Advance Strategic ManagementM.Phil Program – IoBM

Course Instructor : Fasihul Karim SiddiquiSubmitted By : Amin S. Lalani - 11139Dated : September 7, 2010

Final ProjectComparative Study on effectiveness of the Strategic Management in two business organisation within an industry.

Course : Advance Strategic Management

Introduction

Objective

The objective of this research is to identify the effectiveness of planning, implementation and monitoring of Strategic Management within two major players in Food Business, focusing on Recipe Mix market, whilst considering the spice industry as a whole.

Various key Strategic Perspective like; Institutional Perspective, Economic Perspective and Behavioural Perspective will be applied to evaluate the firms’ ability to optimize the implementation of strategic management.

This report will also help the firms in formulating or overcoming their gaps inorder to par with their local and international competitors and will give basis to researcher to take the research to next level in general strategic advancement or focusing on each segment ie Strategic HR, Strategic Marketing, etc

Global Spice Tradition

According to the American Spice Trade Association, “today spices have become known as any dried plant product used primarily for seasoning purposes. This all-inclusive definition seems to cover a wide range of plants like herbs, spice seeds and even dehydrated vegetables and spice blends.

There has always been demand for spice all over Indian sub continent, China and other civilized nation of that time. Spice was one of the major commodity traded between 800AD and 1200AD globally and were bought by Arabian and other traders visiting Indian and at those days Indian sub continent was one of the only place growing spices which is now been grown by many countries of the world.

Spice was greatly introduce by British during their rule over Indian sub continent and were exported to Britain and other parts of the world.

Spices in Local Industry

In Pakistan spices were mainly wholesale and retail at Jodia Bazaar after independence as it was only wholesale market at that time till 1970s, till companies like Shan, National Foods and small traders became active whereby they started delivering the spicies directly to the shops. Perhaps, 60% of market is controlled by Jodia Bazar and national markets where loose spices are being sold and 40% of the spice market is ruled by the branded spice processor. The traders from Jodia Bazar were also actively involved in import and export of spices to world, including India and Middle East.

Today Pakistan has around Rs.20 Billion of Market in Spice trading comprising of 40% of packed spice and 60% loose spices (or other less known brand spices). (SMEDA – Feasibility Report)

Spice got modern forms in the name of Recipe Mix, Ketchups and other forms, which substitute the way we cook food, these makes life lot more easy by keeping 40 difference spices in kitchen and using it to cook the food or using ketchup to make fast food at home.

The industry has growing demand locally and globally and various spice plantations has been cultivated to earn high yield, perhaps there is less awareness about high earning a farmer can get through organic spice farming which is in high demand in the west.

SOME KEY INDICATORS

Pakistanis spends 48% of total spending on Food, Beverages and Tobacco.

Pakistan imports $63 worth of spices and exports $21 defecating $42 (2008-2009)

There were 7000 spice and salt grinding units as of 2007 (SMEDA Feasibility Report)

Major branded spicy traders in Pakistan are:

MAJOR INDUSTRY PLAYERS Shan Foods National foods

Other players Chef’s Pride Mehran Foods Ahmed Foods Habib Foods Zaiqa Foods Kitchen Secrets

Standard Process at any Spicy Processing Unit

Global Scenario

India is the biggest player in Spicy as they have more farming land with optimize per yield capabilities and exports $ globally as they have access to local community worldover as compare to Pakistan.

Source Food and Agriculture Organisation of United Nation

Indian Imports : 1,34,260 tons valued at Rs.591.40 crores (US.$.167.00 million) (Spice Trade Board – Stats Import 2008-09)

India Exports US$1.6 Billion worth of spices - (Spice Trade Board – Stats Import 2008-09)

Strategies at Industry Level

The Spice Industry in Pakistan has 3 levels of consumers. a) Those that mainly depends on affordable locally grown spices to fulfill their basic cooking needs. b)Those who likes taste and use numbers of local, imported and packaged spices for cooking food and mainly opt for loose or branded packed based on quality and quantity required and finally c)Those who likes to have more taste in their food and opt for Recipe Mix masalas offered in loose or by brands.

These 3 levels of consumer are being served by traders who ruled 60% of market and 40% are been served by the branded packages who has various standards to maintain quality, control microbes and follow international standards to give taste and hygienic in the package.

The industry is made up of Oligopolistic Organisation are mainly price taker and the market is easy to enter and exit so anyone can enter into this trade and start trading, this is the reason why Jodia Bazaar has been diminishing its significance in last 2 decade as with the current logistics setup, anyone can easily order products from overseas, setup an efficient processing and packaging plan and with a small Lab to maintain quality and deliver the product to the market. It is important to remember here that there are 250,000 retailers and companies like National Foods too could reach 50% of these retailers whereas Shan Foods has still a lot of homework to do, so its easy for new comer to tap any level of market and seek gaps in retail portfolio and start distribution inorder to enter into the market quickly.

The industry stands at Rs25 Billion (SMEDA, Feasibility Study, 2009) with enormous growth rates as people are changing their lifestyle as they are more accessible to these products at their near store, have higher earning capacity due to privatisation and liberated economy and the rates of youth population, enthusiastic about tasty food are expanding to form large part of population.

With over 250,000 retailers seeking 20% - 40%.discount over tag price, there is huge opportunity for processing companies who can earn around 15% on capital and has one of the fastest turnovers, especially during the month of Ramzan and other occasion where Families and Friends have time to meet and greet for days or for whole month during Ramzan.

Various Super Market and Hyper Market are also keeping an eye on backward and forward integration inorder to import and process spices themselves and distribute excess production into the market, one of such implementation is done by House of Habib who have launched their Recipe Mix and are being highly promoted at their Makro Super Market, such model will definitely evolve as the market gets more accessible and various small and medium size will go for group buying inorder to curtail the cost and earn high profit. In Karachi various retailers as neighbourhood are merging to open up a Mega Store offering discount products inorder to stay competitive with chain stores like Chase and Super Market chain like Makro and Metro and various home delivery companies coming up.

Player like Knorr is planning to enter into spice market using its Ketchup, Recipe Mix and other product with annual estimate turnover of Rs.800 Million and it is important to remember

National Foods

AN OVERVIEW

National Foods was formed in 1970, initially the company dealt in exporting rice and since then it has achieved high objectives by offering various product line. Although the company maintains sustainable growth rate but, at many times face difficulties to succeed in penetrating new product line to cater the niche, especially the high end institutional buyers and kitchens/restaurants who depend on fast cooking using Recipe Mix.

Since National Food started offering Recipe Mix ie in 1980, at the same time Shan Foods also enter into the market to offer their blend of Recipe and since then they been striving to capture maximum market share. Today National Foods and Shan Foods holds 40% of Branded Spice distribution including Recipe Mix but Shan Foods leads National Foods in Recipe Mix market, although Shan Foods has less access to up-countries, especially Punjab region where National Foods has edge over any other suppliers.

NATIONAL FOODS COMPETITIVE EDGE

National Food is a public limited company with one of the most modern corporate structure. National Foods stands at Rs.3.75 Billion in sales revenue in 2009 and has ambitious plan to become Rs.50 Billion Company by 2020 by offering varieties of product line to cater the niche. Although the plan looks to be in struggling phrase due to local and international crisis but, there is a lot National Foods can do. If National Foods can look into emerging Food brands like Olpers and Shangrila who are doing extremely well, National Foods too can spot such area where it can achieve success as it did in Recipe Mix and at the same time keep a close eye on the industry and its competitor who are coming up with National Foods and achieving success where National Foods failed, and it should learn from its past mistake and ensure it revert back and achieve highest success level. Secondly, National Foods as a public limited company can work with international franchise and manufacture and distribute their products to Middle East and other region as being done by P&G to manufacture their product in Saudia by and distribute it in Pakistan as the cost of manufacturing are comparatively high in Pakistan. Most importantly, Pakistan exports only US$.21 Million of spice whereas, India is targeting for US$.1.6 Billion this year (Indian Spice Trade Board – Quarterly Exports Stats), this means there is no competition to Indian spice trade

NATIONAL FOODS STRATEGIC PATH TO Rs.50 BILLION

VISION AND MISSION

To be a Rs.50 billion food company by the year 2020 in the convenience food segment by launching products and services in the domestic and international market that enhance lifestyle and create value for our customer through management excellence at all level

The vision and mission statement reflects a path to achieve in next 10 years, and National Food had affords in Intensive Strategy whereby product modification and development were made to offer modified product to niche customers but it doesn’t seems to work in last 2-3 years National Foods has faced dilemma of loosing one after another campaign by which Ronaq, Reevaj and other brands were launched and were not accepted by the market. In such situation it gets hard on company to stick to 2020 mission but there are other opportunity like export market, diversification into other food products, it is important for National Foods to achieve quantum revenue growth and expansion in order to achieve the vision.

HIGH PERFORMANCE ORGANISATION SURVEY – NATIONAL FOODS

(by Stephen G. Haines)

A. Outputa. Achievements of Results 05

B. Feebacka. Feedback Loop 04

C. Strategic Planninga. Strategic Planning 06

D. Alignment – Deliverya. Operational Task 06b. Technology 08c. Resources 09d. Organisational Design 08e. Team Development 07f. Business Process 06

E. Attainment – People a. Leadership & Management 06b. Employee Involvement 05c. Strategic Communication 05d. Human Resource 06e. Cultural Change 05

F. Strategic Change Management Processa. Strategic Change Management 05b. Annual Strategic Review 05

G. Environmenta. Environment (SKEPTIC) 05

101

Total Score 170A. High Performance Organisation 110-170B. Responsible Organisation 60-110C. Re-active Organisation 0-60

National Foods based on the above calculation can be term as Responsible Organisation. This figure is totally based on my personal understanding towards the company, it may be more or less in someone else view.

Shan Foods

AN OVERVIEW

Shan Foods was established as a cottage / home based industry selling the Recipe Mix mainly to friends and family; then the demand grew and it grew so well that today it reaches Rs.3 Billion sales mark with product distribution channel in 60 countries and deeply rooted in Indian and Pakistani community in UK, USA, Australia and Canada by frequently participate in social and cultural events. Shan Foods has very clear-cut strategy to stay within the spice business and do not get into any other business risking the potential growth opportunity, Shan Foods plays very safe game by limiting themselves to Karachi and major cities and surrounding location but at the same time ensuring the customers get highest quality of product and customer stays satisfied.

SHAN FOOD COMPETITIVE EDGE

Shan Foods always have aggressive strategy to sell as much as they can by setting price parity with the cost and keeping market price in mind. High volume is always the key strategy. Shan Food has recently launch a product line of Oriental Recipe. The new launch is a part of intensive strategy to compete with local and international Recipe Mix brand, including those from Far East. The new Recipe Mix has following recipes

Chicken Chowmein Manchurian Chinese Chicken Vegetable

Chicken Sweet n Sour Chop Suey Fried Rice

Beef Chicken Indonesian Satay Filipino Steak

Malaysian Chicken

One can see the strategy implemented by Shan is Think Globally, Act Locally whereby Shan is capturing middle class who can’t afford restaurant or prefer to eat home and Shan is directly competing with Knorr, a brand introduce by Unilever to offer such international cuisine Recipe Mix. Besides, further Shan tends to place the brand internationally by getting all international certification and winning award ‘Suprerior Taste Award’ by iTQi

SHAN FOOD STRATEGIC PATH

Shan Foods like to concentrate on single range of product with Intensive Strategy, there is no aggressive strategy to penetrate national market or diversified into other products, perhaps the market itself has enormous potential with 50% local growth and huge potential overses where India has been dominating the world market for years with US$1.6 Billion exports (Indian Spice Board 2010). But still there is risk involve for Shan to stay within same arena. Secondly, as compare to National Foods, Shan has limited resource to grow fourfold as being a privately held company, it will have to get public in short term and plan for magnitude growth to compete with International sellers and indulge into volume pack of 40 kgs bags for exports for repacking in importing country.

HIGH PERFORMANCE ORGANISATION SURVEY – SHAN FOODS

(by Stephen G. Haines)

A. Outputa. Achievements of Results 08

B. Feebacka. Feedback Loop 06

C. Strategic Planninga. Strategic Planning 06

D. Alignment – Deliverya. Operational Task 07b. Technology 05c. Resources 05d. Organisational Design 06e. Team Development 08f. Business Process 08

E. Attainment – People a. Leadership & Management 07b. Employee Involvement 07c. Strategic Communication 06d. Human Resource 06e. Cultural Change 05

F. Strategic Change Management Processa. Strategic Change Management 05b. Annual Strategic Review 05

G. Environmenta. Environment (SKEPTIC) 05

105

Total Score 170A. High Performance Organisation 110-170B. Responsible Organisation 60-110C. Re-active Organisation 0-60

Shan Foods based on the above calculation can be term as Responsible Organisation. This figure is totally based on my personal understanding towards the company, it may be more or less in someone else view.