to bottom; it affects all the functional and divisional areas of the business. The purpose and scope of this text is to examine the business administration concepts and tools important in strategy implementation.
Even the most perfect strategic plan will serve little purpose if it is not properly implemented. Many organizations tend to spend a considerable amount of time, money and effort on developing strategic plans, treating the means and circumstances under which it will be implemented. Change comes through implementation and evaluation, not through the plan. A technically imperfect plan that is implemented well will achieve more than the perfect plan that never gets off the paper.
At Shan, strategy implementation is as important as strategy formulation. The strategic plans are strictly followed, implemented and evaluated. Effective strategy formulation, implementation and control are the three basic pillars of Shan group’s success story. Also, the policy of Shariah compliance is strictly followed in every department of the organization, whether it is finance, marketing, production etc. We interviewed the officials at Shan and learned many of their insights of strategy implementation
PROCEDURE FOR STRATEGY IMPLEMENTATION
Any decision taken is conveyed to the COO. The COO conveys and designates work responsibilities to the Head of different departments (HODs). Relevant information and responsibilities flow down to relevant departments. The HODs further divide responsibilities and functions to managers of departments. The managers convey and make sure the work is done and strategy is implemented at even the lower most level. In this way, responsibility flows from top to bottom. The workers report to their managers, the managers’ report to HODs, the HODs report to the COO and the COO is answerable to board of Directors.
ORGANISATIONAL CULTURE, SUPPORTIVE TO STRATEGIES
When asked question about the supportiveness of organizational culture, the Manager HR said that it is supportive yes because no goal can be achieved without team work, co-ordination and support of employees. So, the culture inside the organization has to be supportive and friendly so that all of the personnel can work efficiently.
[SHAN FOODS]
49
MANAGEMENT OF CONFLICTS
Before and during the implementation of decisions, conflicts of interest and opinion arise. The firm conducts awareness sessions for employees, they tell them about the benefits that change will bring to them and to their organization. For management of conflicts, influencing power is also essential.
ALIGNMENT OF CORPORATE STRATEGIES WITH POLICIES
When asked a question whether corporate strategies align with the policies, the official responded in positive. He answered that without alignment and relevance of policies and strategies, the organization
cannot grow and prosper.
[SHAN FOODS]
50
4.1. ANNUAL OBJECTIVES
Shan Foods measure the extent of marketing success over a period of time in the following areas:
Sales: Shan Foods has determined to enhance its annual sales to 20-25% for the current year 2012.
Market share: It is included in its annual objective to increase its market share to 12 -13 %. Expenses: They have determined to decrease its operating expenses to 5-10%. Customer satisfaction: It has also determined to increase the customer satisfaction by offering
differentiated quality products.
4.1.1. ACTION PLAN OF SHAN FOODS FOR THE YEAR 2011-12
What How Who When
s1.Include more varieties
in portfolio
2.Capture 30% Market
share from branded and
un branded industry
Adding new variants in
recipe mix
By Increasing selling
efforts and proper
management of trade
channel
Production Department
Sales department
in 2011
By 2012
3.Increase usage in small
towns and suburbs by 10%
By increasing awareness
By effectively managing
trade members
Marketing Manager
Sales Department
By 2012
4.Increase awareness
among people
By targeting health
conscious people and
making people aware
from hazardouseffect of
loose salt
Marketing Department
By 2012
5.New markets
Taping new markets /
increasing share in
existing countries
Sales Department
(international)
By end of 2012
[SHAN FOODS]
51
4.1.2. PRODUCT/MARKETING PLAN
PRICING
Product Competitor Bench
Mark
Price Positioning
Recipe Mix
Ranges from Rs.30 to 40
Pricing charged by competitors
depends upon SKUs and it uses
Parity Pricing
Pricing charged by Shan depends
upon SKUs and it uses Parity
Pricing
Plain
Depends on SKUs
Like 50 grams red chili powder is
available at a price of Rs.20
and150 grams at Rs.115
Salt
Iodized salt is priced at Rs.17
(800 grams) and plain salt at
Rs.15 (800 grams)
4.1.3. ACTION PLAN
What How Who When
As the pricing policy depends upon the raw material and Shan uses Parity pricing so marketing
department just have to look for how much is it costing them and then accordingly they set the prices
keeping in view the prices of competitors.
[SHAN FOODS]
52
4.1.4. DISTRIBUTION ACTION PLAN FOR THE YEAR 2012
What How Who When
Distributor / Retail
By effectively
managing
distribution network
and giving trade
incentives
Marketing and Sales
Department
In start of 2012
Distributor/
Wholesaler
Cutting some
proportion of
wholesaler and
diverting that
proportion to other
channels
Marketing and sales
Department
in 2012
Institutional Sales
By making more
efforts in building
good clients to
generate more
institutional sales
Marketing and sales
Department
In 2012
Export
Tapping new markets
& increasing sales in
existing countries
Marketing and sales
Department
In 2012
4.2. IMC (INTEGRATED MARKETING COMMUNICATION) PLAN
Shan Foods would follow an integrated marketing communication plan, which would include the different set of activities. Each activity would revolve around the products positioning statement.
The estimated marketing budget for Shan is Rs.110 million for all their ATL and BTL activities in the year 2012. The company does most of its marketing usually on seasonal basis especially before and during Ramadan and near Eid. The breakdown for the budgeting is 80% for ATL activities and 20% for BTL activities. In the recent times Shan has put more emphasis on its export and only comes up with new marketing campaign for new products.
[SHAN FOODS]
53
Shan does not advertise as a ritual and can be termed as quite conservative when it comes to using mass media for promoting itself. The advertising is done seasonally usually; however it does conduct certain promotional campaigns and activities. The advertisements of Shan’s offerings focus entirely in the females of the family. The marketing strategy is very customer oriented i.e. Shan emphasizes on marketing its products keeping in mind its customers thus having a customer centric view.
It has started to reach out to a wider audience keeping in mind the changing lifestyle to nuclear families and convenience seekers.
4.3. TARGET MARKET
Females aging from 18 to 45 years compose the main target market of Shan Foods. This is because of the reason that in our part of the world, women are mostly related to the food and cooking. Hence, Shan Foods develops products that are according the needs and wants of these women no matter if they are stay-at-home or working, single or married ones.
4.4. OBJECTIVES
BUSINESS OBJECTIVES
Shan’s strong connection and respect for Islam drives the company’s core values. Therefore they have committed to follow Shariah Compliance.
Its is the main reason for their low cost as Shan Foods has the latest technology which is one of its kind in south east Asia. The V-look technology and the coal grinding technology is only an example to their dedication to provide nothing but the best to their consumers.
It’s the world class quality that brings the blind trust of the consumers on Shan products that it will not only be hygienically prepared but would be secure from any harmful ingredients that loose spices offer.
Value proposition of Shan Foods is to bereceptive towards innovation and experimentation in food and in life, while remaining a brand that will provide the highest quality products to its customers and will never comprise on this idea.
Shan food considers all major food brands, packed and loose, retailer’s brands, ready to cook or raw food as its potential competitor. The direct competition is with National Foods, Mehran, Ahmeds, and the like.
MARKETING OBJECTIVES
As the strong connection of the Shan Foods owners with Islam, the company does not believe in advertisement heavily on any advertisement medium. Since the product offerings are seasonal the company does advertise in Ramadan and come with its advertising campaigns. Shan advertisement does not show any celebrity or prominent figure to drive sales, rather it just compromises of show-reel showing hands with background music and rotating dishes. The company also conducts BTL activities and holds up demonstrations of cooking with its Spices and product offerings on different venues. All the marketing strategies are customer centric or customer oriented so that it can leverage on already well-developed consumer goodwill for the company.
Shan due to its consumer centric marketing strategies and with market intelligence has started targeting teenagers as they are the future decision makers in households. Shan is aiming to educate and persuade
[SHAN FOODS]
54
the teenage population with innovative campaigns and with demonstrations to provide them complete information on not only Shan Foods but also regarding the superior quality that if offers to them. This is a very strategic move as when the time will be right, Shan’s usage will increase many folds because these teenagers will then already be loyal to the Shan product offerings.
With its proactive research and development department Shan is always on the move to newer and better opportunities that it can cash upon. Regardless of this it has not filled some basic gaps such as products for fisheries and the likewise cuisines.
4.5. THE WORLD OF SHAN FOODS
The world of Shan Foods comprises 14 departments all together:
1) Supply Chain
2) Finance
3) MIS
4) Packaging
5) Engineering & Maintenance
6) Production
7) Creative
8) Human Resource
9) International Sales
10) Quality Control
11) Audit
12) Sales
13) Marketing
[SHAN FOODS]
55
4.6. ORGANIZATIONAL HIERARCHY
Following is the organizational hierarchy of Shan Foods:
In the above hierarchy: CEO: Chief Operating Officer GM: General Manager BM: Brand Manager
Managing Director
CEO
General Manager
Director GM (Production)
Director GM (Procurement)
Sales
Director GM
Sales Office Manager
Regional Sales Manager
Territory Sales Manager
Regional Sales Manager
Territory Sales Manager
Regional Sales Manager
Territory Sales Manager
Regional Sales Manager
Territory Sales Manager
Marketing & Exports
Director /GM
BM (plain spices, instant mixes)
Category Owners
Category Owners
Category Owners
[SHAN FOODS]
56
4.7. GROWTH RATE
The food industry in Pakistan is a developing industry and is witnessing growth. The main reason behind this is that buyers have started to shift from loose to packed spices, thus changing the cooking and eating habits. The claimed growth rate of the entire industry is more than 50% annually.
Shan Foods with a colossal annual growth of more than 50% was quick to respond to the driving forces and key success factors of the industry and today, it proudly is the most preferred spices company. It has become the industry giant holding almost 45% of the market share belonging to the branded spice dealers. It has over the period of time, managed to win the heart share of consumers that has translated into its brand loyalty and true friendship with consumers.
4.8. STRATEGIC MARKETING ANALYSIS
MARKET SEGMENTATION
The market segmentation can be explained by defining demographic, geographic, and behavioral factors that are most important for Shan Foods.
DEMOGRAPHIC FACTOR
The basic demographics that Shan caters to are the women of today belonging to age group of 18 years and above with socio-economic class of middle, lower and above.
GEOGRAPHIC FACTOR
Shan food has not segmented itself on the basis of geographical segmentation. Their distribution ranges from valleys of Quetta to the Khyber Pass and to the seas of Karachi. It has more than 500 distributors in its supply arsenal. However some recipes are more famous in particular areas of the country than others because of sub-culture preferences.
BEHAVIORAL FACTOR
Being Pakistani, loving food is in our blood. Spicy and delicious food is a main part of our lives. Be it the celebrations of Eid or marriage ceremony of a beloved, it’s the food that give colors to the events and brings the relatives together for a quality time.
Another behavioral factor is related to the double income phenomenon that is growing everyday. Both the man and the woman of the house are earning to support the family and they require ease and convenience when it comes to cooking factor.
The purchase behavior changes according to the seasons. If on one occasion Fruit chart Masala is in demand because of Holy Ramadan, BBQ mixes could be in demand on Eidetc.
POSITIONING
Shan Foods position statement is “To the confident and convenience seeking woman of today, our wide range of Shan spice mixes offer premium quality products, made with the finest ingredients like no other.” It is just for the fact that the consumers should be provided with solution of having a tasty meal in no time with homemade mixes of recipes and spices.
[SHAN FOODS]
57
The Shan Foods position itself as the picture of perfection by quoting its tag line as “JUST
PERFECT”.
4.9. PRICING, POLICIES, PROMOTIONAL AND DISTRIBUTION PLANS
Shan Foods is present in 6 broad food categories which are as follows:
Recipe Mix
Plain Spices
Dessert Mixes
Basmati Rice
Pickles
Salts
Though there are many competitors in the Spice Food business, but the main competitor or rival of Shan Foods is National Foods. Shan has a strong market share in the Recipe mixes category from which it derives most of its revenue. Shan is most famous for its Biryani Masala for which today it has nine
different variants.
4.9.1. PRICING POLICY
The pricing of all Shan offerings varies and depends on each Stock Keeping Unit (SKU). However, the price ranges for five (out of six) categories of Shan product offerings are as follows:
RECIPE MIX
o The Recipe mixes range from Rs.30 to 40
PLAIN SPICES
o Pricing of Plain spices varies SKU wise. For example, 50 grams red chili powder is available at a price of Rs.20 and150 grams at Rs.115.
DESSERT MIXES
o Desserts are all priced at Rs.35.
PICKLES
o Pickle pricing is Rs.170 for 1000 grams, pricing varies as per SKU.
SALTS
o Iodized salt is priced at Rs.17 (800 grams) and plain salt at Rs.15 (800 grams).
It is seen that on a general note, Shan Foods’ offerings are based on parity pricing and are similar to those of its rival National Foods. According to sources, this similar pricing is not due to any price war that exists between both companies but is because the raw materials of both are similar in nature for many offerings. If the cost of raw materials increases, both have to increase their prices and again their prices show similar trend after increase.
[SHAN FOODS]
58
4.9.2. PROMOTION
The estimated marketing budget for Shan is Rs.100 million for all their ATL and BTL activities in the year 2011. The company does most of its marketing usually on seasonal basis especially before and during Ramadan and near Eid. The breakdown for the budgeting is 80% for ATL activities and 20% for BTL activities. In the recent times Shan has put more emphasis on its export and only comes up with new marketing campaign for new products.
Almost all of Shan’s promotions are addressed towards women. The marketing strategy is very customer. It has started to reach out to a wider audience keeping in mind the changing lifestyle to nuclear families and convenience seekers.
4.9.3. DISTRIBUTION
At Shan Foods, special care is placed upon meeting market and customer demands in a fitting and timely manner. It is therefore, ensured by the Supply Chain team that goods or shipments reach their destinations well in time to match market trends and customer demands.
Shan makes sure that its authentic brands are distributed by efficient and top of the line distributors. Shan has a separate Sales department focusing on International Modern Trade (IMT) and Local Modern Trade (LMT). This department maintains direct relationships with variety of shops to meet their customized requirements. This practice helps Shan to keep a close and direct relation with high sales outlets which is pivotal for its greater profits and market share.
Sales teams are totally monitored by Territory Sales Manager (TSM) and Regional Sales Manager (RSM). Shan Foods helps by extending all possible marketing support to its distributors to create awareness of its quality products in the international market in mutual sustainable business interest. Company’s TSMs and RSMs work on the basis of area wise policy for distribution. Products are distributed on the basis of geographic segmentation.
In Pakistan alone Shan has 500 distributors. The sales force of Shan supplies its products to these distributors and some direct distribution is also done mainly in Karachi market.
The distribution channels of Shan Foods include:
Retail
Wholesale
Hyper Markets
o (e.g.Makro ,Metro and Hyper Star)
International Chains
(E.g. Wal-Mart, Carrefour, Lulu Hypermarkets, Panda, Safeer, Mall of the Emirate,, Reliance India)
Shan is the largest exporter of premium quality packaged spices, spice mixes, food mixes, rice mixes to USA, Canada, UK, Germany, Holland, Malaysia, Middle east, South Asia, Japan, Singapore, Australia, and many other countries of the world.
[SHAN FOODS]
59
It also exports its products to the Far East, Bhutan, Japan, Malaysia, Singapore, Thailand etc. In totality, it has its presence in almost 62 countries worldwide. It is the first Pakistani brand that has been officially launched in India and Shan foods plans to extend its availability in other lucrative markets around the world.
4.10. PRODUCT AND NEW PRODUCT STRATEGIES IN PIPELINE
4.10.1. GROWTH STRATEGY
Pakistan’s food industry is growing rapidly and is on the growth stage of its life cycle. The prime reason is that consumer are becoming brand conscious these days and are switching from unbranded looses spices to packed branded spices which in turn indicates that cooking and eating habits are also changing. The growth rate of whole industry currently is more than 50% annually, which is phenomenal opportunity for company like Shan to capitalize by filling that gap.
It’s very difficult to compete in spice industry with top-down or centralized organizational structure because of the fact that different departments’ performances are inter-dependent. Shan realized this and it now has decentralized structure. Every worker is welcomed to participate in decision making and can come up with new ideas and thoughts to improve the product or the production process. This helps the strategist in understanding that what is attitude of an average employee about the company and that feedback aids in forming better and improved strategies. Involving employees in decision making process gives employees a sense of ownership and they feel right at home where they have a say.
4.10.2. PRODUCT STRATEGY
Shan in an entrepreneurial venture and it is following market development strategies, product development strategies and penetration strategies as it is expanding its product line to new customer base in various locations, setting up product lines such as spices, pickles, etc and sustaining its global position mainly through exports. The manufacturing plant produces 800,000 units of spices per day. Shan has great range of vegetable mixes for country like India as the target market highly prefers vegetable. Similarly in Pakistan Shan has wide range of meat mixes as people are meat lovers and highly prefer meat diet. Shan is currently present in over 60 countries and is performing to maximum of its potential to become the global leader.
Shan Foods has the competitive edge of technology and innovation. They have adopted latest technology for grinding and packing its spices. Company develops new methods and techniques to test its new products and generate trials in the market to measure the market response before they formally launch any product. So we can say that research is an integral part of the company and the new product is brought in keeping in view the customer preferences and needs.
The spices mixes at Shan’s production plant are created with the exquisite and genuine flavors having the cultural and traditional touch. Shan believes in the best as it never compromises on standards of finest quality and engraves the old age recipes into modern packaging keeping the freshness intact.
The raw material is an initial and important part of whole product strategy. Shan strongly holds the belief that excellent quality is majorly dependent on the first-class quality raw material processed with the help of state of the art technology. For this reason the purchase department at Shan Foods thoroughly selects the best quality spices from fields, local bazaars and international markets. Raw material is also procured from number of countries such as black pepper is imported from India, Africa, Thailand and various other countries. Shan Foods pays special attention in obtaining raw material as different spices are imported from the places where those spices are grown best. They use latest and
[SHAN FOODS]
60
unique V-lock technology. They freeze the materials at -70o C and then grind them to conserve the natural freshness and aroma.
[SHAN FOODS]
61
4.11. Balance Score Card
ANALYSIS
Every organization uses balance score card for strategy formulation and implementation because
Company needs to grow in all four perspectives (financial, costumer, learning and growth and internal
business process). Shan foods use balance score card on both corporate level and departmental level
and the weight of balance score card varies with department to department like in Shan, sales
department gives more weight to financial between 55% to 60% and service and support department
gives more weight to costumers between 25% to 30%. Shan foods give more weight to financial (30%)
Area of objectives Measures or Targets Time Expectations Primary Responsibility
FINANCIAL
30% to 35%
Midyear /final year
Head of department.
Monitored by HR
Final responsibility of
COO for achieving targets
sale 55% to 60%
Midyear/final year
Head of department
Monitored by HR
Services/support 25% to 30% Midyear/final year
Head of department/final
responsibility of COO
CUSTOMER
22%-24%
Midyear/ final year
Head of department
Monitored by HR
Final responsibility of
COO for achieving targets
Sale
20% to 25%
Midyear/final year
Head of department
Monitored by HR
Services 25%
Midyear/final year
Head of department
Monitored by HR
LEARNING ANR GROWTH
22%-23% Midyear/ final year
Head of department and
monitor HR and final
responsibility of COO for
achieving targets
Sale 7.5%
Midyear/ final year Head of department
Monitored by HR
HR 25%
Midyear/ final year Head of department
Monitored by HR
INTERNAL BUSINESS PROCESS
22%-23% Midterm/ final year
Head of department.
Monitored by HR final
responsibility of COO for
achieving targets
Sale 7.5%
Midyear/ final year Head of department
Monitored by HR
[SHAN FOODS]
62
among four because profits are the primary motive of every organization and their strategies then form
on the basis of balance score card weight.
INTERPRETATION
Every organization uses balance score card for strategy formulation and evaluation. But according to our
interpretation that Shan foods use balance score card at the implementation stage and their evaluation
goes side by side with implementation stage .They use balance score card on both corporate level and
departmental level and the weight of balance score card varies with department to department. Shan
foods give more weight to financial (30%) among four because profits are the primary motive of every
organization and their strategies then form on the basis of balance score card weight.
[SHAN FOODS]
63
Strategy Evaluation process of Shan foods
Strategy evaluation is vital to an organization’s well-being; timely
evaluation can alert management to problems or potential problems before a situation become critical. Strategy evaluation includes three basic activities 1- examining the underlying bases of a firm’s strategy, 2- comparing expected results with actual results, and 3- taking corrective actions to ensure that performance conforms to plans. In many organization is simply an appraisal of how well and organization has performed. It is impossible to demonstrate conclusively that a particular strategy is optimal or even to guarantee that will work. Richard Rumelt offered four criteria that could be used to evaluate a strategy Consistency, Consonance, Feasibility and advantage. Strategy evaluation is important because organization face dynamic environment in which key external and internal factors often change quickly and dramatically.
Strategy evaluation is also very crucial for Shan Foods; it conducts midterm and final evaluation. They conduct both formal and informal evaluation. Informal evaluation is done on day to day basis but formal is conducted semiannually and annually in which one to one discussion occurs, But sales evaluation is conducted on monthly basis. Online evaluation is conducted at Shan, employees of each department sent his performance to the manager of respective department then manager write his comment and forward it to the head of department and he writes his opinion. In Shan Foods evaluation is done physically and online.
In Shan Food targets are transparent and every employee knows what Shan want to achieve and targets of each department set by the employees of that department. Strategy evaluation is important because organization face dynamic environment in which key external and internal factors often change quickly and dramatically.
ORGANIZATIONAL CULTURE
Shan Foods gives its employees a wonderful place to express themselves. Today Shan foods have a global brand presence in over 62 countries of the world. Shan is available in almost all the supermarkets throughout major continents of the world. Shan is the place to be success in this world and the world to be hereafter. Shan prepares its employees, grooms and give you guidance to succeed in this life and the life to be hereafter. Shan has the phenomenal growth in Pakistani as well as in the international market. In order to meet the business requirement Shan is continuously searching for new and exceptional talent in the leading institutions of Pakistan. Shan is one of the top food brand today they have clear dominant position in the international market and in Pakistan also they are doing extremely well. Particularly they are focusing a lot in their innovation processes and in very near future they will be able to introduce their very exciting new products for their customer satisfaction. In order to do that they have hired a very good blend of their experience team and young leaders from very good business schools across Pakistan to make this challenge forward and make Shan foods a multi-national company.
[SHAN FOODS]
64
5.1. MANAGEMENT EVALUATION
Evaluation is one of the managerial functions like planning, organizing, staffing and directing. Everything managers do in following, through on decisions taken to achieve defined goals within an established timetable, is considered management control. It is important because it helps to check the errors and to take the corrective action so that deviation from standards are minimized and stated goals of the organization are achieved in the desired manner. This constitutes three main activities:
Setting standards
Measuring actual performance
Taking corrective measures
An earlier view of evaluation saw this concept in action only after errors were detected, but in the modern view of management, evaluation is a foreseeing action.
“Management evaluation can be defined as a systematic effort by business management to compare performance to predetermined standards, plans, or objectives in order to determine whether performance is in line with these standards and presumably in order to take any remedial action required to see that human and other corporate resources are being used in the most effective and efficient way possible in achieving corporate objectives” – Wikipedia.
5.2. SETTING STANDARDS
Management evaluation in Shan Foods takes place at a number of levels namely: strategic, operational and tactical levels. In effect, evaluation variables at one level cascade to the next level below and translate in nature and focus accordingly. For example, these controls may predominantly be financial in nature at the strategic level but translate to departmental activities at the operational level, and hence encompass both financial and non-financial information. Further down to the tactical level, they translate into productivity both for the groups and the individual. Therefore, the focus of this exercise is on finance, performance appraisal and benchmarking. Marketing activities are inherently more volatile due to the constantly changing business environment which is driven by the needs and wants of the market. The performance of Shan is determined in terms of: annual plan, profitability, efficiency and strategy. For Shan Foods, the criteria to measure success are evaluated from the following factors:
Measurement of awareness (of the product range)
Feedback on customer satisfaction
Market share data – both in terms of levels of sales, and repeat business.
5.3. BUDGETING
The process of developing any kind of strategy and its budgeting areintertwined in Shan Foods. Budgeting process translates planned strategy into financial terms, and is the single most common evaluation mechanism. It serves not only to quantify plans but also to coordinate activities, highlight areas of critical importance and assign individual responsibilities. Difficulty, time, negotiation, and
[SHAN FOODS]
65
paperwork: all figure into the budgeting process. Simply put, it is a tool for resource allocation and acquiring the approval for all such allocations. Shan Foods’ managers prepare a budget to look into:
Budgeting guidelines – policy and procedure relating to budget formulation. Includes
assumptions, methods, and presentational requirements.
Cost behavior – understanding the cost drivers within an area of responsibility and how those
costs are allocated.
Timescale – specific time and manageability considerations set for budgetary periods, example
financial year or a rolling budget, with forecasts over regular intervals.
Objectives – specific aims and goals and how they will be assessed.
5.4. PROFITABILITY
Profitability creates a systematic basis for allocating cost and defining profit both in terms of products or marketing activities. Ultimately it helps Shan Food’s decision making in terms of:
Expansion
Reduction or elimination of product offerings
Resource allocation through various distribution channels.
5.5. EFFECIENCY EVALUATION
Shan Food managers are looking for value of money by analyzing the impact of promotional activities and setting controls on:
Sales
Advertising
Directing marketing
5.6. MONITORING MARKETING PERFORMANCE
Shan Food’s emphasis is on monthly monitoring (or weekly in case of critical situations). The questions in mind are:
What is the time period that allows the most realistic and accurate picture of our marketing
performance?
Which KPIs need to be at the center of attention at the moment?
Is there a need to create new KPIs?
[SHAN FOODS]
66
5.7. IMPROVING MARKETING PROGRAM AND THEIR EFFECTIVENESS
In order to establish a better marketing evaluation system, the biggest obstacle at Shan Foods is the often repeated element of resistance. The basic objective of any top management is to make its sales and marketing people more effective. Practicality and clarity is to be addressed when implementing changes. This is done through answering a series of thought provoking questions:
What specific actions should be taken?
When should the actions be taken?
By whom should the actions be taken?
What could be realistic starting and completion dates?
Who shoulders the responsibility of implementing these corrective actions?
5.8. STRATEGIC EVALUATION
In Shan Foods strategy evaluation reviews different strategies and its subsequent implementation, in terms of the direction towards strategic organization goals. This exercise comprehensively examines various activities and assesses their effectiveness and makes recommendations to improve their performance. It is usually conducted in Shan Foods in the form of a Marketing audit.
5.9. MEASURING ACTUAL PERFORMANCE
Ratios:A simple and effective technique to measure performance in Shan Foods is in terms of ratios. However these should not be used in isolation but should rather be considered in relation to trends and comparison with planned or standard ratios. Additionally, it is important to acknowledge that though these ratios are a quick and effective way to establish performance, they are mere indicators and hardly identify the source of a pending problem. It is also important to define the standards and be consistent with their use when using ratios, for example, profit before or after tax is to be considered. Many businesses operate with lower acceptable ratio; however a ratio that is too high shows that the organization is not making optimum use of its financial resources by holding too much cash. Shan Foods use these ratios to analyze the level of asset involvement in its marketing efforts.
5.10. VARIANCE ANALYSIS
Shan Foods is able to examine the variation between the actual and planned results and this applicable to a range of different strategies. In Shan foods variance analysis is apply to sales price and sales volume and the values of variance is apply to either of the two reasons. Through this management of Shan Foods can thus examine why revenue targets fell short of the intended volume or intended price. This technique can further be used to analyze other factors such as profit, cost and market size.
[SHAN FOODS]
67
5.11. PERFORMANCE APPRAISAL
The focus of Shan foods is on achieving better results from groups or individuals and their framework is based on planned objectives, levels of achievement and competence. Management is required to have good people skills and its attitude to be constructive in nature. This involve them using three specific managerial skills
REVIEWING PERFORMANCE –Shan Foods emphasize the use of objective criteria to be used as the basis of such reviews. Far too often our industry and business environments use personal preferences and pre-conceived notions about employees to write performance reviews. The result is a deteriorating workforce which lacks motivation and hence a required level of commitment towards company vision, mission and objectives. The review criteria’s are communicated and all work and personal development plans are considered in tandem with the communicated criteria.
GIVING FEEDBACK–Shan Foods does not just focus on the negatives when giving feedback, since such practices are common in the Pakistani business environment. It is pertinent to be specific yet descriptive when referring to actions, behaviors and judging overall results.
COUNSELING– in order to overcome the observed weaknesses and build on the noted strengths, performance ,Shan Foods’ management is always ready to counsel staff so as to build a workforce that is not only equipped and geared towards achievement but also motivated and committed enough to go attain the company goals.
5.12. THE NEED FOR TAKING CORRECTIVE MEASURES
In Shan Foods if planned strategies are not meeting its intended objectives, it calls for corrective actions. Since there is a wide range of possible outcomes, it is obviously prudent to have the corrective actions which are addressing the areas where the problem exists. Following are a few broad categories where problems usually exist, and the corrective actions that are taken by Shan Foods to address them are:
Unsuitable marketing objectives and strategies.
Unsuitable operational tactics.
Insufficient marketing budget.
5.13. TAKING CORRECTIVE MEASURES:
In Shan Foods corrective action are implemented to address the weakness identified in a management system. Normally corrective actions in Shan Foods are initiated in response to:
Customer complaints
Abnormal levels of internal non-conformity
Non-conformities identified during an internal audit
[SHAN FOODS]
68
Management control leads Shan Foods to a more effective and efficient use of its resources, helping it to channel their efforts towards initiatives and their achievement. This in turn helps them achieve their financial objectives in a controlled manner.
5.14. MARKETING DASHBOARD
A tool used in Shan Foods to simplify marketing reporting and analysis. It continuously tracks marketing metrics, related information and trends and presents everything on a one page report. It helps Shan Foods by:
Staying a step ahead and focused
Providing a better insight into marketing related problems
Communicating information to everyone involved
Saving management valuable time
Measuring marketing effectiveness
Making smart decisions
Continuously tracking marketing activities and metrics like
sales per customer, product, region, industry, etc
sales from new products / customers
Profit and margins per customer, product, region, industry, etc.
profit and margins from new products / customers
market share
5.15.CSR INITIATIVES OF SHAN FOODS
Shan foods is actively involved itself in welfare activities and taking CSR initiatives. They are intensified their welfare activities in the month of Ramadan. It includes providing food to the needy at the time of ‘sehri’ and ‘aftar’. Shan foods other welfare activities which are carried out throughout the year are:
Donating money for the construction of Masjid. Giving money to Madarsas for upbringing of the
children and for spreading religious knowledge. Giving Scholarships for to enhance education level to the children of their own workers and
labors as more than 1200 people worked there.
[SHAN FOODS]
69
Other than this they have set their pay scale minimum of Rs. 10,000 which is higher than the industry average.
[SHAN FOODS]
70
6. CONCLUSION
Spice industry all over the world can be referred to as a sub set of food industry. Spices contribute a considerable share in Pakistan’s imports and exports. Within this industry 40% market share is with unbranded loose spices and the rest with branded packed spices. Shan foods is the leading manufacturer of branded packed spices and holds 50% of the share in 2011 while 45% is occupied by other manufacturer such as National foods, Mehran spices, Habib spices etc.
Shan foods ensure Shariah compliance at every level of the organization. They use Equity financing to cover the firm’s financial aspects. They use latest technology, innovation and effective and efficient management techniques to carry out strategic planning, implementing, evaluating and controlling activities.
In formulating this report, we learned many important aspects of strategy formulation, implementation and control. Shan uses Pest analysis, Porter’s five forces model, EFE and IFE Evaluation, Competitive Price Matrix, QSPM, SWOT matrix, SPACE matrix, BCG matrix, IE matrix, Grand strategy matrix and Product/Market expansion grid. The strategic formulation process is carried out each year and the implementation and evaluation are carried out accordingly.
Strategy Implementation activities are carried out initially current and then projected action plan.
Strategy evaluation includes three basic activities 1- examining the underlying bases of a firm’s strategy, 2- comparing expected results with actual results, and 3- taking corrective actions to ensure that performance conforms to plans. In many organization is simply an appraisal of how well and organization has performed.
As far as strategy evaluation is concerned, for Shan Foods, the criteria to measure strategy success should be evaluated from the following factors:
Measurement of awareness
Feedback on customer satisfaction
Market share data – both in terms of levels of sales, and repeat business
In the end, we can conclude that Shan Foods have got all the factors that are necessary for growth and prosperity and the company is heading on a smooth journey towards the achievement of its mission and vision.
[SHAN FOODS]
71
7. RECOMMENDATIONS
Although Shan Foods has been successful in maintaining its position as market leader in the spice industry but by implementing few different strategies it can further increase its market share and profitability.
One of the growing sector in food industry is of frozen foods, though a new field for Shan foods but with the current performance in spices and the quality it maintains, Shan has strong chances of making its marks in the frozen food category as well which is currently led by K&N.
Shan Foods can use its existing distribution and production facilities in above initiative. And by using this effectively Shan Foods can tap the entirely new market and enhance profitability of its business.
Though the new generations are realizing the benefits of branded spices over unbranded ones, but there still need to be developed effective marketing strategies after understanding the trends in how people are using spices and for what reasons are they using them.
Convenience, environmental concerns, increasing acceptance of food are some of dimensions organizations need to study and develop theirusesfor their spices.
Although Shan foods are using advertisement for the promotional purposes but they are usually doing it seasonally, they should increase the frequency of its advertisement and they should also bring some new ideas for their advertisement campaign.
Shan Foods has huge market in Punjab, therefore, it can produce its own raw material which will reduce cost and improve quality, so Shan can expand its market.
It can also adopt the strategy of market penetration in Punjab as there is vast scope exists in the market to go through with this strategy because in Punjab National has more market share as compared to Shan.
Shan Foods can also do expansion and related diversification like National e.g. ketchup, jams; marmalades etc. and increase its profitability.
[SHAN FOODS]
72
8. GLOSSARY
KRIs – Key Result Indicators
KPIs- Key Performance Indicators
SKU- Stock keeping units
FMCG- Fast Moving Consumer Goods
Marketing Dashboard- A tool used to simplify marketing reporting and analysis
PEST – Political, Economic, Social, Technological
EFE- External Factor Evaluation
IFE- Internal Factor Evaluation
CPM-Competitive Price Matrix
QSPM- Quantitative Strategic Planning Matrix
SWOT – Strengths, Weakness, Opportunities Threats
SPACE- Strategic Position Action Evaluation
BCG- Boston Consulting Group
ATL- Above the Line
BTL- Below the Line
[SHAN FOODS]
73
9. BIBLIOGRAPHY
PRIMARY SOURCES
Mr. AMIR SUBHAN
o Manager Benefits and Compensation o Shan Foods o Email: [email protected]
MR. ZEESHAN ABRO
o Former Manager HR o Shan Foods.
SECONDARY SOURCES
1. Ahmed, Rutaba, 2008, “A Silent Killer”, Jang, [online]. 13th May, 2008
Available at: http://jang.com.pk/thenews/may2008-weekly/health-13-05-2008/index.html
2. Foodtech, “Industry Overview, Pakistan- Steady Pace for Successful Growth”, [online]. Pakistan.
Available at: http://www.foodtechpakistan.com/Indsutry%20Overview.html
3. Small and Medium Enterprise Development Authority (SMEDA) Sindh, 2006,
“Pre- Feasibility Study: Spices Processing, Packaging & Marketing”, [pdf]. December 2006, Pages 3,
8-12, Document No. PREF-12, Pakistan.
Available at: http://www.smeda.org/business-development/pre-feasibility-studies.html
4. Shan Foods, 2012, “Introduction, Company History and Mission Statement” [online]
Available at: http://www.shanfoods.com.
5. American Spice Trade Association,
[online] Available at: http://www.astaspice.org.
[SHAN FOODS]
74
10. SIGNATURE OF ALL THE MEMBERS
Name Roll No Signature ZoyaHaider 68
HamizaNizam 17
MunizaUmoodi 42
NoureenGul 46
Amna Khalid 05
[SHAN FOODS]
75
11. APPENDIX
11.1. FACT SHEET
The most prominent point in Shan Foods is that it is working on Equity Based model. Shan does
not go for bank loans. Their company is free from liabilities.
Shan foods ensure Shariah compliance at every level of the organization. They use Equity
financing to cover the firm’s financial aspects.
Shan foods enjoys an approximately 50% market share in the recipes mixes category and it is a
leading exporter of food items from Pakistan
Shan foods are export based company, its products are not customized but packaging is
customized according to the needs and demands of the people living worldwide.
Shan foods underwent a strategic turnback in 2005, when the CEO decided to
formulate new strategies to bring about an entirely new and improved look of Shan products.
Shan Foods also underwent a strategic turnback in 2008, when the company decided
to expand its operations in foreign countries.
Shan is ISO 14000; ISO 9000 certified and are going for ISO 2000 certification, so it needs to
maintain its quality all over the world.
Shan uses balance score cardin all three stages of strategic management process because
company need to grow in four prospective but it specifically use it in its implementation stage.
Shan’s primary key motivator is that it is successfully working on Equity based model.
Shan’s biggest strength is their technology .The grinding process and better aroma of Masala
create a differentiation from other competitors.
The estimated marketing budget for Shan is Rs.100 million for all their ATL and BTL activities in
the year 2011.
The company does most of its marketing usually on seasonal basis especially before and during
Ramadan and near Eid.
Females aging from 18 to 45 years compose the main target market of Shan Foods.
Recently, Shan launched Oriental recipes In Pakistan that are estimated to give profitable
returns in the upcoming years.
[SHAN FOODS]
76
Shan is already operating in more than 62 countries and it plans for global expansion as
mentioned in their vision. Shan will soon be launching its product range in Tajikistan.
The world of Shan Foods comprises 14 departments all together.
Shan Foods with a colossal annual growth of more than 50% was quick to respond to the driving
forces and key success factors of the industry and today, it proudly is the most preferred spices
company.
The Shan Foods position itself as the picture of perfection by quoting its tag line as “JUST
PERFECT”.
In Pakistan alone Shan has 500 distributors.
Shan is the largest exporter of premium quality packaged spices, spice mixes, food mixes, rice
mixes to USA, Canada, UK, Germany, Holland, Malaysia, Middle east, South Asia, Japan,
Singapore, Australia, and many other countries of the world.
It is the first Pakistani brand that has been officially launched in India and Shan foods plans to
extend its availability in other lucrative markets around the world.
Shan foods is actively involved itself in welfare activities and taking CSR initiatives. They are
intensified their welfare activities in the month of Ramadan.
Other than this they have set their pay scale minimum of Rs. 10,000 which is higher than the
industry average.
They do their strategy evaluation twice a year i.e. Midyear and Full year evaluation.
One of the very unique facts regarding Shan Foods is that they make their company targets so
transparent that it communicates to each employee after finalizing them.
