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Assignment 4: A Group Report on

Marketing Dairy Products in Nepal

Pre Master Programme

Graduate certificate in International Business

DMU Student ID P14010061


DMU Student ID P14010806
DMU Student ID P14010135
DMU Student ID P14010624

Module Tutor: Zurg Fnyh

Module Title: English Language Skills for Business

Module Code: HUMS3006

Faculty: Business and Law

Date of submission: 14th of April 2015

Word count: 2026

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Table of Content

1. Introduction 3
2. Analyzing the case with the porters five forces 3
a. Competitive rivalry
b. Bargaining power of supplier
c. Bargaining power of customer
d. Threats of new entrance
e. The threat of substitute products
3. Analyzing the case with Marketing Mix 4
a. Product
b. Place
c. Price
d. Promotion

4. Pest Analysis 6
a. Political Analysis
b. Economical Analysis
c. Social Analysis
d. Technical Analysis
5. Market segmentation 7
a. Geographical
i. Rural Area
ii. Urban Area
iii. Climate
b. Behavioural
c. Demographical

6. Conclusion and Recommendation 9


7. References 10
8. Bibliography 11
9. Appendix 1 12

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1. Introduction
The dairy is one of the traditional industries in Nepal that has a significant role in
contributing to the economical development of the country. In present situation, the
demand of dairy products is rapidly emerging in the country. Hence, Nepal
Government as well as increasing numbers of entrepreneurs tend to invest in the
industry.
Sufficient source of high quality fresh milk, and other dairy products, such as cheese,
yogurt, ghee, and ice cream produced by skilled manpower and high-tech machines
may not always get right and reasonable price in absence of proper marketing.
Marketing is the special blend of arts and science (Silbiger, 1993). Silbiger further
points out seven different steps of Marketing Strategy Process. Consumer Analysis,
Market Analysis, Review of the Competition and Self, Review of the Distribution
Channels, Development of a Preliminary Marketing Mix, Evaluation of the
Economics, and Revision and Extension of Steps 1-6 until a consistent plan emerge
(Silbiger, 1993). Thus, marketing is the process of understanding and fulfilling the
requirements of consumers while ensuring personal profitability. Focusing on
customer satisfaction determines the success of marketing of any products.
This paper will analytically examine on the base of opportunities to marketing of dairy
products throughout the domestic (Nepalese) as well as international market. In
addition to that, few recommendations will be provided in order for enhancement and
promotion of the industry.

2. Analyzing the case with the Porters Five Forces


Organizations must measure and identify their position and strengths in the particular
business environment. This framework helps management understand the
organization better. Porters Five Forces (Harvard Business Publishing, 2008)
consists of five different elements that are effective to identify both internal and
external strengths and threats that are regularly faced by organizations. Competitive
rivalry, Bargaining power of suppliers, Bargaining power of customers, Threats of
new entrance, and, Threats of substitutes are the five element of the tool that has
been discussed bellow.

a. Competitive Rivalry:
Dairy Development Corporation (DDC) enjoys 50% milk market of Nepal. Moreover,
DDC is not yet being able to fulfill the demand of the market. DDC is the pioneer
public sector dairy entity. It was created in July 1969 under the Corporation Act of
1964. Similarly, the private sectors in the in the industry, like: Nepal Dairy, Himalaya

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Dairy, Sitaram Dairy, Anmol Dairy, Kathmandu Dairy, Adhunik Dairy and many more
that have numbered around 250 make the Competitive rivalry in the industry
extremely high.

b. Bargaining Power of Supplier


The main source of the industry is milk. Therefore, it is vital to have high quality milk
and must be adhered to the regulations of Nepals government. Thus, bargaining
power of supplier in the industry is also high.

c. Bargaining Power of Customer


As many brands in the industry, such as DDC, are famous in terms of quality
product, service and many other rivalry companies provide similar products and
services. Thus, the bargaining power of customer is also high.

d. Threat of New Entrance


The government of Nepal through public health organizations encourages its people
to consume milk and other milk products. Together, the governments policy to invest
on the industry has caused the threat of new entrance to be significantly low.
e. The Threat of Substitute Products
The threat of substitutes also remains at low level as no other can replace dairy
products.

3. Analyzing the case with Marketing Mix (4 Ps)


a. Product/Service
Product is one of the most important elements to the business. First of all, the entire
customers see the product whether it is qualitative or not. Likewise, in the business,
there should be the quality of milk product. The products should be attractive to look.
The packet of dairy product should entice the customers. Slowly and gradually, the
dairy product has to earn reputation of its brand. It must be one of the best products
among other competitors. Once the customers buy the product, the companies have
to make them to buy regularly. There will be no compromise about the quality of the
product. There are some dairy products of Nepal, which are as follows;
S.N. Products
1. Paneer
2. Cheese
Mozzarella Cheese

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Kanchan Cheese
Yak Cheese
3. Ghee
Yak Ghee
Cow Ghee
Buffalo Ghee
4. Butter
Yak Butter
5. Yoghurt
Strawberry Fruit Yoghurt
Mango Fruit Yoghurt
6. Ice-cream
7. Sweets
Rasbari
Lalmohan
Peda

b. Place
To make the business successful, place plays crucial role. Milk is collected from
different part of the rural areas of Nepal and collected in urban areas and then
distributed. Kathmandu, Pokhara, Birjunj, Biratnagar, Chitwan, Butwal are the
famous cities of Nepal where milk is collected and make different types of dairy
products such as; ghee, butter yoghurt, sweets and so on. Delivery service is given
to the customers by bicycle, bus and through online.

c. Price
The amount of money which is charged for the product or the value of product that is
exchanged by the product (Kotler & Armstrong, 2014). The quality of the product
determines the price. The brand name of the company such as Adidas, Nike, Armani
and so forth attract the customers. The price of the item must be moderate, which
can be afforded by both rich and poor people. Discount maximizes the business and
helps to finish the stock items. This idea is used in Nepal as well. Since we make the
price list, we have to consider about the price of the competitors. Skims of the
product can be brought to the customers to attract and know about product like buy
two and get one free etc. The customers can see the price in each and every item of
dairy product in Nepal. Hence it will be easy to seller and buyer as well.

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d. Promotion
After producing, setting and pricing, the company has to communicate to the
customers regarding the products and pricing (Kotler & Armstrong, 2014). For the
promotion of business, the products are advertised to the customers through radio,
TV, get together, billboards etc. are used in Nepal. If there is stock of an old item,
the company sales in cheap rate. We will give delivery service to the customers. The
packets of milk are distributed or delivered Everyday at the morning time. The
company follows the competitors idea how other companies are promoting the
product. The companies bring the idea Be healthy taking dairy product rather than
alcohol for the promotion.

4. PEST analysis
a. Political analysis
Nepal is a country with the area of 1,47,181 Square km, with the total population is
approximately 2.6 million is a landlocked, small, and developing country. It can also
be said that the country lies in the middle of Asia (Sansarnews, 2015). The tax rate in
the country are less as following Vat 13%, sale tax 15% and corporate income tax
20% comparing with other industries (see appendix 1). Moreover government is
supporting the Dairy and milk industry because it is one of the booming industries
and it provides ample of opportunities for employments and generate revenue to the
nation.

b. Economic analysis
Economic condition of the Nepal is suitable for the business of Dairy and milk
product as seen below the table.

Freedom from corruption 31.0

Business Freedom 65.7

Labor Freedom 44.3

Trade Freedom 61.8

Source: (The Heritage Foundation, 2015)

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The Green figures above in the table, shows that country is improving in the
significant area of the business. Somehow corruption level is also decreasing and the
GDP is growing at the rate of 5.48%. The labor cost and inflation rate is now stable
for the good progressive business.

c. Social analysis
Trend is now changing in the country people and youth nowadays, are more
aware about quality of milk and other dairy products. Somehow, consumption of milk
products rely more on reputation of brands and quality. Therefore, the industry has
lots of opportunities in the context of Nepal.

d. Technology analysis
In the technology point of view, Nepal is promoting R&D program in the country.
Using cross docking technique and consolidation warehouse is one of the examples
of the positive area of the country. Nepal is promoting the dairy industry and
providing significant support to the business environment. On the other hand, foreign
logistics companies exist in the market to make business more favorable for
business for example:(DHL, FedEx and APL logistics) and it will make business more
convenient and futuristic.

5. Market Segmentation
Market segmentation is a way to identify the market of the company which helps to
concern on its resources and efforts (Doole & Lowe, 2012, p. 104). Marketing of dairy
products is divided into different segments.
a. Geographical
i. Rural Area
Nepal is mostly based on agricultural industry and most of the agriculture situate in
the countryside, where people are involved in animal farming like cows, buffalos, and
Yaks. Thus, they produce the milk products to fulfill their needs and demands. Rural
areas are potential for the resources and production. The agents directly collect raw
milk products and company from owns farm and other farmers. There are many
small groups and cooperative, which are based on cow farming. There is low
production cost, sufficient human resources and raw materials. People are
experienced in farming and availability of sufficient land and grass make the milk
production more possible. As a result, the rural areas are chosen as the milk
production.

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ii. Urban Areas
Urban areas are the potential market for the milk products. Population density is high
in urban and demand is also high. About 88% households of the urban area
consume milk regularly (Paudelbhuvan, 2011). Products are consumed in the form of
fresh milk and dairy products. Products are consumed in hotel, restaurants,
hospitals, and households of the urban areas. It shows that the main target area of
the milk products is urban areas where people are not involved milk production.

iii. Climate
There are three regions in Nepal, which have different climate and environment. In
Himalaya resign people consume cheese and butter more than other products
because of cold weather. In hilly Resign, there is a demand for cheese, milk, butter,
ice cream and so on. In the southern part of Nepal, people consume more quantity of
yogurt, chocolate, sweets and ice cream because of the warmer temperature.
Whereas, during the winter seasons, people warm, fresh milk and use milk with their
coffee, and tea. On the other hand, the consumption of ice cream, yoghurt, and other
dairy product of milk during the summer season to get relief from higher temperature.

b. Behavioral
People are being educated. Concern on health is increasing every day. Where milk
products are related to fulfill the nutrition, improve, and maintain the health. The
higher demands to milk cheese, chocolates, and sweets on different occasions, and
festival like Dashain, Tihar, and marriage ceremonies or birthday parties. Sports
people also use milk products. Schools and colleges are another areas, where the
demands of the milk and the milk products, are, or high level.

c. Demographic
Companies are focusing to produce milk, curd, cheese, and butter. Products are
available in different sizes in order to meet the needs of different age groups. So, it is
targeted for all age groups. Products are affordable for all income level.

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6. Conclusion and Recommendation
The Dairy industry in Nepal highly contributes the economy of the country. More
efficient and effective marketing ensures better profitability to the milk producing farm
and farmers. Therefore, understanding marketing is a critical aspect of the industry.
The market can be understood by examining the local government policy towards the
particular industry, its customer and suppliers as well as substitute products and
competitors. Similarly, conducting a PEST analysis, it shows that Political,
Economical, Social and Technological sectors of the country are providing stable
platform for the marketing of milk and dairy products. Moreover, it is the suitable
market for business. Rural areas are important for manpower, Dairy farm and raw
milk production where urban areas are the target places for consume the dairy
products. Likewise, the concept of marketing mix plays a pivotal role in the business.
These concepts deals with product, place, price and promotion in the specific
business and ensure the success of marketing of products.

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7. References
Doole, I. & Lowe, R., 2012. International Marketing Strategy. 6th ed. Hampshire:
Cengage Learning.
Harvard Business Publishing, 2008. Harverd Business Review. [Online]
Available at: https://hbr.org/2008/01/the-five-competitive-forces-that-shape-strategy
[Accessed 5 April 2015].
Kotler, P. & Armstrong, G., 2014. Principle of marketing. 14th ed. New Jersey:
Person Education Limited.
Paudelbhuvan, 2011. Scribd. [Online]
Available at: http://www.scribd.com/doc/55417976/dairy#scribd
[Accessed 5 April 2015].
Republica, 2010. Business and Economy. [Online]
Available at:
http://archives.myrepublica.com/portal/index.php?action=news_details&news_id=192
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[Accessed 7 April 2015].
Sansarnews, 2015. sansernews. [Online]
Available at:
http://sansarnews.com/index.php/%E0%A4%AC%E0%A4%BF%E0%A4%B6%E0%
A5%8D%E0%A4%B2%E0%A5%87%E0%A4%B7%E0%A4%A3/9455-problems-
and-complexities-of-the-present-political-situation-of-nepal.html
[Accessed 14 April 2015].
Silbiger, S., 1993. The Ten Day MBA. New York: William Marrow and co..
The Heritage Foundation, 2015. Index of Economic Freedom. [Online]
Available at: http://www.heritage.org/index/country/nepal
[Accessed 8 April 2015].

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8. Bibliography
http://www.ird.gov.np/irdgov/ird/index/content-36-7.html

http://taxconsultantnepal.blogspot.dk/2012/11/tax-in-nepal_7.html

http://www.tradingeconomics.com/nepal/gdp-growth-annual

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9. Appendix 1

Here are Tax structure in Nepal for Fiscal year 2012-13 shown below:
Corporate Tax
No changes in the existing tax rate payable by domestic companies for the fiscal
year 2012-13. The existing tax rates are as follows:
Companies Rate (%)
Banks and financial institutions 30
General Insurance Business 30
Cigarettes, Bidi, Cigar, Chewing Tobacco,
Khaini, Liquor, Beer 30
Petroleum companies 30
Special industries 20
Export industries 20
Power generation, transmission, distribution,
infrastructure projects etc 20
Other entities not covered above 25

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