Shezan - Strategic Analysis & Planning

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ACKNOWLEDGEMENT

We would like to express our gratitude to all those who helped us during the whole of our

project. We gratefully acknowledge the help of my supervisor, Mr. Fareedy who offered us

invaluable advice throughout the project. He has spent time and energy to aid in the completion

of this project and none of this would have been possible without his patient instructions,

insightful criticisms and expert guidance.

We would also acknowledge the enormous support and advice received from my Ms. Hadia

Yasir, without whom this project would not have been of the quality that it is now.

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Table of ContentsChapter I: An Insight into Shezan..............................................................................................................................5

Introduction.............................................................................................................................................................6

Brief History............................................................................................................................................................6

Vision......................................................................................................................................................................8

Mission statement....................................................................................................................................................8

Values......................................................................................................................................................................9

Product Mix...........................................................................................................................................................10

Objectives..............................................................................................................................................................15

Industry Structure..................................................................................................................................................16

Porter’s five forces model......................................................................................................................................17

Juice Positioning....................................................................................................................................................19

Competitive strategy..............................................................................................................................................20

Chapter II: Functional Areas....................................................................................................................................21

Research & Development......................................................................................................................................22

Supply Chain.........................................................................................................................................................22

Procurement...........................................................................................................................................................25

Operations.............................................................................................................................................................26

Logistics................................................................................................................................................................26

Marketing and sales...............................................................................................................................................28

Information systems..............................................................................................................................................30

Human Resource...................................................................................................................................................31

Organizational Structure........................................................................................................................................32

Organizational Culture...........................................................................................................................................33

Chapter III: Financial Performance.........................................................................................................................34

Financial Analysis.................................................................................................................................................35

Analysis of Income statement................................................................................................................................36

Analysis of Balance sheet......................................................................................................................................38

Profitability ratios analysis....................................................................................................................................40

Overall Profitability analysis.................................................................................................................................43

Liquidity Ratio Analysis........................................................................................................................................44

Financial Leverage................................................................................................................................................45

Activity Ratio Analysis..........................................................................................................................................48

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Chapter IV: Analysis of Strategic Viability..............................................................................................................50

SWOT Analysis.....................................................................................................................................................51

External Factor Analysis Summary.......................................................................................................................54

Internal Factor Analysis Summary........................................................................................................................55

Strategic Factor Analysis Summary.......................................................................................................................56

Internal-External Matrix........................................................................................................................................57

SPACE Matrix.......................................................................................................................................................57

Plotted SPACE Matrix...........................................................................................................................................58

TOWS Matrix........................................................................................................................................................59

Value Chain Analysis............................................................................................................................................60

Grand Strategy Matrix...........................................................................................................................................61

Portfolio Analysis..................................................................................................................................................62

BCG Matrix...........................................................................................................................................................63

Chapter V: Shezan Strategic Plan.............................................................................................................................65

Strategic Plan Overview........................................................................................................................................66

Vision....................................................................................................................................................................67

Mission..................................................................................................................................................................67

Objectives..............................................................................................................................................................68

Corporate Development Stage...............................................................................................................................68

Positioning.............................................................................................................................................................69

Research & Development......................................................................................................................................71

Procurement...........................................................................................................................................................72

Operations.............................................................................................................................................................72

Marketing and Sales..............................................................................................................................................73

Logistics................................................................................................................................................................74

Human Resource...................................................................................................................................................75

Organizational Structure........................................................................................................................................76

Organizational Culture...........................................................................................................................................76

Information Systems..............................................................................................................................................77

Applied Models.....................................................................................................................................................78

New BCG Matrix..............................................................................................................................................78

McKinsey’s 7-S Framework..............................................................................................................................79

References....................................................................................................................................................................81

Annexures....................................................................................................................................................................82

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EXECUTIVE SUMMARY

Shezan International Limited was incorporated in 1964 as Pioneer in juices in Pakistan, having mission to produce

the largest food processing unit to meet the country’s local as well as export needs. Since then it

has continued to provide quality products to its customers with products and packaging

innovations. This report covers broad areas of marketing, finance, management and operations of

Shezan international limited.

An important part of this report comprises of financial analysis of Shezan international limited

with its two major competitors Nestle and Tops. The analysis of the company is done through

different measures and tools of analysis used by analysts in order to analyze companies. These

measures include the analysis financial statements, short-term liquidity analysis, capital structure

and solvency ratios, return on invested capital ratios, asset utilization ratios and analysis of profit

margin ratios etc. The study covers all the aspects usually considered by the stakeholders of the

company. The profits and losses, liquidity position, changes in owner’s equity, movements in

assets and liabilities, and all such factors will discussed later in the report.

Another important portion of the report comprises of the current operations of the company,

which is the strategic management. A comprehensive detail is provided about the company’s

strategies devised to maintain and develop the product line of juices. The results have been

interpreted and critically analyzed to propose new strategies for the improvement of Shezan

international.

We also have analyzed the current business strategies of Shezan international and based on the

results of financial ratios and other market and industry analysis, we have proposed some new

strategies.

These new strategies aim to build a better image for Shezan international. In addition to its

image, the proposed strategies will also help in achieving lower costs through better distribution,

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efficiency in operations and revamped marketing plan to better position and sell Shezan juices.

The strategies will help Shezan juices to compete with firms like Nestle.

Chapter I:

An Insight into Shezan

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Introduction

Shezan International Limited is a Private Limited Company, with the main objective to set up an

industrial undertaking for manufacturing of juices, squashes, sherbets, jams, pickles and

preserves from fruits and vegetables. Shezan International Limited was conceived as a

joint venture by the Shah Nawaz Group of Pakistan and Alliance Industrial

Development Corporation of U.S.A. The agricultural background of the Pakistani sponsors

induced them to establish this agro-based industry. Taking advantage of abundance of fruits

available in Pakistan and the advanced technology provided by the American partners, Shezan

became a pioneer in the field of converting fruits into pulps, concentrates and juices. Today

Shezan is the largest food processing unit having developed and installed the capacity to meet

the country's local as well as export needs

Brief History

Shezan Company was incorporated on May 13, 1964 as a private limited company, with the

objectives as set out in the Memorandum of Association in general and in particular to set up an

industrial understanding for manufacture of juices, squashes, sherbets, jams pickles and

preserves from fruits and vegetables. Nature has blessed Pakistan with an ideal climate for a

wide range of delicious fruits. Over the centuries Pakistani experts have acquired and developed

unique strains of exotic fruit varieties, unmatched for their rich flavor and taste Shezan

International Limited was conceived as a joint venture by the Shah Nawaz Group of Pakistan and

Alliance Industrial Development Corporation of U.S.A in1964. The agriculture background of

the Pakistani sponsors induced them to establish this agro-based industry. Taking advantages of

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abundance of fruits available in Pakistan, and the advanced technology provided by the

American partners, Shezan became pioneers in the field of converting fruits into pulps,

concentrates and juices. Today Shezan is the largest food processing unit having developed and

installed the capacity to meet the country’s and export needs. In 1971 the Shah Nawaz Group

purchased all the shares of Alliance Industrial Development Corporation with the permission of

the Pakistan Government. The Company has since shown sustained growth in both the domestic

and exports fields. The Company has been steadily expanding its production capacity over the

years. In1980-81 a separate unit was installed in Karachi which now caters for Karachi, Sindh

and export demand. A new bottle filling plant was set up in1983 in Lahore unit increased the

capacity five-fold. An independent Tetra Brick Plant was commissioned in 1987 making us the

leading manufactures with comprehensive range of production in the fruit processing field in

Pakistan

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Vision

“To be known as leader of quality products in the region. Dedication to quality is a way of life at

our company. In its activities the company will pursue goals aimed at the achievement

of profitable business .these results will be derived from the dedicated efforts of each employee

in conjunction with supportive participation from management at all levels of the company. To

pay its role in the economic development of the country and to enhance quality of life of

its people”

The vision statement should be brief and simple enough to understand by

the stake holders. It should be specific and depict the clear picture of the

company.

Mission statement

“Our mission is to provide the highest quality fruit and vegetable related juices and products to

retail and food services customers.

We will accomplish this by maintaining a tradition of pride in our products, growth through

innovation, integrity in the management of our business and commitment to team management

and quality improvement process.”

The current mission statement of Shezan international is very market

oriented where as in recent perspective the use of customer oriented

mission statements are better to understand by the customers as well as

they are easy to attach with them emotionally.

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Values

Integrity & Ethics

Shezan has an open disclosure policy and transparent processes. All business activities

transactions are carried out honestly and with fairness; results are achieved through

demonstration of honest and ethical behavior

People

Have passionate people with intelligent and firm approach towards business. To facilitate these

people Shezan gives them challenging opportunities, training, and fun loving environment,

necessary resources and facilities. Public recognition of talent is a priority.

Innovation

Innovation is the way of life at EFL. It is valued, encouraged and rewarded in all aspects of

operations.

Safety, Health & Environment

Shezan manages and utilizes resources and operations in such a way that the safety and health of

their people and neighbors.

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Product Mix

Shezan International offers variety of products. Shezan is one of the giant in

the business and its portfolio consist several products. It majorly operates in

the Pickles, Sauces, Salad dressing sector, Juices, Ketchups and Jams. The

company is involved in the processing, manufacturing, trading and selling of

these items.

AllPure:

ALL PURE is a new series of juices of Shezan international, it is filled with the

all pureness of natural fruits. Shezan International range of All Pure juices

claim to enrich the senses of the consumers with the new, healthy and fresh

taste of 100% pure juice. To experience true essence of nature All pure is the

best option because it helps you to embark your taste buds with the

sensation of sweetest fruits.

It is available in the following flavors,

ORANGE

MANGO

GRAPES

PINEAPPLE

TROPICAL

APPLE

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Bottled Juice:

Shezan International bottle juice is very popular and is liked by all age

groups particularly children. Shezan bottle juice claims to reenergize and

revitalize the body, mind and soul of the consumers. It is Pakistan’s most

favorite and iconic juice drink that provide ultimate pleasure and freshness.

Regular Juices:

Shezan international is providing the perfect balance of good taste. Their

regular juices are available in variety of flavors and they are considered as a

good choice by the consumers to complement a light snack. It is available in

five flavors.

ORANGE

LYCHEE

APPLE

PUNCH

LEMON BARLEY

Twist:

Twist is Shezan International another juice brand that is available in

attractive, slim and easy packaging, Twist juices are considered as a must

have in one’s house. It is available in the tasty six flavors.

APPLE

RASPBERRY

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PINEAPPLE

FRUIT PUNCH

MANGO-STRAWBERRY

MANGO

Syrups:

Shezan International has a variety of flavors for their syrups. They can be

mixed with water to provide flavorsome and quench thirsting refreshment.

These are available in the following flavors.

SAMARKAND

SANDAL

POMEGRANATE

ROSE

LIME CORDIAL

Vinegar:

Shezan International produces good quality synthetic vinegar which is

available in the market in various sizes.

Sauces:

Shezan International has very reputable sauces (ketchups) in the market.

Their tomato ketchup is a must for every meal. They are available in

different sizes starting from sachet to 10 kg drum. Green Chilly and tomato

onion sauce is also produced by them.

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Jams:

Shezan international made their Jams and Marmalades from the fresh and

handpicked fruits and that is the reason why Shezan International has been

known in the market for its quality. Shezan’s sweet, yummy and delicious

Jams can be had at breakfast, Lunch, Dinner or any time. Shezan Jams are

available in the following flavors.

PLUM

ORANGE

MANGO

MIXED FRUITS

STRAWBERRY

APPLE

Quench:

Quench is a product of Shezan International that provides a solution to heat

in seconds, open the sachet, mix with cold water and get instant

rejuvenation. It is available in the following two flavors.

LEMON & LIME

ORANGE

Squashes:

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Shezan’s quick mix squashes are present in every household particularly in

summers. They provide the immediate revitalization to the consumers and

are available in the following flavors

MANGO

LEMON BARLEY

POMEGRANATE

ORANGE

Mango Nectar:

Mango nectar by Shezan is extracted from Pakistan’s premium and best

quality mangoes. It is delicacy fit to savor, It is 100% pure and is best

alternative to sodas and soft drinks.

Pickles:

Shezan’s pickles and delicious chutneys provide something special and extra

to every meal in every household. It is available in different sizes and many

flavors.

Ispaghol:

Shezan International has also started to produce Husk because it is very

good for the health. It is used by the consumers for two reasons one being it

slows down the absorption of food during digestion therefore minimize the

intake of calories and second being it takes the edge off hunger. It makes

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you slim, smart and healthy and that is why it has been number one choice

by the consumers.

Objectives

Objectives are the steps which you take in practical to get or achieve short

term as well as long term goals. The objectives can be of three categories

depending upon the time frame attached or associated with that goal, it may

be short range, medium or intermediate range and long range.

As it has been so clear by the mission statement of Shezan international that

what are their major and prime objectives but let us list them here again to

make it quite clear, simple and easy to understand.

To put it’s all efforts to become industry leader in the industry.

To keep focused and determined to provide best quality fruits and

vegetables product

To be committed to provide excellent and quality juices and nectars to

their consumers

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To keep an eye on the fruitful investments and opportunities in new

projects

To achieve better production facilities

To manage the operations of the company in effective and efficient

way

To cope up with the technological advancement and keeping up to

date

Industry Structure

The beverage industry of Pakistan has seen many rise and fall but one can

say with full assurance that it has growing with the years. The industry

consists of the product categories such as soft drinks, juices, syrups, milk

and squashes, although Shezan international doesn’t have all these

mentioned categories yet it falls under the beverage industry. According to

the Stats there are currently 170 units operating and both upstream and

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downstream industries have on rise and are growing significantly. There is

very high profit margin in the industry and has witnessed a significant

increase over the years.

The growth of this sector has been hit badly with the decrease in purchasing

power of the consumers. Inflation and conditions of Pakistan has caused the

growth a bit slow. Poverty has been increasing in Pakistan and thus the

purchasing power is decreasing with the years. The competition has also

increased in few years due to easy import of the products.

Research has also shown us that the term of health consciousness is

widening its arms very rapidly and just because of this consumer prefers to

have low calorie and diet juices or squashes rather than the regular ones.

Future growth of this sector and industry is more likely to rise on a slower

pace because of the intense competition between the local and imported

products. The more innovative products will come up in the market making

consumers to think twice to purchase a product.

Distribution of the products is more likely to increase up to the far rural areas

with time and this factor is very important in the growth of this industry. It is

more logical to think in a way that people will get aware and aware about the

products and thus the increase in sales and revenues will occur which in turn

will make this industry grow.

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The overall industry attractiveness and industry structure is better illustrated

by Porter’s five forces model:

Porter’s five forces model

The juice industry is attractive for new market entrants. The reason being that due to high

demand it is easy to achieve economies of scale. The government policies are also favourable for

the industry and the exit barriers are not too high as well.

Potential entrants

Low switching costs

economies of scale

favourable government

policy

Suppliers

Large number of

buyers like nestle,

tops, country.

Low switching

costs

Substitute raw

material

Buyers

Large no. of

buyers

Substitutes like

nestle, country

available

Low switching

costs

Threat of Substitutes

Similar tasting juice

(country, tops, nestle)

Same price

Same identity.

Degree of rivalry

Many competitors

(nestle, country, tops

etc)

Low product

differentiation

Growing industry

Other stakeholders

Unions, government

etc.

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The buyer strength in the industry is however is high. Many substitutes are available and the

switching costs are low. The same is for supply side which is good for producers as it means less

bargaining power of suppliers. Supplier switching costs are low and firms can and do forward

integration.

As far as substitutes are concerned, there are number of substitutes available. These juices are

really close substitute offering the same benefit. The competing brands also have a similar

product identity or perception. The industry is growing as new entrants are continuously coming

in. This has increased the competition to a great deal.

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Juice Positioning

Positioning is the perception of a product or service in the mind of the people. Positioning of a

product allows it to be seen or perceived in a certain way by the target audience. To have a

successful strategy and product, effective positioning must be done. Without strong positioning

no matter what the product is, it’s going to fail.

Shezan international has positioned Shezan as a low quality affordable juice drink. The

perception has been created in the minds of consumers that Shezan is an affordable juice with

good taste. To support this positioning strategy, Shezan has been priced reasonably well below

the competing high quality juices like nestle.

The target market for Shezan is the middle income group and lower middle. The people Shezan

is targeting are mostly young adults and teenagers. The placement of the product has also

contributed to its low quality positioning. Mostly Shezan juices can be seen at small retail stores,

school cafe and canteens. The presence of Shezan in superstores and big markets is nonexistent.

This may be due to the placement strategy or due to the shelf space in stores.

The company has also created this perception through various advertisements showing young

teenagers drinking and getting refreshed by the juice. These school and college going students

also symbolise that it’s not expensive and is pretty affordable. The price of the juice is also one

of the lowest in the market hence making its perception of low quality juice.

Another factor contributing to this perception is the taste. The juice is made from artificial

flavours and sweeteners thus making its taste give a perception of cheap low quality juice. The

packaging has also contributed to this type of positioning. The juice pack are very basic in design

and lack any creativity.

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In today’s juice industry, companies have started increasing their fruit concentration as the

people are demanding it. The juices with high concentration of pulp are perceived as better

quality. In case of Shezan people associate it as low quality because of this low concentration of

fruit pulp.

Competitive strategy

Shezan has the highest production capacity as compared to its competitors.

Shezan is very strong name and can afford to have super production

facilities.

Shezan international is using cost leadership strategy in which all of the

efforts are made to minimize the costs and to provide the masses with your

low cost product. Shezan with this strategy is quite successful in the market

and is able to cope up with the competition quite effectively and efficiently.

On the other hand Nestle uses the differentiation strategy. It attacks the

market with differentiated products but on high price thus providing room for

Shezan to sustain in the market with targeting low income segment

massively.

The strategy of Shezan gives advantage as there are number of suppliers in

the market that supply material to the industry. But Shezan gets its raw

material from its on farms to get the advantage over its competitors and to

reduce the suppliers bargaining power (Backward integration). Shezan

provides the same product as its competitors are providing, as bargaining

power of buyer is low and many

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Chapter II:

Functional Areas

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Research & Development

At Shezan International, the company uses the best technology and continues to strive towards

acquiring best technology. The company’s major objective is to have sustainable technological

advantage over their competitors. For this reason they continually search and research for

improvements in their manufacturing practices and technologies. They also want their plant to be

of international standard so they can support their claim of being an international firm. Shezan

has excellent manufacturing facility for juice productions. Their machines are not outdated. They

also have world class packaging system bought from tetra pack. This ensures their product to

remain safe and healthy. The R&D department in Lahore continuously works on developing new

product offerings. They also continuously work on improving their current product by changing

ingredients.

Supply Chain

Supply chain management encompasses the planning and management of all activities involved in

sourcing and procurement, conversion, and all logistics management activities. Importantly, it also

includes coordination and collaboration with channel partners, which can be suppliers, intermediaries,

third party service providers, and customers. Supply chain comprises of all the activities necessary for

making and delivering the product to consumers. A basic model of supply chain can be seen in the

following diagram.

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The Shezan international uses a similar supply chain model for its juice manufacturing. The

supply chain of Shezan consists of raw materials, supplier, manufacturer, distribution and

customer.

In juice manufacturing, acquiring of raw materials is a key task. To make the juice of highest

quality, the raw materials that are being acquired must be of the highest quality as well. The

main ingredient in making juice is obviously the fruit pulp. Getting the best quality pulp at

affordable rates is very important. Shezan international for this purpose have set up their own

farms from where they get the most of their pulp. This ensures them the quality they required and

cut the costs as they don’t have to pay to any third party. This backward integration has allowed

shezan to have a competitive advantage. The raw materials take usually 1-3 days, while materials

other than pulp take longer. Apart from the pulp, juice manufacturing requires other raw

materials such as citric acid, concentrates, colour, preservatives, sugar and packaging. The

company usually stores 7 days’ worth of raw materials and adjust it as per demand.

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The suppliers of Shezan international are the people from whom they acquire the raw materials.

These include their own farms, other ingredient suppliers and packaging company i.e. tetra pack.

The juice making process is a continuous process so the inventory is usually ordered in advance.

Sometimes delays are caused due to lack or delay in supplies. This can be due to late orders or

lack of quality of raw materials. Therefore shezan has to keep more inventories then required.

The manufacturing is done at the various plants in different areas of the country. Shezan has a

separate packaging plant as well. The manufacturing process is continuous flow process.

The factories operate as per demand. Manufacturing plants uses several supplies and convert

them into finished product. The process of manufacturing will be explained in detail in

operations section. This finished product is then packed using the tetra pack machinery and is

then thoroughly checked for quality. Packaging is done in different sizes from 250ml to litre

packs. Then these completed units are stored in local facility before being distributed to their

customers and wholesalers.

The next step in the supply chain is distribution. This is perhaps the most important of the steps

and requires great planning. Shezan international has set up their distribution offices in large

cities like Lahore, Multan, Faisalabad, Peshawar and Karachi. Reason for having more offices in

Punjab province is due to its demand and population. Shezan’s distribution is partially done by

the company itself and rest is outsourced. In Lahore the company has its own distribution

network and handles all by itself. For all other cities they have outsourced distribution. The

regional offices in other cities are responsible for acquiring the supplies and getting them

distributed through the use of third party distributor.

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The distributors in Faisalabad and Multan use their own warehouses for the storage of Shezan juices and

they reserve the distribution rights in respective cities. These distributors further give these products to

small distributors which causes various problems. It increases the cost of distribution making the juice

expensive and also causes the delays in the supply chain. When the product doesn’t gets on the retail

shops in time then Shezan has to bear stock out cost.

The last step in the supply chain is the customer. The customer of Shezan is the distributor and large

wholesalers. Shezan supplies directly to them and they are further responsible for providing the end

consumer. Shezan also directly supplies to some large supermarkets and retailers. The end consumers get

their juice from every location where the distributors supply the product. This also increases costs and

delays distribution.

(The individual elements of the supply chain are explained)

Procurement

Procurement refers to the all set of activities that take place in the purchasing of goods or

services.

Shezan international has its own fruit farms for the raw material that is used in the production of

their products. All of the raw material is purchased by procurement department after strong

quality check and assurance. The raw material coming for their most of the products is fruits and

vegetables. It takes two to three days to reach Shezan international from the farm. All of the

department working at Shezan international are well integrated and well-coordinated thus

planning department and store department quite effectively perform their tasks and the activity of

procurement is sufficiently performing with the collaboration and integration of different

departments.

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Operations

The manufacturing process of juices at Shezan International takes place from

the raw materials, First of all the raw material which is fruit is brought to the

factory premises, from there the raw material after checking and inspection

by the team is done. The fruits are graded before they can send further. Only

the fruits which are up to the requirement of Shezan are moved ahead to the

production area.

The raw material is sent to the boiler to extract pulp from it, the process of

heating makes pulp from the fruits which is essential element for the making

of juice. From here the pulp just made is sent to the plate heat exchanger

where the process of cooling takes place, the temperature is lower down to

4degree Celsius allowing pulp to dry, cool and get soft.

The dry, soft and cooled pulp is stored to the pulp storage tank. It is then

further moved ahead to the mixing tank where the process of mixing takes

place, in this area sugar, preservatives, food colours and citric acid is mixed

with pulp to make the final product.

The mixing process takes place for relatively long time so that the true

essence and taste should be achieved. After mixing the products are sent to

the packaging area where attractive packaging of Shezan juices takes place

and are shipped out of the factory to distributors and retailers.

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Logistics

According to porter’s value chain model, logistics can be categorized as inbound and outbound. The

inbound logistics consists of acquiring raw materials and outbound logistics are concerned with

distribution. Shezan international inbound logistics consists of acquiring raw materials from their farms.

The fruit pulp is one of the major inputs and is supplied by Shezan’s on farms. All other raw materials are

supplied directly to the manufacturing plant by their respective suppliers. These various other raw

materials are preservatives, food colour, flavour enhancer, sugar, and citric acid and packaging materials.

The outbound logistics consists of distribution network. Distribution is responsible for making the

product available to end consumer. In Lahore Shezan owns their own distribution network and supply

through their own vans. Agents are also hired for this purpose so they can acquire and market to new

retailers. In all other cities, the distribution is outsourced to third party. Company has formed regional

offices in Multan, Faisalabad, Peshawar and Karachi. Shezan supplies juice to large wholesaler in various

regions who in turn further give the product to other small distributors. These large wholesalers own the

product and reserve rights to distribute. These wholesalers also have their own cold storage where they

store the product n their own expense. Agents are also hired for distribution to certain category like retail

stores and staple food stores.

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As seen in the above diagram, Shezan uses various methods of distribution to reach final customers. Use

of agents and wholesaler as well as their own logistics help them cover vast area but this strategy

sometimes also backfires through high costs and delays.

Marketing and sales

The marketing and sales department is responsible for making forecasts, establishing sales target

and quotas, making promotional plans, advertising the product and satisfying the end user’s

need. Marketing mainly focuses on the 4P’s which are product, price, promotion and placement.

We will be examining each P with respect to Shezan juices.

Product

The first P that we will discuss is product. The product under discussion is Shezan juice. The

product is a revitalizing, fresh and sweet tasting drink. People use juices for the purpose of

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nutrition, freshness and quenching thirst. Shezan juice provides all these through their product.

The product Shezan juice comes in 250ml size packs. The packaging material used is tetra pack

which is the best in quality. Shezan offers various varieties of flavours ranging from apple,

mango, orange and mix fruit. The shelf life of shezan juice is almost 6 months. Shezan juice

belongs to the FMCG category and is primarily aimed at teenagers and young adults. The basic

need that it aims to satisfy is quenching thirst and providing freshness.

Price

The second P is the price. The price is what the seller charges in return to satisfying a need. The

shezan juice is reasonably priced and is one of the lowest priced juices in the market. It is

currently being sold at Rs. 10/ 250ml pack. Compared to its immediate competitor country, it is

competitively priced. Broadly looking at the juice category, shezan is the cheapest juice

compared to Nestle, Maza, Slice and Fresher. The pricing objectives that shezan juice has

established are:

1. To achieve target sales

2. Profit maximization

3. Competitive pricing

4. Increase market share

5. Sell to masses

The pricing objectives clearly reflect the low price. The company aims at maximizing profits by

selling as many units as possible. They want to capture the price sensitive consumer and want to

increase their share by selling to these mass audiences. Another reason for this low price is the

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competition. Juices like country are a close substitute with similar price. Shezan has maintained

its price to compete with it and protect their market share.

Placement

The placement is the distribution of the product. The distribution of Shezan has been discussed in

great detail in the supply chain and logistics model.

Promotion

The last but perhaps the most important P is the promotion. Promotion is the tool which enables

the company to communicate their product and offerings to their target market. It is used to

inform, persuade and communicate the target audience members.

Shezan is mainly using the following media to advertise:

o Billboards

o Television

o Radio

o Newspaper

o Broachers

o internet

Shezan has used in stores promotion where they have discounted their juice if purchased in large

quantities. Shezan has also carried out free taste sampling in various locations.

In addition to this Shezan has been promoting their product through increasing their social

reputation and creating value in consumers mind. Shezan has sponsored several events in the

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past. They also have participated in relief efforts of flood and earthquake victims. They have also

participated in building of mosques and printing of Quran so i can be distributed free of cost.

Information systems

The use of information systems has become increasingly important in today’s world. Companies need to

have the best set of information systems and professional to fully benefit from it. A good information

system can provide company with a competitive advantage. The aim of a good information system is to

create synergy in the organization. It allows information access to all concerned departments and data

availability. Information systems also help in operations, purchasing and marketing activity.

Shezan currently uses software like excel, SPSS and some features of oracle software in their research

and development. Apart from this they have a computerised system for their inventory control and

production handling.

Human Resource

Human resource department is made to help people and organizations reach

their goals and objectives and to facilitate the relationship of organization

with its employees.

The activities performed by the Human Resource department at Shezan

International are very simple and clear. It is responsible for effectively

manage and control the day to day operation at Shezan international and

selecting the system among many systems that will provide efficiency and

effectiveness to the system. The department is also responsible for the hiring

and firing of staff and recruiting the best possible candidate for the company

who will in response bring value to the company and doesn’t hurt or damage

33

the brand name Shezan. Shezan’s HR department also provide guidelines,

norms, rules and regulations which have to be bound by all the employees

irrespective of their seniority or position in the firm. Equal opportunity is also

providing by them and it also ensures its due help in complex decision

making like legal activities and formulation of plans etc.

Recruitment Policies

Shezan International believes in both internal and external postings thus we

are going to discuss them in detail.

Shezan International believes in internal job posting which allows the current

staff or employees of Shezan International for a possible promotion, shifting

or rotation and keeping the morale high.

Self-Nomination:

HR department at Shezan publishes newsletter that has detailed job listings

in it along with description and specification. This incorporates nomination of

job by self as well as nomination by the employee or supervisor.

Nomination by Employees Supervisor:

This is rather an informal technique used by Shezan International. It

incorporates the nomination by the external or independent supervisor which

nominates some employee on the basis of his better work.

34

Shezan International also believes in external job posting. For this purpose

the use of media both print and electronic are used. Ads are published in

dailies for job openings along with its detail and specification.

Organizational Structure

The structure of a company refers to the communication system that has

been used in the firm and the authority that links employees and staff

together to serve the organizational goals and objectives and to achieve the

tasks that are provided by the company.

Structure can be described in the form of an organization chart. Shezan's

organizational chart shows that it has functional structure.

Functional: In functional structure people with similar skills and performing

closely related activities are placed together in formal group. They are

expected to work together to perform a critical function for the total

organization. Common functional departments of Shezan are:

1. Marketing

2. Finance

3. Production

The current structure of Shezan is doing well so there is no need to change

it, For such diverse product company, functional structure is appropriate.

People from different areas and with different skills are put together to work

35

which increases the productivity and bring effectiveness and efficiency to the

firm.

Organizational Culture

Shezan International has excellent organizational culture. The culture is very

professional but yet very enjoyable, the environment is very easy and

casual. Shezan international gives lot of importance to its junior employees

and seniors are always ready to listen to their juniors and are also willing to

act upon their advices and suggestions if considered feasible. Employees are

free to pursue and select their goals and objectives and HR department is

always there for employees to provide them with the best guidance. The

employees of Shezan believe that it is the company of reality and

understanding, where the employees are never for granted.

Shezan is into the business of diverse products, from juices to jams to

ketchups to pickles and thus they recruit people from different areas which

give them opportunity to excel and advance.

The company also offers employment benefits program but the workload is

extreme there. The priority is always given to the job by the staff. The

employee working there declares Shezan international a best place to work

in and to make a reputable name in the corporate market, with a very open

career ahead.

36

Chapter III:

Financial Performance

37

Financial Analysis

The part will focus on the operations Shezan International Limited for the fiscal years

starting July, 1st, 2007 to the fiscal year ending June, 30th, 2011. This chapter includes the

analysis of the company through different measures and tools of analysis used by analysts in

order to analyze the situation of a company; these measures include the analysis financial

statements, short-term liquidity analysis, capital structure and solvency ratios, return on invested

capital ratios, asset utilization ratios and analysis of profit margin ratios etc. The study covers all

the aspects usually considered by the stakeholders of the company. The profits and losses,

liquidity position, changes in owner’s equity, movements in assets and liabilities, and all such

factors will discussed later in the report of the project.

Shezan international Limited has gone through ups and down over the period of analysis

(five years ending ‘11), but there was an overall trend of growth in the company. The company

holds a good reputation in the market which can be considered as a factor of its rising movement

in share price; its shares are currently been traded at an average price of Rs. 219.

This analysis is based upon the facts collected through the annual financial reports of

Shezan international limited, online information available on the official web site of Shezan

international, and other news sources.

38

Analysis of Income statement

Shezan Income Statement

2007 2008 2009 2010 2011

Sales2,174,8

942,468,5

722,728,7

093,528,1

344,221,8

27

Cost of sales1,489,8

451,691,4

431,974,4

462,591,7

903,130,5

44

Gross profit685,04

9777,12

9754,26

3936,34

41,091,2

83

Distribution cost289,33

6368,24

0443,86

2580,49

2629,91

2

administrative costs 68,213 78,951 91,449101,41

3116,60

5other operating expenses 70,145 72,555 71,979 90,702

122,601

other operating income -13,240 -19,880 -20,155 -19,448 -28,798

414,454

499,866

587,135

753,159

840,320

operating profit270,59

5277,26

3167,12

8183,18

5250,96

3

finance cost 12,940 8,104 6,542 17,950 40,343share of loss from associate 760 16 16 18

profit before taxation257,65

5268,39

9160,57

0165,21

9210,60

2

taxation116,98

1107,19

5 58,099 58,474 70,000

net profit for the year140,67

4161,20

4102,47

1106,74

5140,60

2

Financial performance of a company can be fairly assessed by an income statement as it gives a

summary of how the business incurs its revenues and expenses through both operating and non-

operating activities. Notes to the statements helps to look things into details.

39

The five year income statements show that the company is in a good position. The Sales, the

Gross Profit and the Net Profit for the year have shown a continuous rising trend over the last

five years. The Net Profit has increased till 2010 but in 2011 it was decreased. The profits of the

company have massively increased solely and even in comparison with the increase in sales.

Therefore, rising sales is not the only factor of increasing profits; the company has controlled its

cost of sales and operating expenses quite impressively even after drastic rise in energy costs and

energy crises in the country.

The rise in finance costs is way too much in the last year which has caused the profit to decrease.

A moreover high cost of sale is another cause of decrease in profits.

40

Analysis of Balance sheet

Shezan Balance sheet2007 2008 2009 2010 2011

ASSETSNon- Current AssetsProperty, plant and equipment 256,787 292,922 299,770 416,802 423,097Long term investments 25,591 9,915 7,724 7,708 7,690long term deposits 1,938 2,603 2,661 2,588 2,314

284,316 305,440 310,979 427,495 433,769Current assetsStores and spares 1,348 1,091 18,796 15,081 6,997

stock in trade 610,903 689,438 755,711 842,4821,159,55

1trade debts 59,749 74,892 86,291 135,317 165,627Advances, deposits ,prepayments 13,729 38,897 37,113 18,183 14,683income tax recoverable 42,116 114,255 74,651 59,886 57,656cash and bank balances 108,186 84,042 70,844 99,509 82,608

836,0311,002,61

51,043,40

61,191,95

81,511,80

0

Total assets1,120,34

71,308,05

51,354,38

51,619,45

31,945,56

9

EQUITY AND LIABILITIESShare capital and reservesshare capital 50,000 60,000 60,000 60,000 60,000reserves 425,000 500,000 583,449 653,022 723,293unappropriated profits 150,696 176,900 134,371 135,116 169,718Total Equity 625,412 736,700 777,820 848,138 953,011

Long term liabilities 57,281 51,858 45,962 91,121 71,747

41

Current liabilities 437,654 519,497 530,603 680,194 920,811

Total liabilities 494,935 571,355 576,565 771,315 992,558

Balance sheet is one of the three major financial statements of a company, the other two

being income statement and statement of cash flows. It shows the position of the company at a

certain point in time.

The Assets of the company have shown an increasing trend and so have the liabilities and equity.

To further look into the picture we can see that the company’s Assets have increased by 73 %,

liabilities by 100 % and Equity by 52.4%. The rise in assets was obviously partly financed by

liabilities and partly by equity but the major portion was the liability one. Liabilities from the

very beginning are the major proportion of the assets.

There is an overall a rising trend in almost every component of the balance sheet. Long

term finance has increased greatly. Trade debts, stock in trade and other stores are the major

proportion of current assets. The company needs to focus on rising trade debts. Moreover the

balance depicts a satisfactory picture of the company.

42

Profitability ratios analysis

Gross profit margin2007 2008 2009 2010 2011

Shezan 31.50 31.48 27.64 26.54 25.85Nestle 28 26 29 27 26Tops 26.98 29.57 28.34 32.22 33.82

Gross profit margin is an indication of the total margin which is available to cover operating

expenses and yield a profit. The gross profit of Shezan in 2007 was 31.50% which has decreased

over the years and in 2011 it was 25.85. Since sales have increased in this period, the reason for a

decreasing trend in gross profit margin is increase in cost of goods sold. Nestlé’s gross profit

margin has also showed an overall decreasing trend whereas the gross profit margin of Tops has

shown an increasing trend.

Operating profit margin2007 2008 2009 2010 2011

Shezan 12.44 11.23 6.12 5.19 5.94Nestle 12 12 14 13 13Tops 9.55 16.50 15.85 19.41 22.39

The operating profit margin is an indication of the firms’ profitability from current operations

without regard to the interest charges accruing from the capital structure. The operating margin

of Shezan shows a decreasing trend. In 2007 the operating profit margin was 12.44% whereas it

decreased to 5.94% in 2011.this means that the operating expenses of Shezan has increased

over these years which include distribution cost, administrative costs. On the other hand

operating profit margin of Nestle and Tops has increased over this time period. This means that

they have reduced their operating expenses which resulted in greater profit margins.

43

Net profit margin2007 2008 2009 2010 2011

Shezan 6.47 6.53 3.76 3.03 3.33Nestle 9 7 10 11 10Tops -1.05 12.60 8.81 12.23 15.52

The net profit margin shows after tax profit per rupee of sales. Sub-par profit margin indicates

that the sales prices are relatively low or that its costs are relatively high.Net profit margin of

Shezan has decreased over this time period from 6.47% in 2007 to 3.33% in 2011. The reason

for this is the increase in the interest charger and other expenses which have resulted into

deteriorating profit margin. On the other hand the net profit margin for Nestle has increased from

9% to 10% and for Tops it increased from -1.05% to 15.52%.The reason for this is the decrease

in Interest charges and other expenses.

Return on Assets2007 2008 2009 2010 2011

Shezan 12.56 12.32 7.57 6.59 7.23Nestle 11.46 9.34 16.18 17.94 13.28Tops -0.84 5.32 4.82 7.06 10.49

Return on assets measure the return on total investment in the organization. It is sometimes

desirable to add interest or after tax profit to the numerator of the ratio since total assets are

financed by creditors as well as stock holders; hence it is accurate to measure the productivity of

the assets by the returns provided to both classes of investors. The return on assets for Shezan

has decreased over the period from 12.56% in 2007 to 7.23% in 2011. This is solely due to the

decrease in net profit for the company. On the other hand the return on assets of Nestle and Tops

shows and overall increasing trend due to the increasing trend of their profits.

Return on Equity

44

2007 2008 2009 2010 2011Shezan 22.49 21.88 13.17 12.59 14.75Nestle 2.41 2.07 4.01 5.48 6.22Tops -1.14 6.10 5.54 8.33 12.28

Return on equity measure the rate of return on the stockholders investment in the business.

Return on equity of Shezan has decreased over this time period of five years from 22.49% in

2007 to 14.75% in 2011. The reason for this decrease is the decrease in the net income of the

company over these years. Whereas Nestle and Tops return on equity showed an increasing trend

over the years. Return on equity of Tops has increased tremendously from -1.14% in 2007 to

12.28% in 2011.This was due to a tremendous increase in the profitability of the company.

Return on Common Equity2007 2008 2009 2010 2011

Shezan 22.49 21.88 13.17 12.59 14.75Nestle 2.41 2.07 4.01 5.48 6.22Tops -1.14 6.10 5.54 8.33 12.28

Return on common equity measure the rate of return on the common stockholders’ investment in

the business. Return on common equity of Shezan has decreased over this time period of five

years from 22.49% in 2007 to 14.75% in 2011. The reason for this decrease is the decrease in the

net income of the company over these years. Whereas Nestle and Tops return on equity showed

an increasing trend over the years. Return on equity of Tops has increased tremendously from -

1.14% in 2007 to 12.28% in 2011.This was due to a tremendous increase in the profitability of

the company.

45

Earning per share2007 2008 2009 2010 2011

Shezan 2.81 2.69 1.71 1.78 2.34Nestle 39.81 34.24 66.27 90.69 102.94Tops 12.20 14.93 16.45 18.21 30.02

Earnings per share show the earnings available to the owners of the common stock. The earnings

per share of Shezan Shows that it decreased from 2.81 in 2007 to 1.78 in 2010 but again

increased to2.34 in 2011 which is a positive sign for common stock holders. On the other hand

earnings per share of Nestle have increased tremendously from 39.81 in 2007 to 102.94 in

2011.this was due to the increase in the profitability and efficiency of operations in Nestle.

Earnings per share of Tops have also increased from 12.20 in 2007 to 30.02 in 2011 because of

high profits.

Overall Profitability analysis

The profitability of Shezan compared to industry is under threat implying that Shezan is not

managing its operations efficiently as the income statements shows that finance cost,

administrative cost, distribution charges, and cost of goods sold and taxes all have increased. The

major reason behind this trend is the rising inflation in Pakistan which has compelled Shezan’

costs to rise

46

Liquidity Ratio Analysis

Current ratio2007 2008 2009 2010 2011


Current ratio indicates the extent to which the claims of short term creditors are covered by

assets that are expected to be converted into cash in a period roughly corresponding to the

maturity of the liabilities. The ideal current ratio should be 2:1 which means that the company

can give 2 assets to pay a liability. Shezan’s current ratio has decreased over the years from 1.91

in 2007 to 1.64 in 2011 but still it is not considered as a threat. On the other hand Nestlé’s

current ratio is very low which has further decreased over this time period. It was 0.94 in 2007

and decreased to 0.8 in 2011. Tops have a very good current ratio which has an increasing trend.

It was 2.54 in 2007 and increased to 3.16 in 2011.

Quick ratio2007 2008 2009 2010 2011


Quick ratio is a measure of a firm’s ability to pay off short term obligations without relying upon

sale of inventories. The quick ratio of Shezan has a decreasing trend from 0.51 in 2007 to 0.38 in

2011. The reason is that more inventories are being stocked. Moreover Nestlé’s quick ratio has

also decreased from 0.54 in 2007 to 0.38 in 2011. It is also because of increase in inventories of

finished goods at year. However Tops has increased its quick ratio in 2011 from 1.53 to 1.72.

This is because more of the inventories were converted into sales.

47

Inventory to net working capital ratio2007 2008 2009 2010 2011

Shezan 1.53 1.43 1.47 1.65 1.96Nestle -6.75 6.59 -3.15 -3.17 -2.08Tops 0.67 0.76 0.76 0.69 0.67

Inventory to net working capital ratio measures the extent to which the firms’ working capital is

tied up in inventory. The inventory to working capital ratio for Shezan has an increasing trend

over this time period because more inventories is being tied with the working capital. In 2007 the

ratio was 1.53 whereas in 2011 the ratio was 1.96.This increase is due to the increase in the

inventory of finished goods which is held. Nestle is also not doing well , it has a negative

working capital ratio therefore the inventory to net working capital ratio is also negative. Tops is

doing good because it has a low ratio which is maintained over the period.

Financial Leverage

Debt to Equity ratio2007 2008 2009 2010 2011


Financial leverage refers to the use of the debt capital in a company to finance its assets. The Share

holders of the company are interested to know the leverage position of a company. Even though debt is

cheaper, it is considered riskier compared to equity and a huge threat to the company. This portion

discusses the risk arising from leverage position on Shezan International Limited. Comparing the

leverage position of Shezan with Nestle and Tops we can see that Tops is in a very better

position as it is financing almost 90% of its assets and operations from equity financing. It is not

a highly leveraged firm. Its long term debt to equity is 0.22 so most of its long term investments

48

and projects are financed by it equity. Shezan on the other hand is financing 100% of its assets

through debt which is very risky

Debts to Assets ratio2007 2008 2009 2010 2011


The debt to assets ratio shows you how much of your asset base is financed with debt. If this

ratio is 100% it means your company is bankrupt. It is very important to keep your debt to asset

ratio in line with the industry. Debt to Asset ratio for Shezan has increased over the years from

0.44 in 2007 to 0.51 in 2007.This means that Shezan has financed its 51% of the assets with debt.

Nestle has maintained the ratio to around 23-24% in this time period. Whereas Tops has a very

low ratio of 0.07 which means that only 7% of the assets are financed by debts.

Long term Debt to Equity2007 2008 2009 2010 2011


Long term debt to equity measures the balance between debt and equity in the firms long term

capital structure. Long term debt to equity ratio for Shezan had a decreasing trend till 2009

where it dropped to 0.06 from 0.09 but increased in 2010 to 0.11 but again decreased to 0.08 in

2011.This means that a major chunk of long term debt was repaid. Nestle has maintained this

ratio to 0.02 over this time period where as fluctuations can be seen in the long term debt to

equity ratio for Tops.

49

Times Interest Earned2007 2008 2009 2010 2011


Times interest earned measures the extent to which firms earnings can decline without the firm

becoming unable to pay it financial obligations. The ratio for Shezan has declined from 20.91 in

2007 to 6.22 in 2011 which is not a good sign for the company. This is solely due to the decrease

in profits in recent years. Nestlé’s ratio has also declined from 13.37 to 8.05 which is again not a

good sign. Tops Ratio has fluctuated over this time period but since it’s so high, paying its

financial obligations is not a issue for Tops. In 2011 times interest earned ratio was Tops was

180.39 which means that Tops has excess cash to pay its interest cost.

Fixed Charge coverage2007 2008 2009 2010 2011


Another method to see whether a firm can pay its fixed charges is to calculate the fixed charge

coverage ratio. This ratio for Shezan has an overall decreasing trend during this time period. It

was 6.25 in 2007 and decreased to 2.87 in 2011. The reason is the decrease in the profits of the

company. Nestles fixed charge coverage has also decreased from 12.16 in 2010 to 7.96 in 2011.

Whereas Tops fixed charge coverage ratio has increased tremendously from 43.74 in 2007 to

123.97 in 2011. It has excess money to pay off its fixed charges.

50

Activity Ratio Analysis

Inventory turnover2007 2008 2009 2010 2011


Inventory turnover provides an indication of whether the company has excess or inadequate

amount of inventory of finished goods. When the ratio is compared to the competitors, it is seen

that Shezan ha low levels of inventory as compared to Nestle or Tops. Shezan had inventory

turnover ratio of 3.56 in 2007 and 3.64 in 2011. Nestle has a ratio of 9.4 in 2007 and 8.2 in

2011.Tops inventory turnover ratio has increased over the period from 3.70 in 2007 to 4.19 in

2011.

Fixed asset turnover2007 2008 2009 2010 2011


Fixed asset turnover is a measure of sales productivity and utilization of the plant and equipment.

The ratio for Shezan has increased over the years from 7.65 in 2007 to 9.73 in 2011. This is

solely due to the increase in sales of Shezan. The ratio for nestle fluctuated over this time period

and is low as compared to Shezan. However Tops ratio of fixed asset turnover has increased to

1.05 in 2011 but still it is low as compared to Shezan.

Total asset turnover2007 2008 2009 2010 2011

Shezan 1.94 1.89 2.01 2.18 2.17

51

Nestle 1.79 2.06 2.22 2.25 1.84Tops 0.80 0.42 0.55 0.58 0.68

Total asset turnover is a measure of the utilization of the firm’s assets. The ratio for Shezan has

increased over the years from 1.94 in 2007 to 2.17 in 2011. This is solely due to the increase in

sales of Shezan. The ratio for nestle fluctuated over this time period and is low as compared to

Shezan. It increased till 2010 to 2.25 but decreased to 1.84 in 2011. However Tops ratio of total

asset turnover has decreased to 0.68 in 2011 and is low as compared to Shezan.

Average collection period2007 2008 2009 2010 2011


Average collection period indicates the average length of time the firm must wait after making a

sale before it receives payment. The average collection period for Shezan has an increasing

trend. It increased from 10.03 in 2007 to 14.32 in 2011 which means that now Shezan has to wait

more to receive payments. This ratio for Nestle also had an increasing trend; it increased from

14.25 in 2007 to 19.01 in 2011. As compared to Shezan Nestle wait more days to receive

payment. The ratio for Tops fluctuated but as compare to others it has the lowest ratio of 6.02

which means that Tops has to wait less than other to receive payment for credit sales.

52

Chapter IV:

Analysis of Strategic Viability

53

SWOT Analysis

The SWOT analysis refers to the company’s overall strengths (S), weaknesses (W), opportunities

(O) and threats (T). The first two terms are a measure of the company’s internal environment

while the latter two are a measure of the company’s external environment. These combined

factors are used as a decision making tool for better organization of business actions.

Before Shezan’s analysis of strengths, weaknesses, opportunities and threats is conducted, it is

important to define each of these terms so that the scope of our analysis is clear.

Strengths: These are the key factors or set of practices / actions that a firm performs

better than its competitors. Essentially these are the core competencies of the

organization.

Weaknesses: Weaknesses are either a set of resources that an organization lacks in or

activities that the firm does not perform well, relative to the competition.

Opportunities: These are a number of chances and circumstances in the external

environment that if utilized would result in favorable performance.

Threats: Threats are categorized as external factors that may harm performance of an

organization.

The following tables highlight some of the key strengths, weaknesses, opportunities and threats

that have been identified based on company interviews and analysis of published stock exchange

reports.

54

Strengths

Strong financial backing, high capital available

Variety of packing and products available in the market

Vast, comprehensive distribution network throughout Pakistan

High inventory turnover rate

ISO certification

Excellent R&D team

Passionate owners, empathizing with employees and managers

Global scale of operations

Brand name value within the country

High operational expertise

Weaknesses

Lack of innovation

Lack of consumer awareness of product quality

Vendor Relationship Management not prioritized

Decreasing Employee Morale

Ineffective positioning strategy

Lack of defined long term corporate planning & strategy

Limited funds for promotional budget

Unable to match competitors in terms of juice flavors

Lack of sustainable, mainstream advertisement campaign

Product strategy and promotion strategy not synchronized

55

Opportunities

Younger demographic, 67% of population, leading to increasing size of target market

Further backward integration, leading to higher profits

Overall size of Pakistani juice market increasing

Increasing demand for low-priced juices in African countries

Increased investment in the food & beverage sector on the stock exchange

Falling value of Rupee, leading to greater quantities demanded abroad

Demand for multitude of flavors

Potential for diversification of business as Shezan has enough capital to expand

Huge distribution network, allowing for piggybacking of products

Modification of operations to keep abreast of new age practices

Threats

Intense competition within the juice manufacturing industry

Increasing trend of having nutritional drinks rather than artificially flavored ones

Political instability

Increasing inflation rate

‘Non-Islamic’ tag associated with ‘Ahmedis’ in Pakistan

Perceived lack of quality

Decreasing power of the brand name Shezan

Market moving towards fragmentation

Social burden of managing huge quantities of waste that arise in juice manufacturing

Rapidly changing technology within the juice manufacturing industry

56

External Factor Analysis Summary

External Factors Weight Rating W. Score Comments

OpportunitiesIncreased demand for low priced juices in

African countries0.15 4 0.6

Increased exports to Africa

Increasing size of Juice market in Pakistan 0.07 3 0.21 Expand network

Younger demographic largest segment of population

0.05 4 0.2Targeting younger

demographic

Increased investment in food& beverage companies on stock exchange

0.02 3 0.06Current shareholders

satisfied

Falling value of Rupee, greater quantities demanded abroad

0.05 4 0.2Capitalizing on

increased exports

Demand for multitude of flavors 0.03 2 0.06 Limited set of flavors

Possibility of further backward integration 0.05 3 0.15Incorporation of fruit

farms in portfolio

Potential for conglomerate diversification 0.03 2 0.09 conduct feasibility

Distribution network allowing for piggybacking of products

0.05 4 0.2Multiple products using

same channels

Modification of operations to keep abreast of new age practices

0.02 2 0.04Technologically not up

to date

Threats‘Non-Islamic’ stigma associated with

Ahmedis in Pakistan0.1 3 0.3

Distance Shezan from religious views

Decreasing power of the brand name Shezan

0.09 2 0.18Revitalize through

increased brand image

Intense competition 0.04 3 0.12Improved IMC for counter-measures

Increasing inflation rate 0.02 4 0.08Good margins despite

rising costsPerceived lack of quality 0.05 2 0.1 Build on brand image

Increasing nutritional awareness 0.07 2 0.14Need to position juice as a healthy alternative

Market moving towards fragmentation 0.03 3 0.09 Need for multiple lines

Waste management 0.03 3 0.09 Good sense of CSR

Rapidly changing technology 0.02 2 0.04Need for new age

practices

Political instability 0.03 3 0.09Corporate stability

despite political environment

Total 1.00 - 3.04 -

*Analysis of the table is provided in conjunction with the internal-external matrix analysis

57

Internal Factor Analysis Summary

Internal Factors Weight Rating W. Score Comments

Strengths

Financially strong 0.15 5 0.75Excellent financial track

record

Variety of products 0.03 3 0.09 Good utilization of products

Comprehensive distribution network 0.09 4 0.36Multiple products

distributed

High inventory turnover rate 0.02 4 0.08 High efficiency

ISO certification 0.03 3 0.09 Sign of quality

Excellent R&D team 0.05 4 0.2Ability to produce new

designs

Passionate owners 0.03 4 0.12 Good commitment

Global scale of operations 0.1 4 0.4 Ever expanding reach

Brand name value 0.05 3 0.15Shezan still recognized

positively

High operational expertise 0.02 3 0.06 Efficient performance

WeaknessesLack of innovation 0.05 2 0.1 Unable to innovate

Lack of awareness of product quality 0.1 2 0.2Need to communicate high

fruit concentrate

Vendor Relations not prioritized 0.05 3 0.15Need greater

communication with vendors

Decreasing Employee Morale 0.02 2 0.04Need motivational

techniques

Ineffective positioning strategy 0.03 2 0.06 Need to reposition Juice

Lack of defined long term corporate planning & strategy

0.05 2 0.1 Hire outside consultants

Limited funds for promotional budget 0.02 3 0.06Promotional budget as a

function of sales

Lack of flavor variety 0.03 2 0.06 Introduce more flavors

Lack of mainstream advertisement 0.02 2 0.04 Increase budget

Product strategy and promotion strategy not synchronized

0.03 2 0.06 Synchronize both

Total 1.00 - 3.17 -

*Analysis of the table is provided in conjunction with the internal-external matrix analysis

58

Strategic Factor Analysis Summary

Key Strategic Factors Weight Rating W. Score Duration

External Factors

(O) Demand increase in Africa 0.15 4 0.6 Long term

(O) Increasing market size 0.05 4 0.2 Long term

(O) Backward integration 0.05 3 0.15 Intermediate

(O) Large younger demographic 0.05 4 0.2 Long term

(T) Non-Islamic stigma 0.03 2 0.06 Short term

(T) Decreasing brand value 0.07 2 0.14 Intermediate

(T) Nutritional awareness 0.07 2 0.14 Long term

(T) Increasing competition 0.05 3 0.15 Intermediate

Internal Factors

(S) Financially strong 0.1 4 0.4 Long term

(S) Global operations 0.1 4 0.4 Long term

(S) Huge distribution network 0.05 4 0.2 Long term

(S) R&D 0.03 3 0.09 Long term

(W) Positioning 0.05 2 0.1 Short term

(W) Product quality awareness 0.03 2 0.06 Intermediate

(W) Vendor relationship 0.05 2 0.1 Intermediate

(W) Corporate strategy 0.07 2 0.14 Long term

Total 1.00 - 3.13 -

59

Internal-External Matrix

TotalEFEScore

Total IFE ScoreStrong

(3.0-4.0)Average (2.0-2.99)

Weak (1.0-1.99)

High(3.0-4.0)

IShezan

II III

Medium(2.0-2.99)

IV V VI

Low(1.0-1.99)

VII VIII IX

Scores of 3.17 & 3.04 show that Shezan is placed in the first quadrant, meaning that it is in a strong position to avail the external opportunities using its strengths and to minimize weaknesses and threats using a combination of strategies listed in the SFAS.

I-E matrix shows that Shezan is in a position to “grow and build”; It is recommended that Shezan consider backward integration, which would result in maximum utilization of the current position of the company and allow it to grow through concentric (linked) diversification in a way as to capitalize upon the current opportunities in the market through its strengths. [Further strategy planning is provided in the TOWS matrix]

SPACE Matrix

*Internal: (-6 worst, -1 best) | External: (6 best, 1 worst)

Internal Strategic Position External Strategic PositionCompetitive (CA) Industry (IS)

Product Quality -1 +5 Suppliers

Market Share -4 +6 Growth potential

Brand Image -3 +2 Degree of rivalry

Life Cycle -3 +3 Substitutes

Average -2.75 4 Average

Total X Axis Score = 1.25Financial (FS) Environmental (ES)

ROE -2 +4 Technology

Working Capital -1 +1 Inflation

Inventory Turnover -1 +3 Variability

Leverage -4 +4 Barriers to entry

Average 2.0 3 Average

Total Y Axis Score = 1.0

60

Plotted SPACE Matrix

Conservative Aggressive

Defensive Competitive

The suggested strategy based on the SPACE matrix analysis is that of the aggressor and as such

positive, proactive steps should be taken by Shezan to ensure further growth.

It should also be noted that the suggested strategy based on the SPACE Matrix is in line with the

analysis of the I-E Matrix, hence providing further strength to the overall strategic plan.

(1.25, 1)

61

TOWS Matrix

IFAS

\

EFAS

Strengths (S)

1. Financially strong

2. Global operations

3. Huge distribution network

4. Brand name

5. R&D

Weaknesses (W)

1. Lack of innovation

2. Product quality awareness

3. Vendor relationship

4. Positioning

5. Corporate strategy

Opportunities (O)

1. Demand increase in Africa

2. Increasing market size

3. Large younger demographic

4. Backward integration

5. Falling Rupee value

SO Strategies

1. Increase supply to Africa

(S2,O1)

2. Buy farms to increase

backward integration

(S1,O4)

3. Create more availability in

the market (S3,O3)

4. Leverage brand name to cater

to market (S4,O2)

5. Increase operations overseas

(S1,O5)

WO Strategies

1. Look for newer markets

(W1,O1)

2. Reestablish vendor-firm

agreements (W3,O2)

3. Establish consistent strategy

for supply chain (W5,O4)

4. Reposition juice to new target

segments (W4,O3)

5. Establish 5 year plan

incorporating foreign exports

(W5,O5)

Threats (T)

1. Decreasing brand value

2. Non-Islamic stigma

3. Nutritional awareness

4. Increasing competition

5. Perceived quality

ST Strategies

1. Establish a new corporate

image (S5,T1)

2. Incorporate patriotic themes

(S1,T2)

3. Understand consumer nutrition

preferences (S5,T3)

4. Cover a wide area of region

(S3,T4)

5. Use brand equity as quality

assurance (S4,T5)

WT Strategies

1. Utilize foreign expertise in

innovation (W1,T5)

2. Develop healthy juice

alternatives (W4,T3)

3. Focus on brand building

(W2,T1)

4. Benchmark with industry

leaders (W5,T4)

5. Partner with local ‘Islamic’

spokespersons (W5,T2)

62

Support Activities

Value Chain Analysis

INBOUND LOGISTICS

OPERATIONSOUTBOUND LOGISTICS

MARKETING & SALES

SERVICES

Fruit Pulp Heat exchange Establish Centers Celebrity EndorsementMixing Retail promotions Customer Feedback

Packaging Packing Distribute juices Sales training

Primary Activities

Activity Valuable? Rare? Substitutes? Difficulty of Imitation

Inbound Logistics Yes Yes Few High

Operations No No Many Medium

Outbound Logistics Yes No Few High

Marketing & Sales Yes No Many Low

Services No No Many Low

Identified Sources of Competitive Advantage: Inbound & Outbound Logistics

Firm InfrastructureShezan applies hierarchical set-up within

formalized management structureHuman Resource Management

New employee initiative, OJT, mentor programs and remuneration strategy

Technology DevelopmentContinuous research initiative, flavor development and automation change

ProcurementBackward integration allows, purchase of fruit

from self-owned farms

Profit Margin

63

Grand Strategy Matrix

Rapid Growth

Quadrant II Quadrant I

Shezan

WCP SCP

Quadrant III Quadrant IV

Slow Growth

*WCP=weak competitive position; SCP=strong competitive position

The Grand Strategy Matrix, which is made by overviewing all the other matrices, shows that

although there is rapid market growth (local & abroad), Shezan is in a weak competitive position

when comparing it to market leader Nestle as well as other strong competitors like Olfrute. It is

suggested that Shezan utilize the previously mentioned strategies and reposition itself in such a

manner as to improve its competitive position in the minds of the consumers. This, it is felt is

necessary for survival and is the single biggest change that needs to be implemented.

64

Portfolio Analysis

Business Unit

Strength

High

Mediu

m

Low

I.A

High

Sheza

n

Mediu

m

Low

Portfolio analysis depicts that Shezan international is competing in the

industry which is very fast growing, the market share of Shezan is medium to

high. It is evident that economic and political factors are not stable but still

the conditions are favouring Shezan International. It also incorporates the

competitive strength and relative market share in which Shezan is excelling.

After analysis it has become clear that Shezan should opt for funding

according to matrix and can use Invest/Growth strategies. It would be also

viable for Shezan to go for selective strategies because of the nature of the

business in which it is competing.

65

66

BCG Matrix

The BCG matrix method tells us that what priorities should be given in the product portfolio of a

business unit. BCG matrix shows different products of Shezan placed in different quadrants with

respect to the market share and the business growth rate they have. These products include ALL-

PURE, Twist, regular juice and Rose syrup. ALL-PURE lies in the first quadrant and is

categorized as a star because it has a high market share and a high business growth. Star products

are also knows as market leaders. Shezan Twist lies in the second quadrant and is categorized as

67

a question mark. These products are called question marks or problem child because they have a

low market share but a high business growth rate. The strategy to deal with these products is to

divest these products. Shezan regular juice lies in the third quadrant and is categorized as cash

cow because of high market share and low business growth rate. These products are milked and

usually their profits and reinvested in other products. Rose syrup lies in the fourth quadrant and

is categorized as a dog. These products have a low market share and a low business growth rate;

the best strategy for these products is to liquidate them so that other brands don’t suffer from

those products.

68

Chapter V:

Shezan Strategic Plan

69

Strategic Plan Overview

A strategic plan is formed upon the basis of the analysis conducted and as such the plan is only

as good as the analysis which serves as the foundation for strategy. The analysis conducted using

the matrices will serve to shape the proposed strategic plan for Shezan.

The three major factors that have emerged from the matrix analyses are:

Shezan needs to reposition its juices to become more competitive in the market

Shezan needs to capitalize on its strong financial muscle to diversify in fruit farms

Shezan needs to further expand its distribution network to sustain competitive advantage

It is understood that these factors relate primarily to marketing, supply chain and positioning

(also a subset of the marketing function), hence the major focus of the plan would be changes

within the marketing and supply function, along with a repositioned Shezan Juice line; however

since in today’s business world and within Shezan’s structure, most functional departments are

interrelated and need to present a consistent front to attain strategic advantage and hence the

proposed strategic plan brings about changes in other functional areas as well in accordance with

the new strategy.

70

Vision

To be known as the leading quality provider of nutritious food products in the region. Providing the

products and services of the highest quality by adhering to international standards is the primary

objective. Shezan international will maximizing shareholders value by being a good corporate citizen and

recognized as a preferred employer serving the country through economic development. The company

shall contribute to the environment with implementation of green technology. By following best business

practices and ethical behaviour and adopting transparency in its working, Shezan shall become a role

model for the industry.

Mission

Serving the customer needs through manufacturing of highest quality fruit and vegetable based juices and

products. The company aims at being recognized as leader in the industry by maximizing customers,

employees and shareholders’ value. To accomplish this, maintaining a tradition of pride in our products,

growth through innovation, integrity in the management of our business, and commitment to team

management and quality improvement process. Giving back to environment and becoming a preferred

corporate citizen shall be our priority.

71

Objectives

To be the leading company in the industry.

To have a transparent process through open disclosure policy.

Have passionate people with intelligent and firm approach towards business.

Provide challenging opportunities, training, and fun loving environment, necessary resources and

facilities to our employees.

Invest in technology to lead the competition.

Stand committed to sustainable business growth and ensures 100% compliance of CSR by

ensuring the safety of our people, assets and the community in which we operate.

Serve the public through poverty alleviation programs and building farming expertise.

Serve the consumer in every way possible.

Maximize customer value.

Demonstrate honest and ethical behaviour by implementing best business practices.

Corporate Development Stage

Among the 10 stages of corporate development which are courtship, infancy,

go-go, adolescence, prime, stability, aristocracy, recrimination, bureaucracy,

death; Shezan international is at Prime where the clearness in vision and

mission is very clear, everything is aligned and coming together in positive

manner for the firm. Shezan international is ready to start-up their new

product lines and can afford to have innovation in their products and

business.

72

It is suggested that Shezan International move towards the stability stage in

which things will become easier for the firm. The emphasis will be shifted to

R&D from customers and marketing. Rapid growth will take place but with

more maturity and strong brand name.

Positioning

As the juice industry is heavily competed, it is difficult to choose the category in which you want to

position your product. One of the major players in juice industry, nestle has launched a low priced juice

increasing competition for Shezan. To compete with this new competition, Shezan has to reposition its

juice to better sell itself. For the repositioning of Shezan, we will use the seven step positioning process.

The first step in this process is to identify a relevant set of competitive products. The relative set of

products contains competitors like nestle, country, fresher and Tropicana. These are considered in this set

because they all have same perception and quality.

The second step is to identify determinant attitudes. These attributes include price, packaging, taste and

nutrition value. The third step involves collecting data about customer’s perceptions. The current

perception of Shezan is that of low quality and cheap juice. In the fourth step we analyse the current

positions of the products in the set. According to the current position nestle is considered as best tasting

juice and affordable. Nestle is also considered to be the choice of the youth as its trendy and stylish,

Whereas Shezan and country juice are positioned as low quality drinks. The fifth step is to determine the

customer’s most favourable combination of attributes. The most favourable set of attributes according to

the customer are price, taste and packaging. Shezan has to improve its taste and raise its price to change

its perception.

In the sixth step we consider fit of possible positions with customer segments. Here we reposition our

product according to the ideal fit. In the repositioning of shezan, we recommend that shezan should

increase their fruit concentrate and improve their taste while increasing their price to the competing

73

brands. The packaging may also be improved and new updated packaging should be introduced which

should change customer perception. the new packaging should be well designed and should reflect the

youth. They need to follow the trend. Improving the taste is also important as people now demand more

fruit concentrated juice rather than artificially sweetened juices. So in our repositioning we will be

targeting consumers who are from SEC A and B between the ages of 12-30. The primary focus would be

to get the attention of school and college going students and position shezan as the best quality, trendy

and tasty juice in the market.

The last step involves writing a positioning statement. The new positioning statement will be ‘Shezan, the

taste of freshness’.

74

Functional Areas: In accordance with the new strategy in a holistic sense and the new juice

positioning at the smaller scale, a number of changes have been proposed to the functional areas

of business. Each are discussed individually

Research & Development

The R&D strategy should be made by considering the R&D mix. This will help in knowing what

resources should be allocated to research, product development and process. This helps in making

decisions like acquiring new technologies, making strategic alliances and putting in place new processes.

The company can either become technological leader or follower keeping in mind its generic strategy.

In the proposed R&D department, we will like to recommend shezan that they invest more in research

department as the new development of products, new flavour enhancements and better nutritious juices

are being increasingly demanded. The industry is becoming more competitive so there is need for

innovation and to grow companies need to have competitive advantage. The company should

continuously work on new flavours. The R&D department should focus on the changing needs of the

consumer. Through proper research they should be well aware of what the new trends are and what the

consumers want from their juice drink. Then accordingly shezan should develop new juices. Research can

also help in finding new sustainable ways in which juices can last longer. Their shelf life plays integral

part and through research it can be increased.

Shezan also should invest in machinery and other product related technologies. These updated

technologies can improve their operations and can save company quite a lot of money in terms of

75

efficiency and increased productivity. R&D can help shezan in discovering new ingredients and enzymes

which might speed up the process and can eventually save them costs of production. Storage of products

like juices an important aspect. This can be improved on through R&D as well. For this technological

advancement, shezan should see the industry leader try to follow them.

Procurement

Shezan international has a very good procurement department which is well

coordinated and integrated with other departments but there are few things

in the system which needs to be revised. Shezan international is slow down

in the process of logistics, the delivery of raw material that is fruits and

vegetables require two to three days to reach the factory of shezan

international which is quite ineffective in today’s scenario. The delivery time

period should be enhanced by adding more transport and logistics facilities

to the system and the delivery period should be minimized to maximum of

two days.

The other thing which needs serious consideration is that of enhancing and

increasing backward integration. Currently shezan international has few fruit

farms and they are just bound to them but they should increase it by adding

more fruit farms to the portfolio, that will enable Shezan international to

work more than the current capacity. Shezan international has the highest

production facilities among its competitors so it is mandatory to convert that

opportunity into strength and milking upon this. By adding more fruit farms

76

to their portfolio, Shezan can also go for cost minimization and can achieve

economies of scale.

Operations

The current production process of Shezan international is quite effective and

there is no need to change it. They have the highest production capabilities

among their competitors. Their machines and plants are technologically up

to date and have all the due abilities to cope up with this technologically

driven era. They have all the international standard requirements which

makes them best in the business. They have achieved their this position due

to this strict check and balance on their production side because at Shezan

they believe that the product which tastes good will lead the market.

Marketing and Sales

Product

In the product, we are not going to do any major changes. The product would essentially be kept

the same. A little enhancement of flavour would be done by increasing the pulp concentrate. The

rest of the product ingredients will be the same. The packaging of the product however will be

changed. New graphically designed more trendy and up to date packaging would be used. This

will be designed keeping in mind the consumer and target markets lifestyles.

Price

The price of the product would be changed. As our new positioning suggests and modification to

the product, we will increase the price of shezan to Rs. 15/ 250ml pack. This will now be

77

competitive to nestle. We have changed are competitive set and now instead of competing with

country and other low quality brands, we will be competing with better quality brands like nestle.

Promotion

In the promotion part we would be emphasising more on electronic media, magazines and

internet. The juice will be promoted through TVC’s, internet banner ads, print ads and billboards.

In addition in store promotions activity, discounts, coupons and free sampling cars will roam

around the city to promote the juice. Shezan juice will also conduct on campus drives to

influence their target market.

It would also sponsor the school cafes. Shezan will also start sponsoring sports and music events

as they are one of the most watched programs. This new promotion strategy will be carefully

devised after studying the media habits and lifestyles of its target market. The primary objective

of this promotion drive would be to reposition the shezan juice as the good quality, nutritious and

trendy drink.

Logistics

The logistics department of shezan is considered as an efficient and effective one. The inbound

logistics seem to be doing a great job as shezan have their own farms where their major raw

materials come from. The transportation of this fruit pulp is done through their own vans. This

ensures timely supply of pulp and keeps the inventory down. So we recommend that shezan stick

with their current way of inbound logistics.

As far as outbound logistics is concerned, shezan has a mix of different strategies. As mentioned

above, shezan supplies all its products through their own system in Lahore. this allows them to

78

operate efficiently and effectively as it allows them to supply to vast area in Lahore and also

helps in keeping the costs down.

For other cities, the company sells the product to large wholesalers who further sell to small

wholesalers who then distribute it. This process includes intermediaries. Due to them the cost of

the final product increases as the product goes through several channels. The efficiency is also

compromised as delays are caused. Shezan needs to rectify this distribution system for outside

Lahore suppliers.

It needs to appoint company owned agents in different cities who should be responsible of

identifying selling pints and then supply to them as per need. Primarily they need to control the

wholesalers by giving them contracts and incentives to distribute efficiently. In the longer run

Shezan needs to set up their own distribution channels in at least big cities where the demand is

high.

Human Resource

Shezan international Human Resource department has certain flaws and

weakness which should be removed to ensure the effectiveness of Human

Resource department. HR department of Shezan is more focused in daily

operations which make it weak in term of employees and staff perspective.

The employees want their HR department to guide them towards their career

path whereas the current HR department thinks that their duty is to ensure

better communication between and within department, effective daily

operations at the company and recruiting/hiring the best suitable candidate

for the firm but actually HR department is more than that, it is the link that

79

strongly or weekly bonds the company and employee together. The HR

should focus on the motivation and performance evaluation practices.

Employees always need motivation from their company and that should be

done by Shezan’s HR department. HR department should also consider

incentives for their performing employees as that will bring more value to

the firm.

The HR department should also incorporate feedback system, 360 degree

feedback motivation system will be very effective for Shezan as it will help to

identify future leaders for the firm and also in evaluating the performance of

oneself. HR department should also highlight the best performers and also

ensure to adopt a systematic approach for sharing of knowledge among

seniors and juniors.

Last but not the least, HR department of Shezan international should apply

training programs for their employees to keep them up to date and to cope

up with the current technological trends. More formalised on the job training

should be conducted to train the junior employees effectively.

Organizational Structure

The current structure of Shezan is doing well so there is no need to change

it, For such diverse product company, functional structure is appropriate.

People from different areas and with different skills are put together to work

80

which increases the productivity and bring effectiveness and efficiency to the

firm.

One reason for not changing the current structure is that the functional

structure also provides the chain of command and clear chain of command is

important because it increases accountability and make formal standard

operating procedures.

Functional structure also offers qualified supervision and this provide the

employees with more trust, credibility and deep insight to the business.

Since everyone is operating in his area of expertise so the outcome of task or

activity will be specialized and more accurate.

Organizational Culture

According to Shezan’s international employees, Shezan is the best place to

work in but yet there are few things in the culture which need to be a part of

it. The first and the most important thing is the company should opt

participatory culture. In this culture the participation of employees will be

more welcomed and will be given more value which in turn will improve the

performance of employees. This type of culture will also help Shezan to keep

their employees motivated and encouraged. Participatory culture will also

offer a sense of trust between the employees and the company.

81

Information Systems

There are many other information systems that can be incorporated to make operations

throughout the company smooth. Shezan can use supplier integration systems which allow them

to be linked with suppliers through the online system. This will help in having inventories filled

when needed just like just in time concept. The suppliers will be aware of the inventory level and

when the inventories are below certain level they will automatically supply it.

Same kind of system can be used for distribution side. When distribution networks will be linked

with the company, shezan will know which distributor has what level of inventory with it. It will

also allow for checking which areas are most profitable.

Shezan can also use software’s like SAP AG., and R3 which allow for credit checking, payment

handling and book balancing etc. Shezan juices can make use of internet and networks to make

the whole system online. This will ensure that every department in the value chain is linked to

each other hence ensuring the alignment of strategic goals and objectives of the company which

is key for having an efficient and effective organization system.

82

Applied Models

The New BCG matrix, along with McKinsey’s 7-S framework have been chosen to illustrate the

changes that will be brought about by the new strategy for Shezan International.

Although a number of models would help explain the changes and benefits of the new strategy,

these two models best visualize the changes that Shezan will undergo.

New BCG Matrix

Numb

er

Of

Appea

rance

s

Man

y

Fragmented Specialized

ROI

Market Share

ROI

Market Share

Stalemate Volume

Few

ROI

Market Share

Shezan

ROI

Market Share

Small Large

Size of Advantage

The New BCG Matrix is used to show the size of competitive advantage and

the approaches to achieve those advantages.

83

Shezan International is a giant in the industry with having very strong market

share and competitive advantage in terms of production capabilities.

Shezan international comes under the heading of Volume business where the

production of Shezan products is huge and massive. Shezan international

cannot segment or differentiate its market because of its level of production.

It is not possible for Shezan to use differentiation strategy rather they pursue

cost leadership which is considered to be a success for them.

McKinsey’s 7-S Framework

Style

Staff

Skill

Super ordinate goals

SystemStrategy

Structure

84

1. Structure: The organizational structure of shezan is functional structure and it is relatively

unchanged.

2. Strategy: The strategic position has already been discussed in great detail, including

vision mission & objectives and how they form the basis of change

3. System: Shezan had strict rules. We have proposed to less standardization of rules.

4. Skill: Shezan should focus more on financial and marketing competencies.

5. Staff: We have introduced new policies to boost employee motivation.

6. Style: The culture of the organization has been made more participative which allows for

360 degree feedback.

7. Super ordinate goals: We have suggested continuous improvement for super ordinate

goals.

85

References

1. Srinivasan, R., 2005, Strategic Management: The Indian Context, Prentice Hall, New

Delhi, pp. 48-84

2. Ahmed Jibran, 2009, Shezan: Business Strategy Proposal. Journal of Scribd, pp. 4-42

3. Porter, M.E., 1985, Competitive Advantage, the Free Press, New York, pp. 482-512

4. Zohaib H. Shah, 2010, Impact of Celebrity Attributes on Purchase Behavior, Research

Thesis, Lahore School of Economics, pp. 11-18

5. Menon, A. et al., 1999, Antecedents and Consequences of Marketing Strategy Making,

Journal of Marketing, pp.18-41

6. Armstrong et al., 1996, Bringing Structural Change through Strategy, London CIPD,

pp.218-267

7. Shezan International Limited, 2007-2011, Published Annual Reports for Stakeholders,

Lahore Stock Exchange

8. Nestle Ltd., 2007-2011, Published Annual Reports for Stakeholders, Lahore Stock

Exchange

9. Murree Brewery Ltd., 2007-2011, Published Annual Reports for Stakeholders, Lahore

Stock Exchange

10. Keller et. al 2004, Strategic Brand Management, Prentice Hall, pp.249-401

11. www.Shezan.com

12. www.ibid.com

http://www.Shezan.com/

86

Annexures

Nestle Income statement2007 2008 2009 2010 2011

Sales 28,235,393 34,183,84741,155,82

2 51,487,302 64,824,364

Cost of goods Sold-

20,285,142-

25,231,532 (29256902-

37,608,733-

48,099,046

Gross Profit 7,950,251 8,952,31511,898,92

0 13,878,569 16,725,318

Distribution and selling expenses -3,538,284 -3,890,352 -5,238,488 -5,709,078 -6,862,113Administration expenses -900,822 -956,816 -1,085,121 -1,311,637 -1,405,298

Operating profit 3,511,145 4,105,147 5,575,311 6,857,854 8,457,907

Finance cost 584,434 557,325 442,050 513,081 1,050,355Other operating expenses -442,914 -1,382,138 -1,091,149 -819,084 -1,064,233

Other operating income 65,959 61,800 144,145 170,491 159,545

Profit before taxation 2,549,756 2,227,484 4,186,257 5,696,180 65,202,864

taxation -744,544 -674,590 -1,181,124 -1,583,331 -1,834,507

Profit after taxation 1,805,212 1,552,894 3,005,133 4,112,849 4,668,357

Earnings per share 39.81 34.24 66.27 90.69 102.94

87

Nestle Balance sheet

2007 2008 2009 2010 2011

Equity and liabilities

Authorised capital75,000,00

075,000,00

075,000,00

075,000,00

075,000,00

0Equity 4,111,705 4,388,847 4,426,955 5,581,873 7,612,416

Non current liabilitiesLease obligations 119,602 177,582 118,275 55,415 13,690Long term finances 4,028,700 5,139,875 4,210,750 5,573,750 7,848,050

total 5,758,347 6,988,758 6,076,895 7,563,78710,778,98

8

Current liabilities 5,978,522 5,306,571 8,083,130 9,806,57216,788,45

5

Assets

tangible10,045,61

110,846,77

411,615,83

014,447,08

321,601,08

9Longterm loans and advances 80,670 98,544 113,490 125,674 161,982

Current assets 5,623,823 5,684,078 6,845,528 8,352,92313,395,01

7Inventory 2,393,306 2,488,573 3,895,038 4,602,019 7,064,170

Total assets15,750,10

416,629,39

618,574,84

822,925,68

035,158,08

8

Working capital -354,699 377,507-

1,237,602-

1,453,649-

3,393,438

88

Tops Income statement

2007 2008 2009 2010 2011

Turnover 1285181 1713574 2220715 2578533 3349788

Cost of sales -3206849 -1206849 -15911385 -1747741 -2216880

Gross profit 346725 506725 629330 830792 1132908

Distribution cost 120966 120966 159907 177976 247735Administrative expenses 102365 102365 112989 149906 130892Finance cost 707 707 4466 2507 4350Operating profit 122687 282687 351968 500403 749931

Other expenses 26311 26311 21379 37661 56026

Other operating Income 15197 15197 35308 61839 90781

Net profit before Taxation 111573 340854 296616 524581 784686

Tax 125022 125022 100771 -209252 -264765

Net profit after tax -13449 215832 195745 315329 519921

89

Tops Balance Sheet

2007 2008 2009 2010 2011Fixed AssetsProperty,Plant and equipment 743801 2946626 2946626 2997183 3074902investment property 78207 78207 96405 111149Long term advances 4092 631 631 1546 4694Long term deposits 2438 2704 2704 3480 14773

750331 3028168 3028168 3098614 3205518

Current assetsstores and spares 62247 102474 102474 72384 82235stock in trade 347640 503415 503415 595396 799342trade debts 43680 86697 86697 38885 55285advances 63473 17778 17778 18936 15343short term prepayments 3534 4295 4295 5545 10752interet accured 584 50 50 2087 4506Securities purchased 69083 69083 3787 3836Investment at fair value 182050 25744 25744 74704 84132advance income tax 4288Cash at bank 151262 222140 222140 552986 696290

858938 1031676 1031676 1364710 1751721Total assets 1609269 4059844 4059844 4463324 4957239

Share capital and reserves

Share capital 108440 131213 131213 144334 173201Capital reserve 30681 30681 30681 30681 30681Contingency reserve 20000 20000 20000 20000 20000General reserve 327042 327042 327042 327042Reveneu reserve 695829 668388 668388 916729 1347693

Surpless on revaluation 322227 2358432 2358432 2346692 2334615

90

Equity 1177177 3535756 3535756 3785478 4233232

Non current liabilitiesLiabilities subject for lease 3440 1072 1072 1633 3258Deffered liabilities 16202 15769 15769 23713 29619Deffered taxes 74865 137529 137529 150156 137616

Current liabilitiesLiabilities subject to lease 1887 2122 2122 1050 1996trade and other payables 331544 367596 367596 465750 536097Short term running finance 4154 35544 15421

337585 369718 369718 502344 553514Total liabilities 1609269 4059844 4059844 4463324 4957239

Working capital 521353 661958 661958 862366 1198207

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Shezan2007 2008 2009 2010 2011

Profitabilitygross profit margin 31.50 31.48 27.64 26.54 25.85

op profit margin 12.44 11.23 6.12 5.19 5.94

net profit margin 6.47 6.53 3.76 3.03 3.33

ROA 12.56 12.32 7.57 6.59 7.23

ROE 22.49 21.88 13.17 12.59 14.75

return on comon equity 22.49 21.88 13.17 12.59 14.75

earning per share 2.81 2.69 1.71 1.78 2.34

liquidity ratios

current ratio 1.91 1.93 1.97 1.75 1.64

quick ratio 0.51 0.60 0.54 0.51 0.38

inventory to net working capital 1.53 1.43 1.47 1.65 1.96

levrage ratios

debt to assets 0.44 0.44 0.43 0.48 0.51

debt to equity 0.79 0.78 0.74 0.91 1.04

long teerm debt to equtiy 0.09 0.07 0.06 0.11 0.08

92

times interest earned 20.91 34.21 25.55 10.21 6.22

fixed charge coverage

activity ratios

inventory turnover 3.56 3.58 3.61 4.19 3.64

fixed asset turnover 7.65 8.08 8.77 8.25 9.73

total asset turnover 1.94 1.89 2.01 2.18 2.17

average collection period 10.03 11.07 11.54 14.00 14.32

Nestle2007 2008 2009 2010 2011

Profitabilitygross profit margin 28 26 29 27 26

op profit margin 12 12 14 13 13

net profit margin 9 7 10 11 10

ROA 11.46 9.34 16.18 17.94 13.28

ROE 2.41 2.07 4.01 5.48 6.22

return on comon equity 2.41 2.07 4.01 5.48 6.22


liquidity ratios

current ratio 0.94 1.07 0.85 0.85 0.80

93

quick ratio 0.54 0.60 0.37 0.38 0.38

inventory to net working capital -6.75 6.59 -3.15 -3.17 -2.08

levrage ratios

debt to assets 0.26 0.31 0.23 0.24 0.22

debt to equity 0.98 1.17 0.95 1.00 1.03



fixed charge coverage 5.16 5.83 10.16 12.16 7.96

activity ratios





Tops2007 2008 2009 2010 2011

Profitabilitygross profit margin 26.98 29.57 28.34 32.22 33.82

op profit margin 9.55 16.50 15.85 19.41 22.39

94

net profit margin -1.05 12.60 8.81 12.23 15.52

ROA -0.84 5.32 4.82 7.06 10.49

ROE -1.14 6.10 5.54 8.33 12.28

return on comon equity -1.14 6.10 5.54 8.33 12.28


liquidity ratios

current ratio 2.54 2.79 2.79 2.72 3.16

quick ratio 1.51 1.43 1.43 1.53 1.72

inventory to net working capital 0.67 0.76 0.76 0.69 0.67

levrage ratios

debt to assets 0.21 0.03 0.03 0.04 0.07

debt to equity 0.29 0.03 0.03 0.04 0.08



fixed charge coverage 43.74 121.24 45.35 147.77 123.97

activity ratios





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Shezan - Strategic Analysis & Planning

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