TABLE OF CONTENTS
PARTICULARS
PAGE N
OINTRODUCTION
2-4• Pakistan Edible Oil Industry Overview 5-6
• Introduction & History Of Dalda 5-6
• Mission Statement 7-8
• Organization Structure 9-10
• Manufacturing Facility & Process 11
• Market Share 12-13
• Competitors Overview: Sufi Oil 14-16
Habib Oil Mills
ENVIRONMENTAL ANALYSIS
• Porter five forces model 17-23
• Political, Economic, Social and Technological 24
• EFE Matrix 25-26
COMPANY AND COMPETITOR ANALYSIS
• CPM Matrix 27
INTERNAL ANALYSIS
• Value Chain Management 28
• Core Competencies 29
• Strategic Cost Management 30
• IFE Matrix 31-32
STRATEGIC ANALYSIS AND RECOMMENDATIONS
• Generic Strategy 33 • SWOT Analysis 34-37 • TOWS Matrix 38-39 • SPACE Matrix 40-42 • BCG Matrix 43-44 • IE Matrix 45
• Grand Strategy Matrix 46
• QSPM Matrix 47-49
STRATEGIC IMPLEMENTATION
• The components of Strategic implementation 50-51
• Balanced Business Scorecard 52-54
PAKISTAN EDIBLE OIL INDUSTRY-
OVERVIEW
Edible oils and fats are an essential part of the daily needs of a Pakistani family. It is also a significant part of household expenditure of an average family - almost 6% of the household budget is spent on it.
Branded as well as non-branded products compete in the market. Branded products are mostly at the high end of the market and non-branded towards the lower end of the market and mostly selling in loose form.
Edible oils and fats are marketed in variety of packaging formats – tin cans, plastic bottles, plastic pouches, plastic buckets and in loose form.
Ghee and cooking oil industry in Pakistan relies heavily on the imported edible oil and spends a hefty foreign exchange on the payment of edible oil imports. Currently, Pakistan spends about $1.0 billion per annum on the import of edible oil. At present the capacity utilization of ghee or edible oil is about 55 percent. A probable reason for this under utilization is the existence of unregistered ghee and cooking oil-processing units in the country.
Edible oils market is a highly fragmented market with many brands and non branded players.
Total Consumer Cooking Fats & Oils Market
52%
48% Branded
An analysis of the major players in the branded market reveals that most of this market is non-premium segment taken by a large number of very small regional brands. Companies with national presence dominate the premium segment.
On the basis of its market, it is divided into three categories; national, regional and local. National brands are those popular in the whole country and marketable in the whole cities of Pakistan. Some examples are Dalda, Habib and Sufi. Local brands are those, which are present in a particular province like Punjab. Some examples are Kisan, Meezan, Kashmir or Shan. Regional brands are those which are present in a particular city like Rawalpindi.Some examples are Latif, Shahbaz etc.
INDUSTRY SEGMENTS
The oil and ghee industry has 3 clear segments.
Ghee (75.33%) with a total consumption of 1.75 Mil tons. Cooking Oil (23.33%) with a total consumption of 1.0 Mil tons Industrial Fat (1.34%) with a total consumption of 50,000 tons.
LIST OF ALL PLAYERS:
INDUSTRY PALYERS
The names of various players in the industry with their respective sales volume per annum in the ghee and oil categories are as follows:
GHEE
OIL
Dalda
65,000
100,000
Habib
85,000
105,000
Ghee Corpo. Of
Pakistan
144,000
Associated
66,000
1,200
Hamza
30,000
1,500
United
30,000
Punjab Oil
20,000
800
Gulf
6,000
700
Continental
2,500
600
Mehboob
20,000
Faisalabad (Kissan) Oil 20,000
3,000
Shahbaz
30,000
Khayaban
30,000
Chniot Ent.
20,000
Waheed Hafeez
40,000
Piracha Ghee
10,000
Hunza
20,000
2,500
Madni
10,000
2,500
P T C
3,000
Agro (Soya Supreme)
15,000
65,500
TULLO
25,000
85,000
SUFI
20,000
81,000
Evolin
5,000
Market Share
Habib Oil Mill -Habib, 13%
Dalda, 11%
Wazir Ali - Tullo, 3%
ATM Gases -Soya Supreme,
2%
Sufi Group - Sufi Cooking Oil,
0.5% Paracha Textile -Meezan/ Kissan,
0.5% Loose & Other
Small Branded Cooking Oil,
DALDA FOODS
INTRODUCTION
The Dalda brand has a strong heritage in Pakistan. It is synonymous with assured quality, which is why the business has been able to charge a premium over its competitors year after year. The Dalda brand is one of the 3 leading top brands in the Country.
Current trademark and license rights in Pakistan only for: o Dalda Vanaspati
o Dalda Melange o Dalda Cooking Oil o Dalda Planta
HISTORY OF VANASPATI
Dalda brand was first launched in British India in 1938. However, the Company launched the brand in Pakistan in 1952. The brand was successfully re-launched in 1997 when the Trans level in formulation was reduced to below 1% making it the healthiest Vanaspati available in Pakistan. The brand was again re-launched in 2001 with a new flavor “Irresistible taste with nutrition.
HISTORY OF COOKING OIL
Dalda cooking oil was first launched in 1981 and re-launched in 1997 with the addition of Vitamin-E to create functional differentiation.
The brand was again re-launched in 2001 on the platform of “Good Health, Great Taste…” Dalda is an all-purpose Vanaspati used in the preparation of all types of meals and is branded as a high quality grade in the retail market. Dalda is the most established branded vanaspati and holds a significant market share of the premium branded vanaspati market (Excluding Industrial Vanaspati Market).
Dalda Melange is a recently developed cooking medium that is typically used in the preparation of all types of meals. It has been developed as a middle product between Vanaspati and edible oil primarily to appeal to the health conscious customers
Dalda Cooking Oil is a well-established name in the Edible Oils Market having significant share of premium branded cooking oil. Launched in 1981, the brand is on top of the recalled foods brands of Pakistan. It has seen a continuous volume growth over the years and is one of the most trusted household names.
Planta was launched in 1989 specifically to attract the customers who wanted the health benefits of oil and taste of Vanaspati. The brand was transferred to the house of Dalda in June 2000 and the name was reformatted as Dalda Planta. It enjoys very loyal customers’ base taking 4% of the branded edible oil market.
Dalda products are manufactured in a Company-owned plant located at Sindh Industrial & Trading Estate (S.I.T.E.) Karachi.
The Company’s principal products compete in the categories of
• Vanaspati and
• Edible Refined Oils and are distributed primarily through an integrated channel of company distributors.
MISSION STATEMENT OF DALDA
Dalda …. Our Purpose
”At the heart of the corporate purpose, which guides us in our approach to doing business, is the drive to serve consumers in a unique and effective way. This purpose has been communicated to all employees worldwide”.
Our purpose in Dalda is to meet the everyday needs of people everywhere – to anticipate the aspirations of our consumers and customers and to respond creatively and competitively with branded products and services which raise the quality of life.
Our deep roots in local cultures and markets around the world are our unparalleled inheritance and the foundation for our future growth. We will bring our wealth of knowledge and international expertise to the service of local consumers – a truly multi-local, multinational.
Our long-term success requires a total commitment to exceptional standards of performance and productivity, to working together effectively and to a willingness to embrace new ideas and learn continuously.
We believe that to succeed requires the highest standards of corporate behavior towards our employees, consumers and the societies and world in which we live. This is Dalda’s road to sustainable, profitable growth for our business and long-term value creation for our shareholders and employees.”
MAIN COMPONENTS OF MISSION STATEMENT
1. CUSTOMERS: The purpose of Dalda is to serve consumers in a unique and
effective way.
2. PRODUCTS OR SERVICES: It caters the requirement of everyday namely soap
and detergents for washing and cleaning, tea for drinking and margarine for daily breakfast.
3. CONCERN FOR SURVIVAL: The Economic objectives of Dalda are deep rooted
in local cultures and markets around the world.
4. PHILOSOPHY: The philosophy of the company is to provide highest standard of
corporate behavior towards the employees, consumers and the societies.
5. SELF CONCEPT: Total commitment to exceptional standards of performance and
productivity.
6. CONCERN FOR PUBLIC IMAGE: Profitable growth for the business and long
term value creation for shareholders and employees.
7. CONCERN FOR EMPLOYEES: The Company also focus to look after the
DALDA FOODS (PVT) LIMITED
ORGANIZATION STRUCTURE
CHAIRMAN
BOARD OF
DIRECTORS
DIRECTOR PRODUCTIO N DIRECTOR COMMERCIA L DIRECTOR FINANCE GENERAL MANAGER-PRODUCTIO N FACTORY MANAGE R SALES MANAGE R FINANCE MANAGE R GENERAL MANAGER-MARKETING GENERAL MANAGER-FINANCE DIRECTOR HUMAN RESOURCE GENERAL MANAGER-HUMAN RESOURCE GENERAL MANAGER-HUMAN RESOURCEOrganizational Chart Of a Department
Business Unit Head
Marketing
Manager
Commercial
Manager
Factory
Manager
Development
Manager
Brand
Manager
MANUFACTURING FACILITY
Production facilities are situated at a strategic location at Sindh Industrial & Trading Estate (S.I.T.E.), Karachi near to the Karachi Sea Port to enable easy access to imported raw material. The factory has an area of about 9.27 acres.
The oil refinery is highly automated and utilizes advanced technological processes. The Refinery includes all buildings, land, electrical and mechanical installations, furniture, fittings, machinery and equipment utilized by the business, including the margarine plant but excluding the third party packing facilities, which are located within the same vicinity.
MANUFACTURING PROCESS
Material Intake Blending P hosphoric Acid De-Gumming
Caustic Soda Neutralisation Sodium Methylate Interesterification
Bleaching Earth Bleaching Filteration De-Gassing De-odourisation Vitamins flavours etc. Blending
Filling
Va na spa ti
M aterial Intake
Phosphoric Acid De-Gumming Caustic Soda Neutralisation
Bleaching Earth Bleaching
De-Gassing De-odourisation V itamins flavours etc. Blending
Filling
MARKET SHARE
In a highly fragmented MARKET Dalda is the largest selling single brand. Dalda‘s market can be broadly divided in two parts.
1. Vanaspati market 2. Edible oil market.
VANASPATI MARKET
Total Vanaspati Market
Dalda 4% Un-branded 47% Other Premium Brands 8% Non-Premium Brands 41%
Branded Vanaspati Market
Dalda 8% Other Premium Brands 15% Non-Premium Brands 77%
Edible Refined Oil Market
An analysis of the total market reveals that about 52% of the market is un-branded. Of the remaining 48% market, premium segment constitutes about 30% of the total market. In the branded market, however, the premium segment has a major share and accounts for about 62%.
OIL COSTING SHEET
A: COSTING PER KG % EXAMPLE (RS)
Oil 80% 80
Ingredients 1% 1
Packaging Material 8% 8
Total Cost of Material / TON 89% 89
2. Product Cost (per ton) Variable Costs Material Cost 89% 89 Variable FOE 2% 2 Distribution Cost 2% 2 Fixed Costs FOE 2% 2
Total Product Cost per ton 94% 94
3. Period Cost (per ton) Direct Team Cost Admin Costs 1% 1
Finanical Charges 1% 1
Ammortization 0% 0
Advertising & Promotion 2% 2
Others - Taxation 1% 1
Total Period Cost Per Ton 3% 3
4. NPS COST Redistribution 0% 0
TPR
2% 2
Shortages/ Damages .35 % of GSV 0% 0 Total NPS Cost 2% 2 Total Cost 100% 100 CHANGE TOTAL COST ALL OTHERCOMPETITORS
INTRODUCTION
Sufi Group of Industries are one of the most dynamic and quality conscious companies with customer oriented approach towards their products.
Sufi has a long-standing commitment to the community and to giving back to society. The top management of Sufi has believed that the Company has a responsibility to use its money, its people, its energies and resources for the long-term benefit of society.
Over the last decade, Sufi Group of Industries has emerged as one of the fastest growing, forward-looking and most innovative consumer goods company in Pakistan. Right from recruiting and training top talent to setting new standards of product quality and promotional excellence.
Sufi provides products and services of superior quality and value their customers. Their customer oriented policy has given them a proper identity in the market. Their slogan is that customer is the lifeline of business and they need to be satisfied at any cost.
Serving the country since 1952, the company has diversified into the field of Soap chemical products, detergent and edible oil business.
Products are Sufi Mini, Sufi Darja Awwal, Sufi Glycerine, Sufi Brown, Sufi Special Quality, Sufi Super, Sufi Nirol and Sufi Ploy Bag 1 kg; 1/2 kg.
HISTORY OF SUFI
Established in 1992 with state of the art facilities to produce quality guaranteed cooking oils. The company defined its goals as producing the best edible oil for quality conscious consumers with the local market in mind and proper influx of quality management. The Sufi oils have become a household name. The company is currently producing oil under the following brand names.
o Sufi Canola Oil o Sufi Banaspati Ghee o Sufi Sunflower Oil o Sufi Soyabean Oil
The Strong market presence with its marketing team and customer support has built a solid reputation of being committed to their quality. This has led Hamza Vegetable oil to become a leading manufacture of quality oils.
HABIB OIL MILLS
Habib Oil Mills (Pvt.) Ltd. "HOM" is the largest FMCG Company exclusively in the vegetable oil & fats sector in Pakistan. The company produces premium brand cooking oils and hydrogenated cooking mediums, and markets the products through its own distribution network, which covers almost all commercially viable markets nation wide.
Habib Oil Mills (Pvt.) Ltd. is one of the leading processors and marketer of vegetable oil and its products. The company sells 52,000 tons of branded consumer packs of cooking oil and banaspati nationally through a well-established network of 350 distributors. The total turnover of Habib Oil Mills is Rs. 2 billion. It has grown at the rate of 9-10% per annum for the last 5 years. It has an 8.8% share of the total branded consumer pack market.
The company covers all major segments of the market. It enjoys an excellent marketing reputation and is viewed as a professionally managed, ethical company marketing quality product. There is a growing concern with environmental issues in the organization.
PRODUCTS
The products of Habib Oil Mills include Edible Oil and Banaspati. These products are being marketed in a variety of sizes and packaging options. Habib has the largest range of products. Out of all the products offered by the company, Super Habib, Habib Cooking Oil, and Habib banaspati are all flagship brands. Super Habib and Habib Cooking Oil are the most profitable brands whereas Habib Banaspati has the highest volume tonnage sales.
• Super Habib
• Habib Cooking Oil
• Habib Banaspati
• Habib Corn Oil
• Nayab, Handi and Mayar Banaspati
• Nayab, Handi and Mayar Banaspati are regional brands of Habib Oil Mills.
ANALYSIS OF THE INDUSTRY USING MICHAEL PORTER’S FIVE
COMPETITIVE FORCES
Worksheet on Industry Structure
Industry Competitors
Rivalry Among Existing Firms MODERATE Industry Competitors
Rivalry Among Existing Firms MODERATE Substitutes Substitutes LOW LOW Buyers Buyers Potential Entrants Potential Entrants Suppliers Suppliers MODERATE MODERATE1. Threat of Entrants
Yes
(+) Moderate No (-)
1) Do large firms have a cost or performance advantage in your
segment of the industry?
2) Are there any propriety product differences in your industry?
3) Are there any established brand identities in your industry?
4)Do your customers incur any significant costs in switching
suppliers?
5) Is a lot of capital needed to enter your industry?
6) Does the newcomer to your industry face difficulty inaccessing distribution channels?
7) Does experience help you to continuously lower costs?
8) Does the newcomer have any problems in obtaining thenecessary skilled people, materials or supplies?
9) Does your product or service have any proprietary features
that give you lower costs?
10)
Are there any licenses or qualifications that are difficult to
obtain?
11)
Can the newcomer expect strong retaliation on entering the
market?
12
) Is serviceable used equipment expensive?
Total 6 6
ANALYSIS
Although this matrix suggests that the threat of entrants is moderate, however, we feel that factors such as capital requirements (and existing established brands would create problems for new entrants) have a higher weight age. It is therefore our opinion that the threat of entrants is low. This alone explains why in recent past we have seen hardly any new companies entering the edible oil industry.
2. Bargaining Power of Buyers
(To what extent are your customers locked into you?)
Yes
(+) Moderate No (-)
1) Are there a large number of buyers relative to the number of
firms in the business?
2) Do you have a large number of customers, each with relatively
small purchases?
3) Does the customer face any significant costs in switching
suppliers?
4) Does the buyer need a lot of important information?
5) Is the buyer aware of the need for additional information?
6) Is there anything that prevents your customer from taking yourfunction in-house?
7) Your customers are not highly sensitive to price
8) Your product is unique to some degree or has accepted
branding
9) Your customers' businesses are profitable
10) You provide incentives to the decision makers
Total 5 1 4
ANALYSIS
The table above shows that buyers of the edible oil industry have low to moderate bargaining power. This is because, there are large numbers of buyers as compared to the producers in the edible oil industry, and the end consumer to some degree does purchases based on brands rather than prices, therefore, buyers have little bargaining power. There is however a limit to which the company can exploit the buyers, for example if Dalda starts charging too higher price then the buyers would switch brands.
3. Threat of Substitutes
(some other product or service that performs the same job as yours)
Yes
(+) Moderate No (-)
1)Substitutes have performance limitations that do not
completely offset their lowest price. Or, their
performance is not justified by their higher price.
2)The customer will incur costs in switching to a substitute.
3)Your customer has no real substitute.
4)Your customer is not likely to substitute.
Total 4
ANALYSIS
As the table suggests, there is basically no real substitute of the edible oil. The closest substitute is butter however that poses as a little threat to the industry. And there is very little chance that consumers would use this substitute.
4. Bargaining Power of Suppliers
Yes
(+) Moderate No (-)
1)My inputs (materials, labor, supplies, services etc.) are standard rather
than unique or differentiated.
2)I can switch between suppliers quickly and cheaply.
3)I can substitute inputs readily.
4)I have many potential suppliers.
5)My business is important to my suppliers.
6)My suppliers would find it difficult to enter my business or my
customers would find it difficult to perform my function in-house.
7)My cost of purchases has no significant influence on my overall costs.
Total 4 3
ANALYSIS
Bargaining power of suppliers is moderate. Companies cannot easily switch from one supplier to another as they have signed contracts. As producers, there is virtually no substitute to the inputs that the firm uses.
5. Determinants of Rivalry among Existing Competitors
Yes (+) Moderate No (-)1)The industry is growing rapidly.
2)The industry is not cyclical with intermittent overcapacity.
3)Fixed costs of the business are a relatively low portion of totalcosts.
4)There are significant product differences and brand identities
between the competitors.
5)The competitors are diversified rather than specialized
6)It would not be hard to get out of this business because there are no
specialized skills and facilities or long term contract commitments,
etc.
7)My customers would incur significant costs in switching to a
competitor.
8)My product is complex and requires a detailed understanding on
the part of my customer
9)My competitors are all of approximately the same size as I am.
Total 4 1 4
ANALYSIS
This table illustrates that the rivalry among the firms in the edible oil industry is moderate. Since no new firms are entering the market, existing firms have targeted specific end consumers, and unless there is significant price increase, end consumers would not switch brands easily.
Summarized Worksheet
Favorable Moderate Unfavorable
1) Threat of new entrants
2 ) Bargaining Power of Buyers 3) Threat of Substitutes 4) Bargaining Power of Suppliers 5) Intensity of Rivalry among Competitors Overall Rating 2 3 0
FINAL ANALYSIS
The porters 5 forces model shows that the edible oil industry is a two star industry; however we feel that the remaining factors do not show that the industry is un-favorable. We feel that the current profit margins would remain the same. And existing firms that are doing well would have no real threat of new entrants and there is no real threat of substitutes.
Rivalry to some degree is non existent, however rivalry would occur when competing firms target each other target market, there have been one or two occasions where this has happened but this doesn’t occur in the industry very often.
Since there are very few producers in the edible oil industry as compared to the buyers, and the general end consumer does look at brand when making a purchase decision rather than the price, at the same time buyers of this industry have a tendency to switch to other brands if firms try to exploit them too much. Therefore we feel that buyers have low to moderate bargaining power.
ENVIRONMENTAL ANALYSIS AND INDUSTRY ATTRACTIVENESS
PEST (Overall Industry)
Political
Political factors play an insignificant role. Even if the government changes the import duty or tax structure, the increase in cost can be transferred to the consumer; an increase in price would not result in decrease in sales due to the fact that edible oil has an in-elastic demand. Also, any changes in the government regulation would affect the entire industry; therefore the effect is on all firms.
Recently, the government has introduced sales tax on items that are imported, directly on the port. This reduced the chances of small producers from tax evasion, however they start smuggling raw materials. Geo-political factors influence greatly (as it does all other industries), factors such as strike, riots are increasing in this country and they are greatly affecting the profitability of all industries.
Economic
Economic factors greatly influence the edible oil industry, due to consistent increase in inflation; the purchasing power of the end consumer is decreasing. The PKR Rs is also devaluating, on top of that countries from which we import oil raw material (e.g. Malaysia) have improved economically, their currencies have appreciated, and causing problem for our local producers as the cost of imports has increased substantially. So companies have found it difficult to purchase raw materials at high costs and not to increase prices. This has greatly reduced the profit margin for the industry.
Social
Social factors play very insignificant role in this industry, existing oil producers have not been able to create that “premium brand” image (one in which snob value cannot be created). Also, as mentioned before although brands do influence purchasing decision making however it is not that significant as consumers are becoming more and more price sensitive.
Technological
Technology doesn’t impact highly on this industry, even if firms are able to reduce production cost, but the main expense comes from purchases of raw material and that cannot be reduced. Technology has helped (as in the case of Dalda, who has tried to differentiate themselves but introducing VTF technology) firms create core competencies but that doesn’t greatly influence the firms profitability as consumers are becoming more and more price sensitive.
WEIGHT RATING
WTD. SCORE
OPPORTUNITIES
Setting Refineries 0.08 4 0.32
Local production of Raw Material 0.06 3 0.18
Emerging modern trade departmental chains like Macro and Metro
0.07 4 0.28
Institutional Selling 0.05 3 0.15
People are becoming more health conscious 0.04 3 0.12
Untapped rural Market 0.06 3 0.18
Export potential 0.06 3 0.18
Population growth 0.05 3 0.15
Increase in per capita consumption of edible oil
0.04 3 0.12
THREATS
Unbranded edible oils 0.05 3 0.15
New entrants 0.04 2 0.08
Lower pricing by competitors 0.05 2 0.10
Intense competition in the industry 0.07 3 0.21
Deteriorated law and order situation 0.06 2 0.12
Declining real purchasing 0.05 2 0.10
Non-availability of basic utilities power 0.05 3 0.15
Political influence is used 0.04 2 0.08
Reduction in the purchasing power of people due to inflation
0.04 2 0.08
International brands are entering in the market
0.04 2 0.08
1.00 2.83
ANALYSIS
The average total weighted score of EFE Matrix is 2.83 which is above industry average. It appears that Dalda is responding in a good way to existing opportunities and threats in the industry. The average weighted score shows that Company’s performance is good but not outstanding in the industry.
each factor is 3. These are the areas where Dalda needs improvement to take advantage of the market opportunities.
When we analyzed the threats we found that the biggest threat in the industry is intense competition and company’s rating is 3. It shows that competition is the biggest threat for Dalda (competition from the local as well as from unbranded/ loose edible oil) after that Deteriorating law and order situation and Non-availability of basic utilities power are also severe threats face by the whole industry.
STRATEGIES
• Dalda has to focus on the local production of raw materials, because Dalda import the basic raw material for production- they can enter into joint venture with Malaysian companies for getting help in the local production and refining of raw material like; cotton seed, Soya bean etc.
• Untapped rural market is one of the biggest opportunities for Dalda where people still use unbranded or loose cooking oil- Dalda has to work on the easy availability and distribution of cooking oil in the rural area/markets.
• The demand of Pakistani cooking oil is high in Asian countries like Afghanistan and Middle Eastern countries like Dubai, where people know Dalda and also having emotional attachment with Dalda- in these markets there is a high export potential. Dalda has to work on the local production of the raw material to have an easy accessibility of raw material to increase production at a lower cost to meet local demand and also taking advantage from export potential.
COMPETITIVE PROFILE MATRIX
Dalda
Habib
Sufi
Critical Success
Factors
Weight Rating
Wtd.
Score
Rating
Wtd.
Score
Rating
Wtd.
Score
Price
Competitiveness
Market Share
Product Quality
Promotion Efforts
.20
.15
.10
.20
.20
4
4
3
3
4
.8
.6
.3
.6
.8
4
3
3
3
3
.8
.45
.3
.6
.6
3
2
3
4
3
.6
.3
.3
.8
.6
ANALYSIS
From the analysis of CPM, we found that overall rating of Dalda is better than Habib and Sufi. In CPM if Dalda’s rating is higher than the competing firms it doesn’t mean that Dalda is better than the second or third. So, we have to take a look to individual success factors.
If we take a look to individual factors we found that the price, Market share, Customer loyalty and financial position is better as compare to competitors. In product quality the company’s position is same as the competing firms. But in promotional efforts Sufi’s position is better than Dalda. So, Dalda has to pay more attention to the promotional efforts.
STRATEGIES
Dalda should increase the frequency of advertisement, to make sure that the target market gets the exposure. Also Dalda need to keep a track of competitor’s promotional activities.
INTERNAL ANALYSIS
VALUE CHAIN
Human Resource Management
When the Dalda foods got de-merged from Unilever in 2004, 5 departmental heads and a director straight away joined the new company and apart from them the management of the new company was given the option of picking the employees working at the plant after they were given “Golden Hand Shake” by Unilever. This is how Dalda has gotten the advantage of employing the best skilled workers available in the industry.
Technological Development
Dalda has the plant that manufactures the banaspati which is Virtual Trans-Fat Free (VTF). Company is providing the best quality product available in the market. Technology which manufactures VTF is only available with Dalda. Efforts were made in the past by major competitor like Habib to develop such technology but they could not succeed in developing a plant that manufactures VTF banaspati.
Procurement
Most of the large companies in the industry purchase their raw materials from the same suppliers. However “Dalda” employs procedures which help purify the final product. Most of Dalda’s competitors are not employing these procedures and we feel this is giving Dalda a competitive edge. Most of Dalda’s consumers are aware of this fact, since most of them reveal that they purchase Dalda because of its superior quality.
Outbound Logistics
Dalda’s distribution network is one of the biggest strength the company has right now. It has given the company a superior edge over its competitors. The distribution network has made it possible for the management to make sure that product is available at every possible place and at the same time the distribution network is also a very effective one. Ultimate goal is to have a high product availability which is getting achieved through the well-structured distribution network
Marketing & Sales
Dalda’s slogan “Jahan Mamta Wahan Dalda” is still in people’s mind and it is the marketing of the product which has taken the brand to such new heights. The brand awareness is also very high and this along with the marketing campaigns has played a major role in bringing such success to the brand. The sales forces that the company has is well trained and has all the traits that any sales team would require to perform at highest level.
Service
There is “Rabta Advisory Service” which is provided through a toll free number. Through this service consumer can ask any question regarding the product. Dalda is the only company in Edible Oil industry which is providing such service to its consumers.
CORE COMPETENCIES
Quality
Dalda is not just meeting the standards which are set by PSQCA but also the more stringent ones which have been stated by the U.N. It has been learnt that in the recent past the company has even exported the product to the European countries, which itself is a proof that Dalda has been able maintain the quality levels which are at par with international standards. Distribution
Dalda is the only company in Pakistan which has the distribution network spread all over the country. Most of the brands in the country are either sold in a particular city or in a particular province and those who have their presence in more than one province either don’t have presence in all the four provinces and if they have the presence then they are not in every city. Dalda has the most wide spread and efficient distribution network among its competitors.
Efficient Supply Chain
The supply chain of the company is very efficient which has made the availability of the product quite effective.
Strong Brand
Dalda is there in the industry for more than 50 years and has great brand equity. The brand awareness is around 90-95 %( as been told by an employee).
Competent Sales Team
Sales personnel are always the front-liners for every company. They are the ones who are representing the company in the market. Dalda is best equipped with the human capital in
STRATEGIC COST MANAGEMENT
Increased number of Depots
Dalda has increased its depots all over the country. This not only gives them a competitive advantage but also a cost advantage. Through this large network of depots Dalda is able to deliver goods to all their distributors quickly and cheaply. They save considerable distribution/transportation costs, and the distributors stay satisfied with the timely deliveries.
Acquisition
Dalda recently acquired “TULLO”. This move not only helped Dalda to broaden/increase the number of customers it had, but also helped the company decrease its cost per unit of production slightly (economies of scale). Previously during certain seasons Dalda had to increase production, and since it was working at full capacity it had to outsource some of its production. Due to this the company was incurring huge costs. However after acquiring Tullo, the company’s costs were reduced, since it no longer had to outsource its operations any more.
Planning to Develop Logistics Network
The company is planning to buy and develop a logistics network, this way delivery of goods will become more efficient and company can provide this service to other companies as well.
INTERNAL FACTOR EVALUATION
WEIGHT RATING WTD. SCORE
STRENGTHS
A respectable position in the eyes of the consumers
0.10
3
0.30
Brand Name
0.05
4
0.20
Dalda’s slogan
0.02
3
0.06
Market leader – not a follower
0.08
4
0.32
Loyal customers
0.07
3
0.21
Production facilities
0.08
4
0.32
Efficient supply chain management system
0.12
4
0.48
Pricing
0.06
3
0.18
Strong sales and distribution network
0.12
4
0.48
WEAKNESSES
Centralized Decision Making
0.12
2
0.24
Huge amount of Import
0.10
2
0.20
Lack of company-owned R&D
0.08
1
0.08
ANALYSIS
The total weighted score of IFE Matrix is 3.05 which is above industry average. It means that company’s internal position is good. Factors like efficient supply chain management system and sales and distribution network are getting higher weights and company’s rating to these factors are also very strong. It appears from this analysis that Dalda is overcoming its weaknesses quite fairly with its strengths. Such as strong distribution network, production facilities and efficient supply chain management system.
When we analyzed the weaknesses, centralized decision making and huge amount of import are the weaknesses that need to be overcome.
STRATEGY
• In order to decrease the amount of import of raw material, Dalda has to be self sufficient in it. Dalda should enter in joint ventures with raw material producing and refining companies like Malaysian oil refining companies to get help in cultivating basic raw material like: cotton seed, Soya bean etc. in Pakistan and also refining it
STRATEGIC ANALYSIS AND RECOMMENDATIONS
GENERIC STRATEGY
ANALYSIS
We feel that Dalda has a large target market. In the edible oil industry, product information does not play a vital role in influencing end consumer purchasing decision, the two most important factors that do influence decision making are product price and brand image. We have observed that Dalda has been able to create a high quality brand image of it.
Companies in the edible oil industry are consistently trying to reduce their cost, but we feel that reducing cost should not be the primary strategy. As we know that companies that fall in the product differentiation category consistently try to reduce costs, therefore it is our strong belief that even though Dalda is trying to develop methods to reduce their expense but their main strategy would be creating a product differentiation for their brand.
SWOT Analysis
STRENGTHS
• A respectable position in the eyes of the consumers :
The Dalda brand is one of the 3 leading top brands in the Country. This is strength for the company in the market as it gives a respectable position to Dalda in the eyes of the consumers and ensures brand loyalty.
• Brand Name:
The name “ Dalda” is a great strength for the company as some people buy the product just because of the name. Dalda has reserved the right for using the name Dalda for itself through trademark. This prohibits any other company or individual from using the name Dalda for their products.
Current trademark and license rights in Pakistan only for: 1. Dalda Vanaspati
2. Dalda Melange 3. Dalda Cooking Oil 4. Dalda Planta
• Dalda’s slogan :
Dalda’s slogan “Jahan Maamta, wahan Dalda” (“Mother’s Love is Dalda”) became a synonym for purity and quality and has been the platform for the brand for many, many years. It means that Dalda is as pure as a mother’s love. This is a strong message, which has given Dalda an edge over the competitors. The company has hold true to the message by maintaining their quality and standards over the years.
• Market leader – not a follower :
Dalda is the overall market leader in the vanaspati and edible refined oils market in Pakistan as it has a significant market share position both in the edible oil market and vanaspati market. This has enabled Dalda to be a leader in the market and not a follower.
• Loyal customers :
•
Production facilities :Production facilities are situated at a strategic location at Sindh Industrial & Trading Estate (S.I.T.E.), Karachi near to the Karachi Sea Port to enable easy access to imported raw material. This cuts down transportation costs for Dalda.
•
Efficient supply chain management system :The Company has an efficient supply chain management system. There is a dedicated specialized oil-buying department within the Company catering to all the input needs of Dalda.
• Pricing:
The pricing of Dalda’s is almost equivalent to the pricing of Habib, which is a major player in the industry. This has given Dalda a similar platform to compete in the industry.
• Strong sales and distribution network:
The company has a very strong sales and distribution network in Pakistan.
WEAKNESSES
• More like a family owned business :
Being a family owned business, although a very professional team of expert looks after the marketing department, the marketing plan and the final budgets comes from the owners of the business so some times the marketing department faces problems in implementing certain decisions which have to be taken immediately in the competitive environment.
• Centralized Decision Making
As discussed it’s a family owned business, so most of the decision making is centralized.
•
Hugh amount of Import :OPPORTUNITIES
• Setting Refineries
Industry players believe the setting up of refineries would encourage crude edible oil import, which is much cheaper in terms of cost than the refined product.
• Local production of Raw Material
Now the government is taking steps to grow Soya beans and different type of seeds at the coastal line of thatta.
• Emerging modern trade departmental chains like Macro and Metro
• Institutional Selling
• People are becoming more health conscious
Now the people become more health conscious and they prefer branded products.
• Untapped rural Market
There is a lot of potential to cater untapped market where people still use unbranded/ loose cooking oil.
• Export potential
There is potential to export in Middle Eastern countries where people prefer strong established brands like Dalda.
• Population growth
• Increase in per capita consumption of edible oil
THREATS
Unbranded edible oils:
One of the threats for Dalda, are the low category brands which price their products at much low cost then Dalda but they feature their brand in such a way that the people think that the brand is very hygienic and nutritious.
Edible oil industry is a growing market and hence many people are entering the market. This is increasing competition in the industry.
•
Lower pricing by competitors :Sufi is charging a low price for its product. Although Dalda is well established all over the country it still needs to be careful of Sufi’s action as it can steal some of Dalda’s customers.
• Intense competition in the industry:
There is an intense competition in the industry, due to which Dalda has to keep a close eye on its competitors.
• Deteriorated law and order situation
• Non-availability of basic utilities power
• Weak Infrastructure of the country
• Political influence is used
• Smuggling of unbranded edible oil from Afghanistan
The edible oil businesses were now facing fierce battle with the combined pressure from smuggled, unbranded and competitive local ghee and cooking oil brands.
• Reduction in the purchasing power of people due to inflation Consumers might shift to open packet oil due to rise in prices.
TOWS
Int
ernal
Factors
External
Factors
STRENGTHS (S)
1. A respectable position in the eyes of the consumers;
2. Brand Name; 3. Dalda’s slogan;
4. Market leader – not a follower; 5. Loyal customers;
6. Production facilities;
7. Efficient supply chain management system;
8. Pricing;
9. Strong sales and distribution network.
WEAKNESSES (W)
1. Centralized Decision Making;
2. Hugh amount of Import; 3. Lack of company-owned R&D.
OPPORTUNITIES (O)
1. Setting Refineries; 2. Local production of Raw Material;3. Emerging modern trade departmental chains like Macro and Metro; 4. Institutional Selling; 5. People are becoming
more health conscious; 6. Untapped rural Market; 7. Export potential; 8. Population growth; 9. Increase in per capita
consumption of edible oil.
S-O STRATEGIES
• -By using efficient distribution network, Dalda can increase the market share by targeting modern trade departmental chains and institutions (S9, O3.O4).
• -Strong sales and distribution and sales network can be use to tap rural market (S9, O6).
• -Dalda’s name and image is very reputable in the international market help Dalda to get export potential (S7, O1, O2).
• -Dalda’s production facility is very strong if it succeeds to establish local production of raw material Dalda can further increase the production of cooking oil (S6, O2).
• -If Dalda decreases
W-O STRATEGIES
•
-If Dalda improves the
R&D it able to have local production of raw material (W3, O2).• -If Dalda decrease import and focus on local production of raw material can increase the export (W3, O7).
the price by lowering its cost, able to get share in the rural market (S8, O6).
THREATS(T)
1. Unbranded edible oils; 2. New entrants;
3. Lower pricing by competitors;
4. Intense competition in the industry;
5. Deteriorated law and order situation;
6. Non-availability of basic utilities power;
7. Weak Infrastructure of the country;
8. Political influence is used 9. Reduction in the
purchasing power of people due to inflation;
10. International brands are entering in the market.
S-T STRATEGIES
• Dalda can use its strong sales and distribution to compete with unbranded oil in rural markets (S9, T1).
• If Dalda decrease its prices by lowering its cost, can cope with the decreasing purchasing power (S8, T9)
• Dalda should further strengthen its brand name and positioning to increase threat for new entrants (S1, S2, T10)
• Dalda should decrease the prices by lowering cost to make prices competitive and reasonable(S8, T3)
• Strong sales and distribution ca be used to face the competition (S7, S9, O4)
W-T STRATEGIES
• If Dalda become self sufficient in raw material production, it helps Dalda to decrease the cost of production and become more competitive and strong in the industry (W2, T3, T4)
THE SPACE MATRIX
INTERNAL STRATEGIC
POSITION
Financial Strength (FS)
Return on Investment
+4
Liquidity
+4
Debt to Equity
+4
Ease of Exit from Markets
+3
FS Average
+3.75
EXTERNAL STRATEGIC
POSITION
Environmental Stability (ES)
International Economic Instability-4
Rate of inflation -4
Prices of Competitor’s Products -3
Competitive Pressures
-3
ES Average
-3.5
Competitive Advantage (CA)
Market Share
-1
Product Quality
-2
New Product Development -1
Customer Loyalty
-2
CA Average
-1.50
Industry Strength (IS)
International Growth Potential +4
Profit Potential
+3
Capital Intensity
+4
Ease of Entry into New Markets +3
Y axis
Financial strength
+3.75
Y axis: 3.75+ (-3.5) = 0.25
Environmental stability
-3.5
X axis
Industry strength
3.50
X axis: 3.5 + (-1.5) = 2.0
ANALYSIS
Dalda is financially very strong (3.75) and having good competitive advantage (-1.5) in a growing industry.
Dalda is in an excellent position to use its internal strengths. Dalda is taking full advantage of external opportunities and overcoming internal weaknesses and avoiding external threats.
STRATEGIES
• Market penetration and Market development – is a good strategy and this can be increased by targeting rural markets where people are still using unbranded/ loose cooking oil. Dalda should use its efficient distribution network to increase market penetration.
Conservative
FS
Aggressive
+2
+1
*
CA
IS
-1
+1
+2
-1
-2
-3
Defensive
ES
Competitive
• Product development – Dalda is currently is working on this strategy, recently it introduced olive oil as people are becoming more health conscious. New product development is a good strategy. Further new product development can be a good strategy.
• Backward integration – backward integration is like acquiring supplier as the suppliers of Dalda are the raw material providers and Malaysian refining companies, acquiring supplier is a good strategy because raw material costs 70% of total cost of production. Acquiring suppliers or join venturing with them is a good strategy to driven out cost and decreasing cost of production.
Star
• Dalda Cooking oil
• Dalda MunPasand
• Dalda Olive Oil
These are products which have a large market share in a fast growing industry. Their sales are consistent throughout the year. Their cash generation is also high and at the same time has a high growth potential, therefore require larger investments.
• Tullo
This product of Dalda’s requires plenty of additional investment. It was acquired only a few years ago. Right now it has a small market share in a market with a high growth rate.
Cash Cow
• Dalda Banaspati
This product of Dalda has one of the largest market shares in the category of banaspati. However during recent years there has not been consistent growth in the industry. And the company has chosen to decrease its additional investments.
Dog
• Dalda Canola
This is a declining market. Dalda’s product has a low market share in this category. And the company is not considering heavy investment in this product.
The IFE Total Weighted Score
Strong Average Weak
3.0 to 4.0 2.0 to 2.99 1.0 to 1.99 High I II III 3.0 to 3.99 Medium IV V VI The EFE Total Weighted Score 2.0 to 2.99
DALDA
Low VII VIII IX
1.0 to 1.99
ANALYSIS
In IE Matrix, Dalda lies in the region of Hold and Maintain. Means that Dalda has to maintain and hold its current position.
STRATEGIES
•
Market penetration
Dalda need to work on market penetration, it should capture rural markets where people still use loose or unbranded cooking oil. In this why Dalda can further strengthen its position and increase its market share.
•
Product development
Product development is another strategy that Dalda is following. Recently Dalda introduced olive oil, in order to cater health conscious people. Further product development is a good strategy to maintain and hold current position.
THE GRAND SRTATEGY MATRIX
RAPID MARKET GROWTH Quadra nt II Quadrant IDALDA
WEAK STRONG COMPETITIVE COMPETITIVE POSITION POSITIONQuadrant III Quadrant IV SLOW MARKET
GROWTH
ANALYSIS
Dalda is in an excellent strategic position. Dalda should continue its current strategies. As we discussed earlier:
• Market development,
THE QSPM
MATRIX
QSPM
Strategic Alternatives
Key factors
weight *Strategy 1 Attractiveness score stratgey1 *Strategy 2 Attractive ness score strategy2
OPPORTUNITIES
Setting Refineries 0.08 3 0.24 4 0.32Local production of Raw Material 0.06 3 0.18 4 0.24
Emerging modern trade
departmental chains like Macro and Metro
0.07 -
-Institutional Selling 0.05 - - -
-People are becoming more health conscious
0.04 4 0.16 3 0.12
Untapped rural Market 0.06 4 0.24 3 0.18
Export potential 0.06 - - -
-Population growth 0.05 3 0.15 4 0.2
Increase in per capita consumption of edible oil
0.04 4 0.16 3 0.12
THREATS
Unbranded edible oils 0.05 4 0.2 3 0.15
New entrants 0.04 2 0.08 4 0.16
Lower pricing by competitors 0.05 3 0.15 4 0.2
Intense competition in the industry 0.07 4 0.28 3 0.21
Deteriorated law and order situation
0.06 3 0.18 2 0.12
Declining real purchasing 0.05 3 0.15 4 0.2
Non-availability of basic utilities power
0.05 2 0.1 4 0.2
Political influence is used 0.04 2 0.08 4 0.16
International brands are entering in the market
0.04 2 0.08 3 0.12
STRENGTHS
A respectable position in the eyes of the consumers
0.10 3 0.3 4 0.4
Brand Name 0.05 3 0.15 4 0.2
Dalda’s slogan 0.02 - - -
-Market leader – not a follower 0.08 - - -
-Loyal customers 0.07 3 0.21 4 0.28
Production facilities 0.08 2 0.16 4 0.32
Efficient supply chain management system
0.12 4 0.48 3 0.36
Pricing 0.06 2 0.12 4 0.24
Strong sales and distribution network
0.12 4 0.48 3 0.36
WEAKNESSES
Centralized Decision Making 0.12 - - -
-Huge amount of Import 0.10 1 0.1 4 0.4
Lack of company-owned R&D 0.08 1 0.08 4 0.32
Sum Total Attractiveness Score
1.0 4.63 5.66
*Strategy 1:
Market penetration, capturing the rural markets of Pakistan where people still use unbranded / loose cooking oil for cooking.*Strategy 2
: Joint ventures with Malaysian companies for the production and refining of raw material, in this way Dalda can reduce its cost of production, because raw material costs 70% of total cost of production.ANALYSIS
Joint ventures with Malaysian companies for the production and refining of raw material, in this way Dalda can reduce its cost of production, because raw material costs 70% of total cost of production.
Through this strategy Dalda can easily get raw material as the raw material of cooking oil are cotton seed, Soya beans etc are not easily available in Pakistan by joint venturing with Malaysian companies for the production and refining of raw material. Dalda will be to reduce the cost of production and make the prices more reasonable in the market.
In this way Dalda can also increase its market penetration, by increasing production and lowering the prices.
STRATEGIC IMPLEMENTATION
Strategy implementation is the most important area of the whole strategic management process. 99% of the strategies fail at the implementation stage. Just being able to devise bold new strategies to outperform the competitors is not enough. The strategic vision has to be translated into concrete steps & the internal processes and management system have to be aligned accordingly.
THE COMPONENTS OF STRATEGIC IMPLEMENTATION
• Building an organization with the competencies, capabilities and resource strengths to carry out the strategy successfully
• Developing budgets to steer ample resources into critical value chain activities.
• Creating Strategy Supportive Structure
• Creating a Strategy-supportive work environment and corporate culture
• Pitfalls of Strategy Implementation .
BALANCED BUSINESS SCOREBOARD
•
Financial
Customer
Initiative 1. Bring Prime in 16 Kg tin. 2. Introduce Sales Promotion schemes for modern trade Target 1. Increase in sales volume by 25% by June, 2008. Measure 1. Increase the institutional selling. 2. Take advantage of International modern trade Objective 1. Increase customer base. Target Measure 1. Capturing more rural markets. 2. Drive out cost to increase profits. Target Increase profits by 15% Initiative Acquiring Tullo has helped Dalda to broaden its market share and increase profits. Objective1. Increase profits & ROI
•
Internal
processes
Initiative Empowerment. 2. Leading by example. 3. Restructuring of Human Resource department and policies. Objective 1. Continuous training and development 2. Bring in R&D 3. Organizational culture which encourages change and development. Objective 1. Forward integration 2. Lower production costs/ process efficiency. Measure Acquire a transport company and establish logistics network to drive out cost & decrease cost of production.Target Drive out costs.
Initiative 1. Acquire a
logistics company.
Balanced Scorecard aligns organizations to new strategies: away from the
historic, short-term focus on cost reduction and low-price competition, and
toward generating growth opportunities by offering customized, value-added
products, and services to customers.
• Financial: How does Dalda look to shareholders?
• Customers: How do customers see Dalda?
• Internal process: What must we excel at?
• Innovation and Learning: Can we continue to improve and create value?
Diagnostic Survey of Primary and Secondary Management
Practices
Strategy
Inferior Average Superior
The company has a clearly articulated and
widely understood strategy. 1 2 3 4 5
The company has strong external antennae and quickly anticipates external shocks, emerging opportunities, and market downturns.
1 2 3 4 5
The company has a very good
understanding of its competitors and can
anticipate competitors’ moves. 1 2 3 4
5 The company is focused on
extending/improving its core business or businesses and is committed to growing them aggressively.
1 2 3 4 5
Subtotal of Execution score: 16
Culture
Inferior Average Superior
The company sets demanding performance
standards for all of its employees. 1 2 3 4 5 The company consistently raises the
performance bar. 1 2 3 4 5
The company’s culture is exciting,
engaging, and fun. 1 2 3 4 5
The company has clear values that people
in the company abide by. 1 2 3 4 5
Subtotal of Culture score: 11
Execution
Inferior Average Superior
The company’s products and services
consistently meet customer expectations. 1 2 3 4
5
The company consistently improves
employee productivity. 1 2 3 4
5
The company’s programs and initiatives
consistently achieve desired outcomes. 1 2 3 4
5
The company’s IT systems enhance its
ability to execute its value proposition. 1 2 3 4
Organizational Structure
Inferior Average Superior
The company makes decisions quickly. 1 2 3 4 5
The company minimizes bureaucracy. 1 2 3 4 5 The company’s business processes are
simple. 1 2 3 4 5
The company effectively cooperates across
the organization. 1 2 3 4 5
Subtotal of Organizational Structure score: 13
Talent
Inferior Average Superior
The company has great “talent” and “bench
strength” at each position. 1 2 3 4 5
The company successfully develops talent. 1 2 3 4 5 The company designs jobs that intrigue and
challenge talented employees. 1 2 3 4 5 The company’s senior management is
personally involved in recruiting and
developing talent. 1 2 3 4
5
Subtotal of Talent score: 15
