Documente Academic
Documente Profesional
Documente Cultură
GDW2015138
Title
Analysis of Business Environment and Strategy of Engro Corporation Limited A
Pakistani Company
Year
Pages
Document format
2016
44
Microsoft Word
Programme
International Executive Masters of Business Administration
(IEMBA)-2015-16
University
University of International Business and Economics (UIBE)
Supervised by
Professor Leinen Zhang
Abstract
This study report examines the business environment and strategy of a company in
Pakistan. It analyzes its resources and capabilities and their utilization to support business
and marketing strategies in the case of medium sized industry company. An increasing body
of literature emphasizes the strategic choices of core competencies/capabilities based on
resources and the combination of these with marketing strategies. Both competencies and
capabilities need to be aligned to the business environment where the company operates.
Further, the competitive advantages at the market place were analyzed against the
competitive environment where the company operate, and their decisions of the current and
future geographical location. Various study reports on similar industry case company were
studied.
The report on the company emphasized closeness to the markets, good logistic
network and large market size as the main sources of its competitive advantage. The overall
reliability, good image and reputation of the company and its qualified and skilled personnel
1
were the most important factors which placed the company in the best competitive position
against their rivals. High taxation, corruption, trade regulations & restrictions and low cost of
living are the characterized problems present in the business environment. In the future, if the
case company wanted to diversify its products and business by applying various innovative
and R&D techniques, it can hold competitiveness in the industry and expand its business in
other countries for higher value added products.
Contact information
Abdul Hameed Anwar , Dy Financial Adviser ,
Finance Division, Govt of Pakistan.
hameedanwar199@yahoo.com
Presently enrolled in IEMBA Program 2015-16
University of International Business and Economics (UIBE)
No 10 Huixin Dongjie Chaoyang District Beijing 10029, China.
ACKNOWLEDGEMENTS
2
First of all I would like to give my gratitude to Almighty Allah for His blessings upon
me for completion of this quite tasking IEMBA programme, this thesis and my stay here in
China and UIBE. I am also grateful to the Chinese Scholarship Council and MoFCOM for
their continuous support.
I wish to acknowledge the contributions of my family, friends, classmates and
teachers throughout the period of the IEMBA program and especially during this research
work.
I am highly grateful to my supervisor Professor Leinen Zhang for all of his support,
guidance and kind responses to my requests and especially for believing in me and this
work.
Thanks to all my friends and the class mates who remained helpful throughout the
programme. You were indispensable.
It will be unfair to forget my wife, my daughters and my son who had been extremely
very supportive of this work. I am indeed very grateful.
Table of Contents
1.
INTRODUCTION...............................................................................................................7
1.1.
Industrialization in Pakistan.................................................................................7
1.2.
Companys Background.......................................................................................8
1.2.1.
Vision...................................................................................................................9
1.2.2.
Mission..............................................................................................................10
1.2.3.
1.3.
1.3.1.
Values at Engro...................................................................................................10
1.3.2.
1.4.
1.5.
1.5.1.
1.5.2.
1.5.3.
1.5.4.
1.5.5.
1.6.
Objective of Study...................................................................................................16
1.8.
Methodology............................................................................................................17
1.8.1.
Research Strategy...........................................................................................17
1.8.2.
Research Approach.........................................................................................17
1.9.
Framework...........................................................................................................18
CHAPTER- 02.........................................................................................................................19
2.
Literature Review..............................................................................................................19
CHAPTER- 03.........................................................................................................................22
3.
ENVIRONMENT ANALYSIS.........................................................................................22
3.1.
PEST ANALYSIS.....................................................................................................22
4
3.1.1.
Political..............................................................................................................22
3.1.2.
Economical.......................................................................................................22
3.1.3.
Social.................................................................................................................23
3.1.4.
Technological....................................................................................................23
3.2.
SWOT Analysis.......................................................................................................24
3.2.1.
Strengths...........................................................................................................24
3.2.2.
Weaknesses.....................................................................................................24
3.2.3.
Opportunities....................................................................................................25
3.2.4.
Threats..............................................................................................................25
3.3.
Summary..................................................................................................................26
CHAPTER- 04.........................................................................................................................27
4.
Segmentation.......................................................................................................27
4.2.
Targeting...............................................................................................................28
4.3.
Positioning............................................................................................................28
CHAPTER- 05....................................................................................................................30
5.
5.2.
5.3.
5.4.
CHAPTER- 06.........................................................................................................................33
6.
CONCLUSION.................................................................................................................33
6.1.
7.
Theoretical Implications................................................................................................33
6.2.
Managerial Implications.........................................................................................34
6.3.
References.........................................................................................................................37
5
List of Abbreviations................................................................................................................39
Annex-A...................................................................................................................................40
Annex-B...................................................................................................................................41
A.
Board of Directors...................................................................................................41
ii.
1. INTRODUCTION
industrialized world. Pakistan had to start from the scratch to develop its industrial sector and
stand on its own feet. It had to make the most of its limited resources in order to keep the
pace with the changing trends of the world. With the passage of time Pakistan utilized its all
available resources domestic as well as external for rapid development of manufacturing
sector. Pakistan has now attained a fairly diversified base in manufacturing ranging from
essential goods to ship building industry. Domestic production of items such as refined sugar,
steel, fertilizers, cement etc. has helped in import substitution and has saved substantial
amount of foreign exchange.
way for Companys branded urea called Engro an acronym for Energy for Growth.
In 1978, Esso became Exxon as part of an international name change. The Company
was, therefore, renamed Exxon Chemical Pakistan Limited. In 1991, Exxon decided to divest
its fertilizer business on a global basis. The employees of Exxon Chemical Pakistan Limited
in partnership with leading international and local financial institutions bought out Exxons
75% equity. This was, and perhaps still is, the most successful employee buy-out in
Pakistans corporate history.
Engro Corporation Limited was established in Pakistan in 1965 as a subsidiary of
Exxon Ltd (USA) (Engro, 2015), mainly known as a fertilizer producer and supplier, but
currently it is operating in many other areas as well. In fertilizers, as a core product, the
company offers nitrogenous, phosphate, blended fertilizers, and micro nutrients, such as zinc
sulphate (Engro, 2015). Company has subsidiaries through which it also operates in chemical
terminal and storage, PVC resin manufacturing and marketing, industrial control &
automation businesses, dairy food and power generation businesses. The company was
previously known as Engro Chemical Pakistan Limited, but in January 2010, in result of
being converted into a holding company structure, it has changed its name to Engro
Corporation Limited, and now the company has become Pakistan's largest conglomerate
involved in the businesses from fertilizer manufacturing to food production and power
generation (Engro, 2015).
Engro is one of the most dynamic and progressive institutions in Pakistan. Its Mantra
of Energy for
Growth
is
nature
and
business
of
its
Subsidiaries. Undeniably, the company has become an icon of augmentation and Value
addition for its stake holders. They have an opportunity to enhance business/sales activities
by understanding customers businesses better. Capitalize on competitor's weaknesses and
target the market opportunities available to them. Scout for potential acquisition targets, with
detailed insight into the companies strategic, financial and operational performance.
1.2.1. Vision
To become the premier Pakistani enterprise with a global reach passionately pursuing
9
1.2.2. Mission
Company's mission is to grow its business in profitable, ethical and sustainable way.
Growth and sustainability are basic targets of the mission.
Integrity& Ethics: Engro sustain ethical behavior and loyalty in all their
activities that show their care for the achievement of the results. Highest
integrity is their best interest and they maintain the highest standards and
ii.
professionals.
Health, safety& environment: Engro always ensured the safety of their
people, customers, neighbors and visitors and for this they use their resources
and operations smoothly. It is the belief of Engro that their health, safety and
iii.
iv.
v.
vi.
loyal.
Community and External involvement: The industrial organizations must be
trusty and the trust and confidence can be earned by different ethical ways.
The performance of the Engro, its direct and open communication and the
vii.
viii.
process.
Enthusiastic search of profit: The important basis of our career security and
personal growth depends on the distribution of responsibilities to the
shareholders of Engro for improvement of the long-term profitability and
growth of the Engro Corporation.
11
ix.
Fun and Enjoyment: Engro believe that for the creative, healthy and high
performing work environment the satisfaction and excitement and recognition
are the important elements. Engro believes that having fun in work is a great
x.
experience.
Partnership and Teamwork: Team is strength of any company and there are
high performing teams in Engro and they retain building teams in their
xi.
xii.
Launched in 2005, EFL manufactures, processes, and sells dairy products, juice,
ice cream, and frozen desserts in Pakistan. It is the second largest producer of processed
milk in the country. EFL has state-of-the-art processing plants and an ice cream factory in the
province of Punjab, as well as its own dairy farm in the province of Sindh. The company
employs more than 1,700 people, including 200 staff in rural areas. EFL is a majority-owned
(87%) subsidiary of Engro Corporation Limited (ECL), one of Pakistans largest
12
technical
training and agri-services for farmers. EFLs value-proposition to small farmers has three
elements:
on electricity or a generator in off-grid areas. Centers are on average within two kilometers of
farmers homes so are walking distance or a short ride by local transport. Each center collects
around 400 liters of milk per day.
Second, farmers who are far from an MCC can sell milk to Village Milk Collectors
(VMCs) hired by EFL. The company has hired over 1,700 VMCs including Female Village
Milk Collectors (FVMCs). EFL trains them in milk testing, handling, and hygiene practices.
The company provides VMCs with basic equipment such as collection utensils, a testing kit,
and record keeping register; those who collect large quantities are given coolers and
generators. VMCs collect milk regularly from dairy farmers in their villages at the companyset price and after conducting the required tests. They receive commissions based on volumes
collected.
Third, EFL uses contractors and dodhis who purchase milk from farmers and transport
it to an MCC where it is tested. Dodhis are village-level door-to-door milk collectors who
purchase and sell milk to a number of buyers. Contractors may have their own milk collection
networks of dodhis. In general, purchase prices are mutually agreed, farmers may receive
cash advances, and tests are not conducted at the time of purchase. More than 360 trucks
with insulated tanks then transport milk from MCCs to EFL regional hubs and
thereafter to the milk processing plants.
facilitate payment via direct deposit to suppliers or to MCCs that pay farmers in cash.
Payment schedules can be customized based on farmers needs.
help the company improve quality. Instead, it needs to invest in farmer training to
procure quality milk to deliver high quality products. Third, growing demand for EFLs
products requires the company to ramp-up its milk supply. To ensure stability and security
of milk supply in the medium- to long-term EFL requires a strong system to expand
domestic procurement.
1.5.5.
i.
ii.
iii.
EFL began operations in 2006 with a processing capacity of 234,000 liters of milk per
day, which has increased to over 1.8 million liters per day as of 2013. The companys total
revenues grew from $16.5 million in 2006 to $370 million in 2013. The company became
profitable in 2010, and its gross profits increased from $2 million in 2010 to $8.5 million in
2013.
The companys supplier base of small dairy farmers more than doubled between 2008
and 2013 to reach 300,000. During the same period, the total value of milk procured grew
from $55 million to $90 million. In 2013, EFL procured 200 million liters of milk or 95% of
its total supply from small farmers, while the balance was sourced from the
companys dairy farm. A small dairy farmer supplies an annual average of 1,000 liters
of milk to EFL, earning approximately $450 in sales revenue. The company has also
established a vast procurement infrastructure with a field force, 40 agri-service units, and
over 1,800 milk collection centers across 200,000 square kilometers to cover around 15,000
villages.
In 2012, EFL received the G20 Challenge on Inclusive Business Innovation Award. In 2013,
the Computer world Honors Program, which recognizes visionary applications of information
technology to promote positive social, economic and educational change, recognized EFL as
a laureate for its EMAN system.
16
The objective of this study is to analyze business environment and strategy of Engro
Corporation Limited and to investigate how the said company perceives the business
environment currently in Pakistan. In particular, the study is to form an updated
understanding of the fertilizer and dairy products industry in the Pakistan with regard to how
this industry perceives the business environment. This study also evaluates how the problems
and possibilities present in companys internal structures and in external business
environment have developed during the last decade from the company standpoint.
Furthermore, the study describes what kind of core capabilities the company emphasizes, and
how the company plans to develop its businesses in future.
1.7. Research Questions
This study addresses the following specific questions:
i.
What kind of business environment and strategy which is being adopted by the
ii.
iii.
iv.
v.
vi.
1.8. Methodology
1.8.1.
Research Strategy
In light of the future needs, the common research strategies adopted are survey and
case study research. The case study is generally superior when answering the how and why
17
questions about a specific topic, while the survey is appropriate when answering who, what,
where, how many and how much questions about a topic. Both research strategies required
when the researcher has little control over the behavioural events and when the events under
investigation are contemporary. In the instant case I have adopted the case study research
method, which incorporates the business strategies and current development in the industry.
2nd chapter deals with the literature review section. The 3 rd chapter includes the PEST
and SWOT analysis. While chapter 04 covers the marketing strategy design section which
include STP for a company. Moreover, chapter 05 includes marketing strategy
implementation section i.e. 4 Ps of a marketing mix. Finally chapter 06 the following section:
i.
ii.
iii.
Theoretical implication
Managerial implications
Future research directions
18
CHAPTER- 02
2. Literature Review
The literature review in this chapter gives background explanations of the elements of
the research work such as analysis of business environment and strategy of a company in
Pakistan. This is also an overview of literature and past research work in related areas which
provides a premise for this current research.
To be competitive, a company needs to have a superior performance in comparison
with its competitors. Usually, superior performance is connected with superior quality of
products and services, or other means of differentiation. The second option is to gain such
cost-advantage that facilitates cost-leadership. The third alternative is to be a niche-company
and focus on a certain very small market segment (Porter 1985). The concept of sustainable
competitive advantage may be seen as a function of the uniqueness or difficulty to imitate the
source of this advantage (see e.g. Hoffman 1999). However, not all company resources have
the potential to provide competitive advantage; instead, these resources must possess four
attributes: rareness, value, inability to be imitated and inability to be substituted (Barney
1991).
Our theoretical background is based on an increasing body of literature, which
emphasizes the strategic choices of core competencies/capabilities, i.e. the Resource Based
View (RBV), Barney 1991, Pralahad and Hamel 1990, Fahy 2002), and the combination of
these with company-level strategies in creation of sustainable profitability. Compared with
the traditional industrial organization perspective and Porters (1985) three generic strategies,
the RBV defines availability of resources - tangible, intangible or human - and their
heterogeneous combination in the formation of competitive advantage. While the Porters
commonly applied framework is dominantly based on the industry characteristics, the RBV
underlines the role of companys internal resources and is therefore more suitable for
analyzing heterogeneous group of small-and medium sized companies, as in this study.
19
Figure 1(below), modified from Grant (2002), broadly summarizes our theoretical
frame of reference. Importantly, both the competencies and capabilities need to be aligned
with the business environment, where the company operates, in order to identify industry key
success factors.
Competitive
Strategy
Industry key
Advantage
success factors
Organizational
Capabilities
RESOURCES:
Tangible
Intangible
Human
iii.
iv.
v.
costs),
financial efficiency (cost advantages, free trade),
know-how (embodied in technology) (technology, abilities, possibility to use
new company to gain technical knowledge)
21
CHAPTER- 03
3. ENVIRONMENT ANALYSIS
3.1.1. Political
In Pakistan, the tax policy, employment laws, environmental regulations, trade
restrictions and tariff regulations have been formulated, yet implementation on these policies
is still weak (Global Security, 2014). Being a member of WTO, Pakistan supports the free
market and free trade ideology, yet like other countries it has trade barriers to protect its
domestic industry. An antidumping duty ordinance is in place to protect local industry that
also encourages local industrialists to invest further (Global Security, 2014). Having all these
indications, Pakistan still needs to modernize the trade and industrial sectors by developing
transparent policies. As for the analysis of the Engro Corporation, having the above
environment in background and beyond, one should give a considerable attention to the
Engro's internal strengths and weaknesses. Engro has tried to be far from political atmosphere
and has concentrated properly on its business, which has helped it to become a professional
organization (Engro, 2015). Engro has been complying with the country's law and cultural
values.
3.1.2. Economical
Currently, Pakistan's economic growth rate is 5.5% which was 8% once in 2005 but
huge shortage of electricity has affected the growth rate (Heritage, 2015). Economic growth
22
of Pakistan can be seen through gross domestic purchasing power parity of $4,886.27 in
2015, and GDP per capita income of $1,513 in 2015 (Heritage, 2015). Interest rates are
slightly high in Pakistan because of IMF conditional bailout program and rose by 7%
currently in 2015 (Pakistan Today, 2015). Purchasing power of Pakistanis has been shaken up
by 8.7% of inflation rate (Highlights of Pakistan Economic Survey, 2014). Minimum wages
are 48 hours per week working time in manufacturing sector and 40 hours in service sectors,
suitable for large and international businesses (Government of PakistanLabour Policy, 2010).
Country's cost of living is lower comparing to developed countries. Engro
Corporation is directly affected by these factors. Engro has tried to take benefit from
availability of cheap labor but interest rates are putting a negative effect on Engro's internal
economy because it has financing relations with most banks in Pakistan, as well as with some
international banks like HSBC, Barclays etc. Inflation rate is also affecting Engro, especially
Engro Foods, which involves direct relation with public purchasing power on broad levels.
Engro needs deeper analysis, in order to develop strategies for international perspective.
3.1.3. Social
Pakistan is an agricultural country with 55% population living in rural areas, 98%
population is Muslim, 42% population under 15 years of age only 4% over 64 years of age
(Heritage, 2015). Country is known to be one of oldest civilizations in the world i.e. Indus
Valley Civilization. Influenced with different factors, a strong business and industry culture is
steadily developing itself. A large portion is covered by Engro fertilizer. Engro Foods is
taking health consciousness into the consideration for its product development. Engro is
building a green power house in Pakistan to tackle the global warming issue. International
health and safety standards have been achieved by Engro within all its industries especially in
chemical industry. Providing employment on large scale Engro has shared the change in
career attitudes (Engro, 2015).
3.1.4. Technological
23
3.2.1. Strengths
Because of its long time relation with the suppliers and distributors of the industry,
one can look at the following strengths of the company:
i.
ii.
business.
Engro is well-known in the other parts of the world, so it can easily attract
iii.
investors.
Personal Relations with farmers in Engro Food sector. Engro has gained a good
reputation among the farmers. The farmers are highly able to sell and supply
iv.
their milk to the industry, which is a big advantage for the company.
Positive response from customers. All the products of Engro from their first
year of launch get a customer attention and have a good feedback for a best
quality of products. So Engro Food in 2012 crossed 1.4 billion sales figures,
v.
vi.
3.2.2. Weaknesses
It also has a drawback that it has narrow portfolio as compared to the other companies
like Nestle and Haleeb foods having a much diversified dairy product line. Also, it has high
antagonism in price in such segments as UHT market.
i.
ii.
iii.
iv.
3.2.3. Opportunities
Company has an adequate capital to extend, especially into other markets of the
world.
Company has a potential to innovate and differentiate the companys products to sustain a
competitive advantage
i.
be an opportunity for the farmers to better able to store the milk for longer period of time.
ii.
Awareness
As the literacy rate is rising, the awareness about health and hygiene issues might
increase, so by advertising Engro might be able to increase consumption and purchase of its
products.
25
iii.
production of 32 billion liters a year. Milk is the largest commodity from the livestock sector
accounting for 51 percent of the total value of the sector.
Also, some other opportunities are: company has important enlargement opportunity due to
population growth, high urbanization, and flexible government policy on food industry. It
also may merge with other global businesses to eliminate competitors.
3.2.4. Threats
i.
Competition
Engro has a threat of competition, especially in food industry, with competitors such
as Nestle and Haleeb, which already have consumers attention and exist in the industry for
long time. Thus, excluding the competitors might be difficult for the company. Also, entrance
of any new company in the industry might also affect the company.
ii.
differentials. The company has to come up to the expectations of the consumer so that they
might pay the demanded price of their product. Competitors may develop marketing
strategies to eliminate Engro Corporation products, which could create an economic
downturn in the business cycle.
Some other threats are: low purchasing power, diminish in GDP expansion rate, falling
speculation, recessionary period in business cycle. (Note: All above information is based on
Engro Corporation Annual Report 2014, available at Engro.com).
3.3. Summary
PEST and SWOT analysis of the company highlight a good prospect to understand
and evaluate a companys business environment, strategy and internal assets. In this regard,
Engro Corporation Limited is placed in a good position. Thus far, as evaluated the company
holds a good position in its niche. As long as it holds continuous improvement, by applying
various innovative and R&D techniques, it can hold its competitiveness in the industry, and
26
27
CHAPTER- 04
4. Marketing Strategy Design/ STP (Segmentation, Targeting, Positioning)
4.1. Segmentation
It is difficult for any one company to engage in mass production, mass distribution
and mass promotion for its product. The complexities arise from the proliferation of
advertising and distribution channels and the high costs associated with reaching a mass
audience. Therefore, companies segment the market so that they can target the group of
customers who share similar needs and wants. The milk sector shows a market that has
homogeneous preferences that is the consumers have similar preferences. They want milk to
be white, carefully processed, and good for health and bones. Keeping these things in mind
Engro foods market has been segmented. The marketers at Engro Foods have had a number
of options available to them when segmenting the market for their products.
4.1.1. Demographic Segmentation
Engro products are not bounded to any particular age, gender or lifecycle stage. The
brand is meant for all the users in higher upper or middle class families. Even though the
brand calls for a small percentage of an individuals income but lower class wouldnt want to
buy the brand maybe because they are price sensitive or because they believe lose milk is
better than processed milk and has all the nutrients that the processed milk lacks. However all
the companies in the milk sector are trying to change the image of processed milk as nonnutritionist milk? Therefore it can be said that Olpers has been positioned as a brand for high
income earners. Due to the income factor involved it can be said that Engro foods target a
specific social class who are health conscious and concerned about their weight.
4.1.2. Psychographic Segmentation
On the basis of psychographics, factors such as personality traits, lifestyles and
values, the marketers at Engro foods have segmented the market more towards achievers
who are goal oriented and focused on their careers, and experiences those who are seeking
variety in the milk sector. For example the ads for Olwell mostly show achievers who want to
be successful, have high aims and are already doing quite well in their concerned fields. The
28
Engros products have targeted experiences because the company has given them a new set of
brand and so many will make their first purchase because they want to try something new.
Olpers ads also target believers, traditional conservative people with concrete beliefs. The
ads for Engros show the beliefs of healthy life with processed milk and plays on the
emotional aspect more.
4.1.3. Behavioural Segmentation
Engros products have been segmented on the basis of benefits that consumers seek in
the milk. In this case, people look for a brand that can be used for all purposes from drinking
to tea whiteners as well to feed the animals. The ads also show that consumers should
increase their milk consumption for example with every tea they should use Olpers, every
morning they should drink Olpers and everyday they should feed their pets with Olpers
milk. There may be some hard core loyal in the milk sector. Loyalty may be towards such
established brands as Nestle and Haleeb. There might even be switchers and shifting loyal in
the milk sectors that are either price sensitive or want variety. As a result, the marketers need
to find ways to make the hard core loyal attracted to the Olpers brand and shifting loyal and
switchers to convert into hard core loyal as well.
4.2. Targeting
Engro foods have realized the importance of homemaker in the scheme of their things
and hence have been actively targeting the homemakers to buy their products. The healthy
milk products are a hit with them and the kids love the taste of its ice creams.
4.3. Positioning
The brand Positioning involves designing the product and image that will occupy a
distinctive place in the minds of the target market. As can be seen, nestle milk pak and Haleeb
have the largest profit margins and market share in the milk industry. Thus the marketers at
Olpershave decided to create its own unique image and then strengthen the position in the
customers minds. They have done this by taking a number of following steps:
29
i.
Packaging of Olpers milk and Olwell in red color and Olpers cream packed
in purple color are quite different and distinctive from the typical green and
ii.
30
CHAPTER- 05
Lassi
Flavored milk
Milk powder
Fruit juices
Ice creams
Milk
The brands milk items include olpers full cream milk that is creamy in nature and
Olpers lite for health conscious people who tend to drink low-fat milk. The fruit juicers
include Dairy omung and olpers y-frooter.Tarang is the special and creamy milk powder
whereas the frozen desserts are available in cups and sticks. Olpers cream and olpers tarrka
are some of its other products. The tarrka is used as a special spice to enhance any food item.
Although the ice creams are available in various sizes, the other dairy products are available
in mostly half and one liter sizes. Engro Foods also deals in anhydrous milk fats that are used
for various purposes like frying, cooking, as replacement for fat in dairy products, as
ingredients in bakery products and for making ice creams and confectionary. Its product also
includes unsalted butter that is derived from the pasteurized cream of both buffalo and cow.
31
For its international market, Engro Foods has also started venturing in to various other
food products. Besides the regular items, the other products served are frozen meat related
food items like turkey, beef and chicken.
5.2. Place in the Marketing Mix of Engro Foods
Engro Foods is actively involved in the distribution of all its food products. It follows
both the direct and indirect channel of distribution. Under indirect channel Engro food
products are available at almost all the large and small-scale outlets and stores. Even high
profile marts and showrooms that have food item counters display the products of this
company. This has become possible because of the transports owned by private firms. The
usual channel under this scheme includes distributer, wholesaler, retailer and then the
consumers.
The direct channel has become possible because the company is selling their products
to the consumers directly through their own personnel on cycles, trucks or tricycles. The
distribution network is an extensive one so that prompt deliveries are possible. Engro Foods
has set up its own dairy farms as well as plants for milk processing in Sahiwal and Sukkar. It
has appointed workforces for milk procurements and created departments that are vigilant in
its efforts to ascertain the freshness of the products. The company covers at least twelve
regions and has nearly three hundred and fifty distributers working under it.
Under its international expansion plans, the company signed an agreement to buy the
American food company Al-Safa- Halal. Today the company has become an international
company with a global market.
The company has decided to keep the prices flexible on a minimum and reasonable
scale, so that each and every section of the community can reach towards these products.
Large volume of sales yields larger profits for the organization. Keeping all its options open
the prices tend to fluctuate to meet the demands of the consumers as well as other economic
factors. In order to maintain its commitment towards providing realistic food prices the
company has taken admirable and active steps so that cutting of excessive costs can be made
possible.
In some cases, the company has also used a premium pricing policy where the prices
are a bit more than the prices of local available brands but are quite reasonable when
compared to the international brands. These are for brand conscious customers who tend to
purchase products that provide competition to foreign markets.
33
CHAPTER- 06
6. CONCLUSION
6.1. Theoretical Implications
On the basis of the foregoing analysis of the Engro Corporation about its microenvironment, macro-environment and finance, prospective investors are invited to make
investment in this progressive company of an emerging market of the world. Investing with
Engro Corporation will give investors an exceptional opportunity to channel their hard earned
savings into one the fastest growing organizations of Pakistan. Engros diverse portfolio of
businesses and impeccable work ethics guarantee that all the investments are secure and
reliable.
I recommend that Engro Foods implement the Innovation to penetrate open
milk/loose market strategy for the reasons described above. This strategy has an immense
potential to provide Engro Food with a resource to enter and gain market share of loose/open
milk which makes up 91% of dairy milk industry of Pakistan worth about USD $26 billion.
In the first phase of the implementation, Engro foods should divest from some of other
segments of the food industry such as ice-cream segment where it is competing against world
largest ice-cream manufacturer Unilever or it can divest from its beverage businesses where it
is facing a stiff competition from competitors like Pepsi and Coca Cola. This divesture will
provide Engro Foods with much needed capital which should be invested in to R&D unit
under R&D division dedicated solely to product innovation to target open milk industry. To
implement this, a functional structure should be adopted so as to allow for a coordinated
approach to increase the pace of innovation. Since the focal point of this strategy is R&D
division, it should be supported by all division. Different division such as R&D, plant
operations division should have an effective communications channel where flow of
information such exchange of ideas and feedback takes place with ease.
Another major challenge that Engro Foods will face is attracting and selecting
qualified team of scientists in Pakistan where higher education in dairy technology is almost
non-existent. Engro foods will have to hire mostly expatriate staff or select the best
candidates from its pool of R&D staff to go overseas for advanced education in dairy
technology. The time involved in the educating a staff and then implementing that education
to innovate a product is very long hence hiring a qualified staff from across the globe is a
34
much better option. After hiring qualified personnel, Engro should research on innovation of
a product which has an extended shelve like UHT milk along with the quality and taste like
regular milk. Engro foods must protect all its trade secrets and product formulas to avoid
losing competitive advantage over its rivals. Since Engro Foods as extensive experience in
product diversification, and implementation of strategies related to product diversification,
this is a rather easy option.
In this era of severe competition, this really matters to stay in pace. But the need to
remain competitive requires much effort especially when the industry has high exit barriers.
Operating profitably in such an industry becomes a matter of survival. Especially when the
attractiveness in the industry is so fascinated by the high profitability and growth potentials
with future prospects shaped so well, industry gradually becomes populated, the market share
concentrates and the profit margin deteriorates. A similar situation is taking shape around the
world in Fast moving consumer goods industry and to remain competitive, good care of
externalities should be taken. Externalities that force to innovate the product marketing and
promotions and externalities that forces to creatively enhance your product line in the
business portfolio.
company is optimistic of the potential that the country holds. Engro Foods will continue to
live its purpose-inspired growth strategy and bring to the fore affordable and nutritious
products that guarantee wholesome goodness to its consumers. To allow the company to
maintain focus on managing and improving operations during the commodity downturn, it
proposes to restructure its balance sheet through issuance of preference shares, subject to
shareholder approval.
ENGRO is one of the most dynamic and progressive institutions in Pakistan. Its
Mantra of Energy for Growth is well represented in the nature and business of its
Subsidiaries. Undeniably, the company has become an icon of augmentation and Value
addition for its stake holders. They have an opportunity to enhance business/sales activities
by understanding customers businesses better. Capitalize on competitor's weaknesses and
target the market opportunities available to them. Scout for potential acquisition targets, with
detailed insight into the companies strategic, financial and operational performance. In fact
ECPL is growing by leaps and bound and they prove that they say Growing with pride.
Based on the success story of Engro Corporation, in the future the multinational
companies can do their business successfully in Pakistan and it will be beneficial for the
investors to invest in Engro Corporation Limited,Pakistan.
37
7. References
i.
Engro Corp, (2015). Engro Corp. [online] Available at: http://engro.com [Accessed 29
May 2015].
ii.
Government of Pakistan Labour Policy 2010. (2010). 1st ed. [ebook] Available at:
http://www.ilo.org/dyn/travail/docs/995/Government%20of%20Pakistan%20Labour
%20Policy%202010.pdf [Accessed 27 May 2015].
iii.
Available
at:
http://finance.gov.pk/survey/chapters_14/Highlights_ES_201314.pdf [Accessed 29
May 2015].
iv.
v.
vi.
Fahy, J. & Smithee, A. (1999). Strategic marketing and the resource based view of the
firm.
Academy
of
Marketing
Science
Review,
10.
http://www.amsreview.org/articles/fahy10-1999.pdf.
vii.
Galbreath, J. (2005). Which resources matter the most to firm success? An exploratory
study of resource based theory. Technovation, 25 (2): 979-987.
viii.
ix.
x.
Hooley, G., Greenley, G., Fahy, J. & Cadogan, J. (2001). Market-focused resources,
competitive positioning and firm performance. Journal of Marketing Management. 17
(6): 503-520.
38
List of Abbreviations
CAGR: Compounded Annual Growth Rate
DAP: Diammonium Phosphate
EBITDA: Earnings Before Interest, Taxes, Depreciation and Amortization
EPS: Earning Per Share
GDP: Gross Domestic Product
HSBC: Hong Kong and Shanghai Banking Corporation
IMF: International Monetary Fund
IT: Information Technology
KIBOR: Karachi Interbank Offered Rate
KSE: Karachi Stock Exchange
LIBOR: London Interbank Offered Rate
LNG: Liquid Natural Gas
MARS: Mortgage Assistance Relief Services
PACRA: Pakistan Credit Rating Agency
PKR: Pakistan Rupee
PVC: Polyvinyl Chloride
YoY: Year on Year
UHT: Ultra-high Temperature
USD: United state Dollars
WTO: World trade organization
39
Annex-A
Hierarchy structure of Engro Corporation limited:
40
Annex-B
A. Corporate Structure of the Company:
i.
Board of Directors
Engro's Board of Directors includes one Executive Director, Four Independent
Directors and Five Non-Executive Directors. The Board has the collective responsibility for
ensuring that the affairs of Engro are managed competently and with integrity. These are the
members of the Board of Directors:
i.
ii.
iii.
iv.
v.
vi.
vii.
viii.
ix.
x.
xi.
ii.
within the power delegated to them by the Board of Directors. The members of Engro's
company are:
i.
ii.
iii.
iv.
v.
vi.
vii.
viii.
iii.
Share Holders
41
These are the shareholding pattern of Engro Corporation as at December 31, 2014.
Number
Shareholders held
15
4
1
38
Insurance Companies
13
65
a. Local
12,698
b. Foreign
9
of share
OTHERS
385
42
5,938,693
228,797,8
41
96
13,421,17
8
14,074,44
2
23,392,12
5
175,012,5
55
98,153,78
2
140,006,5
98
Percentage
1.13
43.68
0.00
2.56
2.69
4.47
33.41
18.74
26.73
iv.
Governance Framework
program, based on an annual risk assessment of the operating areas. The Internal Audit
function carries out reviews on the financial, operational and compliance controls, and reports
on findings to the Board Audit Committee, Chief Executive and the divisional management.
Directors
As at December 31, 2014, the Board comprises of one executive director, four
independent directors and seven non-executive directors of whom three are executives in
other Engro Group Companies. The Board has the collective responsibility for ensuring that
the affairs of Engro are managed competently and with integrity. A non-executive Director,
Mr Hussain Dawood, chairs the Board and the Chief Executive Officer is Mr. Muhammad
Aliuddin Ansari. A Board of Directors meeting calendar is issued annually which schedules
the meetings of the Board and the Board Audit Committee. The full Board met 8 times
including meetings for longer term planning, giving consideration both to the opportunities
and risks of future strategy. All Board members are given appropriate documentation in
advance of each Board meeting. This normally includes a detailed analysis on businesses and
full papers on matters where the Board will be required to make a decision or give its
approval.
44