chinese restaurant

Research Report on

Feasibility Study of Opening a New Chinese Restaurant in Karachi

Institute of Business Administration, Karachi.

METHODS IN BUSINESS RESEARCH

Fall Semester 2007

FEASIBILITY STUDY OF OPENING A NEW CHINESE RESTAURANT IN KARACHI

Prepared for

Mr. S.M. Saeed

Course Instructor

Methods in Business Research

Prepared by

Maria Taqi

M. Zeeshan Khan

Raazia Bari

Zarmeena Riaz

November 19, 2007


TABLE OF CONTENTS

Executive Summary...............................................................................................................................................1

1 Introduction.................................................................................................................................................2

1.1 Document Purpose...............................................................................................................................2

1.2 Scope of the Document........................................................................................................................2

1.3 Intended Audience...............................................................................................................................2

1.4 Document Organization.......................................................................................................................2

2 Research Problem........................................................................................................................................4

2.1 Problem Statement..............................................................................................................................4

2.2 Background..........................................................................................................................................4

2.3 Research Objectives.............................................................................................................................5

2.4 Scope of the Research..........................................................................................................................5

3 Research Design...........................................................................................................................................6

3.1 Purpose and Nature of the Study.........................................................................................................6

3.2 Research Motivation............................................................................................................................6

3.3 Type of Investigation............................................................................................................................6

3.4 Extent of Researcher Interference.......................................................................................................6

3.5 Study Setting........................................................................................................................................6

3.6 Unit of Analysis....................................................................................................................................6

3.7 Time Horizon........................................................................................................................................6

3.8 Research Instruments..........................................................................................................................7

3.9 Research Limitations............................................................................................................................7

4 Sample Design..............................................................................................................................................8

5 Data Gahering and Processing.....................................................................................................................9

5.1 Data Gathering.....................................................................................................................................9

5.2 Data Processing....................................................................................................................................9

6 Brief Market Analysis.................................................................................................................................10

6.1 Target Market....................................................................................................................................10


6.2 Demand..............................................................................................................................................10

6.3 Supply................................................................................................................................................10

7 Survey Analysis and Interpretation............................................................................................................11

7.1 Eating Habits and Food Preferences...................................................................................................11

7.1.1 Time of Day for Eating Out.......................................................................................................11

7.1.2 Most Important Attraction of a Restaurant.............................................................................12

7.1.3 Popular Cuisines........................................................................................................................13

7.1.4 Menu Options...........................................................................................................................14

7.2 Taste for Chinese Cuisine...................................................................................................................16

7.3 Currently Preferred Chinese Restaurants in Karachi..........................................................................19

7.4 Entertainment and Ambience Expected.............................................................................................21

7.5 Clientele for a New Chinese Restaurant.............................................................................................25

7.6 Locality with Greatest Demand for Chinese Restaurant.....................................................................29

7.7 Most Effective Mode of Advertisement.............................................................................................31

8 Enterpreneur Interview..............................................................................................................................32

9 Conclusion and Recommendations............................................................................................................34

9.1 Conclusion..........................................................................................................................................34

9.2 Recommendations.............................................................................................................................34

Appendix I - Questionnaire................................................................................................................................... ii

Appendix II – Interview Questions.....................................................................................................................oo

Appendix III - Interviewees.................................................................................................................................pp


LETTER OF TRANSMITTAL

December 15 2008

Mr. Javaid Ahmed

Strategic Management

IoBM.

Dear Sir,

Here is the report based on “Edible Oil Industry”, which you had authorized and is ready for your

perusal.

Through this report we’ve had a chance to investigate the strategic management practices at Habib

Oil Mills and to evaluate the attractiveness of the edible oil industry.

If there be any clarification demanded, we would appreciate a call from you to our group members.

Sincerely,

Mustafaina Akif (5448)

Maryam Cassim (5272)

Shahzaib Hasan (5283)

Bilal Mustafa (5377)

Maryam Saeed (5474)

Maryam Arif (5387)

Maheen Hira Sherwani (5914)


1 ACKNOWLEDGEMENT

All praise is to Allah who makes everything possible in the universe and beyond.

First of all, we would like to thank Allah, who helped us with everything and made everything come together, then our parents and family who have always supported us in every good thing that we do. We are greatly thankful to our course instructor for Strategic Management, Mr.Javaid Ahmed, who provided us clear concepts and a strong foundation of understanding for the subject. He made the course a valuable learning experience for all of us and made us grow as learned individuals.

Secondly we would like to thank

Mr. Ijaz Hussain Malik – Group Executive Director – Habib Oil Mills,

Mr. Akram Chaudhry – Head of sales operations - Habib Oil Mills

Ms. Farheen Zehra – Senior Assistant Brand Manager – Habib Oil Mills

for taking out time and helping us in providing useful information for our project

We would also like to thank our college; The Institute of Business Management, it has been a great learning place with different academic and extra-curricular experiences, all contributing to our growth as students.

Lastly we would like to thank our fellow classmates for making this learning experience a thoroughly productive and enjoyable one.

Hopefully this report will serve a good purpose.

Thank you,

Mustafaina Akif (5448)

Maryam Cassim (5272)

Shahzaib Hasan (5283)

Bilal Mustafa (5377)

Maryam Saeed (5474)

Maryam Arif (5387)

Maheen Hira Sherwani (5914)


2 EXECUTIVE SUMMARY

In this report we have tried to conduct an in depth analysis of the oil industry in Pakistan, focusing

mainly on Habib oil along with its competitors Dalda and Soya supreme of Agro Processors &

Atmospheric Gases. We have tried to derive the nature of competition existing in the edible oil industry and have observed that the competitive pressures in the industry are very intense. In the premium segment of oil industry, Dalda is the market leader having around 25% with Habib as its closest competitor having a market share of about 20% and Soya supreme having a market share of 16%.these companies try to engage in head to head rivalry. We have also extensively analyzed the external factors in the industry and how it is affecting the companies within the industry. How the awareness of health, changing lifestyles, worsening economic conditions and environment affects an individual’s life forms the crux of this report. It is the prime responsibility of these firms to create health awareness among masses, which will in turn lead to their increased sales.

The report also focuses on the internal activities and value chain management done by Habib in making its brand improved and in creating a competitive advantage. Habib oil mills has constantly evolved, innovated and changed with times. It product line includes different oil variants and ghee thus offering a complete range of cooking solution for house hold as well as industrial consumers .In order to gain a sustainable competitive advantage, the generic strategy used by Habib is broad differentiation. The two corporate strategies we have recommended for the company is product development (i.e. launching olive oil) and market development (i.e. entering into Afghanistan and Iran).Finally have given a brief action plan for the implementation of the recommended strategies.

This world is the survival for the fittest, so it is an advice for all strategic managers that if they want to run their companies successfully they have to sustainable competitive advantage which cannot be matched by rivals. This is just the beginning for strategic managers.


3 WHY WE HAVE CHOSEN THIS INDUSTRY?

The edible oil industry has a growing market in Pakistan and its usage is expanding rapidly. Due to its increasing consumption and oil being a basic food commodity, the edible oil industry has attained critical importance .The consumption of edible oil has increased from 0.3 million to more than 2 million tons during the last two decades. There are some consumers who use ghee and are hard core loyal of this product as they feel that the particular taste of ghee can never be obtained if food is cooked in oil. While most of the consumers use oil, they are basically health conscious individuals who are of the opinion that having food cooked in ghee will raise their cholesterol level and thus cause any kind of deadly disease.

A phenomenon that has been noted is that the basic manufacturing process for all edible oils in Pakistan is the same but still the surprising part is that all companies have different claims for their brands. Some claim that it is light on heart, while others claim that it makes food tasty, yet few companies, particularly that old ones, claim that it reflects traditions and values of the family. Thus the point of differentiation between the various brands does not lie in the product features as such, but rather in the projected positioning/ USP and the prices at which they are offered.

Pakistan is not really self-sufficient in this particular area. It has to import quite a few seeds from abroad that are essential in the manufacturing process, like Soya seed and palm oil seeds. At the same time in few areas it cultivates more than its requirement thus it also exports them to foreign countries, example cotton seed and sunflower seed is produced in abundance. The funds generated from exports art utilized in importing the seeds.


4 LITERATURE RESEARCH

4 . 1 S T R AT E G Y - W H AT I S S T R AT E G Y ?

Johnson and Scholes (Exploring Corporate Strategy) define strategy as follows:

"Strategy is the direction and scope of an organization over the long-term: which achieves advantage for the organization through its configuration of resources within a challenging environment, to meet the needs of markets and to fulfill stakeholder expectations".

How Strategy is Managed - Strategic Management:

In its broadest sense, strategic management is about taking "strategic decisions" - decisions that answer the questions above.

In practice, a thorough strategic management process has three main components, shown in the figure below:

Strategic Analysis:

This is all about the analyzing the strength of businesses' position and understanding the important external factors that may influence that position. The process of Strategic Analysis can be assisted by a number of tools, including:

PEST Analysis - a technique for understanding the "environment" in which a business operates

Scenario Planning - a technique that builds various plausible views of possible futures for a business

http://www.amazon.co.uk/exec/obidos/ASIN/0273651129/tutor2u00


Five Forces Analysis - a technique for identifying the forces which affect the level of competition in an industry

Market Segmentation - a technique which seeks to identify similarities and differences between groups of customers or users

Directional Policy Matrix - a technique which summarizes the competitive strength of a businesses operations in specific markets

Competitor Analysis - a wide range of techniques and analysis that seeks to summaries a businesses' overall competitive position

Critical Success Factor Analysis - a technique to identify those areas in which a business must outperform the competition in order to succeed

SWOT Analysis - a useful summary technique for summarizing the key issues arising from an assessment of a businesses "internal" position and "external" environmental influences.

Strategic Choice:

This process involves understanding the nature of stakeholder expectations (the "ground rules"), identifying strategic options, and then evaluating and selecting strategic options.

Strategy Implementation:

Often the hardest part. When a strategy has been analyzed and selected, the task is then to translate it into organizational action.

4.2 MISSION

Mintzberg defines a mission as follows:

“A mission describes the organization’s basic function in society, in terms of the products and services it produces for its customers”.A clear business mission should have each of the following elements:


4.3 THE FIVE COMPETITIVE FORCES THAT SHAPE STRATEGY

Awareness of the five forces can help a company understand the structure of its industry and stake out a position that is more profitable and less vulnerable to attack.

In essence, the job of the strategist is to understand and cope with competition. Often, however, managers define competition too narrowly, as if it occurred only among today’s direct competitors. Yet competition for profits goes beyond established industry rivals to include four other competitive forces as well: customers, suppliers, potential entrants, and substitute products. The extended rivalry that results from all five forces defines an industry’s structure and shapes the nature of competitive interaction within an industry.

As different from one another as industries might appear on the surface, the underlying drivers of profitability are the same. The global auto industry, for instance, appears to have nothing in common with the worldwide market for art masterpieces or the heavily regulated health-care delivery industry in Europe. But to understand industry competition and profitability in each of those three cases, one must analyze the industry’s underlying structure in terms of the five forces. (See the exhibit “The Five Forces That Shape Industry Competition.”)

If the forces are intense, as they are in such industries as airlines, textiles, and hotels, almost no company earns attractive returns on investment. If the forces are benign, as they are in industries such as software, soft drinks, and toiletries, many companies are profitable. Industry structure drives competition and profitability, not whether an industry produces a product or service, is emerging or mature, high tech or low tech, regulated or unregulated. While a myriad of factors can affect industry profitability in the short run—including the weather and the business cycle—industry structure, manifested in the competitive forces, sets industry profitability in the medium and long run. (See the exhibit “Differences in Industry Profitability.”


Differences in Industry Profitability :

Understanding the competitive forces, and their underlying causes, reveals the roots of an industry’s current profitability while providing a framework for anticipating and influencing competition (and profitability) over time. A healthy industry structure should be as much a competitive concern to strategists as their company’s own position. Understanding industry structure is also essential to effective strategic positioning. As we will see, defending against the competitive forces and shaping them in a company’s favor are crucial to strategy.

4.4 FORCES THAT SHAPE COMPETITION: ( BY MICHEAL E. PORTER HBR)The configuration of the five forces differs by industry. In the market for commercial aircraft, fierce rivalry between dominant producers Airbus and Boeing and the bargaining power of the airlines that place huge orders for aircraft are strong, while the threat of entry, the threat of substitutes, and the power of suppliers are more benign. In the movie theater industry, the proliferation of substitute forms of entertainment and the power of the movie producers and distributors who supply movies, the critical input, are important.

The strongest competitive force or forces determine the profitability of an industry and become the most important to strategy formulation. The most salient force, however, is not always obvious.

For example, even though rivalry is often fierce in commodity industries, it may not be the factor limiting profitability. Low returns in the photographic film industry, for instance, are the result of a superior substitute product—as Kodak and Fuji, the world’s leading producers of photographic film, learned with the advent of digital photography. In such a situation, coping with the substitute product becomes the number one strategic priority.

Industry structure grows out of a set of economic and technical characteristics that determine the strength of each competitive force. We will examine these drivers in the pages that follow, taking the perspective of an incumbent, or a company already present in the industry. The analysis can be readily extended to understand the challenges facing a potential entrant.

Competitive Strategy: The Core Concepts :

Competition is at the core of the success or failure of firms. Competition determines the appropriateness of a firm's activities that can contribute to its performance, such as innovations, a cohesive culture, or good implementation. Competitive strategy is the search for a favorable competitive position in an industry, the fundamental arena in which competition occurs. Competitive strategy aims to establish a profitable and sustainable position against the forces that determine industry competition.

Two central questions underlie the choice of competitive strategy. The first is the attractiveness of industries for long-term profitability and the factors that determine it. Not all industries offer equal opportunities for sustained profitability, and the inherent profitability of its industry is one essential ingredient in determining the profitability of a firm. The second central question in competitive strategy is the determinants of relative competitive position within an industry. In most industries, some firms are much more profitable than others, regardless of what the average profitability of the industry may be.

The Structural Analysis of Industries :

The first fundamental determinant of a firm's profitability is industry attractiveness. Competitive strategy must grow out of a sophisticated understanding of the rules of competition that determine an industry's attractiveness. The ultimate aim of competitive strategy is to cope with and, ideally, to change those rules in the firm's favor. In any industry, whether it is domestic or international or produces a product or a service, the rules of competition are embodied in five competitive forces: the

http://harvardbusinessonline.hbsp.harvard.edu/hbsp/hbr/articles/?pageNumber=1&ml_subscriber=false&articleID=R0801E&value=R0801E&referer=/hbsp/hbr/articles/article.jsp&reason=unknown&productId=R0801E&ml_action=get-sidebar&ml_context=sidebar&ml_issueid=BR0801&ml_id=R0801E&ml_sidebar_id=1


entry of new competitors, the threat of substitutes, the bargaining power of buyers, the bargaining power of suppliers, and the rivalry among the existing competitors.

Generic Competitive Strategies :

The second central question in competitive strategy is a firm's relative position within its industry. Positioning determines whether a firm's profitability is above or below the industry average. A firm that can position itself well may earn high rates of return even though industry structure is unfavorable and the average profitability of the industry is therefore modest.

Each of the generic strategies involves a fundamentally different route to competitive advantage, combining a choice about the type of competitive advantage sought with the scope of the strategic target in which competitive advantage is to be achieved. The cost leadership and differentiation strategies seek competitive advantage in a broad range of industry segments, while focus strategies aim at cost advantage (cost focus) or differentiation (differentiation focus) in a narrow segment. The specific actions required to implement each generic strategy vary widely from industry to industry, as do the feasible generic strategies in a particular industry. While selecting and implementing a generic strategy is far from simple, however, they are the logical routes to competitive advantage that must be probed in any industry.

Cost Leadership :

Cost leadership is perhaps the clearest of the three generic strategies. In it, a firm sets out to become the low-cost producer in its industry. The firm has a broad scope and serves many industry segments, and may even operate in related industries -- the firm's breadth is often important to its cost advantage. The sources of cost advantage are varied and depend on the structure of the industry

Differentiation :

The second generic strategy is differentiation. In a differentiation strategy, a firm seeks to be unique in its industry along some dimensions that are widely valued by buyers. It selects one or more attributes that many buyers in an industry perceive as important, and uniquely positions itself to meet those needs. It is rewarded for its uniqueness with a premium price.

Focus :

The third generic strategy is focus, This strategy is quite different from the others because it rests on the choice of a narrow competitive scope within an industry. The focuser selects a segment of group of segments in the industry and tailors its strategy to serving them to the exclusion of others. By optimizing its strategy for the target segments, the focuser seeks to achieve a competitive advantage in its target segments even though it does not possess a competitive advantage overall.

Stuck in the Middle :

A firm that engages in each generic strategy but fails to achieve any of them is "stuck in the middle." It possesses no competitive advantage. This strategic position is usually a recipe for below-average performance. A firm that is stuck in the middle will compete at a disadvantage because the cost leader, differentiators, or focusers will be better positioned to compete in any segment. If a firm that is stuck in the middle is lucky enough to discover a profitable product or buyer, competitors with a sustainable competitive advantage will quickly eliminate the spoils. In most industries, quite a few competitors are stuck in the middle.


Source:

CREATING AND SUSTAINING SUPERIOR PERFORMANCE, By Michael E. Porter

Institute of strategy and competitiveness

4.5 PORTER’S THINKING

Porter's thinking on strategy has been supported by precision research into industries and companies, and has remained consistent as well as developmental. He has concentrated on different aspects at different times, spinning the threads together with a logic that is irrefutable.

Before Competitive Strategy, most strategic thinking focused either on the organization of a company's internal resources and their adaptation to meet particular circumstances in the marketplace or on increasing an organization’s competitiveness by lowering prices to increase market share.

In Competitive Strategy, Porter managed to reconcile these approaches, providing management with a fresh way of looking at strategy - from the point of view of industry itself rather than just from the point of view of markets, or of organizational capabilities.

To be able to survive competition and supply what customers want to buy, the firm has to ensure that all these value-chain activities link together and fit, as a weakness in any one of them will impact on the chain as a whole and affect competitiveness.

Porter describes two different types of business activity - primary and secondary. Primary activities are principally concerned with transforming inputs (raw materials) into outputs (products), and delivery and after-sales support. These usual line management activities include Inbound Logistics (materials handling, warehousing), Operations (turning raw materials into finished products), Outbound Logistics (order processing, and distribution), Marketing and Sales (communication and pricing), and Service (installation and after-sales service).

Secondary activities support the primary and include Procurement (purchasing and supply), Technology Development (know-how, procedures and skills), Human Resource Management (recruitment, promotion, appraisal, reward and development), and Firm Infrastructure (general and quality management, finance, planning).

The New Strategic Wave

Somewhere between 1980 and 1990 strategic planning came unstuck. Old theories no longer worked as customers became more demanding and changeable, and markets and technologies rose and fell ever more rapidly. Even industries that were once distinct with definable products and services now converged and became blurred.

http://www.simonsays.com/author.cfm?isbn=0684841460


4.6 THE SHORTCOMINGS OF THE TRADITIONAL APPROACH

At the heart of the traditional strategy framework lies a microeconomic model of industry. The Porter model, which combines exogenous forces (such as technology and regulation) that act on an industry with endogenous ones. More important, it makes three tacit but crucial assumptions. First, an industry consists of a set of unrelated buyers, sellers, substitutes, and competitors that interact at arm's length. Second, wealth will accrue to companies that can erect barriers against competitors and potential entrants; in other words, structural advantage is the source of value. Third, uncertainty is low enough to permit you to make accurate predictions about the participants' behavior and to choose a strategy accordingly. Even if any one of these assumptions were correct, the likelihood of all three being so would be low. Let us examine their validity.

Source:

Kevin Coyne is a director in McKinsey's Atlanta office, and Somu Subramaniam is a director in the New York office. This article was originally published in The McKinsey Quarterly, 1996 Number 4.

Strategic Cost Management:

Strategic cost management not only leads to incremental performance improvement but also to transformational change across the value chain. Strategic costing is viewed as part of a larger business process to influence decisions on pricing and profitability across several dimensions: product, customer, region, and distribution channel. Learn how your costing process aligns with industry best practices, and be on the leading edge of emerging practices such as value chain costing, shared services costing and outsourcing. Understand how German Cost Accounting and Resource Consumption Accounting are being put into practice.

4.7 SIX CRITICAL SUCCESS FACTORS

Critical Success Factor 1:

Move out of your comfort zone—today’s paradigms—and use new and wider boundaries for thinking, planning, doing, evaluating, and continuous improvement.


Differentiate between ends (what) and means (how).


Use all three levels of planning and results (Mega/Outcomes; Macro/Outputs; Micro/Products).


Prepare all objectives—including the Ideal Vision and mission—to include precise statements of both where you are headed, as well as the criteria for measuring when you have arrived. Develop “Smarter” Objectives.


Use an Ideal Vision (what kind of world, in measurable performance terms, we want for tomorrow’s child) as the underlying basis for planning and continuous improvement.



Defining “need” as a gap in results (not as insufficient levels of resources, means,

or methods).

5 EDIBLE OIL INDUSTRY

5.1 BRIEF HISTORY ABOUT THE EDIBLE OIL INDUSTRY

In 1972 the edible oil industry was nationalized and a ghee corporation of Pakistan (GCP) was established .Since 1988, private sector has also been allowed to enter this industry. With the passage of time most of the units which were previously controlled by GCP have been privatized (93-95%).

5.2 PRESENT SITUATION OF EDIBLE OIL INDUSTRY IN PAKISTAN

The cooking oil and vegetable ghee industry is another large manufacturing sector. A shortfall has been witnessed over the last two decades.

This shortfall is made up through the import of cooking oils, which are added to the local production. Pakistan spends 2nd largest amount of foreign exchange on the import of edible oil which puts a lot of strain on the economy and it is still increasing. The gap is widening constantly as the population increases and standards of living improve.

Vegetable oil is obtained from edible oil seeds grown especially for this purpose. Pure butter oil is produced in small units; many people prefer to use this instead of cooking oil or vegetable ghee. Vegetable ghee is formed when edible oil is hydrogenated. The market for vegetable oil and ghee is spread all over Pakistan. The manufacturing units are also widely distributed.

The number of vegetable oil and ghee plants operational in the country is about 183 with a capacity exceeding two million tons.

The edible oil market is about 2.5 million tones (65% of total oil industry), out of which Vanaspati market accounts for 1.5 million tones and Edible oils for about 1 million tones.

5.3 CONSUMPTION

Per capita consumption in 2002 was 15 kgs. Because of growth in population in increase in consumption it is expected that the per capita income of edible oil will reach 24kgs in 2010.


5.4 EDIBLE OIL INDUSTRY (3 SEGEMENTS)

The oil industry is subdivided into three segments according to target market i.e. according to preferences, buying habits, price structure, nature of product; income group .

5.4.1 Group 1(Premium Segment)

Group 1compromises of 6 oil companies that have formed an oligopoly.

This group includes Dalda, Seasons Canola, Habib, Soya Supreme, Eva, Foreign Brands

Brand loyalist in this segment account to 50%. Consumers do not switch to other brands easily due to strong positioning. They are not price conscious in-fact they prefer quality. Upper class/health conscious people mostly contribute to this segment. Consumers are willing to pay a high price for this product backed by a higher income group.

5.4.2 Group 2(Popular Segment)

This group includes, Kisan, Kashmir, Manpasand, Sufi, Meezan and Rafhan

Upper middle/lower middle class mostly prefer such brands. price conscious consumers form a major part of the segment 5% of consumers are brand loyal. They keep on switching to other brands due to price instability.

5.4.3 Group 3 (Lower Segment)

This group includes Loose oil,, Family, A-1, Gulab, Zaiqa and Sultan.

Consumers who are not at all health conscious add to this segment. They are highly price conscious. In this segment the product is more or less a commodity and there is no concept of branding. This segment mostly covers poor people and rural consumers.

5.5 MARKET SHARE ANALYSIS OF THE OVERALL INDUSTRY


The Pakistani edible oil industry overview of the major players is shown as follows by means of a pie chart is:

Market share analysis of overall indstry

Habib, 7%

Non branded/Small local brands, 69%

Soya Supreme, 4%

Foreign brands , 5%

Eva, 2%Tullo, 3%

Seasons Canola, 1%

Dalda, 9%

Dalda

Habib

Soya Supreme

Seasons Canola

Foreign brands

Eva

Tullo

Non branded/Smalllocal brands

The analysis reveals that most of the market is non-premium segment taken by a large number of very small regional brands, as shown above that the other small /non-branded market amounts to 69%.The analysis also reveals that Companies with national presence dominate the premium segment. Dalda is the market leader in the vanaspati and edible refined oil market in Pakistan with a significant market share position.

The statistics of the total edible oil market with a clear indication of the market leader is as follows:

Dalda– 9% Habib Cooking Oils – 7% Soya Supreme – 4% Tullo -3% Seasons – 1% Non branded/small local brands – 69% % (includes all those companies that either do not

have a brand name as such, or they do have a name but it is not established)

5.6 BRANDED VERSUS UNBRANDED


Analysis of the total market reveals that about 43% of the market is unbranded. Of the remaining 57% market is branded oil.

57%

43%

0%10%20%

30%40%

50%60%70%

80%90%

100%

branded oil unbranded oil

BRANDED VERSUS UNBRANDED OIL

mkt share

5.6.1 Market share information of tier 1 segment

In the tier segment 1, Dalda is the market leader having around 25% with Habib as its closest competitor shaving a market share of about 20%.and Soya supreme having a share of 16% .The rest of the market share in this category is captured by the some local brands as well as some international companies in the market including Seasons canola, Eva and foreign brands.

Market share analysis of premuim segment

Foreign brands 14%

Seasons Canola

8%

Soya Supreme16%

Eva9%

Tullo8% Dalda

25%

Habib20%

Dalda

Habib

Soya Supreme

Seasons Canola

Foreign brands

Eva

Tullo

6 WHAT IS EDIBLE OIL


Edible oil is the blend of various seeds oil. These seeds include: Cotton Seed Soya beans Sunflower seeds Castor seeds, etc.

6.1 MANUFACTURING PROCESS

The procedure that is adopted by all manufacturers of edible oil is given as follows. However organizations modify the processes to suit their requirements.

Step # 1: Blending of different oils in different quantities. Step # 2: Refining the blended oil. Step # 3: Packaging. Step # 4: Marketing and Sales

A variety of seeds are used in the manufacturing process which includes Soybeans, Cottonseeds, Ground seeds, Rapeseeds, Sesame seed, Linseed and Castor seed. The blend of the seed depends on the oil. The differentiation of oils/vanaspati is created by altering the proportions of the seeds that are added in producing the oil/vanaspati.

6.2 SOURCE OF EDIBLE OIL

The countries main source of edible oil is cottonseed. The major oilseeds include traditional crops like cotton, rapeseed, canola and mustard, and non-traditional crops such as soybean, sunflower and safflower. There are two kinds of crops:

Rabi crops:

These include rapeseed, mustard, linseed, sesamum, sunflower and safflower.

Kharif crop:

Under this category are cottonseed, groundnut and soybean. Their maturing period extends over three to four months. It should be noted here that cotton is cultivated for fiber and not for oilseed.

6.3 IMPORTANT FACTS REGARDING OIL SEEDS

Due to shortage of locally available seeds, imports of edible oil, palm oil and soybean oil have continued since the early 1970's, mostly from Malaysia.


During the 1970's, it was less than half million tonnes rising to one million tonnes by the end of the 1980's.

By the 1990's the imports ranged between 1 million and 1.4 million tonnes. Between 1995-96 and 1998-99, increase in import was 5 % annually. From 2000-2005 the increase in imports were 7 to 8% annually. At this rate, by 2010 the import will exceed 2 million tonnes, putting extraordinary pressure on

the balance of payments.

The position can be summed up in the words of the report of the National Commission on Agriculture of 1988.

"The past performance of oilseeds production stands in sharp contrast to the rest of the agriculture sector; gross output of all agricultural products has quadrupled since independence, but the production of oilseeds has stagnated. As demand in the past decade has grown by about 9 per cent

per year, import of edible oil has climbed sharply. Import costs have grown to a level which, if left unchecked in the years ahead, will exert

considerable pressure on the balance of payments".

6.4 CATEGORIES OF OIL

The first is “loose oil” which has no name on it and is sold in plastic bags.

The second category includes “brands”, which do have a name but are not established and occupy a very small share in the he market.

The final category of oils are called “branded”, under which only three brands are mainly included – Soya Supreme, Habib and Dalda along with various other brands,

Types of customers in the edible oil industry:


Category of Oil Category Specification Customer Defined

A Highly Refined & High Price oil Health Conscious with medium to upper income class

B

Average Refined & Average Price Oil

Health conscious as well as price conscious with medium to lower income group.

C Low Refined & Low Price Oil Price Conscious with lower middle to lower income group.


7 COMPONENTS OF MACRO ENVIRONMENT

There are 25 different variables in the external environment.

Managing these 25 different variables helps us to create a competitive advantage.

For e.g. the economic force would be affecting all five forces of porter (threat of new entrant, bargaining power of buyer, bargaining power of supplier, threat of substitute and rivalry),similarly the social force would be affecting all 5 forces of porter and so on.

5 x 5 = 25

Managing these 25 different variables helps us to create a competitive advantage.

7.1 WHY PORTERS FIVE FORCES?

Two fundamental questions in developing a strategy are the attractiveness of industry and the company’s position within the industry. Therefore the essence of formulating competitive strategy lies in relating a company to its environment. Although the relevant environment is very broad, the key aspect of the firm’s environment is the industry in which it operates. The state of competition in an industry depends on porters 5 forces. The strongest force out of these becomes important from the point of strategy formulation. The strength of these forces also determines the profit potential of the industry.

Political and legal forces


PORTER’s 5 FORCES

7.2 THREAT OF NEW ENTRANTS:

7.2.1 Is a lot of capital needed to enter you industry?

The industry is classified as labor intensive industry and there is not much use of extensive capital requirements. The machines that are used in the manufacturing process are quite inexpensive. In the processing stage the majority of processing units are pipes and vessels that are locally made. The content of local parts being used is high and the reason being that these parts can be easily

Industry

Competitors

Industry

Competitors

Potential

Entrants

Potential

Entrants

SubstitutesSubstitutes

BuyersBuyersSuppliersSuppliers

RivalryRivalry

High

Medium

Medium

High

Low


manufactured in Pakistan. The machines required in packaging of the finished product also cost very less.

7.2.2 Are there any proprietary product differences in your industry?

There are no such proprietary product differences in the edible oil industry.

7.2.3 Does the new comer face any problems in obtaining the necessary skills or people?

Secondly the skill requirement for labor in the processing of edible oil industry is very basic. According to Habib oil the skill required is very nominal and types of employees are usually skilled or semi skilled.

7.2.4 Are there any established brand identities in your industry?

There are about some very strong branded companies existing in the market. The top players in the edible oil industry include Dalda, Habib oil, Soya Supreme. Some others include Rafhan corn oil. Kissan oil, Corroli, Tullo, Planta, Meezan and Seasons canola cooking oil.

7.2.5 Does your customer incur significant cost in switching supplier?

Buyers have the flexibility to fill their needs by switching brands because that does not require any significant cost. Therefore a new comer can easily get customers when he enters the market.

Therefore we can conclude that the Edible oil industry is such an industry where there are less entry barriers for any new entrant to come and make their place. For this reason the threat of potential entrants in this industry is quite high.

7.3 BARGAINING POWER OF BUYERS

7.3.1 Are there a large number of buyers relative to the firm?

There are a very large number of buyers of edible oil as it is a basic food commodity and therefore it is required by every household and family.

7.3.2 Is your buyer very aware and knowledgeable?

The consumer is basically illiterate when speaking of knowledge about the edible oil industry, they have no knowledge regarding the processes used in manufacturing and the fact that how important it is to consume an oil which has undergone proper refining, blending, heating and boiling.

7.3.3 Is your buyer aware of the need for additional information?

There are some health conscious people who are trying to be more aware and more knowledgeable consumers so that they can make a right decision of choosing that brand which is best for health. Majority of them are not aware are not even interested.

7.3.4 What is the purchasing power of your consumers?


As far as purchasing power of buyers are concerned there are two types of buyers. One category includes those who have low purchasing power and this category constitutes the major segment of edible oil consumers .They prefer to buy loose unbranded edible oil. These buyers are targeted by the unbranded oil manufactures. As their purchasing power is low they have a high power over the edible oil firms

The other category includes consumers having high purchasing power.(premium segment/tier 1) This segment is targeted by branded oil manufactures. The users of branded oil have low price sensitivity and therefore their power is low over the firms

7.3.5 Is it easy for your buyers to switch?

The users of branded edible oil are hard- core loyal, they won’t switch because of the price differentials but they may switch because of the quality. However it is very easy for the buyers of the unbranded oil to switch as they are very price sensitive and are not all concerned with the brand. They just go for the company which is offering them the lowest price.

Conclusively We also know that the buyers of edible oil cant investigate or confirm that the manufacturing processes used by the company were following quality control criteria or not. Therefore theses branded buyers from the point of view of the ultimate consumers remain uneducated about the oil manufacturing processes, thus the power is not that strong. But we also observed that the buyers are getting health conscious with the passage of time therefore we can conclude that the buyer power is moderate.

7.4 RIVALRY AMONG FIRMS

7.4.1 Is the industry growing rapidly?

The industry is not growing rapidly because it’s almost on the maturity stage.

7.4.2 The fixed costs of the business are relatively low portion of total cost?

The machines that are used in the manufacturing process are quite inexpensive. The machines required in packaging of the finished product also cost very less. The fixed costs out of total cost are not a very significant portion.

7.4.3 Are their any significant product differences?

The manufacturing process used by all the oil manufactures is very similar and there is no such product difference with respect to features or ingredients.

7.4.4 Are their any established brand identities?

There are about 13 large and medium sized firms competing on the basis of quality, price and marketing. These include Dalda, Planta, Habib, Soya supreme, Seasons canola, Sundrop, Kissan ,Corolla, Pure cooking oil and Rafhan cooking oil


There is a great deal of rivalry persisting among the top players of the industry – Dalda, Habib and Soya Supreme. All of them are struggling to either become the market leaders (Habib and Soya Supreme), or if they already are the market leaders then to maintain their current position (Dalda).

The companies also engage in head-to-head rivalry with each other through price wars and advertising. Habib for example some years back ran a campaign against Dalda Melange that it is mainly a deception and is not really ghee cum oil. Habib fiercely attacked the product, by advertising that oil should be very smooth and if it is not smooth and dilute, then it cannot be oil. Dalda Melange was very thick and thus this led its customers to believe that Dalda Melange is actually ghee and not oil. In order to counter this argument, Dalda Melange responded by saying that their product is “itna refined jitna zaroori hai”.

Besides, there are also companies that simply copy/imitate the market leaders and continue their business safely. For instance, Soya Supreme follows the “risk-free-texture”, that is they introduce products that are similar to oil/ghee that have been launched by either Habib or Dalda and are selling in the market, thus avoiding any kind of risk associated with the product.

7.4.5 Is the product complex and requires detailed understanding on the part of customer?

No, the edible oil is a very basic product and there are no such technicalities involved in its usage. Therefore it is a very simple product and does not require and detailed understanding.

Conclusively we can say there is a great deal of rivalry going on in the edible oil industry.

7.5 THREAT OF SUBSTITUTES

There are no direct substitutes of oil/ghee; as such in this market thus the threat of substitutes is quite low. However, a few of them that can be potential substitutes include the following:

Butter/margarine Desi ghee Flora margarine has been recently introduced in the market – this product claims that it is for

the health conscious consumers and also claims that food can be cooked in it therefore we can say that it is a emerging substitute of cooking oil

7.6 BARGAINING POWER OF SUPPLIERS

Suppliers of the industry can be categorized in to Domestic and Foreign Suppliers

The foreign suppliers usually import at a lower price than the price demanded by local suppliers. For this reason the power of local suppliers is low over the firm.

7.6.1 Suppliers

Suppliers of the industry can be categorized in to Domestic and Foreign Suppliers.

Domestic Supplier


The local supplier can be divided into two categories.

1) Agriculturist: Provider of cotton oil seed, maize, etc for oil extraction.2) Provider of other supporting raw material to companies which includes supplier of chemicals,

flavors, tense, tin and plastic bags used in packaging of oil.

Foreign Suppliers:

This includes supplier of imported seeds. Following are the names of some countries though are regular supplier of oilseeds:

U.S.A.,

Argentina,

Vietnam,

Germany,

Nether land,

Brazil,

South Korea,

India,

Bulgaria,

Ukraine,

Poland and Australia

7.7 OTHER STAKEHOLDERS (GOVERNMENT)

Government has establishes Pakistan Standards Institute (PSI) to monitor the standards that are specified are met or not. These standards are relating to the level of refining or the type of packaging that is appropriate. However, government is not all that strong to impose their rules/standards on the organizations, and companies tend to break the rules/regulations frequently in order to save costs at the expense of the lives of the consumers.


8 PEST ANALYSIS

Forces outside the industry in the mega environment are significantly primary relative in a sense, since outside forces affect all firms in the industry, the key is found in differing abilities of firms to deal with them. The Pakistani environment has made a major impact on the procedures and strategies of the local firms as well as the multinationals operating here, as they have to formulate their tactics according to the customer psychology and culture that are prevalent in this country. Some major environments that affect the edible oil industry are discussed below:

8.1 ECONOMIC FACTORS

Pakistani economy kept on fluctuating with the passage of time. In Musharaf’s era we could see

stabilizing of economy and gradual removal of trade barriers, thus helping the Pakistani business enterprises as well as the MNC’S to enjoy the benefits of rapid growth. The accelerated growth in GDP coupled with the positive economic environment of the country had enabled the edible oil manufacturers to reap the benefits of increasing their production every year. This had also impacted the edible oil industry in the sense that the buying power of people had improved. At present Pakistani economy is again facing a downturn. From the last year the economic conditions are getting of for worse and the economic crises in the country is affecting everybody. The GDP this year has declined to 5.8% and the country witnessed terrible inflationary pressures with food inflation reaching to around 15%. In such a situation the lower income strata and the middle income strata are founding it almost impossible to make their both ends meet. Only the purchasing power of higher income strata are not affected much. Additionally the government has increased the sales tax by 1% that worsen the situation because through this price of the single tin of oil increases.

8.2 TECHNOLOGICAL FACTORS

Pakistan is not very advanced while talking on the technological aspect. However during the last decade we have seen a rapid growth in the technological industry that has impacted every industry. Office automation systems have become a necessary part of office operations. Production has also become easy, quick and accurate with the help of technology. With the advance in technology the expectation of the people has increased. . The Local manufacturers face the problem of adopting new technological advancements because they don’t have enough resources available with them to acquire new and mechanized machineries very often. Multinationals get benefited from their parent company with respect to technology and resources.

The basic techniques used in production of edible oil are rather similar for all the companies. The difference lies in the projection of the brand by the company and the image that they want their brand to acquire in the consumers’ minds. In most of the companies having branded oils, automated methodology is adopted to manufacture the oil. A few oil manufactures have acquired ISO 9000 certification and some are passing through the implementation phase, other still lag far behind. The management of major oil companies alike Dalda and Habib are keen to take environmental initiatives but most of the unbranded manufactures don’t have the resources to do so.

Since it is perceived that environmental protection calls to large extent for technological investments with low or nil payback, it is natural that most of the companies tend to postpone the environmental protection act as long a possible. There is an intense need for new methodologies so we can reduce the environmental hazards.

. Some of the dangerous environmental hazards include


Wastewater – this is generally caused directly from processes, mainly from neutralization of oil. Wastewater results in pollution load and concentration on the atmosphere.

Solid waste – solid waste generations from the oil mills are mainly in the form of spent earth, filter cloth, and spent catalyst. Though most of this is used in by-products, however, the carbon oil extracted from theses elements can be harmful to the surroundings.

Soil contamination – this can be seen around oil storage tanks in oil mills due to spillage on uncovered ground. This also poses the risk of contaminating the ground water.

Air emissions – major sources of air emissions are generator exhaust and emission from the gas cracking unit. From both the sources carbon monoxide is emitted in high concentration.

Noise emissions – industrial equipment and machinery create high noise levels during operation. The main noise sources in edible oil industry include: steam ejectors, tin can manufacturing unit, gas cracking unit, boiler building, hydrogen compressor and ammonia compressor. The noise levels from some of the above sources are higher than the permissible limit given by ISO 14000

There can be in-house improvement measures related to waste reduction at source and adoption of environment friendly processes. At the same time, a number of cleaner production technologies also need to be implemented in order to minimize the level of pollution as well as increase the efficiency of energy use.

8.3 POLITICAL FACTORS

As Pakistani environment is not very stable every time there is some or other things happened that can rejuvenate already existing problems. Secondly Government policies changes every now and then, which further give, rise to these problems.

Sometimes Govt. allows imports, which is a bad signal for the local manufacturers but a good point for the foreign manufacturers. All these things together make problems to the sale of the local products manufacturers because due to this instability nobody wants to create any trade relationships with Pakistan

Thirdly because of the political instability in Pakistan especially during the past decade and the rapid changes in government without even completing their tenure, a negative image has been created in the minds of the investors coming from abroad

8.4 LEGAL FACTORS

The industry is expected to be very much affected by the government regulations as the government plans to increase excise duties and rebates on the imports of the raw materials in order to protect the local oilseed cultivators or farmers..

There are a number of laws designed by the government to ensure that the standards are met by the companies in the edible oil industry. With the promulgation of Pakistan environmental act 1997, the Pakistani edible oil industry is required to comply with the regulations of environmental protection. However, the instability of the government and the lethargic attitude of the people controlling these laws enable the companies to violate the laws without any penalties.


Majority of the laws are regarding environmental effects and few are regarding quality specifications of the edible oil industry because the environmental effects are quite disastrous.

A few of the terrible environmental effects are mentioned on the following page:

8.5 SOCIO CULTURAL FACTORS

Water – this is generally caused directly from processes

Solid waste – solid waste generations from the manufacturing process.

Air emissions – major sources of air emissions are generated exhaust and emission from the manufacturing unit.

Noise emissions – industrial equipment and machinery create high noise levels during operation which is harmful for both the factory employees and the people working around it.

As the attitudes of people towards products and services change, the demand for those products also changes

It has been seen that the health awareness among masses is also increasing day by day; therefore people are shifting from oil to ghee. Previously a large chunk of the population was hard core loyal of ghee/vanaspati. Under no circumstances were they willing to settle for a taste less than what was produced by ghee. however this major segment of loyal ghee lovers have been transforming into a minor segment with a majority of people shifting from ghee to oil .majority of the population has now become health conscious individuals who prefer oil and have discarded the use of ghee/vanaspati in preparation of food, due to health related reasons. Thus there is a huge demand for oil this part of the world. For the small segment that prefers using ghee, the manufacturers have launched extensions of their brands that is to produce oils as well as ghee.

Besides, the increasing trend in population has also ensured that the sales of the oil/ghee continue at a steady or rather increasing pattern.

8.6 GOVERNMENT

All the laws applicable in Pakistan is Subjected to Edible Oil Industry. The government of Pakistan has established some supporting organizations for the development of different industries of Pakistan, such as Export Promotion Bureau and Federal Board of Statistic. These governmental bodies help the edible oil/ghee manufacturers in supplying information regarding the oil trends in various parts of the world. They provide data relating to those countries that have demand for oil/ghee but a shortage in the local market, and about those countries that are the largest exporters of oil/ghee and pose a threat to the Pakistani market.

As already mentioned that large amount of seeds are imported to be used in the manufacturing of edible oil. Custom duty on Palm Oil, Soybean Oil, etc is very high plus high sales tax has made it difficult for the manufacturers to compete and make profits out of their business. The major drawback of the industry is that small players try and evade the taxes, which imposes a huge burden on the large companies. As their prices offered to the ultimate consumer increases and thus people are attracted towards lower priced oils/ghee which are also of a lower quality.


8.7 PAKISTAN STANDARD INSTITUTE (PSI)

Provides the list of standards to be maintained by the manufacture of edible oil for example three years back there was no concept of keeping the batch number, or expiry date on the packed finished goods, but now all the manufacturers are supposed to maintain that.

Government has establishes Pakistan Standards Institute (PSI) to monitor the standards that are specified are met or not. These standards are relating to the level of refining or the type of packaging that is appropriate. However, government is not all that strong to impose their rules/standards on the organizations, and companies tend to break the rules/regulations frequently in order to save costs at the expense of the lives of the consumers.

8.8 ENCOUNTERING THE ENVIRONMENTAL UNCERTAINTY

There are a lot of situations where organizations find themselves at the mercy of the uncertain environments and they have to formulate their strategies such that they can make the most of environmental changes. There are indicators whether the organization should avoid, react, influence or anticipate the environmental changes.

8.9 IN THE EDIBLE OIL INDUSTRY, THE ENVIRONMENTAL CHANGES THAT CAN BE FORESEEN ARE

Firstly, the regulations of World Trade Organization to have liberal import policies. These regulations may affect the local industry

Growth is the main issue regarding the edible oil segment, which is growing at a rate of 12.4% per year.

Catering to the needs of diverse, demanding and aware consumers and the employees, so as to keep them satisfied and to keep them from running away or switching.

Moving with the ever-changing technological advancement and adopting the new technology rapidly.

Foreseeing changing customer attitudes, trends and tastes, so as to remain alive in the market.

To be the pioneers and innovators of any new product, which caters to the mass market of the Pakistani population


9 KEY DRIVING FORCES

Industry and competitive conditions change because there are forces that create incentives or pressures for change. The most dominant forces are called driving forces because they have the biggest influence on what kinds of changes will take place in the industry’s structure and competitive conditions.

As a company you first need to identify the driving force and then assess the impact of the driving force on the firma s well as industry

9.1 GLOBALIZATION

All the industries in the world are moving towards globalization. A nationally prominent firm may launch an aggressive long term strategy to win a globally dominant market position. Also many multinationals are entering in many different parts of the world. As a part of the globalization scenario, Pakistan has reduced trade barriers and has also opened up once closed markets to foreign competitors. Previously the government of Pakistan had strict regulation to protect the domestic oil industry but now there are no such restrictions. There are liberal import policies. Tariff reductions, large scale de-regulation and privatization of government owned enterprise bring local competitors eyeball to eyeball with ambitious global companies. Multinational companies with the ability to transfer their production, marketing and management know how from country to country at a very low cost can sometimes gain a significant competitive advantage over pure domestic competitors. For example: Multinationals like Unilever first had their brand Dalda, but they later sold it in 2005 as a part of their strategy to cut down on brands.

Global competition is affecting the pattern of competition among industry’s key players like Dalda, Habib and Soya supreme who are constantly trying to improve quality and doing extensive research and development to come up with new products that are suited for the emerging health conscious consumers .this will help them to deal with the foreign competition and cope up with the rapid challenges of the globalization era.

9.2 CHANGING LIFESTYLES AND HABITS:

Growing physical fitness concern and health conscious concern has emerged as a major driver of change in the edible oil industry. Consumers growing concern about saturated fat, cholesterol and nutritional values .this has forced the edible oil manufacturers to revamp their oil processing techniques, redirect their research and development efforts to use healthier ingredients. Increased interest in physical fitness has also affected the edible oil manufacturers to come up with oils with low contents of saturated fats.

With the increasing social concerns about air and water pollution, the consumers are developing a sense that the natural environment should be protected. This has forced the edible oil manufacturers to incorporate expenditures for controlling environmental pollution in their cost structure.

Those players who respond quickly to the changing trends and lifestyles are usually successful in the long run.

9.3 TECHNOLOGICAL CHANGES


This is an era of rapid technological advancement and it is affecting every industry in the world. The new technology has made possible many new things. There can be in-house improvement measures related to waste reduction at source and adoption of environment friendly processes. At the same time, a number of cleaner production technologies also need to be implemented in order to minimize the level of pollution as well as increase the efficiency of energy use

Large technological investments by the edible oil manufacturer will help in environmental protection. The management of major oil companies alike Dalda and Habib are keen to take environmental initiatives but most of the unbranded manufactures don’t have the resources to do so. The new technology evolving has made possible for the edible oil manufacturers to make one time big investments and ten produce new and better products at lower cost and opening up new industry frontiers.

9.4 MARKETING INNOVATIONS

Now a day we can see that many companies are using creative and innovative marketing techniques. In the edible oil industry the basic differentiation lies in branding and the way companies market their products. This is because the consumers are illiterate regarding the procedures used in manufacturing, processing, blending and refining. Thus the main weapon used by the edible oil companies to attract the customers is advertisement. Customers prefer to stick to their brands, yet there is an uncertainty in the market because the consumer is flushed with so many different ads. The oil companies are confusing the consumers by telling how one company’s processing is better than others, but in reality it’s the same.

Companies who used the most innovative marketing ways and show the most creative ads are the ones who are able to capture the biggest market share in the edible oil industry

9.5 HEALTH CONSCIOUSNESS

With the changing trends consumers likes and dislikes have immensely changed. Today people are more health conscious then it was before. This is due to more awareness as well as more and more interaction with media through advertisement, and informative programs telecasted on T.V

Now a day there is a shift from ghee to oil. Today all the oil manufacturers are playing with the consumer psyche, and increasing the demand of their product by doing informative advertisements and how their brand of oil is good for health.

9.6 STRATEGIC ISSUES IN THE MACRO ENVIRONMENT

The biggest food item of Pakistan is currently edible oil even than the Edible Oil Industry is very backward in term of technology, research and development, innovation etc. The reason for this backwardness is lack of government’s attention and companies focus towards the development of this sector. Almost all the companies with good quality product are playing on the low margins and finds the industry unattractive.

We have tried to cover the various issues prevailing in the industry and affecting the firms operating in the edible oil industry. Following are some of the issues and recommendations for the Edible Oil Industry as a whole.


9.6.1 ISSUE # 1

Substandard processing and product

Due to the fact that there are no such strict government regulations on the edible oil manufacturers, a lot of local oil manufacturers are using substandard processes. The packaging machines used in the edible oil industry are quite cheap. This has encouraged the small investors to invest in this market/industry and produce low quality Product.

The producers generally purchase the packaging equipment, while the other process is done in a substandard manner. That is, the manufacturers just boil/heat the oil on a normal stove, without undergoing any kind of refining or blending and using the packaging machine to pack the oil/ghee sell off their product. These sellers are selling this low quality, least refined oil at a market price or slightly lower than the markets rates prevailing in the mark. This has hindered good reputable companies to sell there product in the market because the customers are not so literate. The cost of production of these companies is very high because they are fulfilling the standards determined by the Pakistan Standard Institute. The customers don’t really know that the companies though are selling at a slightly lower prices are not selling the right product.

Recommendations

The players of the Edible Oil Industry need to educate the public/consumer that why are they charging a high amount as compare to loose and low brands. The companies have to create market awareness, as already discussed that consumers are becoming health conscious. This can be a company effort or combine efforts of the premium quality edible products, may be via Pakistan Vanaspati Association. This kind of a strategy can avoid easy entrants in the industry .this will also discourage the local manufacturers who do not follow the quality specifications.

9.6.2 ISSUE # 2

Dependence on imported oil

(Low production of edible oil seeds, high amount of foreign exchange is invested in importing crude oil and increasing crude edible oil prices)

A very important aspect here to mention is that until 1970,s we were self sufficient in edible oil production but after that the share of imported oil has been increasing rapidly to meet the growing demands .Pakistan spends second largest amount of foreign exchange on the import of edible oil (average 700 million $ per year) and 70% our demands requirements are met through imported oil. Our local farmers are hesitant to cultivate oil seeds because they are not sure that whether their product will be sold in the market at the right price or not, because the imported edible oil price is lower than local oil price. This indicates that are edible oil manufacturers are largely dependent on imported oil which is not good and economically viable in the long run.

Recommendations


The edible oil industry is agro based and Pakistan being an agrarian economy lacking in oil seed cultivation seems to be a shocking thing. There is a strong need for the government to Pakistan to protect the local suppliers of oil and farmers and provide subsidies to them so that they cultivate the oil seeds in sufficient amount and thus we can at least we can again try to become self sufficient in our edible oil production and save our foreign exchange. The government already knows the importance of this matter. The government has taken various steps regarding this issue and formed certain association to encourage the production of oil seeds. But the current situation (Data form SBP annual report, Economic survey and other sources) reflects that issue is still unresolved.

The government needs to consult industry specialist of our country and other countries though can assist the government to come over with this issue. The Pakistani farmers and manufacturers also have compromise on some of their benefits in order to get a long term gain for the country.

9.6.3 ISSUE # 3

Counterfeiter brands

Because of the fact that edible oil sector is unorganized and entry is easy there are Counterfeit oil brands existing in the industry. These counterfeiters copy the product of existing market leaders and sell them with inferior quality. These counterfeiters just by charging a little low price are playing with the lives of consumers. This also affects the sales of the original companies.

Recommendations

The companies should try to create brand awareness and make the consumers knowledgeable about these counterfeiter brands, so the consumers don’t get fooled by these counterfeiters.


9.6.4 ISSUE # 4

Environmental hazards

The Edible Oil Industry has created great hazards to the environment. This issue is already in the notice of the government but the government is not taking any action right now. The companies have certain important responsibilities towards the environment and need to take concrete measure in order to gain long term benefits.

Recommendation

It is recommended that in-house improvement and adoption of cleaner technologies be undertaken immediately. The in-house improvement and adoption of cleaner technologies have the potential to reduce the pollutant.

Environmental Management Systems (EMS)

Edible oil mills in Pakistan should implement Environmental Management Systems (EMS) in their industries for a better, environment Friendly management. The companies need to hire management though have experiences in some what same area, because the release of gasses during the process is the normal phenomenon in many industries, for example Textile Industry.

9.6.5 Issue # 5

Unaware consumers

The consumers don’t know have the proper knowledge about the storage and usage of the edible products, thus creating an unethical stance for the organizations in this industry.

Recommendation

The consumers should be educated about how to store a product. Some precautionary measures should be communicated either through advertisements or print material on the package or tin. The ads should also tell the consumers that Vanaspati (Ghee) should not at all be consumed by the heart and blood pressure patients but none of the organizations teaches this to the consumers. Mostly consumers get to know about this from their doctors. The reason the company needs to educate their consumers because the companies, otherwise, are damaging the trust of innocent consumers. We have the example of cigarette industry who clearly state in their advertising as well as on their cigarette packets that how important the health issues are.


9.6.6 ISSUE # 7

Market saturation

The edible oil industry seems to be very saturated with about 183 small and medium size enterprises operating. There are about 10 big players with Dalda, Habib and Soya Supreme Being the top three.

Recommendations

The best way to differentiate is to be exceptional in value addition. Only making the oil tin or package more attractive is not enough. The companies should try to communicate that how their particular brand of oil is of a greater value as compared to other brands by mentioning the health benefits which the consumers would get by using the product. This can be ensured through heavy promotional campaigns and bright new selling ideas.

9.6.7 ISSUE # 8

Smuggling

Smuggling is also an important factor which affects this industry. Government estimates that .87 million tones of oil is smuggled into Afghanistan every year

Recommendation

The companies can export oil to the areas where oil is being smuggled .if the demand of local people in the smuggled areas will be fulfilled in the right way they wont need to smuggle oil for Pakistan. Also the Recent developments in Afghanistan have allowed the oil companies to export their oil to Afghanistan .this was only possible due to the improved road link.


10 EXTERNAL FACTOR EVALUATION MATRIX

Weight Score Wt Score

OPPORTUNITIES

1) Increasing health consciousness 0.16 4 0.64

2) improved Infrastructure leading to deeper market

penetration into local areas

0.05 3 0.15

3) Expansion into international markets 0.14 1 0.14

4) Increasing Population 0.1 3 .30

5)Celebrity endorsement 0.07 2 0.14

6) Backward integration 0.02 1 0.02

7) Strategic alliance with bakeries and hotels 0.04 1 0.04

8) Creating awareness 0.03 3 0.09

THREATS

1) Fluctuating Oil Prices 0.03 2 0.06

2)Increasing health consciousness 0.07 4 0.28

3)Political instability/poor international relations 0.02 1 0.02

4) Devaluation of our local currency 0.03 1 0.03


5) buyers expectations to meet international standards 0.03 3 0.09

6) High taxes and tariffs on the import of raw material 0.05 1 0.05

7)intense competition 0.1 3 0.3

8)smuggled oil 0.02 2 0.04

9)counterfeiter product 0.04 2 0.08

Total 1.00 2.47

11 OPPORTUNITIES AND THREATS FACING THE INDUSTRY

11.1 OPPORTUNITIES EXISTING IN THE INDUSTRY

Pakistan’s GDP is growing. This is coupled with a growing population with rising per capita income

leading to distinct change in consumption pattern which have resulted in huge growth opportunities.

There are a number of opportunities for edible oil industry for future growth in the Pakistani market in

order to supplement the historical performance of the sector. The opportunities and how they can be

capitalized upon by the edible oil manufacturers are discussed below

11.1.1 Health Consciousness

The consumer are becoming health conscious they want to shift to the low fattening foods .these

consumers are interested having a oil or ghee which is light for body and equally good and tasty when

food is cooked in it. Therefore the edible oil manufacturers can very well capitalize on the fact that an

increased number of people are getting health conscious and can come up with new variants of their

brand with greater health benefits and lowest saturated fat levels. This will also help them in

increasing the profits in the long run.


11.1.2 Pakistan’s improved Infrastructure helps in wider coverage

Pakistan’s new infrastructure is creating connectivity between different regions and different cities. There has

been an improvement in the road networks both within Karachi and from Karachi to other areas of Pakistan.

The leading companies say that the improvement in the roads infrastructure will help them their products to

all parts of Pakistan. Thus an opportunity has been created for companies to sell there product where the

product was/ is not available. Transportation cost for edible oil companies accounts for 5% of their cost and

this figure is higher for the northern areas and extreme parts of Baluchsitan, so when the road links will

improve the cost will go down further.

11.1.3 Expansion into international markets

There is a great opportunity for the edible oil manufacturers to enter into new international markets

such as Afghanistan and Iraq. This is because the political conditions existing in these countries have

destroyed the countries’ own resources and therefore they are relying on the other countries for

satisfaction of there needs. This industry also has the opportunity to enter in these markets. Secondly

due to improved infrastructure and improved road links easier of the local or MNC’s operating in

Pakistan to enter into these new markets

11.1.4 Increasing Population:

Currently the population of Pakistan is approximately 160 million. There is a continuous increasing

trend in the population of Pakistan which ensures that as the population will increase the demand of

edible refined oil and the edible vanaspati. Cooking oil is a basic commodity and every household

needs it to cook food.

11.1.5 Celebrity endorsement:

Another opportunity of which Habib oil can fully make use of is celebrity endorsement – this can be

used in a way that they can take some famous chef in their advertisement campaign who becomes

the brand ambassador of their product. That chef can be used to convince people that the food

cooked in Habib oil is healthy and tasty.

Habib’s major competitor used Mrs. Zubaida Tariq as its brand ambassador to promote their product.

11.1.6 Backward integration

As we know that the edible oil manufacturers are largely dependent on imported oil. The company can

set their own local farms where they can cultivate oil seeds and thus they can get rid of the

dependency on foreign suppliers. in this way the company can even ensure that the quality criteria are

being fulfilled while cultivating the seeds.

11.1.7 Strategic alliance with bakeries and hotels


Bakeries and hotels are amongst the highest industrial consumers of oil. They comprise of about 17%

consumption of edible oil in Pakistan. Bakeries consume about 60,000 tons of edible oil per year and

hotels consume about 52,000 tons of edible oil per year. Therefore the edible oil companies can make

strategic alliance with renown bakeries and hotel and can do combined marketing and promotions. in

this way they can even save cost on part of their promotion For e.g. they can advertisement to show

that the chefs cook the food in their brand of oil because it is very good for health and also makes the

food very tasty

11.1.8 Creating awareness

The companies can utilize the opportunity of creating awareness among consumers that how

important it is to use that good quality pure oil. The consumers are basically illiterate when speaking

of knowledge about the edible oil industry. They are not aware of the fact that how important it is to

consume an oil/ghee which has undergone proper refining, blending, heating and boiling otherwise it

could be harmful for health and heart

The companies need to tell the consumers about the counterfeiter brands that how theses

counterfeiter brands are playing with the lives of consumers. Just by charging little low price they are

selling the lowest quality oil very harmful for health.

11.2 THREATS EXISTING IN THE MARKET

Some of the major threats existing in the edible oil industry are given below:

11.2.1 Fluctuating Oil Prices internationally

The prices existing in the international market has shown an fluctuating trend. This has created the

problem for the edible oil manufacturers. Although the branded manufacturers prices do not fluctuate

on daily basis with the international oil prices but they are to some extent affected by it. As far as the

unbranded oil manufacturers are concerned their oil prices fluctuate on daily basis with the change in

international oil prices. Therefore the unbranded manufacturers are more prone to price fluctuations.

11.2.2 Increasing Health Consciousness

Health conscious customers are also a threat for the industry as the consumers now demand superior

quality oil with heart and health benefits. This will be a major threat for companies who do not respond

to the growing sophisticated needs of buyers.

11.2.3 Political instability and international relations


Pakistan relationship with the foreign countries is highly unpredictable and mostly strained. This

industry is relying highly on the international market for its raw material, which is the crude oil.

Therefore international relations are one of the extreme threats for this industry.

11.2.4 Devaluation of our local currency

Constant devaluation of the rupee is increasing the cost of imports and taking forward cover premium

from banks does not make much of a difference

11.2.5 Expectations by buyers to meet International Standards

International Standards are much higher than Pakistan’s oil standards determined by the Pakistan

Standard Institute. Some of the International Standards include the process which is followed, the

working condition under which the company workforce is supposing to work. Meeting these standards

is very expensive for the companies. The local Pakistani buyers are trying to be more knowledgeable

and are requiring our local companies to follow the international standards

11.2.6 High taxes and tariffs on the import of raw material

The edible oil industry is relying highly on the international market for its raw material and 70% of

our demand is met through imported oil. These high taxes and tariffs are increasing the cost by

significant amounts for the local oil manufacturers

11.2.7 Intense competition

There is an intense competition in the edible oil industry as there are many players in the market there

are about 13 competing firms in the edible oil industry. These are the firms that are operating on large

and medium scale and are competing on the basis of quality, price and marketing. These include

Dalda, Planta, Habib. Dalda, Soya supreme, Seasons canola, Kissan cooking oil and Rafhan corn oil.

11.2.8 Smuggled oil

Smuggled oil brands available in the market can further aggravated the problem because these

smuggled brands are available in the market at a cheaper rate and people prefer using that s as they

are foreign brands. Due to that, local brand manufacturer suffers because of the higher prices they

charged from their product

11.2.9 Counterfeiter product


Another threat prevalent in the industry is of counterfeit a product which is very difficult for the

organization to trace and because of this the local firms like Habib and Soya Supreme are incurring

great losses.


12KEY SUCCESS FACTORS (KSF)

For any industry to be successful in the market needs to focus on its critical success factors. The

success factors can be the manpower, the strong company name, its popular products and their

images in the minds and hearts of the consumers, the strong financial background, the profitability if

the company, the brand recall, the marketing and pricing strategies. These KSFs spells the difference

between profit and loss and ultimately between competitive success and failure. The purpose of

identifying key success factors is to make judgments about what things are more important to

competitive success and what things are less important. A company with clear understanding of KSFs

can gain a sustainable competitive advantage by training its strategies on industry’s KSFs and

devoting its energies to being better than its rivals on any one or more of these factors.

Along with explaining the key success factors of the edible oil industry we have also mentioned with

examples that how the leading players in the edible oil industry are dealing with the key success

factors to be the best in industry.

12.1 CLEVER MARKETING AND ADVERTISEMENT TACTICS

The basic key success in the edible oil industry is to create a difference in the product by

means of clever marketing/advertising tactics. This is because the market is basically illiterate and

has no knowledge about the process that is adopted in the manufacturing of oil. Basically the success

depends on how effectively is a company able to establish a unique positioning in the minds of

customers. It is not important for the product to meet all the claims that companies have done in the

advertisements, since the consumers are basically illiterate in this area and will accept any kind of

deception. Therefore if the company has enough budgets to invest into advertisements, then they

have mind and heart shares of their consumers

For example; it is easy for a consumer to judge the quality of tea by its taste and aroma but it is not

easy or possible for a consumer to determine the quality of oil. Although a consumer can satisfy itself

by saying that the texture of oil is very pure and smooth so it is good quality oil but he never know that

the company might have used some substandard procedures in the manufacturing stage.

For example: Looking at all the three major companies who have positioned their brands differently.


Dalda – Jahan Maamta, wahan Dalda

Habib – Kyunkai yeh dil ka maumla hai

Soya Supreme – Lazat ka khazana, sehat mand gharana

All the three companies have managed to create a point of differentiation amongst their brands which

gives them a clear embarkation from the rest. Although it is quite ironic that there is no basic

difference between each of the brands as the basic manufacturing process in the Edible Oil industry is

the same. .

12.2 STRONG BRAND NAME

It plays a very important role in the edible oil industry because sometimes people have very strong

association with the company and its products. For any company in the edible oil industry who wants

to make a place in the minds of consumers and to attract a huge number of customers, they should

make an innovative USP and associate it with the brand name.

A very common concept used by the major players in the edible oil industry is that the brand which is

being used by the family passes from it generation to generation

Consider the example of Dalda:

They have been associating their brand with ‘Mamta’ since their establishment

“Jahan Mamta Wahan Dalda”

12.3 PROPER SEGMENTATION

It is very important to do proper segmentation because we have seen some of the company’s

products fail just because they haven’t done enough research for their product, and due to that, target

consumers would be wrongly calculated. Most of the brands of edible oil are sold in sold markets but

niche selling is very common in this industry. Some of the brands are only developed so as to focus

on market niche

For example when Unilever was handling Dalda they launched Dalda Melange claiming that its

texture is like oil but it tastes like ghee. They allocated a huge advertising budget assuming that even

that will be a hit; however Dalda melnage was a failure. Habib oils put an allegation against Dalda that

this claim is a deception. Dalda mélange is basically ghee and is not good for health. So when there is

a problem in the segmentation then it gives rise to wrong positioning and so the whole process goes

wrong just because of one factor and that is segmentation.


12.4 PROMOTIONAL ACTIVITIES

It is another important factor after segmentation because most of the times these promotional

activities increase willingness to purchase the product from the buyers perspective. Especially when a

product is a consumer food product than letting the costumers try it free or at lower rates is a very

attractive way to introduce your product to them. It is a general tendency of Pakistani population that

they always try when the products are available at a low rate and then if they likes it, they will further

used it in the future. So the purpose for doing these activities is to make people’s attitude to use the

product once, and then if the product gets the acceptance then may be it will increase the sales.

12.5 COMPETITIVE PRICES

There is one strategy in edible oil industry which is common to all companies in the industry. The

pricing strategy of all the companies revolve around the same concept .the concept is basically that all

the firms try their best to sell their products at the lowest possible price so as to attract customers.

Also the competition provided by the small scale operators pose a problem for the big players and

they are forced to set competitive prices.

Setting a competitive price means that the company in order to be competitive has to set the price

range up to the market not very high neither not very low. In order to set the price range according to

the market it is difficult for the manufacturer to charge high for their particular differentiating

characteristics, for that they have to reduce the per oil tin margin in order to be at the market.

Example of Soya Supreme’s pricing strategy:

The prices of the Soya Supreme products are also set in compliance with their immediate competitor,

Habib. Mostly Pakistan

Habib also varies its price in different localities of the area. A tin of Soya Supreme will be sold at a

slightly higher price in Defence and a slightly lower price in Malir

Example of Habib’s pricing strategy:

The basic strategy that is adopted is that the price that Unilevers sets for its brand, a figure slightly

lower than that is adopted as the price for Habib.

For any company to maintain its established name in the minds of the consumers it is favorable for

them to have a good distribution network available for them. This helps company’s to make their

product available at every nock and corner where ever they want to reach. For this reason some

multinationals like P&G, Unilever are so active in the market because they have their own distribution

networks and they can able to reach each and every possible place


12.6 GOOD DISTRIBUTION NETWORK

For edible oil company to maintain its name in the minds of the consumers it is very important for

them to be always available in as many retail stores as possible and also covering an ample space of

the retailer’s shelves. A strong network of whole sale distributors is the best was to gain access to as

many retail outlets as possible. A strong distribution network also helps company’s to make their

product available at every nock and corner of the country where ever they want to reach.

For this reason some multinationals like P&G, Unilever are so active in the market because they have

their own distribution networks and they can able to reach each and every possible place

Example of Dalda:

There is a supply chain manager who is responsible to dispatch products to warehouses, and then

goods are transported to distributor, retailer and wholesaler. One distributor covers more than one

area. Dalda has a network of 350 distributors across Pakistan that makes sure that product is

available in every corner, village, town and city of Pakistan. Dalda products are available in far flung

coastal areas of Balochistan like Gwadar, Pasni Rural areas of interior Sindh and Mountainous

regions of N.W.F.P like Swat, Chitral and manshera

Dalda also has a very wide distribution network in all the main commercial, industrial and agricultural

cities of Pakistan. for this reason Dalda has a high sales volume in cities like Karachi, Hyderabad,

Quetta, Peshawar, Islamabad and Rawalpindi.

12.7 RESOURCES (FINANCIAL AND HUMAN)

Resources are another very important factor because through that company can achieve its

objectives and can give competitive edge to its competitor. Secondly in this competitive environment

Human resources are extremely important in the edible oil industry because the industry is presently

classified as a labor intensive industry and therefore the labor force is very important. It is basically

the people who can make every impossible action into possible, through their knowledge and

technical skill they have. For that reason companies are now hiring fresh graduates with new idea and

creative mind and can train them through Management Trainee programs to make them effective for

the company.

Example of Habib :

Habib oil mills us very much supportive and concerned about their labor force. It employs a workforce

of about 350 employees in different departments.

12.8 PRODUCT QUALITY


Company’s product should try to supersede the expectations of the users and tries to give more value

to the people to make them attached with the company and its products. Product quality is a very

important factor in edible oil. Oil that does not clog or thickens is considered to be good quality oil.

12.9 RESEARCH AND DEVELOPMENT

Many companies in the edible oil industry are carrying research and development at the corporate

level. Habib and Soya supreme have specialized research and development departments. These

specialist departments are focusing on improving the processing of oil and to remove impurities in the

edible oil so as to be more health friendly and consumer friendly. These companies are trying to

increase customer sophistication and brand loyalty, by improving the quality of their cooking oils by

extensive R & D.

Due to the highly developed Research and Development centers they are able to perceive in much

better way what is in the consumer’ s mind and what are the consumers looking for.


13 COMPARATIVE STRENGTH ASSESSMENT OF THE MAJOR PLAYERS

Selected 3 players out of the Edible Oil industry

The companies that we have chosen out of the edible oil industry of Pakistan are as follows.

Dalda

Habib Oil Mills (Habib)

Agro Processors and Atm Gasses (Pvt.) Ltd. (Soya Supreme)

The details of respective companies are also mentioned. We have chosen the following players

because they have the highest market share in the market are well known by the industry and the

customers

13.1 HABIB OIL MILLS

13.1.1 History

Incorporated in 1954-55, Habib Oil Mills (Pvt.) Limited was initially established as an oil expelling unit.

The present management took over the unit in 1978 when it was producing only 5000 metric tons of

cooking oil annually.

The new management has carried over major expansion and modernization of the unit over the years,

and has converted it into an integrated unit for edible oil refining, cooking oil blending and production

of hydrogenated cooking mediums. The unit after subsequent expansion and modernization has now

an installed production capacity of 58,000 metric tons of cooking oil and Vanaspati per annum

The products enjoy vast popularity and brand loyalty and stands first in terms of market share in this

sector nationwide. The company has achieved a growth of over 500% in last ten-year period, which is

primarily attributed to its consistent quality care and driving successes from application of needed

market strategies.

13.1.2 Corporate Philosophy

Customers


HOM is customer driven. We strive to provide products and services of superior value to meet the

expectations of our internal and external customers

Innovation

HOM constantly strives to be creative and innovative in all its endeavors. All HOM employees are

encouraged to bring forth new and better ideas for improved performance, whatever our

responsibilities.

Ethics

HOM demands openness and honesty throughout its operations to engender trust, and integrity

underscores everything we do. We believe that every activity must be able to pass the test public and

internal scrutiny at all times.

People

HOM employees are all partners, working together in the pursuit of the mission and strategy. We

strongly value teamwork, and we want every employee to be motivated to succeed.

13.1.3 Product

Habib Cooking oil and ghee is a premium quality product which enjoys a market share of 7% (second

in the industry). The various products of this company are as follows:

Habib Cooking Oil

Habib Vanaspati

Super Habib

Friyo (industrial use)

Handi Vanaspati/cooking oil (regional brand)

Nayab Vanaspati (regional brand)

Among the various oils/ghee manufactured by the company each of them has its own unique blend of

oils and seeds. Habib cooking oil is a blend of Palm oil, Soya oil and Canola oil.

Habib Oil Mills are the pioneers in introducing pet bottles in part of the world. They are very particular

that the best quality of oil/ghee should be provided to their customers.

13.1.4 Pricing


The pricing of the product is compatible with Soya Supreme and lower than the market leader Dalda.

The basic strategy that is adopted is that the price that Unilevers sets for its brand, a figure slightly

lower than that is adopted as the price for Habib.

13.1.5 Placement – distribution network

The product is made available in all retail outlets that stock oil/ghee. The company also tries its level

best to keep its product just besides Dalda oil/ghee because it is an immediate competitor of the

brand.

13.1.6 Promotion

Since quite a few months Habib has not indulged in any kind of promotional activities. This is because

it feels that it has a solid customer base and all its customers are loyal towards the brand. For this

reason any kind of promotion is not necessary for Habib to sell its brand in the market. At Habib they

believe that “Consumer pull” should be the tactic for a good quality product. And that is what Habib

primarily enjoys, that is the consumers themselves demand the product and in case of a shortage

they refuse to purchase any other brand.

The last promotional activity that Habib conducted was in Ramadan which was called “Ramadan

Khazana ”. Besides there was also an Eid offer called “Eidi Lakhon Ki ”.

13.1.7 Positioning – critical success factor

Habib entered the edible oil industry in the year 1954-55. When they launched their product Habib

Cooking oil/ghee the market for this kind of a product was already established and ready to accept

any new entrant. The initial tough work of educating the market was already done by Unilevers. At the

time of launching Habib, the management decided a different kind of positioning for their product.

They said “Kyunkay yeh dil ka muamla hai”. The reason behind this is that Habib realized that now the

customers are fully aware of the product features and its pros/cons. Thus the best method to attract

people towards Habib was to make them realize that ghee affects the heart, and since a human heart

has extreme importance so people should not settle for anything lesser in quality. They attached a lot

of family values and traditions to their product claiming that Habib is a family product, a family

ghee/oil.

The positioning adopted by Habib was yet another emotional strategy which created a point of

differentiation from the market leaders – Dalda. Presently the scenario is that Habib has a market

share of 7%. Inspite of the fact that there is no crucial difference between Dalda or Habib, yet Habib

managed to develop a difference through their advertising and positioning strategies.

COMPETITOR PROFILE


13.2 SOYA SUPREME

Agro Processors & Atmospheric Gases (Pvt.) Ltd., established in 1980, is a leading manufacturer of

edible oil in Pakistan. In 1991, in its quest to provide the best Cooking Oil and Vanaspati, the

company made huge investments in research and product development and launched the famous

brand of Soya Supreme Oil and Vanaspati. Today, Soya Supreme is a household brand used by

health conscious consumers all over Pakistan

Soya Supreme is a comparatively newer product and entered the Pakistani market in 1989. At the

time of their launch the problem that Soya Supreme faced was that the Pakistani industry already had

established players in the market that had high market shares and were dominating the edible oil

industry. In such a situation Soya Supreme had to develop something different than its competitors in

order to attract customers.

They did manage to create a difference through advertising. Soya Supreme claimed that it is only their

product that is UHT (ultra heat treatment) treated and is absolutely free from cholesterol.

Their positioning statement was “Lazat ka khazana sehat mand gharana.”

This was a unique feature being offered in the market. Soya

Supreme developed this strategy keeping in view the growing

awareness regarding health problem and how ghee is harmful for

the heart. They claim that their oil/ghee is treated at 255 degrees

centigrade which is unique in the market as the two top players –

Dalda and Habib, process their product at 180 degrees centigrade.

13.2.1 Soya Supreme-the product

The ingredients for manufacturing Soya Supreme are imported from US and Brazil. The basic product

is such that it resembles the two market leaders – Habib and Dalda. Soya Supreme claims that they

use the “risk-free texture” thus avoiding any kind of problems/risks associated with the product. The

risk free texture concept is that Soya Supreme tends to adopt the texture that the two market leaders

are using in their manufacturing process. In this way it is free from any possible risk associated with

the failure of the variant, as it is already accepted by the consumers. The different products of Agro

Processors are:

Soya Supreme oil

Soya Supreme ghee

Champion

Taqat


13.2.2 Pricing


Habib. Mostly Pakistan Vanaspati and Manufacturing Association (PVMA) determine the prices for

companies. An interesting feature is that the prices of Soya Supreme oil/ghee vary according to the

area. Example in the area of Clifton it is available at a slightly higher price which in Malir the price will

be lower

13.2.3 Placement

Soya Supreme is placed at all retail outlets that carry oil/ghee, as well as in hotels, and bakeries. Care

is taken that at least few of the fast moving stock keeping units (SKU) are available at all retail outlets.

Soya Supreme has more than 250 distributors all over the country.

13.2.4 Promotion:

Agro Processors use a great deal of sales promotion for their products example 25% off schemes,

Jeetiye chaphar phar kai schemes, free spoons, cutlery sets, dinner set and kitchen tools. This serves

as a cushion to the customers. The different media on which advertising is done are – TV, Radio and

Outdoor (Billboards).

13.2.5 Positioning/Unique Selling Proposition (USP) – critical success factor

Soya Supreme is the only company in the industry that uses UHT treatment in its products. This is a

method which eliminates the cholesterol element totally from the oil. It employs a continuous

deodorizing process. This is a feature that is unique to the product Soya Supreme. Agro Processors &

Atmospheric Gases (Pvt.) Ltd. is one of the few edible Oil and Vanaspati units in South Asia that

process oil at 255° - C using UHT or Ultra High Temperature heating system and continuous

deodorizing. Most manufacturers use batch deodorizing with conventional heating systems which

process oil only up to 180° - C

13.3 DALDA


Dalda as a 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 three leading top brands in the Pakistan.

Dalda as a brand has a history of 50 years. Previously, Dalda was a brand of Unilever and contributed

to 25% of the total revenue of Unilever. Dalda got separated from Unilever two years back and thus

has embarked on a journey of its own. Divesting Dalda was part of Unilever’s international strategy to

pull out of cooking oil sector from the South Asian region as part of their long term goals. The new

directors who took over the company were former employees at Unilever and headed the Dalda

brand. Their task was made easy as Dalda was already a household name and was a popular brand.

They just had to maintain the quality and live up to the expectations.

Dalda is a premium quality that has the highest market share of 8%. They are the price market

leaders as well as the price initiators. They are the innovators who introduce new product variants

time after time. However not all their products have been a success. Like for example Dalda Melange

was a failure product and could not sell

13.3.1 Dalda-the product:

The variants of the product Dalda are:

Dalda Cooking Oil

Dalda Vanaspati

Dalda Melange

Dalda Planta Cooking Oil

13.3.2 Pricing

It is price initiators in the he industry. They prices of Dalda Cooking Oil and Dalda ghee are

comparatively higher than the competitors. This fact is attributed to the excellent product quality and

well established name of the company

13.3.3 Distribution

There is a supply chain manager who is responsible to dispatch products to warehouses, then goods

are transported to distributor, retailer and wholesaler. One distributor covers more than one area.

Dalda has a network of 350 distributors across Pakistan that makes sure that product is available in

every corner, village, town and city of Pakistan. Dalda products are available in far flung coastal areas

of Balochistan like Gwadar, Pasni, Turbat and Omara, Rural areas of interior Sindh like Thatta,

Khairpur, Badin and Rohri, Mountainous regions of N.W.F.P like Swat, Chitral, Mardan, Nowshera

and Balakot, Tribal areas like Khuzdar, Bajur and Loralai, agricultural terrains and outstations of

Punjab like Khaniwal, Okara, Chakwal and Sahiwal.


Distributors are supplied the products using a dynamic replenishment model. The model is based

among other things on preset safety stock levels, sales of retail outlets, promotional activities and

competitor activity.

13.3.4 Promotion:

The company does not believe in giving trade discounts on their product as they feel in this way control over

the product is lost. However they have various sales promotion schemes like “khul ja sim sim” in year 2002 in

which they distributed over 100,000 prizes. Besides in the same year they also raised money for the Shaukat

Khanum Memorial Hospital by increasing the price of their products and also making a note of the same on the

tin/bottle that this is for a social cause. The most successful of the schemes was cross promotion with Lux

which raised the volume of purchase by 30%!

13.3.5 Positioning of Dalda – critical success factor:

UPL’s competitive marketing strategy is primarily drawn from the trust and emotive attachment of

people to its established brands. The brand story for Dalda has revolved around the core of Pakistani

society:” A mother’s love”. Whether it be an upscale urban family from Karachi or the more traditional

eastern setup in the north, the mother symbolizes all that is pure. Dalda’s slogan “Jahan Maanta,

wahan Dalda” became a synonym for this purity and quality and has been the platform for the brand

for many, many years. The language may have changed, the pictures may have altered but the core

of this message still rings true. This symbolism was of course established over the years with well-

crafted and executed communication campaigns across the different medias, touching consumers

everywhere.

Another important aspect which has been used quite effectively by the company is their name –

Unilever. This name has an established brand equity which has been a major reason behind the

strong trust of the consumers towards Dalda. Unilevers were the pioneers in this part of the world.

They started their operations in the edible oil sector in 1948 with their product “Malta”. Later the name

was changed to “Dalda”. Unilevers has actually educated the market regarding the features and

benefits of using branded ghee/oil for cooking purposes. They have the first mover advantage which

mainly provides them with the loyalty of their customers. It was at that time when they decided to

associate mothers love to their product and since then till today the customers relate the product to

that aspect and purchase it. This is the secret behind the success of Dalda; presently it is the market

leader and had a market share of 8%.


13.3.6 Positioning of Dalda – critical success factor:

Dalda has been in this part of the world since a very long time. Unilevers Pakistan Limited has

developed a positioning of their product keeping in mind the importance of a mother in the life of a

child. They have tried to tap the emotional side of a mother saying that if she loves her children, then

she will give them the best which is Dalda. The English translation of the tagline “Jahan mamta

wahaan Dalda” is “Mothers love is Dalda”. They have managed to utilize this strategy in a very

effective manner as people have come to realize that it is only Dalda that provides high quality

features thus making food tasty/delicious.

Another important aspect which has been used quite effectively by the company is their name –

Unilever. This name has an established brand equity which has been a major reason behind the

strong trust of the consumers towards Dalda. Unilevers were the pioneers in this part of the world.

They started their operations in the edible oil sector in 1948 with their product “Malta”. Later the name

was changed to “Dalda”. Unilevers has actually educated the market regarding the features and

benefits of using branded ghee/oil for cooking purposes. They have the first mover advantage which

mainly provides them with the loyalty of their customers. It was at that time when they decided to

associate mothers love to their product and since then till today the customers relate the product to

that aspect and purchase it. This is the secret behind the success of Dalda; presently it is the market

leader and had a market share of 8%.


14 COMPETITIVE PROFILE MATRIX

DALDA HABIB SOYA SUPREME

Critical Success

FactorsWeight Rating

Weighted

ScoreRating

Weighted

ScoreRating

Weighted

Score

Marketing and

advertisement 0.20 4 0.80 4 0.80 3 0.60

Brand loyalty 0.15 4 0.60 3 0.45 2 0.30

Promotional

activities0.10 4 0.40 2 0.20 3 0.30

Competitive prices 0.10 3 0.30 2 0.20 2 0.20

Distribution

network0.10 3 0.30 4 0.40 2 0.20

Human resource 0.05 3 0.15 3 0.15 1 0.05

Product quality 0.10 4 0.40 4 0.40 3 0.30

Research and

development0.15 4 0.60 3 0.45 2 0.30

Market share 0.05 4 0.20 3 0.15 3 0.15

Total 1.00 3.75 3.2 2.4


14.1 COMPARISON OF THREE COMPANIES ON KSF

The critical success factor of the three companies depends on their brand name, their clever

marketing tactics, proper segmentation, promotional activities, Competitive pricing effectiveness of

distribution network and availability of resources.

As all these three companies are the top three players and they have developed a very good image

in the consumer’s mind. Consumers trust on their brand. Further more any product launched by these

companies get popular fast among the consumers as in comparison launched by other small brands

or local brands. This is because of the low brand image and quality of the other local products in the

consumer’s mind.

14.1.1 Marketing and advertisement

The more innovative and heart capturing the advertisement is, the higher it will induce the customer to

purchase a particular brand. All the three companies have managed to create a point of differentiation

amongst their brands through unique positioning and USP, which gives them a clear embarkation

from the rest. Although it is quite ironic that there is no basic difference between each of the brands as

the basic manufacturing process in the Edible Oil industry is the same.

Dalda:

Dalda marketing strategy is primarily drawn from the trust and emotive attachment of people to its

established brands. The brand story for Dalda has revolved around the core of Pakistani society:” A

mother’s love”. Whether it is an upscale urban family from Karachi or the more traditional eastern

setup in the north, the mother symbolizes all that is pure. Dalda’s slogan “Jahan Maanta, wahan

Dalda” became a synonym for this purity and quality and has been the platform for the brand for

many, many years. The language may have changed, the pictures may have altered but the core of

this message still rings true. This symbolism was of course established over the years with well-

crafted and executed communication campaigns across the different medias, touching consumers

everywhere.

Due to the fact that they have associated their brand with ‘Mamta’ since their establishment,

their advertisement concept has been the most effective concept out of all.Dalda has associated

its image as a family’s possession where mothers pass Dalda to their daughters who are future

mothers and are the foundation of another family. Thus, Dalda has been able to position itself as a

family health need for which there is no compromise.

Habib


The advertisement messages of Habib is also very effective and emotional.

The positioning used by Habib for their product is as follow:

“Kyun kay yeh dil ka muamla hai”.

The reason behind this is that Habib realized that the best method to attract people towards Habib

was to make them realize that ghee affects the heart, and since a human heart has extreme

importance so people should not settle for anything lesser in quality. They attached a lot of family

values and traditions to their product claiming that Habib is a family product, a family ghee/oil. The

positioning and adopted by Habib is yet another emotional strategy which has created a point of

differentiation from Dalda.

Habib managed to develop a difference through their advertising and positioning strategies.

Soya Supreme

Soya Supreme also tries to bring an emotional touch in the advertisement message.

The advertisement message of soya suprme is :

Lazat ka khazana, sehat mand gharana

The different media on which Soya supreme advertise include– TV, Radio and Outdoor (Billboards).

14.1.2 Brand loyalty

For any company in the edible oil industry who wants to make a place in the minds of consumers and

remain there they have to establish a strong loyal base of customers. We have seen that most of the

families in Pakistan are very loyal towards their particular brand of oil. If a family has been using habib

for years then they will pass on this trend to their daughters as well.

Dalda

A high brand loyalty has been seen in Dalda consumer. Many mother said that they mothers pass on

this the trend of cooking oil to their daughters and it goes on. the reason behind this is that the Mamta

concept is considered to be a very basic element of Pakistan’s culture and tradition and most of the

mothers have been loyal to Dalda because they are emotionally attached to this brand and this

sensitive concept.

Habib


Habib has a strong customer base. This is because habib has been always maintaining its strict

quality standards. The products enjoy vast popularity and brand loyalty and stands second in terms of

market share in this sector nationwide. The company has achieved a growth of over 500% in last ten-

year period, which is primarily attributed to its consistent quality care and driving successes from

application of needed market strategies

Secondly the positioning adopted by Habib is yet another emotional strategy which has captured the

heart of many consumers. The marketing concept of habib revolves around the health element and

we have seen that the health consciousness trend is of the most significant trends emerging in the

Pakistani society. This is one reason that is contributing to the highest brand loyalty of Habib

consumers

Soya supreme

Soya supreme has a small loyal base of customers as compared to Dalda and Habib. One reason for

its low brand loyalty among its competitors is that it basically imitates what its other two competitors

are doing. It never comes up with a new product variant or a new strategy on its own. This has

created a negative feeling in the minds of consumers and many of them have switched to Dalda and

habib

14.1.3 Promotional activities

Promotional activities are a very attractive alternative for the company in the case of consumer food

product. Through these activities the customers can try the product for free or at lower rates and thus

it become a very is a very attractive way to introduce your product to them So the purpose for doing

these activities is to make people’s attitude to use the product once, and then if the product gets the

acceptance then may be it will increase the sales

Dalda:

Dalda stand first in promotional activities. the owners of Dalda strongly believe that promotional

activities are the one of the most feasible alternatives to attract consumers and a huge budget is

spend on theses activities. The Company does not believe in giving trade discounts on their product

as they feel in this way control over the product is lost. However they had various sales promotion

schemes like “khul ja sim sim” in which they distributed over 100,000 prizes. They also raised money

for the Shaukat Khanum Memorial Hospital by increasing the price of their products and also making

a note of the same on the tin/bottle that this is for a social cause

.

When Dalda was under Unilever one of the most successful schemes was cross promotion with Lux

which raised the volume of purchase by 30%!


Habib:

Habib is rated low in promotional activates relative to its competitors because the management of

Habib rarely indulges in any kind of promotional activities. The reason is that its management believes

that Habib has a solid customer base and all its customers are loyal towards the brand. For this

reason any kind of promotion is not necessary for Habib to sell its brand in the market. At Habib they

believe that “Consumer pull” should be the tactic for a good quality product. And that is what

Habib primarily enjoys, that is the consumers themselves demand the product and in case of a

shortage they refuse to purchase any other brand.

Some of the promotional activities conducted by Habib include Ramadan Khazana. In Eid season

they sometimes come up with an Eid offer called “Eidi Lakhon Ki”.

One of the recent promotional activities conducted by Habib is that they place convertor girls in

supermarkets whose job is to convince the customer to buy their products.

In December 2008 they plan to come up with some new promotional activities.

Soya supreme:

. Agro Processors use a great deal of sales promotion for their products example 25% off schemes,

Jeetiye chaphar phar kai schemes, free spoons, cutlery sets, dinner set and kitchen tools. This serves

as a cushion to the customer

14.1.4 Competitive prices

The pricing strategy of all the companies revolves around the same concept that all the firms try their

best to sell their products at the lowest possible price so as to attract customers. Setting a competitive

price means that the company in order to be competitive has to set the price range up to the market

not very high neither not very low. Mostly Pakistan Vanaspati and Manufacturing Association (PVMA)

determine the prices for companies

Dalda:

Dalda is the price initiators in the he industry and considering the fact that it is the market leader, it still

charges lower price than Habib therefore we can say that it has competitive prices... They prices of

Dalda Cooking Oil and Dalda ghee are set comparatively with the price of competitors.. The company

still tries it best to resist the price increase as they are aware of the fact that the market is price

sensitive

Habib


As far as competitive pricing is concerned habib charges more than Dalda. This is one flaw in its

pricing strategy. We know that Habib is striving to be the market leader so a suitable pricing strategy

for Habib would be to set its prices lower than the market leader Dalda, which it is currently not doing.

Pricing strategy of Habib is as follows:

Habib is available at different prices in various localities of Pakistan at different prices..

Soya Supreme:


Habib. Mostly Pakistan

As Soya supreme management has the habit of imitating Dalda and Habib, they also vary their price

in different localities of the area. A tin of Soya Supreme will be sold at a slightly higher price in Clifton

and a lower price in Korangi.

14.1.5 Good distribution network:

A strong network of whole sale distributors is the best was to gain access to as many retail outlets as

possible. A strong distribution network also helps company’s to make their product available at every

nock and corner of the country where ever they want to reach. For this reason some multinationals

like P&G, Unilever have their own distribution networks.

Dalda:

Dalda has a network of 350 distributors across Pakistan covering 400 towns that makes sure that

product is available in every corner, village, town and city of Pakistan. The Dadla distributors even

don’t mind using cycles to reach those areas where there is high traffic or roads are two narrow for

trucks and Suzukis, so you can very well imagine how good distribution network Dalda has.

Dalda also has a very wide distribution network in all the main commercial, industrial and agricultural

cities of Pakistan. for this reason Dalda has a high sales volume in cities like Karachi, Hyderabad,

Quetta, Peshawar, Islamabad and Rawalpindi

The distributors use trucks to transfer goods to major stores where Dalda is required in more quantity.

They use vans or Suzuki to supply Dalda to small stores or in areas where trucks are

unreachable.Another means of distributing Dalda is the use of comet (bicycles) by distributors. These

are used in places like Sunday Bazaar, Friday Bazaar, Exhibitions, Fairs, Tradeshows, Mela and to

reach out to customers. The advantage of using these bicycles is that consumer can buy the desired

quantity pack required at his doorsteps.

Habib: (450 towns)


As far as the effectiveness of distribution channels is concerned Habib has the best distribution

network as compared to its competitors. Habib products are available in far flung coastal areas of

Balochistan like Gwadar , Pasni Rural areas of interior Sindh and Mountainous regions of N.W.F.P

like Swat, Chitral and Manshera. The company tries its best to make sure that the product is made

available in all retail outlets that stock oil/ghee.

Habib Oil Mills is using Hino Pak Trucks and Mazda trucks for its distribution purposes.

Soya supreme:

Soya supreme distribution is not as effective as Dalda and Habib’s distribution markets. . Inspite of

the fact that it offers the s highest margin to its distributors it is still behind Dalda and Soya supreme..

The reason behind this is that it wants aggressive sales in order to reach the top position. Soya

Supreme has more than 250 distributors all over the country. The management tries to ensure that

the product is placed at all retail outlets that carry oil/ghee, as well as in hotels, and bakeries. Care is

taken that at least few of the fast moving stock keeping units (SKU) are available at all retail outlets.

14.1.6 Human resources:

Human resources are the most valuable assets because it is basically the people who can make

every impossible action into possible, through their knowledge and technical skill they have. Human

resources are extremely important in the edible oil industry because the industry is presently classified

as a labor intensive industry and therefore the labor force is very important.

Dalda:

The management of Dadla has stringent hiring policies and they hire only those people who they

believe have the right attitude and skills matching the job. Thus Dalda has a very talented, motivated

and hardworking staff.

Habib :

Habib oil mills employ a workforce of about 350 employees in different departments. Its employees

are very dedicated, motivated and hardworking being a Pakistani firm Habib faces problem of not

easily getting skilled personals to their company. Most of the professional prefer to work in MNC’s and

they do not prefer local companies at all. In order to attract highly skilled candidates habib has

designed attractive compensation packages

HOM treats all employees as partners, working together in the pursuit of the mission and strategy.

The company strongly value teamwork and it wants every employee to be motivated to succeed


Soya supreme:

It is placed third as far as its hr is concerned. The reason is there is no department of Human

Resource at Agro, and most of the HR matters are handled by the top management. There is no

formal training imparted to the employees of Agro. They are taught by their respective supervisors on-

the job. Performance Appraisal/Assessment of the employees is also done by the supervisors.

14.1.7 Product quality

Product quality is a very important factor in edible oil. Oil that does not clog or thickens is considered

to be good quality oil.

Dalda :

Dalda is offering the most premium quality oil. Dalda’s slogan “Jahan Maanta, wahan Dalda” has

become a synonym for purity and quality and remained the platform for the brand for many, many

years

Habib:

The management of Habib is very strict about quality control criterias. . it is evident form the fact that

habib is the First Edible Oil & Food Company to achieve ISO 9001:2000 (E) & ISO 14001: 1996 (E).

Another milestone which has been achieved through continuous quality improvement and efforts of

each individual of HOM in the shape of ISO 9001:2000 (E) and ISO 14001:1996(E) certifications. The

achievement of the same shows an indication of continuous growth featuring Key parameters of

Quality as well as Environment

Soya supreme:

The quality of Soya supreme are inferior as compared to competitors. .Soya Supreme claims that they

use the “risk-free texture” thus avoiding any kind of problems/risks associated with the product. The

risk free texture concept is that Soya Supreme tends to adopt the texture that the two market leaders

are using in their manufacturing process. In this way it is free from any possible risk associated with

the failure of the variant, as it is already accepted by the consumers

14.1.8 Research and development:

Many companies in the edible oil industry are carrying research and development at the corporate

level. These companies are trying to increase customer sophistication and brand loyalty, by improving

the quality of their cooking oils by extensive R & D.

Dalda:


The technology used for manufacturing Dalda is the best in the market. the Dalda process in

Pakistan to be approved from the research center at Holland. Dalda has to receive a technical

clearance and health & safety clearance. For this reason all processes are scientifically proven and

tested. It is ensured that there has been no bacterial growth in the product. It has been identified by

the Holland research center that Trans fatty acids are harmful for the heart. Dalda is virtually free from

this element; it has less than 1% of Trans fatty acids. While the other products contain almost 20% of

this acid

They are the innovators who introduce new product variants time after time. However not all their

products have been a success. Like for example Dalda Melange was a failure product and could not

sell. This was because of some wrong research findings on the part of Dalda team

Habib:

HOM constantly strives to be creative and innovative in all its endeavors

Research and development at Habib is outsourced to different agencies. There are mainly two

agencies that have been given the contract by Habib to research new products and blends of

oils/seeds. They are

Gallop Oasis

A C Neilson

Example:

Habib’s research and development alters the texture and composition of same oil for two different

regions of Pakistan. In Punjab as people prefer using thick oil whose texture resembles to ghee, the

oil manufactured for Punjab is made thick and viscous. On the other hand the people of Karachi prefer

using light oil so for them Habib manufactures light oil with less viscosity and thickness Also we can

see that now Habib is expanding in a wide variety of products including masla mixes.

Soya supreme:

There is not any strong research and development activities carried out by Soya supreme. However

one good research development unique to Soya supreme is that they are the only company in the

industry that uses uht treatment in its products. This is a method which eliminates the cholesterol

element totally from the oil. It employs a continuous deodorizing process. This is a feature that is

unique to the product Soya Supreme. Agro Processors & Atmospheric Gases (Pvt.) Ltd. is one of the

few edible Oil and Vanaspati seeunits in South Asia that process oil at 255° - C using UHT or Ultra

High Temperature heating system and continuous deodorizing. Most manufacturers use batch

deodorizing with conventional heating systems which process oil only up to 180° - C(including Dalda

and Habib).


14.1.9 Market share:Dalda being the market leader has the highest share in the premium market segment that is of 25%,

Habib oil mills come at number two with the market share of 20% where as the market share of Soya

supreme amounts to 16%.


15 INTERNAL COMPETENCIES OF THE COMPANY FOR ADDRESSING THE KEY SUCCESS FACTORS:

15.1 COMPETENCIES BUILDING FOR IMPROVED MARKETING AND ADVERTISEMENT

The company should try to recruit the most creative marketing people who think out of the box. Such

people will have the ability to come up with most attractive, persuasive and eye catching ads and

promotional campaigns. The marketing people should have the ability to be extremely responsive to

the market rend and demand of people

For example: the company can initially launch teasers on bill boards and then later they can come up

with whole advertisement. This is a very good way to make the advertisement attractive.

For example: Habib can use a famous heart specialist as a celebrity endorser in their advertisement.

The appearance of a DR in the advertisement would easily persuade consumers that Habib is very

good for heart with low levels of cholesterol and Trans fat.

15.2 COMPETENCY BUILDING FOR STRENGTHENING THE LOYAL CUSTOMER BASE

To further strengthen it already strong base of loyal customers the company needs to come up with

some kind of schemes or offers on continuous bases that makes the customer feel good and they

remain strongly attached to the brand.

For example: Habib can come up with royalty card for its most favorite customers who buys the

product most frequently and in largest quantities. This royalty card can have features like price

discount and free product delivery to the door steps.

15.3 COMPETENCY BUILDING FOR PROMOTIONAL ACTIVITIES

Habib pays less attention to promotional activities because it believes in the pull strategy. Habib

should increase the budget allocated to its promotional activities because it is important for Habib to

use promotional activities, to remain competitive in market as its other two competitors Dalda and

Soya supreme are making a wide use of promotional activities


For example. :Habib can televise a show like the best cook in town, going to various localities of

Karachi and giving housewives their cooking oil to use to make a dish. Habib can choose a panel of

judges consisting of the most famous chefs like chef Zakir, Zubeida TarIq and Rahat.

For example: Habib can open up a cooking institute for girls where it can charge reasonable rates

and training girl to cook tasty dishes using Habib oil

15.4 COMPETENCY BUILDING FOR COMPETITIVE PRICING:

In order to achieve the objective of competitive pricing, the company needs to pay attention to its

value chain activities and constantly manage cost along the value chain by modifying its processes.

For example: Habib can consolidate its operation and reduce the number of manufacturing plants. It

can modify its manufacturing plants in such a way that a whole family of products can be

manufactured and processed on a single plant. This will save the machine maintenance cost as well

as the electricity and energy cost required to run the plant.

It can use pure plastic for packaging as it cost low rather then using metal or tin cans.

15.5 COMPETENCY REQUIRED FOR BUILDING GOOD DISTRIBUTION NETWORK

A comprehensive and modernized information system seems to be good option which will help Habib

in improving the effectiveness of distribution system. lets see how it works.

For example: Habib can built a Comprehensive and affective information system connected to the

super markets and distributors that will help them to know in which retail store and super market their

product stock is required and then they can directly order their distributors online to deliver the

product to that specific super market.

15.6 COMPETENCIES REQUIRED FOR ACQUIRING HUMAN RESOURCE

It has been obvious by experience that if a company has talented and highly skilled human resource

that company is bound to succeed. The c hr department of Habib should develop best skills in

choosing employee with the right attitude whose skills and capabilities match with the job

requirements. Secondly choosing the right kind of employee largely eliminates the need to hire

outside personnel for higher post because when the time comes for the senior executive to retire, the

junior executives are so capable that they are promoted to these higher post.


For example: Habib can send its HR department personnel on regular training and workshop so that

they keep on polishing and improving their skills when it comes to recruiting employees fro the

organization. it can provide attractive compensation packages and salary and wage rate above the

industry pay rates level.

15.7 COMPETENCIES REQUIRED FOR MAINTAINING PRODUCT QUALITY

The company needs to stick to the strict quality standards as set by the control department who

needs to constantly keep a check over all the manufacturing processes and procedures. the members

of quality control department can have surprise quality checks by visiting the manufacturing processes

and the activities of the labor working in the factory that whether all quality control criteria are being

met or not. In order to motivate the employees to strictly adhere to these quality policies the

management can keep incentives like a 2500 RS bonus to the employees each month if no customer

complains regarding is received during a particular month.

15.8 COMPETENCY FOR BUILDING RESEARCH AND DEVELOPMENT

When asked from the mangers of Habib they said that one of their weaknesses was research and

development .We know that research and development at Habib is outsourced to different agencies.

Now obviously these research agencies won’t have the same level of interest for the company as

compared to what the company will have FOR itself.

Therefore it is strongly recommended that Habib should build a strong research and development

department inside the company. if Habib is facing difficulty in managing research and development

alone it can partner with some international research agencies so as to get their resource and

technology access . Habib can even get approvals from some international research agencies in order

to makes research and development practice better and authentic


16STRENGTHS AND WEAKNESSES OF HABIB OIL MILLS

16.1 THE STRENGTHS OF HABIB OIL MILLS ARE:

Established Brand:

The company is established for the past 50 years so it has created its image in the eyes of people –

its loyal customers are one of the major strengths. Its reputation is a very strong asset. They have an

innovative USP which they associate it with the brand name.

In other food items people taste and then rate the product but when it comes to cooking oil they

usually go for the reputation of the brand, as they are sure that if the company has good reputation

then they must be using good manufacturing processes, ensuring the safety of the consumers.

Strong customer loyalty:

Habib has the strongest customer base among its two major competitors. This is because Habib has

been always maintaining its strict quality standards. Dalda had the strongest customer base but after

being separated from Unilever, it had a slight decline in its loyal customer base which created an

opportunity for Habib and they capitalized over it. The brand itself is very strong in the mind of the

consumer as they feel that it’s a family possession. The trend in Pakistani culture is that the brand of

cooking oil used by a family is passed on from generation to generation – thus reflecting a very strong

customer loyalty base.

Strong Distribution Network:

Habib Oil Mills has one of the strongest distribution

networks all over Pakistan – it is available in almost 450

towns across Pakistan. There are 8 ware-houses of habib

oil all over Pakistan. This distribution network ensures that

the products are delivered to the end customers just in time

and shelves are never empty in any of the retail stores.

First ISO certified company:


At Habib Oil quality is of prime importance – there is no compromise on the quality – therefore it goes

through certain quality control measures and standards and most of its process are ISO 9001 certified

– In fact HOM was the first one in the edible oil industry to be ISO certified. HOM has been an ISO

9002:1994 certified company since November 1997. Recently another milestone has been achieved

through continuous quality improvement and efforts of each individual of HOM in the shape of ISO

9001:2000 (E) and ISO 14001:1996(E) certification. The achievement shows an indication of

continuous growth featuring Key parameters of Quality as well as Environment.

Socially Responsible Firm:

Another major strength that we see is that Habib oil is a major supporter of the corporate social

responsibility- they have

Some of the activities include

Habib Water ”Habib Oil Mills Will supply 100,000

Liters of Water to National institute of Child Health

Every Month

Habib Oil Mills Donates School Van to J. S.

Academy for Deaf

This year HOM has donated a complete operation

theatre in the new complex of Civil Hospital

Traffic Signs and Direction Boards City Government with the sponsorship of Habib Oil Mills

has placed numerous traffic signs and direction

boards.


Strong Product Advertising:

The advertisement messages of Habib rates 2nd when compared with the advertisement of Dalda. A

major reason for this is because Dalda has hit the viewers of its ad on the moist sensitive concept

(THE MAMTA CONCEPT)

The positioning used by Habib for their product is as follow:

“Kyun kay yeh dil ka muamla hai”.

The reason behind this is that Habib realized that the best method to attract people towards Habib

was to make them realize that ghee affects the heart, and since a human heart has extreme

importance so people should not settle for anything lesser in quality. They attached a lot of family

values and traditions to their product claiming that Habib is a family product, a family ghee/oil. The

positioning adopted by Habib is yet another emotional strategy which has created a point of

differentiation from Dalda.

Habib managed to develop a difference through their advertising and positioning strategies.

Strong Research and Development

The research and development department of Habib Oil is very strong. STRONG RESEARCH IS

CARRIED OUT USING MODERN EQUIPMETNS AND TECHNOLGYIES. The strong R&D of Habib

has lead habib to become the market leader in the cooking oil industry

HOM HAS installed the latest and most modern European plant in Pakistan for Edible Oil processing.

This is the most modern technology employed for Oil processing

Regional Product Range:

Habib Oil Mills has a wide product range to be offered in various areas – they cater to different areas

with different products – For example they have different products for Karachi and then if we look at

the interior areas of Sindh and Pubjab they have other brands like Handi and Nayab to be sold there –

In Skardu and Gilgit their brand super Habib is very popular.


16.2 THE WEAKNESSES OF HABIB OIL MILLS ARE:

Olive oil not included in the product range:

Today the consumers are becoming more health conscious and aware of various diseases, and one

of the major causes of this is the eating lifestyle of people. Many consumers are switching over to

olive oil which has less fat as compared to the normal oil or ghee – One of the weakness of HOM is

that at the moment they are not offering Olive Oil as a part of their product range although the

demand for that exists.

Centralized Management:

HOM is a family owned business and in most of such business there organization is usually Seth

governed where they practice the traditional centralized system. Most of the people do not want to

work with such organizations today as that hinders their individual growth – because in centralized

system employees have do to as they are directed and they do not have a chance to contribute their

ideas to the management.

High Cost of Operation:

As the rates of everything including the basic resources like electricity, gas, fuel etc are rising today so

the cost of operations have gone up which is also a weakness for HOM. They need to work over it

and reduce these expenses.

High Employee Turnover:

If the employees get opportunities from multinational firms they prefer leaving the job and going

because multinational promote the growth of a person as an individual as well and the exposure is

also greater in those companies. The employee turnover increases in such a scenario as people

leave the local firm if they get an opportunity to work for a multinational or a global firm.


17INTERNAL FACTOR EVALUATION MATRIX

Weight Score Wt Score

STRENGTHS

1) Established brand 0.075 3 0.225

2) Strong Distribution Network 0.15 4 0.60

3) First ISO certified company 0.075 3 0.225

4) Regional product range 0.025 4 0.10

5)Socially Responsible firm 0.05 3 0.15

6) Strong R and D 0.2 4 0.8

7) Strong customer loyalty 0.1 3 0.30

8) Strong product advertising 0.1 3 0.30

Weaknesses

1) Olive oil not included in product range 0.125 1 0.125

2) Centralized management 0.05 2 0.10

4) High operating expenses 0.025 1 0.025

5) High turnover of employees 0.025 2 0.050

Total 1.00 3.00


We need to jealously guard the two strengths which are

The strong distribution network

Research and development

Habib Oil Mills currently has a very strong distribution network with almost 450 distributors – they

should come up with strategies like forming strategic alliances with distributors that the distributors

will only work for them and not for the competitors at the same time – this would prevent them from

being copied by their major competitors.

At the moment Habib has an in house research department– to jealously guard this strength they

should seek affiliation with recognized international research institutes.


18VALUE CHAIN ANALYSIS

What is a value chain?

18.1 WHAT IS VALUE CHAIN

FIRMS INFRASTRUCTURE

Habib has highly developed information systems to connect with suppliers and distributors

HUMAN RESOURCE MANAGEMENT

The HR department is trying to improve salary packages for employees. strict recruitment processes to hire competent employees and also regular training programs for employees.

TECHNOLOGICAL DEVELOPMENT AND R & D

Largest budget is allocated to be invested in R& D and technology. Through R & D it focuses on improving the

PROCUREMENT

Habib purchases raw material from the suppliers who uses the finest oil seed

INBOUND LOGISTICS:

Habib Oil is using the latest Information

system to coordinate with their local suppliers so that the raw material is available to them just

in time

OPERATION

Habib follows the policy consistent

manufacturing of good quality products

meeting the changing preferences of buyers

In the manufacturing process the quality is ensured as there is no

compromise on the quality

OUTBOUND LOGISTICS

A fleet of delivery vehicles consist of Hino Trucks and

Mazda Trucks to cover its entire routes. The distribution staffing is

designed to have a strong link between the senior sales staff

and the end consumers. This staffing is further

reinforced with CSF

MARKETING AND SALES

Strong coordination between R & D.

marketing dept and product dev

dept ,helping it to introduce new

products as per the demands of consumers.

Good personal relationship with industrial buyers

including re known hotels.


Every firm is a synthesis of activities performed to design, produce, market, deliver and support its

product. The primary activities in value delivery chain cover the sequence of bringing materials into

the business (inbound logistics), converting them into final product (operations), shipping out final

products (outbound logistics), marketing them (marketing and sales) and servicing them (service).

Purchased supply and inbound logistics:

Habib Oil is using the latest Information system to coordinate with their local suppliers so that the raw

material is available to them just in time - the raw material imported from abroad is stored in the 8

warehouses that HOM has all over Pakistan. Habib has some fixed suppliers from which it procures

the supplies. The prices charged by international suppliers are low but still habib only imports 40% of

the raw material from imported supplier because of government regulation in order to protect the local

suppliers

Operations:

In operation habib follows the policy consistent manufacturing of good quality products meeting the

changing preferences of buyers. There are 2 types of plants HOM has in Pakistan - batch type plants

and 5 to 7 automatic refining plants. Once the raw material is brought to the plants then it goes

though the manufacturing process in which the quality is ensured as there is no compromise on the

quality. The crude oil is obtained from the suppliers .this crude oil then refined and neutralized. In the

refining process it is treated with alkali and phosphoric acid to remove gums and fatty acids. In the

next stage bleaching is done in order to remove pigments and color. In the next step we have

filtration. After filtration, the next stage is de-odorization in which the odor is removed. After this stage

we have polish filter and chilling stage and then the product is finally packed and dispatched to

distributors. Packing is first done in the form of respective packing and then in the cartons and then it

is sent to the various distributors

Distribution and outbound logistics:

Habib has rapid and timely product deliveries to is customers. A fleet of delivery vehicles consist of

Hino Trucks and Mazda Trucks to cover its routes. The distribution staffing is designed to have a

strong link between the senior sales staff and the end consumers. This staffing is further reinforced

with CSF (customer sales force) to enhance the contact with the customers and the market. It sells its

product to the distributors on cash. Its other two competitors sell the product to distributor on credit

basis.

Sales and marketing:


Habib has developed strong relationship with its large industrial buyers like owners of renown hotels

thorough strong partnering programs. It also has Strong coordination between R & D and marketing

dept and product development dept. a large budget is allocated to its marketing department because

it knows that the marketing and advertisement are the two most critical success factors in the industry.

The marketing concept of habib revolves around the health concept (KYUN KA YEH DIL KA MAMLA

HAI). Thus Habib has managed to develop a difference through their advertising and positioning

strategies

Service:

Habib is lacking in this service element of value chain as they have no advisory service. We can see

that its competitor Dadla has its advisory service with the name Dalda advisory service lead by the

reknown lady ms Zubeuida Tarik.

Technology and Product research and development:

Habib allocates the largest budget to be invested in research and development and investment and

t4echnolgy so that it comes up with highly differentiated products responding to customers need

HOM constantly strives to be creative and innovative in all its endeavors. Research is carried out

using modern equipments and technologies. It has a strong research and development department

which constantly tries to come up with new product variant, and tried to respond to the changing

market trends and consumer preferences. It has installed the latest and most modern European plant

in Pakistan for Edible Oil processing.

Human resource management:

The HR department of Habib Oil is constantly working hard to improve their compensation and salary

packages for employees.They have a very strict recruitment selection process to hire competent

employees and also regular training programmes for employees. The employees of each and every

department of Habib are working relentlessly with dedication to get the best out puts in their

departments, thus the combined efforts of all helps the company to deliver high value added products

to its customers.

Firms infra structure:

Habib has highly developed information systems to connect with suppliers and distributors.

Core competency:


A core competency is something that a company does well relative to its other internal activities. it is

basically combination of resource and capability It is central for the company’s competitiveness and

profitability.

We did and internal assessment of Habib to see whether it was using its core competency and how it

was using it. The core competency of Habib as derived from our analysis is the strongest distribution

network as compared to its competitors.

Resource capability Core competency

Financial resources Research and development

Modern equipment and

manufacturing plant

Good communication and

interaction skills

Using the specialized sales

forces who have the

capability of good

communication skills they

have made the strong

distribution network as their

core competency

Well connected information

system

Product innovation skills

Highly specialized sales force Ability to foresee new market

opportunities

Advance Technology

Brand name

Resources:


Some of the most valuable resources of Habib are advance technology, modern manufacturing

plants, strong brand name, human resource, innovation and well connected information system.

Some of the resources like manufacturing plants and computerized systems are easy to copy how

resources like a highly specialeized salesforce; innovativeness and a strong brand name are not at

easy for rivals to copy. Using theses unique resources, Habib combines it with some of its unique

capabilities to deliver its core competency.

Capability:

Some of the most important and unique capabilities possessed by Habib is a strong research and

development department and good communication skills.Habib is trying to increase customer

sophistication and brand loyalty, by improving the quality of their cooking oils by extensive R & D.

Core Competency:

Habib has the strongest distribution network which is unmatched by the rivals. The distribution

network also helps the company to make their product available at every nock and corner of the

country where ever they want to reach.

Habib products are available in far flung coastal areas of Balochistan like Gwadar , Pasni Rural areas

of interior Sindh and Mountainous regions of N.W.F.P like Swat, Chitral and Manshera

Using the specialized sales forces who have the capability of good communication skills they have

made the strong distribution network as their core competency.


19GENERIC STRATEGY OF THE COMPANY

Differentiation Cost Leadership

Broad

Narrow

At Habib we get the competitive advantage by providing buyers with a value they perceive as

superior i.e. we basically provide a superior product line to our customers that is worth paying

more.

We can see that Habib’s differentiating strategy is successful because it creates buyers value

in a way which is not at easily matched by rivals

.


Habib Oil is following the broad differentiation strategy – we can conclude this by the following

evidences:

Research and Development:

Habib allocated a large budget to its R & D department. It has a strong research and development

department which constantly tries to come up with new product variant, and tried to respond to the

changing market trends and consumer preferences. This we can conclude from the fact that now they

are expanding in a wide variety of products including Masla mixes. In order to reduce the

environmental hazards they have made

In-house improvement measures related to waste reduction at source and adoption of environment

friendly processes. Thus their strong R & D serves as a differentiation attribute for them.

Region wise product:

Habib Oil is not only catering to the major cities but also to the other cities and towns in the interior

areas of the 4 provinces – It is almost available in 400 towns – they have region wise product which

clearly emphasizes that they are broadly differentiating – For big cities they have brands like Habib

Cooking Oil – Habib Banaspati Ghee, Super Habib etc and for the smaller towns and cities they have

brands like Handi and Nayab.

Habib has come up with different products for different regions because they understand the

purchasing power and preferences of the people from different places. By purchasing power here we

mean that the standard of living of rich in a rural area and the standard of living of rich in Karachi are

different.

The value Habib is being delivered through its wide product range and healthy products. Their target

Market comprises up of the health conscious people who are aware about the major diseases like

cholesterol and heart diseases which are caused by the use of Ghee. This is one very major point of

differentiation and the target market should understand the value of the brand and should be willing to

pay the premium price for the brand and hence Habib is successful in this area.

Outbound Logistics:

Habib has highly skilled sales force who are responsible to go to various hotels and restaurants in

order to convince them to use Habib Oil.

Habib has a very good distribution network which differentiates it from its competitors – it caters to

almost 400 towns with about450 distributors all over the country.


Operations:

In the edible oil industry the processes which are used to refine oil are such that they produce a lot of

pollution and waste substances that isn’t good for the environment. So in order to do that Habib Oil

has differentiated itself and now it is using systems that do not cause harm to the environment. They

have made huge technological investments in this area.

Habib Oil has also made production methods which are safe for the environment. This is being done

as they are quite aware that how important it is to be socially responsible these days.

Pros and cons:

Pros:

When there is intense competition in the industry then its differentiating attributes helps it to

stand out among the industry players and also helps it to maintain a good profitable growth.

Sometimes the differentiating factor is so unique that it becomes a symbol or creates a major

association in the mind of consumers.

Cons:

One of the major cons of differentiation is that most of the features are easy for rivals to copy.

Sometimes in an effort to differentiate the company comes up with an attribute which is not

perceived as valuable by the buyer and therefore he is not willing to pay the cost and hence

the company has to face losses.

Over differentiating sometimes creates a product or a service that is not needed by the buyer.


20RECOMMENDED CORPORATE STRATEGY

The two corporate strategies that we recommend for Habib Oil Mills in order to gain a competitive

advantage are:

Market development

Product development

These two strategies are basically intensive strategies and would be requiring intensive efforts by the

company in an attempt to increase the firm’s competitiveness.

20.1 MARKET DEVELOPMENT

In the market development strategy of Habib, it would involve introducing the present product line into

new geographic areas of Afghanistan and Iran.

As we observed that a lot of oil is being smuggled to Afghanistan and Iran as the need of the local

people are not at all being fulfilled – the major reason for this was the war going on and the

destruction of the whole country and the destruction of the local industries as well.

According to our analysis, right now it would not be a viable idea for Habib to install a plant over there,

as the conditions of both the countries are very unstable right now but it would be a much better for

Habib to export its products right now and once the conditions gets stable then a manufacturing plant

can be set up.

The reason why we think that Habib should go for this market development strategy is that Habib has

the needed capital and the human resource to manage this expanded operation. Secondly we have

seen that there has been a lot of improvement in the infrastructure and the transportation system,

which has made it less expensive and easier to access these new markets.

20.2 PRODUCT DEVELOPMENT:

As we have seen that the health awareness among the masses is increasing day by day, thus we can

predict that in the coming time there could be a huge demand for products which are safest for health

and heart. Therefore we recommend that Habib can launch an extension of the brand by introducing

olive oil in the market. The increasing trends of health consciousness also ensures to a large extent

that the sales of olive oil would continue to grow.


Another strategy which Habib can employ is to increase its market share externally through

acquisitions or via joint ventures with another firm in the same industry.

Like it can enter into a joint venture with soya supreme.

20.3 EXISTING STRATEGY

The existing strategy focuses on the fact that through using differentiating attributes they are coming

with different product variants like ghee for taste conscious consumers, oil for health conscious

consumers and lower parts products for interior part of the provinces.

Frontal Assault:

Habib has followed this offensive tactic as it competes head to head with Dalda. It matches them in

every category

20.4 MODIFICATION IN THE STRATEGY

One of the aspects which we think that should be modified in the existing strategy is that they should

eliminate the lower price products for the interior parts of the provinces – Majority of the people in

interior have no sense of brands and they are not at all brand conscious and therefore these people

are willing to buy loose oil even if there is not much price difference in the loose and branded oil.

For example if Habib is charging Rs.100/ liter and the loose oil is for Rs.90/litre the consumers would

definitely prefer to buy the loose oil and would not be willing to spend Rs.10 extra just for the sake of

the brand name.

Although there are some people who are brand and health conscious in the interior parts as well but

this is a very small chunk of the entire market of the interior.

The company should not change its existing strategy because if it wants to be a major player

in the edible oil industry it has to differentiate itself from the other major players in the

industry. Habib Oil is following the broad differentiation strategy at the moment which it

should follow in the future as well – with huge technological investments in research and

development and also high operating expenses it is very difficult for them to cut down their

expenses and when they cant cut down the expenses it is near to impossible for them to

become cost leader.


21 EVALUATION OF THE ALTERNATIVE STRATEGIC RECOMMENDATIONS IN THE LIGHT OF INPUT/MATCHING/DECISION MODEL

1 st Stage – Input Stage:

In the input stage we have used the EFE, CPM and IFE matrix. These matrices summarize the basic

information required to formulate the strategy.

2 nd Stage – Matching Stage:

In the matching stage we have made the TOWS and the SPACE matrix. These matrices have

generated the feasible alternatives by aligning the internal and external factors.

3 rd Stage – Decision Stage:

Here we have used the quantitative strategic planning matrix. We have derived the attractiveness of

the alternative strategy and it provided us a base to choose a strategy.

.


22 TOWS MATRIX

STRENGTHS

Established Brand

Strong Distribution

Network

Socially responsive firm

Regional product range

Strong R&D

Strong Customer

Loyalty

Strong product

advertising

First to get ISO

certification

WEAKNESSES

No focus on Olive Oil

Centralized Management

High Operating Expenses

High Employee Turnover

OPPURTUNITIES

Increasing Health

Consciousness

Improving Infrastructure

Expansion into

International Market

Alliances with Bakers &

Hotels

SO STRATEGIES

As HOM is a established

brand, they can grab the

opputunity to expand in the

International Mkt S1,O3

As it got a strong distribution

network, with the improving

infrastructure it can now

reach to those areas where it

wasnt possible earlier. S2,02

WO STRATEGIES

With the increase in no of

health concious buyers,

HOM can focus on the Olive

oil Sector to grab the

opputunity. W1,01.


THREATS

Fluctuating Oil Prices

Increasing Health

Consciousness

Political Instability

Devaluation of Local

Currency

Buyers expectations to

meet International

standards

Illegal smuggling of oil

ST STRATEGIES

As Habib is aestablished

brand it can counter the

threat with of fluctauting Oil

Prices by making contracts

with the oil exporters. S1,T1

With good customer loyalty

and CSR practices Habib can

show in its advertisements

that it would not

comprosmise with customers

health. S6,S7,T2

By becoming the first

company to gt ISO

certification in oil, HOM can

easily counter the threat of

buyers expectation. S9,T5

WT STRATEGIES

With the increase in no of

Health concious buyers,

HOM can counter this threat

by focusing on the Olive Oil

Sector. W1,T2

Cost of production can be

controlled if Habib starts

exporting oil. W3,T6


23 SPACE MATRIX HABIB OIL

FINANCIAL STRENGTH Ratings

Their debt to equity to 70:30, this means its not a high leveraged

company, so not taking high risk.

ROI is showing increasing trend since last 4 years. This means

company is very efficiently utilizing its assets to increase income.

Gross profit margin ratio is also increasing and company showing a

good profitable growth.

Company has sufficient amount of cash for any uncertain situation.

5.0

2.0

2.0

4.0

-------

13.0

INDUSTRY STRENGTH

Growth opportunity for oil industry expected as population is

increasing. The consumption of edible oil rose from 0.3 million to 2

million tons during the last two decades.

It is unorganized sector so competition is intense.

70% of domestic production is met through import of edible oil.

The government is also making efforts through a pilot project to grow

palm trees along the coastal belt of Thatta in Sindh.

High research and development due to technology know-how.

Ease of entering into the market.

Government has deregulated this industry, no regulation on imports.

4.0

2.0

4.0

1.0

2.0

3.0

1.0

17.0


ENVIRONMENTAL STABILITY

Pakistan is experiencing high inflation and political instability.

Global prices of oil have fluctuated in recent years.

Edible oil industry in Pakistan is fully dependant on Malaysia and

Indonesia for palm oil as they are the only producers in the world.

Therefore, risk is involved.

Improvement in country’s infrastructure helps for easy distribution

throughout the country.

Competition is very tough with big brands like Dalda but now we see

the trend that smaller regional brands like Sultan are giving tough

time and making big brands run for their money.( because of big

number of lower income group)

Habib prices are highest in the market and there is a lot of pressure

from competitors.

Resource and capital utilization is optimal due to high demand of

edible oil.

-4.0

-4.0

-5.0

-2.0

-2.0

-2.0

-2.0

----

-21.0

COMPETITIVE ADVANTAGE

Habib has the 2nd highest market share in premium oil market after Dalda.

Habib has large customer base and customers are loyal to the brand

First ISO9000 certified company, product quality is high.

R & D is very strong.

Strongest distribution network of around 450 distributors.

Socially responsible firm

-3.0

-1.0

-2.0

-5.0


-1.0

-2.0

---

-14.0

CONCLUSION

ES Average is -21.0 ÷ 8 = -2.62

IS Average is + 17.0 ÷ 7 = 2.43

CA Average is -14.0 ÷ 7 = -2.00

FS Average is + 13.0 ÷ 4 = 3.25

Directional Vector Coordinates:

x-axis: -2.00 + (2.43) = +0.43

y-axis: -2.62 + (3.25) = +0.63

The bank should pursue Aggressive Strategies.


Aggressive strategies should be followed by Habib. . When a firm's directional vector is located in the

aggressive quadrant (upper-right quadrant) of the SPACE Matrix, Habib is in an excellent position to

use its internal strengths to (1) take advantage of external opportunities, (2) overcome internal

weaknesses, and (3) avoid external threats. Therefore, market penetration, market development,

product development, backward integration, forward integration, horizontal integration, conglomerate

diversification, concentric diversification, horizontal diversification, or a combination strategy all can be

feasible, depending on the specific circumstances that face Habib.

It can diverse in the market of olive oil by using its financial strength to capture opportunity of

health awareness among people.

It can go to international markets like Afghanistan etc which will take it to market

development.

It can penetrate into market by extensive marketing and introducing lower price products

also.

It can also go for harvesting the raw material itself so it can overcome threats and pressures

of high global market prices of palm oil etc, this can be backward integration.


24 QSPM FOR HABIB OIL

Expanding to

international

markets like

Afghanistan, Iran

Expanding to

olive oil

segment

Weight AS TAS AS TAS

OPPORTUNITIES

1) Increasing health

consciousness

0.16 2 0.32 3 0.48

2) improved Infrastructure

leading to deeper market

penetration into local areas

0.05 - 1 0.05

3) Expansion into

international markets

0.14 4 0.56 2 0.28

4) Increasing Population 0.1 2 0.2 2 0.2

5)Celebrity endorsement 0.07 1 0.07 1 0.07

6) Backward integration 0.02 2 0.04 2 0.04

7) Strategic alliance with

bakeries and hotels

0.04 3 0.12 1 0.04

8) Creating awareness 0.03 2 0.06 3 0.09


THREATS

1) Fluctuating Oil Prices 0.03 2 0.06 1 0.03

2)Increasing health

consciousness

0.07 1 0.07 3 0.21

3)Political instability/poor

international relations

0.02 3 0.06 -

4) Devaluation of our local

currency

0.03 3 0.09 1 0.03

5) buyers expectations to

meet international standards

0.03 3 0.09 2 0.06

6) High taxes and tariffs on

the import of raw material

0.05 2 0.10 2 0.10

7)intense competition 0.1 3 0.3 2 0.2

8)smuggled oil 0.02 4 0.08 1 0.02

9)counterfeiter product 0.04 2 0.08 2 0.08

Total 1.00 2.3 1.98


EXPLANATION

OF QSPM:

Weight AS TAS AS TAS

STRENGTHS

1) Established brand 0.075 4 0.3 4 0.3

2) Strong Distribution

Network

0.15 3 0.45 3 0.45

3) First ISO certified

company

0.075 4 0.3 3 0.225

4) Regional product range 0.025 - -

5)Socially Responsible firm 0.05 3 0.15 2 0.10

6) Strong R and D 0.2 3 0.6 3 0.6

7) Strong customer loyalty 0.1 - 3 0.3

8) Strong product

advertising

0.1 2 0.2 2 0.2

Weaknesses

1) Olive oil not included in

product range

0.125 2 0.25 4 0.5

2) Centralized

management

0.05 2 0.1 -

4) High operating

expenses

0.025 2 0.05 2 0.05

5) High turnover of

employees

0.025 2 0.05 1 0.025

Total 1.00 2.45 2.48

SUM TOTAL

ATTRACTIVENESS

1.00 4.75 4.46


QSPM recommends that both the strategies i.e. entering into markets of Afghanistan and Iran

are strategically more or less desirable. The sum total attractiveness is a little different

showing preference towards the strategy of international market expansion.

The major contributor towards the favorability of international expansion strategy is the

opportunity in international market. Also a lot of foreign exchange is used in importing oil so

the export can help it balance a bit.

Strong R & D is also a contributor towards this strategy as it can help to filter and purify oil

according to the needs of people over there.

The ISO certification, socially responsible behavior and good brand name can help HABIB to

enter into these markets easily.

High tax tariffs on imports can also be minimized by exporting as it can help in getting export

incentives. So it leads to decrease in costs.

As we have seen in SPACE matrix also that HABIB falls in aggressive quadrant so market

development is a preferable option due to good financial conditions and industry structure.

It may lead to product development also due to changes in product according to target market

in those countries.

Entering in olive oil sector is also a viable option due to increase in health consciousness of

people and good brand name. so it can help habib to settle in that sector easily.

Entering into foreign markets is the most viable option from strategic and long-term

perspective. It will increase the ROI of the company at the end.


As we have come up with two major corporate strategies of MARKET DEVELOPMENT (entering into

Afghanistan and Iran) and PRODUCT DEVELOPMENT (adding olive oil to product line). The generic

strategy should not be changed; they should continue to follow DIFFERENTIATION WITH BROAD

AUDIENCE. To implement these strategies

Habib should link its budget to its strategies.

All departments including HR, IT, Marketing, Finance, and Budgeting etc. should link their

priorities to business strategy.

Incentives to employees should be linked to strategy

Strategy should be well articulated to all employees.

Employees must be clear about the vision of the company.

RESOURCES STRUCTURE CULTURE

Financial

resources

Modern

equipment and

manufacturing

plant

Well connected

information

system

Human resource

centralized

structure

Decision-making

authority is with

higher

management.

Horizontal

structure, many

lines of reporting.

Span of control is

high at lower level

whereas its low at

Strong grapevine.

Lack of trust in

middle level

employees

resulting high

turnover.

Value based

culture, like

heath, integrity

are basic values.

Innovative

thinking.


Technology

Brand Name

Strong R & D

middle level.

Different business

units, around 10.

Regional system.

Habib can make use of it resources to implement the strategic goals. The resources like brand name,

strong R & D, technology, machinery can help habib to execute its strategies of product development

and market development. In going to expand market like to Afghanistan etc, brand name, finances

and HR will play a vital role whereas in entering olive to product range, R & D will play the most

important part.

Habib should move to a blend of decentralized and centralized structure, it should give employees

autonomy to perform operational activities and keep a continuous check on strategic goals.

Culture is a most crucial part. The spirit of team-work should be introduced and trust should be

developed. Employees should be motivated and given authority at all levels.


25 BALANCED BUSINESS SCORECARD

The balance scorecard is a management system that helps organizations to clarify their vision and strategy and put them into action. It provides feedback around both the internal business processes and external outcomes in order to continuously improve strategic performance and results.

“The balanced scorecard retains traditional financial measures. But financial measures tell the story of past events, an adequate story for industrial age companies for which investments in long-term capabilities and customer relationships were not critical for success. These financial measures are inadequate, however, for guiding and evaluating the journey that information age companies must make to create future value through investment in customers, suppliers, employees, processes, technology, and innovation.”

The balanced scorecard suggests that we view the organization from four perspectives, and to develop metrics, collect data and analyze it relative to each of these perspectives:


Measurers of Balanced Business Scorecard applied at Pfizer Inc:

26 FINANCIAL MEASURES FINANCIALFINANCIAL : HOW DO WE : HOW DO WE LOOK TO SHAREHOLDERS?LOOK TO SHAREHOLDERS?

The inventors do not disregard the traditional need for financial data. Timely and accurate funding data will always be a priority and managers will do whatever necessary to provide it. Will achieve Profitable growth within the targets of Growth in net margin annually, i.e. Yr 1: 50 % and Yr 2: 70% and will also achieve a target of Return on investment.

27 OPERATIONAL MEASURES CUSTOMERSCUSTOMERS : HOW DO : HOW DO CUSTOMERS SEE US?CUSTOMERS SEE US?

Recent management philosophy has shown an increasing realization of the importance of customer focus and customer satisfaction in any business. These are leading indicators: if customers are not satisfied, they will eventually find other suppliers that will meet their needs. Poor performance from this perspective is thus a leading indicator of future decline, even though the current financial picture may look good.

27.1.1.1.1.1.1 INTERNAL PROCESSINTERNAL PROCESS : WHAT MUST WE EXCEL AT?: WHAT MUST WE EXCEL AT?

This perspective refers to internal business processes. Metrics based on this perspective allow the managers to know how well their business are running, and whether its products conform to customer requirements.

Innovation and LearningInnovation and Learning: Can we continue to improve and create value?: Can we continue to improve and create value? This perspective includes employee training and corporate cultural attitudes related to both individual and corporate self-improvement. In the current climate of rapid technological change, it is becoming necessary for knowledge workers to be in a continuous learning mode.


Four dimensions of a learning organization

Organizational Design

Learning organizations are boundary less. People work in teams. Employees are sufficiently empowered to take their decisions (MBO).

Organizational Culture

The culture of a learning organization is based on strong mutual relationship. People feel like one community working for common objective. Every one cares for others. There is environment of mutual trust and respect.

Information Sharing

In learning organization, the flow of information is open, timely, and accurate.

Leadership

The leadership of learning organization has vision, where he wants to steer the organization. To achieve this objective he believes in collaboration with others.

THE LEARNING ORGANIZATION

Organizational Design

Boundary less Teams

Organizational Culture

Strong Mutual Relationship

Sense of Community

Information Sharing

Open Timely Accurate


Area’s Objectives Measures Targets Initiatives

Financial perspective

Profitable growth

Return on investment.

Growth in net Margin

ROI Ratio

Growth in net margin annually

Yr 1 50 %

Yr 2 70%

Improving local market Pakistan

Improving profitability

Customer perspective

Create value for customers to make differentiation from our competitors.

Create/ retain loyalty customer loyalty

Improving access to the product

Through questionnaires

Percent of Service Level Agreements

Surveys

Highest market share in the targeted segment

Also caters to health conscious consumers

Unique positioning

Promotional activates

Perform Activities focused on education, public health, safety and improv

Leadership

Shared Vision

http://www.pfizer.com/pfizer/subsites/corporate_citizenship/report/improve_access.jsp

http://www.pfizer.com/pfizer/subsites/corporate_citizenship/report/improve_access.jsp


ement of the environment

Internal process

Discovering and Developing New Medicines

Apply advanced science and technology in the manufacture of medicines to produce cost-effective, high-quality products

Turn over of employees

Operating expenses

Human resource

Distribution

Strong R and D

Develop Corporate performance measurements

10% decrease in operational cost

Attractive compensation package

Make product available to all retail stores

Ensure that contract manufacturers and key suppliers have responsible environment, health and safety management related to production of materials for Habib

Innovation & learning

.Encourage Continuous

Hiring


innovation and promotion of new idea’s there for increasing organizational learningSkills, technologies, and corporate culture needed to support your strategy

Adapting to technological changes

To create local R&D department under the supervision of regional and then main headquarters

learning of all employee in the organization

Training of the employees

fresh graduates who have new idea’s

Management training programs


Financial perspective:

Habib oil can be classified as a business in sustain stage it is expected to increase and s sustain their current market share which can be one of their long term financial objective. This is a (Pvt) ltd so the stakeholders invest in the company and not the general public. In this stage investment is not much required for growth of the business but for removing the hindrances in the process of expanding the capacity and enhancing continuous improvement of all processes including value chain. Such businesses are required to earn excellent ROI which can be seen in the case of HOM that the ROI is showing an increasing trend since the last 4yrs which shows that HOM is utilizing their assets efficiently to increase the operating income. The financial objectives are evaluated on Cash flows and capital budgeting. The basic objective is to earn good returns on investment that is done in the business.

The financial theme that Habib uses is the Revenue Growth and Mix they should reach new customers by providing more value added products like canola and olive oil to cater to the needs of more targeted customers in new market segments. Also the other strategy would be that of exporting and entering into the markets of Afghanistan and Iran.

Customer perspective:

The market segment identified buy the HOM is that of premium oils. Consumers do not switch to other brands easily due to strong positioning. They are not price conscious in-fact they prefer quality. Health conscious people mostly contribute to this segment.Consumers are willing to pay a high price for this product backed by a higher income group. The brand loyalty is high.The generic out come measure include the customer satisfaction which is measured by surveys conducted by the company HOM tries not to satisfy but Extremely Satisfy their valuable customers each individual customer is valuable to the company. The market share revels that the company comes second after Dalda which was previously owned by Unilever. Customer retention HOM is able to retain their valued customers by exceptional product quality and a strong brand name recently the Habib oil mils have started BTL activates one of which is called store converters who are girls hired to stand in different stores and to tell people who purchase the products about the qualities and to change the views of customers and convince them to purchase Habib oil. This activity helps in both customer retention and also new customer acquisition. Customer profitability plays a very important role, it enables the company to be customer focused. It is measured by profitability of business in the target market.

Customers value the ability of HOM to satisfy their needs through existing and to develop products that would satisfy the emerging need of people by entering into the olive oil market Habib will cater to the needs of people who are health conscious because the trend of health consciousness is increasing.

Product quality is exceptional there are strict regulations and standards are maintain. It is an ISO certified company. Habib has a very strong brand name and image among the customers the customer loyalty is high. HOM conducts frequent surveys to make sure that the customers are satisfied and to take their feedback.

Internal business process:

The critical aspect for HOM is the availability therefore they should concentrate on their distribution if the product is available readily then the sales would increase and the financial objectives can be achieved Habib should work on improving the distribution of products. To supports the long term objectives innovation is the key ingredient they should bring innovation in products to cater the emerging need of market.


The employment turnover ratio is high in the company which affects the cost this should be reduced by retaining valuable employees in the company and providing them attractive compensation packages accordingly hiring the right people can also help in reducing the employee turn over rate.

Learning and growth:

At HOM creative ides are welcomed people are continuously going though the learning process. People are taught to be flexible and adaptive to change in the environment. Skills are developed by training the employees. Employees gain knowledge and skill and then put it to use applying it to increase sales and meet the financial objectives.

To be a learning organization is important to survive in such a competitive environment. By learning and knowledge the internal processes can also be improved.


28 RECOMMENDATIONS AND ACTION PLAN (IMPLEMENTATION)

Keeping in view the various issues that engulf the edible oil industry of Pakistan, we would

like to give the following recommendations based on our limited expertise and knowledge

Product Development (olive oil):

The company doesn't contain in its product line anything specifically for the extreme health conscious

or acute heart disease patients. It would be quite feasible, if the company develops olive oil for them,

which should be positioned accordingly. Direct marketing techniques can be used for this purpose and

the company could use extensive marketing techniques at the time of the launch to make the target

market aware.

Focus on existing product (canola oil):

Habib oil is a mixture of three oils namely

Canola

Xxx

Soya bean

How ever the trend indicates that canola oil is becoming more popular in Pakistan for various reasons

canola oil has lesser fat content and is highly recommended by doctors there fore R and D at habib oil

should work to introduce pure canola oil.

Creating awareness:

Communicating value through advertisement:

Keeping in mind the fierce rivalry existing, the most effective thing to do is to differentiate oneself from

the clutter by being exceptional in value added services and also to communicate the value to the

customers. Though only adding features to the product is not enough. People must also know that

how our product is better than competitor and how the consumers can gain benefits from them this

can be ensured through heavy promotional campaigns and bright new selling ideas


Moreover, heavy promotions and marketing campaigns will ensure wide spread coverage and

awareness.

Advertisements play a vital role in promoting the product and its features. They create and promote

brand name advertisements emotionally target the consumers and take up a place in their minds. The

Habib oil add gives the message “ ye dil ka mamla hai” that Habib oil is suitable for all kinds of people

even people who are health conscious it has lesser cholesterol and so is also suitable for people who

might have some kind of heart diseases. This shows that HOM takes care of the consumers and their

needs.

How ever it is recommended that Habib oil should use celebrity endorsement as part of their

promotional campaign so that the recall of their advertisement is higher. To promote the feature that it

is suitable for health conscious people they can also show doctors in their ads certifying this feature of

Habib oil.

Communicate the justification of high price to consumers:

The company need to educate the public/consumer that why are they charging a high amount as

compare to loose and low brands. The company should communicate the value that it is delivering

through its product line, i.e. basically how the Habib oil products are good for health. This can be

matched with the fact that consumers’ theses days are becoming health conscious. This kind of a

strategy can avoid easy entrants in the industry .this will also discourage the local manufacturers who

do not follow the quality specifications

Ghee is not good for health:

The companys ads should also tell the consumers that Vanaspati (Ghee) should not at all be

consumed by the heart and blood pressure patients but none of the organizations teaches this to the

consumers. Mostly consumers get to know about this from their doctors.

Dealing with environmental hazards:

In order to reduce or eliminate the bad environment hazards that result due to the manufacturing

processes used in edible oil manufacturing processes the company can use environmental friendly

system. Habib should try to adopt the safest technologies to reduce the affect of pollutant.

New Market Development (Afghanistan markets):

Currently, the company is only catering to the needs of local market because it is a

Purely local company right now and it has not yet entered any international markets. We have seen

that a lot of oil has been smuggled to Afghanistan in the past years

the companies can export oil to the areas .if the demand of local people in the smuggled areas will be

fulfilled in the right way they wont need to smuggle oil for Pakistan. Also the Recent developments in


Afghanistan have allowed the oil companies to export their oil to Afghanistan .This was only possible

due to the improved road link and improved infrastructure.

Promotional activity:

In order to increase the effectiveness of promotional activities the company can do the following

things:

They can induce the retailers to promote the brand by giving price reduction stickers, which will

enable the consumers to obtain a cash rebate. The retailers can then return these coupons and get

allowances based on the specific number of coupons returned. This will also create more awareness

through excitement.

The retailers can be given extra money for putting their product on the front shelf and simultaneously

given discount on purchase of large bulk

The company can have Point of Sales displays. These PSD’S are very important as they attract

customers and prompt them to buy the product on the spot. These stands should be put up in places

where the sales are decreasing in order to remind the people about Habib

Client service:

Habib can come with up with very sophisticated client services. They can go to urban as well as

suburban cities where they can ask about people’s preferences and find out the consumption of oil in

that locality. After knowing this they can set their strategies while looking at their mind about the likes

and dislikes of people they have surveyed. Through this way they can gather desirable information

about what people wants at what price & what action should be taken to improve the present product

line.


BIBLIOGRAPHY

www.tutor2u.net/business/strategy/what_is_strategy.htm

www.imanet.org (institute of management and accounting)

www.hom.com.pk

www.soyasupreme.com.pk

www.google.com

www.MkinseyQuarterly.com

Strategic Management Concepts by Thompson and Stickland

Interviews with:

Mr. Ijaz Hussain Malik – Group Executive Director – Habib Oil Mills,

Mr. Akram Chaudhry – Head of sales operations - Habib Oil Mills

Ms. Farheen Zehra – Senior Assistant Brand Manager – Habib Oil Mills

http://www.google.com/

http://www.soyasupreme.com.pk/

http://www.hom.com.pk/

http://www.imanet.org/

http://www.tutor2u.net/business/strategy/what_is_strategy.htm

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Documents

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