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 our course supervisor, Mr. Naveed Anwar 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.

MBA-V Team Members: Altaf Hussain Khaskheli Yousif Altaf Jatoi Javed Ahmed Shaikh Muhabat Khan Junejo

Dated: 13-12-2013

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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 countrys 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 owners 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 companys 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. 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, 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.

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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 background of the Alliance Pakistani Industrial sponsors

Development Corporation of U.S.A. The agricultural

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 countrys 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:

Squashes Ketchup Juices

Vinegar

Chutney

Pickles (in oil)

Ispaghol

Salt

Pickles (in vinegar) Vegetables (can) Fruits (can)

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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 its 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 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

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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 doesnt 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 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 Porters five forces model:

Porters five forces model:

Potential entrants Low switching costs economies of scale favourable government policy Other stakeholders Unions, government etc.

Suppliers Large number of buyers like nestle, tops, country. Low switching costs Substituteraw material Threat of forward integration

Degree of rivalry Many competitors (nestle, country, tops etc) Low product differentiation Growing industry

Buyers Large no. of buyers Substitutes like nestle, country available Low switching costs Threat of backward integration

Substitutes Similar tasting juice (country, tops, nestle) Same price Same identity.

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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 favorable for the industry and the exit barriers are not too high as well. 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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Product 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, its 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 symbolize that its 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 flavors and sweeteners thus making its taste give a perception of cheap low quality juice. The

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packaging has also contributed to this type of positioning. The juice packs are very basic in design and lack any creativity. In todays 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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CPM Matrix For Shezan:

Shezan Critical Success Factors

Advertising Product quality Price competitiveness Management Financial position Customer loyalty Global expansion Market share

Nestle

Haleeb

Nurpur

Weight
0.2 0.15 0.1 0.1 0.1 0.1 0.15 0.1

Rating
3 4 2 3 4 2 3 3

Score
0.6 0.6 0.2 0.3 0.4 0.2 0.45 0.3

Rating
4 3 3 4 4 2 3 4

Score
0.8 0.45 0.3 0.4 0.4 0.2 0.45 0.4

Rating
2 2 3 3 3 2 2 2

Score
0.4 0.3 0.3 0.3 0.3 0.3 0.3 0.2

Rating
1 2 3 3 2 3 3 2

Score
0.2 0.3 0.3 0.3 0.2 0.3 0.45 0.2

Total

3.05

3.40

2.4

2.25

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CPM Matrix For Shezan:

In the CPM the industry average take as 3.50, so the Nestle performing is the best as compared to their competitors in juices. Shezan is at second place. It deals in nectar juices, flavored juices and targets the lower income group of the population and its all sales is due to customer loyalty. Haleeb lunched its juices few years ago but their performance is good and it is in third number in field of juices due to their pure and nectar juices with high quality and reasonable prices. NurPur, being an unknown brand falls at number four.

Sr. #
1 2 3 4

Company
Shezan Nestle Haleeb Nurpur

Generic Strategy
Differentiation Differentiation focus Cost Leadership Cost Focus

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As know that nestle is using differentiation focus strategy as it focuses on its research and development to identify new niches in the market and to enter in them. Nestle selects a segment do research and develop strategy to enter that market through differentiated product. Nestle achieve competitive advantage by dedicating itself to these segments exclusively. The essence of focus is the exploitation of a particular market niche that is different from the rest of the industry. Nestle might expect narrow focus itself (being different) is simply not sufficient for above average performance. Nestle focuses differentiation strategy to improve competitive position. But there are some disadvantages if this strategy is not properly used. As if we select the niche with too much rivals it will be easier for the competition to imitate it easily in a shorter span of time as if nestle launches some new product Shezan immediately follows it and hence nestle loses its competitive advantage. Shezan uses the research and development of nestle and captures its share from the market. But it shows that Shezan is following the Nestle. This is a weakness in itself because it shows that Shezan has the potential to become market leader but they do not try to do so. 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 substitutes are available in the market with slight differentiation which do not makes difference so Shezan captures the market share of the competitors. Shezan competes its competitors like nestle and Haleeb is discussed in the above paragraph.

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Industry Life Cycle

Industry Shezan

To us the juice industry is at growth stage as new research and development is taking place and people are getting more conscious about their health these days. People tend to buy natural juices rather than buying carbonated drinks. Shezan is also at growth stage by following the Nestle.

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Functional Areas

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Operations:

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 users need. Marketing mainly focuses on the 4Ps which are product, price, promotion and placement. We will be examining each P with respect to Shezan juices.

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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 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

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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.

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Financial Analysis of the Company

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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 owners 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.

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Analysis of Income statement

Shezan Income Statement Sales Cost of sales Gross profit Distribution cost administrative costs other operating expenses other operating income 2007 2008 2009 2010 2011 2,174,894 2,468,572 2,728,709 3,528,134 4,221,827 1,489,845 1,691,443 1,974,446 2,591,790 3,130,544 685,049 289,336 68,213 70,145 -13,240 414,454 270,595 12,940 257,655 116,981 140,674 777,129 368,240 78,951 72,555 -19,880 499,866 277,263 8,104 760 268,399 107,195 161,204 754,263 443,862 91,449 71,979 -20,155 587,135 167,128 6,542 16 160,570 58,099 102,471 936,344 1,091,283 580,492 101,413 90,702 -19,448 753,159 183,185 17,950 16 165,219 58,474 106,745 629,912 116,605 122,601 -28,798 840,320 250,963 40,343 18 210,602 70,000 140,602

operating profit finance cost share of loss from associate profit before taxation taxation net profit for the year

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

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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.

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Analysis of Balance sheet

Shezan Balance sheet

2007 ASSETS Non- Current Assets Property, plant and equipment Long term investments long term deposits Current assets Stores and spares stock in trade trade debts Advances, deposits ,prepayments income tax recoverable cash and bank balances 2008 2009 2010 2011 256,787 25,591 1,938 284,316 1,348 610,903 59,749 13,729 42,116 108,186 836,031 Total assets EQUITY AND LIABILITIES Share capital and reserves share capital Reserves inappropriate profits Total Equity Long term liabilities Current liabilities Total liabilities 1,120,34 7 292,922 9,915 2,603 305,440 1,091 689,438 74,892 38,897 114,255 84,042 1,002,61 5 1,308,05 5 299,770 7,724 2,661 310,979 18,796 755,711 86,291 37,113 74,651 70,844 1,043,40 6 1,354,38 5 416,802 7,708 2,588 427,495 15,081 842,482 135,317 18,183 59,886 99,509 1,191,95 8 1,619,45 3 423,097 7,690 2,314 433,769 6,997 1,159,55 1 165,627 14,683 57,656 82,608 1,511,80 0 1,945,56 9

50,000 425,000 150,696 625,412 57,281 437,654 494,935

60,000 500,000 176,900 736,700 51,858 519,497 571,355

60,000 583,449 134,371 777,820 45,962 530,603 576,565

60,000 653,022 135,116 848,138 91,121 680,194 771,315

60,000 723,293 169,718 953,011 71,747 920,811 992,558

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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 companys 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.

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Profitability ratios analysis:

Gross profit margin 2007 2008 2009 2010 31.50 31.48 27.64 26.54 28 26 29 27 26.98 29.57 28.34 32.22

Shezan Nestle Tops

2011 25.85 26 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. Nestls gross profit margin has also showed an overall decreasing trend whereas the gross profit margin of Tops has shown an increasing trend. Operating profit margin 2007 2008 2009 2010 12.44 11.23 6.12 5.19 12 12 14 13 9.55 16.50 15.85 19.41

Shezan Nestle Tops

2011 5.94 13 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.

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Shezan Nestle Tops

Net profit margin 2007 2008 2009 6.47 6.53 3.76 9 7 10 -1.05 12.60 8.81

2010 3.03 11 12.23

2011 3.33 10 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 Assets 2007 2008 2009 12.56 12.32 7.57 11.46 9.34 16.18 -0.84 5.32 4.82

Shezan Nestle Tops

2010 6.59 17.94 7.06

2011 7.23 13.28 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 is 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.

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Shezan Nestle Tops

Return on Equity 2007 2008 2009 22.49 21.88 13.17 2.41 2.07 4.01 -1.14 6.10 5.54

2010 12.59 5.48 8.33

2011 14.75 6.22 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 Equity 2007 2008 Shezan 22.49 21.88 Nestle 2.41 2.07 Tops -1.14 6.10

2009 13.17 4.01 5.54

2010 12.59 5.48 8.33

2011 14.75 6.22 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.

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Shezan Nestle Tops

Earning per share 2007 2008 2009 2010 2.81 2.69 1.71 1.78 39.81 34.24 66.27 90.69 12.20 14.93 16.45 18.21

2011 2.34 102.94 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

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Liquidity Ratio Analysis:

Current ratio 2007 2008 2009 1.91 1.93 1.97 0.94 1.07 0.85 2.54 2.79 2.79

Shezan Nestle Tops

2010 1.75 0.85 2.72

2011 1.64 0.80 3.16

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. Shezans 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 Nestls 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 ratio 2008 2009 0.60 0.54 0.60 0.37 1.43 1.43

Shezan Nestle Tops

2007 0.51 0.54 1.51

2010 0.51 0.38 1.53

2011 0.38 0.38 1.72

Quick ratio is a measure of a firms 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 Nestls quick ratio has also decreased from 0.54 in 2007 to 0.38 in 2011. It is also because of increase in inventories of

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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. Inventory to net working capital ratio 2007 2008 2009 2010 Shezan 1.53 1.43 1.47 1.65 Nestle -6.75 6.59 -3.15 -3.17 Tops 0.67 0.76 0.76 0.69

2011 1.96 -2.08 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 ratio 2007 2008 2009 0.79 0.78 0.74 0.98 1.17 0.95 0.29 0.03 0.03

Shezan Nestle Tops

2010 0.91 1.00 0.04

2011 1.04 1.03 0.08

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

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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 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 ratio 2007 2008 2009 2010 0.44 0.44 0.43 0.48 0.26 0.31 0.23 0.24 0.21 0.03 0.03 0.04

Shezan Nestle Tops

2011 0.51 0.22 0.07

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.

Shezan Nestle Tops

Long term Debt to Equity 2007 2008 2009 2010 0.09 0.07 0.06 0.11 0.02 0.02 0.03 0.02 0.29 0.03 0.03 0.04

2011 0.08 0.02 0.08

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
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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. Times Interest Earned 2007 2008 2009 2010 20.91 34.21 25.55 10.21 6.01 7.37 12.61 13.37 157.81 482.11 66.42 209.25

Shezan Nestle Tops

2011 6.22 8.05 180.39

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. Nestls 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 its 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 coverage 2007 2008 2009 2010 6.25 4.70 4.02 3.08 5.16 5.83 10.16 12.16 43.74 121.24 45.35 147.77

Shezan Nestle Tops

2011 2.87 7.96 123.97

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.

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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.

Activity Ratio Analysis:

Inventory turnover 2007 2008 2009 3.56 3.58 3.61 9.4 10.3 9.2 3.70 3.40 4.41

Shezan Nestle Tops

2010 4.19 8.9 4.33

2011 3.64 8.2 4.19

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 turnover 2007 2008 Shezan 7.65 8.08 Nestle 2.81 3.15 Tops 1.71 0.57

2009 8.77 3.54 0.73

2010 8.25 3.56 0.83

2011 9.73 3.00 1.05

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

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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 turnover 2007 2008 2009 1.94 1.89 2.01 1.79 2.06 2.22 0.80 0.42 0.55

Shezan Nestle Tops

2010 2.18 2.25 0.58

2011 2.17 1.84 0.68

Total asset turnover is a measure of the utilization of the firms 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 period 2007 2008 Shezan 10.03 11.07 Nestle 14.25 15.22 Tops 12.41 18.47

2009 11.54 16.87 14.25

2010 14.00 18.64 5.50

2011 14.32 19.01 6.02

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.

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External Factor Analysis (EFE) :

External Factors Opportunities

Increased demand for low priced juices in African countries Increasing size of Juice market in Pakistan Younger demographic largest segment of population Increased investment in food& beverage companies on stock exchange Falling value of Rupee, greater quantities demanded abroad Demand for multitude of flavors Possibility of further backward integration Potential for conglomerate diversification Distribution network allowing for piggybacking of products Modification of operations to keep abreast of new age practices

Weight
0.15 0.07 0.05 0.02 0.05 0.03 0.05 0.03 0.05 0.02

Rating
4 3 4 3 4 2 3 2 4 2

W. Score
0.6 0.21 0.2 0.06 0.2 0.06 0.15 0.09 0.2 0.04

Comments
Increased exports to Africa Expand network Targeting younger demographic Current shareholders satisfied Capitalizing on increased exports Limited set of flavors Incorporation of fruit farms in portfolio conduct feasibility Multiple products using same channels Technologically not up to date Distance Shezan from religious views Revitalize through increased brand image Improved IMC for counter-measures Good margins despite rising costs Build on brand image Need to position juice as a healthy alternative Need for multiple lines Good sense of CSR Need for new age practices Corporate stability despite political environment -

Threats
Non-Islamic stigma associated with Ahmedis in Pakistan Decreasing power of the brand name Shezan Intense competition Increasing inflation rate Perceived lack of quality Increasing nutritional awareness Market moving towards fragmentation Waste management Rapidly changing technology Political instability Total 0.1 0.09 0.04 0.02 0.05 0.07 0.03 0.03 0.02 0.03 1.00 3 2 3 4 2 2 3 3 2 3 0.3 0.18 0.12 0.08 0.1 0.14 0.09 0.09 0.04 0.09 3.04

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Internal Factor Analysis (IFE):

Internal Factors Strengths
Financially strong Variety of products Comprehensive distribution network High inventory turnover rate ISO certification Excellent R&D team Passionate owners Global scale of operations Brand name value High operational expertise

Weight
0.15 0.03 0.09 0.02 0.03 0.05 0.03 0.1 0.05 0.02 0.05 0.1 0.05 0.02 0.03 0.05 0.02 0.03 0.02 0.03 1.00

Rating
5 3 4 4 3 4 4 4 3 3 2 2 3 2 2 2 3 2 2 2 -

W. Score
0.75 0.09 0.36 0.08 0.09 0.2 0.12 0.4 0.15 0.06 0.1 0.2 0.15 0.04 0.06 0.1 0.06 0.06 0.04 0.06 3.17

Comments
Excellent financial track record Good utilization of products Multiple products distributed High efficiency Sign of quality Ability to produce new designs Good commitment Ever expanding reach Shezan still recognized positively Efficient performance Unable to innovate Need to communicate high fruit concentrate Need greater communication with vendors Need motivational techniques Need to reposition Juice Hire outside consultants Promotional budget as a function of sales Introduce more flavors Increase budget Synchronize both -

Weaknesses
Lack of innovation Lack of awareness of product quality Vendor Relations not prioritized Decreasing Employee Morale Ineffective positioning strategy Lack of defined long term corporate planning & strategy Limited funds for promotional budget Lack of flavor variety Lack of mainstream advertisement Product strategy and promotion strategy not synchronized Total

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Strategic Factor Analysis:

Key Strategic Factors External Factors (O) Demand increase in Africa (O) Increasing market size (O) Backward integration (O) Large younger demographic (T) Non-Islamic stigma (T) Decreasing brand value (T) Nutritional awareness (T) Increasing competition Internal Factors (S) Financially strong (S) Global operations (S) Huge distribution network (S) R&D (W) Positioning (W) Product quality awareness (W) Vendor relationship (W) Corporate strategy Total 0.1 0.1 0.05 0.03 0.05 0.03 0.05 0.07 1.00 4 4 4 3 2 2 2 2 0.4 0.4 0.2 0.09 0.1 0.06 0.1 0.14 3.13 Long term Long term Long term Long term Short term Intermediate Intermediate Long term 0.15 0.05 0.05 0.05 0.03 0.07 0.07 0.05 4 4 3 4 2 2 2 3 0.6 0.2 0.15 0.2 0.06 0.14 0.14 0.15 Long term Long term Intermediate Long term Short term Intermediate Long term Intermediate Weight Rating W.Score Duration

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Internal-External Matrix (IE):

Total IFE Score Strong Average (3.0-4.0) (2.0-2.99) I II Shezan IV VII V VIII

Weak (1.0-1.99) III VI IX

Total EFE Score

High (3.0-4.0) Medium (2.0-2.99) Low (1.0-1.99)

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

Competitive (CA)

External Strategic Position

Industry (IS)

Product Quality Market Share Brand Image Life Cycle Average

Financial (FS)

-1 +5 -4 +6 -3 +2 -3 +3 -2.75 4 Total X Axis Score = 1.25 -2 +4 -1 +1 -1 +3 -4 +4 2.0 3 Total Y Axis Score = 1.0

Suppliers Growth potential Degree of rivalry Substitutes Average

Environmental (ES)

ROE Working Capital Inventory Turnover Leverage Average

Technology Inflation Variability Barriers to entry Average

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Plotted SPACE Matrix:

Conservative

Aggressive

(1.25, 1)

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.

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TOWS Matrix:
Strengths (S) Weaknesses (W)

IFAS \ EFAS

1. Financially strong 2. Global operations 3. Huge distribution network 4. Brand name 5. R&D

1. Lack of innovation 2. Product quality awareness 3. Vendor relationship 4. Positioning 5. Corporate strategy 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

Opportunities (O)

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)

1. Demand increase in Africa

2. Increasing market size

3. Large younger demographic

4. Backward integration

4. Leverage brand name to cater segments (W4,O3) to market (S4,O2) 5. Increase operations overseas (S1,O5) ST Strategies 1. Establish a new corporate 5. Establish 5 year plan incorporating foreign exports (W5,O5) 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)

5. Falling Rupee value Threats (T)

1. Decreasing brand value

image (S5,T1) 2. Incorporate patriotic themes

2. Non-Islamic stigma

(S1,T2) 3. Understand consumer nutrition

3. Nutritional awareness

preferences (S5,T3) 4. Cover a wide area of region

4. Increasing competition

(S3,T4) 5. Use brand equity as quality

5. Perceived quality

assurance (S4,T5)

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Value Chain Analysis:

Support Activities

Firm Infrastructure Shezan applies hierarchical set-up within formalized management structure Human Resource Management New employee initiative, OJT, mentor programs and remuneration strategy Technology Development Continuous research initiative, flavor development and automation change Procurement Backward integration allows, purchase of fruit from self-owned farms
OUTBOUND LOGISTICS Establish Centers Distribute juices MARKETING & SALES Celebrity Endorsement Retail promotions Sales training

Profit Margin

INBOUND LOGISTICS Fruit Pulp Packaging

OPERATIONS Heat exchange Mixing Packing

SERVICES

Customer Feedback

Primary Activities

Activity Inbound Logistics Operations Outbound Logistics Marketing & Sales Services

Valuable? Yes No Yes Yes No

Rare? Yes No No No No

Substitutes? Few Many Few Many Many

Difficulty of Imitation High Medium High Low Low

Identified Sources of Competitive Advantage:

Inbound & Outbound Logistics

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Grand Strategy Matrix:

Rapid Growth

Quadrant II Shezan

Quadrant I

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.

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Major issues and problems:

Their overall Distribution is not properly integrated. They are not sharing information with each other. The logic behind identifying this problem is that they have their own farms and they are getting most of their raw material for the production from their own suppliers. And sometime when the raw material is reached at the warehouse for storage, the quality of fruits is not up to the standard and therefore they have to reject the supply. The point is, if they have their own supplier why cant they check the quality of their raw material before dispatching it to the production plant. They are not sharing information and thats why when the supply is rejected, they have to face loss of time and their production has to face lack of raw material.

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Recommendation:

First of all they have to improve their overall supply chain. They have main problems in their supplying side and the distribution channel. The problem of their raw material can be solved if they start inspecting their raw material for pulp formation at the farm before dispatching the supply. And they should use better trucks in which the quality of the fruits is not damaged. And when they temporary store their raw material in the warehouse, they must not store it for a long time and they should keep it in a dry and safe place.

They should reduce their inventory of fruits to a minimum level and move towards the just in time supplies. In this way they will be able to save the time which is wasted after rejection of raw material due to poor quality or poor handling or poor storage. Their major delays in their supply chain are at the raw material incoming and in cold storage waiting for distribution.

They should make their relations with the salesman on long term basis, and not on short term contract basis. Because then they are hired for short term, they do not give the productivity which is needed in the full demand season. They are not able to deliver on time and thats why they lose their next orders from retailers. They should make long term relations with their salesmen and they should be trained well so that they can deliver the products on time.

And for other distributers like in Faisalabad and Multan, they have to discourage them to not give the product to smaller distributors for distribution. Because in this way they are facing two main problems, one is that it takes more time for the product to reach to the retail shop and secondly when the product is reaching the retailer after passing through two distribution channels , the price of their product is increased as compare to Lahore city. When the customers have to pay more for the same product, they will start switching to other brands.

Right now, they have a centralized distribution center in Lahore. They are distributing the products from the production plant facility. They should focus on primary and secondary distribution centers so that the On Shelf Availability of their products in the markets and shops is increased and their existing customers do not switch to other brands.

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Conclusion:
As according to what we observed from the Shezans Strategies we have found that Shezan is sometimes proactive and some time it adopts reactive approach. Shezan is very much conscious and careful about its sales and about the customer satisfaction level and since 1964 they tried to maintain a same graph of satisfaction level and give customer a quality, fresh farm products direct from their own farms. Shezan is very much concerned about its SWOT analysis and keeping a closer eye on every action it can take for the better of its products. Every SBU has its own strategies to make and to implement and here at SBU level business strategy focus more narrowly on their own products. The MD plays an important and central role for the strategic planning to be more effective not just as a MD but also as a strategic thinker and corporate culture leader. Shezans management deals with developing a marketing mix to serve a designated market. Their main focus is on the strategies at SBU level where Shezan make their strategies considering three forces: Customer Competition Corporation

And in addition to this internal and external factors also play an important role to develop strategy. Shezan is concerned about the external information pertains on social, economic, political and technological trends and product/market environment. The information is analyzed to identify the SBUs strengths and weaknesses, which together with competition and customer define the objective of SBU. Shezan is also very concerned about the Corporate Appraisal and for this they keep a closer interact with all the groups of corporate publics having a stake in the organization. In this context Shezan is very much concerned about the Financial Position of the company. And they evaluate this factor very closely for the further decision making of their products.

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