STRATEGIC MANAGEMENT ANALYSIS OF

Submitted to: Mr.Asad MengalSubmitted by: Nasibullah khan Azhar Hussain

Balochistan University of Informational Technology Engineering and Management Science Quetta

Engro

Engro Chemical Pakistan Limited is the second largest producer of Urea fertilizer in Pakistan. The company was incorporated in 1965 and was formerly Exxon Chemical Pakistan Limited until 1991, when Exxon decided to divest their fertilizer business on a global basis and sold off its equity of 75% shares in existent company. The Employees of Engro, in partnership with leading international and local financial institutions bought out Exxon’s equity and the company was renamed as Engro Chemical Pakistan Limited. Engro is a public limited company listed on the Stock Exchanges of Karachi, Lahore and Islamabad.

The principal activity of the Company is manufacturing, purchasing and marketing of fertilizers. The Company is also involved in the production and marketing of seeds and has invested in joint ventures engaged in chemical related activities. As part of its diversification strategy, controlling interest was acquired in a company offering industrial solutions in automation and control. A new milk plant has been established at Sukkur the milk is branded as Olpers.

Engro Foods’ History

Engro Foods Limited is subsidiary of Engro Chemical Pakistan Ltd. which is one of the most reputed enterprises in Pakistan with more than 40 years of diversified business operations in the areas of fertilizer and chemicals. Engro Foods started its business operations in March 2006 and with the successful launch of Olpers Milk, Tarang, Olwell, and Olpers cream, it has established itself as a major player in the foods business. Engro Foods has already set up two processing plants at Sukkur and Sahiwal. With the ever expanding milk collection network and processing facilities, the Supply Chain has geared us for the growing sales of our products

We believe that our recent successes will take us to our goal: To be one of the biggest players in the food business. Our aim is to dominate the food business, and to achieve this we will settle for nothing less than the cream!

Our Brands.

Our Affiliates.

Vision And Mission.

Vision Aims at transforming the company within the next

five years into first a national food industry giant, then into a regional force and finally into a global player.

Mission Build Branded food business to improve quality of

life by offering tasty, affordable and highly nutritional products to our consumers while maximizing stake holders' value

Core Values.

1. Leadership

2. Innovation

3. Diversity and International focus

4. Quality and continuous Improvement

5. Candid and open communications

6. Individual growth and development

7. Enthusiastic pursuit of profit

8. Ethics and integrity

9. Safety, Health and Environment

ANALYSIS OF MISSION

Component of mission statement Description Addressed or not?

Customers Who are the firm’s customers? yes

Products or services What are the firm’s major products? yes

Markets Geographically, where does the firm compete? yes

Technology Is the firm technologically current? no

Concern for survival, growth, and profitability

Is the firm committed to growth and financial soundness?

yes

Philosophy What are the basic beliefs, values, aspirations, and ethical priorities of the firm?

yes

Self-concept What is the firm’s distinctive competence or major competitive advantage?

yes

Concern for public image Is the firm responsive to social, community, and environmental concerns?

no

Concern for employees Are employees a valuable asset of the firm? no

STRATEGIC Internal and external Audit

STEEPLE ANALYSIS

S - Social Factors T - Technological Factor E - Economical Factor E - Environmental Factor P - Political Factor L - Legal Factor E - Ethical Factor

PORTERS FIVE FORCES MODEL

SWOT Analysis

Strength

Engro’s back. PR with farmers Positive response from customers Strong consumer & product research Third-Generation Plant Worldwide fame of Engro. Efficient milk collection system. Keeping high quality standards. Integrated distribution and warehousing facilities. Successful related diversification. Generic brand name of Olper’s Large market share of Engro innovative and chemicals. Having Good reputation in the market by strong brand name i.e. Engro

Weaknesses

Olwell TVC Owning Red Color Low Quality Milk Packaging Milk collection & distribution costs Narrow brand portfolio Unable to compete in price sensitive segment of UHT milk market. Under-utilization of the capacity. Unable to fulfill the demand of local powder milk market. Not yet ISO certified

Opportunities.•Increased funding by Government •Increased consumption of PLM •Awareness •Third largest producer of milk •Improving Economy •Population growth rate.•High urbanization rate.•High literacy rate.•Flexible government policies for food industry.•Have significant growth opportunities•Has sufficient capital to expand.•Has the potential to innovate and differentiate the company's products to sustain a competitive advantage•May merge with other global businesses to eliminate competitors.•Having Capable of expanding into other markets of the world

Threats

Competition Perceptions and Price Differentials High inflation rate. Low purchasing power. Decrease in GDP growth rate. Increasing interest rates. Decreasing investment. Recessionary period in business cycle Competition with Nestle, Engro Foods and the new entrants. Engrofoods is currently facing are increase in Sales Tax

What is SWOT matrix?

The concept of determining strengths, weaknesses, threats, and opportunities is the fundamental idea behind the SWOT model. To present the model in a more understandable way, scholars came up with so-called SWOT matrix. SWOT matrix is only a graphical representation of the SWOT framework.

The Below is a schema of how SWOT works. You start at the top level and go down to details. When this is filled with content, it gets the shape of a matrix, such as Example below:

Engrofood SWOT Matrix

Strengths1. Worldwide fame of Engro.2. Efficient milk collection system.3. Keeping high quality standards.4. Integrated distribution and warehousing

facilities.5. Generic brand name of Olper’s6. Large market share of Engro innovative

and chemicals.7. Having Good reputation in the market by

strong brand name i.e. Engro8. Strong R&D

Weaknesses1. Unable to compete in price sensitive

segment of UHT milk market.2. Under-utilization of the capacity.3. Unable to fulfill the demand of local

powder milk market.4. Not yet ISO certified

Opportunities1. Improving Economy 2. Population growth rate.3. High urbanization rate.4. High literacy rate.5. Flexible government policies for food

industry.6. Have significant growth opportunities7. May merge with other global businesses to

eliminate competitors.

8. Having Capable of expanding into other markets of the world

SOIncrease production of quality milk to cater the

unsatisfied demand(S2,O2,O8)They should go in the product line of powdered milk.

(S8,O2,O5)They should increase their exports.They should cater the wide range of unsatisfied

demand by improving their distribution networks

WOAs per the increase demand of the milk they should

fulfill the demand as EFL have the ability to expand.(W3,O8).

They should make a strong distribution system to cater to avail the full benefit of the growing market.(W3,O2)

They should adopt affective marketing strategies for the promotion of their product.(W2,O1)

Threats1. High inflation rate.2. Low purchasing power.3. Decrease in GDP growth rate.4. Increasing interest rates.5. Decreasing investment.6. Recessionary period in business cycle7. Competition with Nestle, Engro Foods and

the new entrants.8. Engrofoods is currently facing are

increase in Sales Tax

STInvest more on the dairy product line as there is still a

large chunk of the market which require modernization(S6,T5)

Introduce new technology for quality assurance and better productivity(S4,T7)

WTThe co-ordination between different departments of

EFL should be improved it will lessen the bureaucratic cost and increase the efficiency of

the company.Engro must get the ISO certification as to beat

their competitors(W4,T8)

INTERNAL FACTOR ANALYSIS

Key Strategic Factors Weight Rating Weighted Score

STRENGTHS

Brand Image 0.08 4 0.32

Growing Sales 0.03 3 0.09

Market Share 0.05 3 0.15

Distribution Channel 0.08 4 0.32

Product Quality 0.07 3 0.21

Capacity 0.08 4 0.32

Innovation 0.04 3 0.12

Customer Oriented 0.02 3 0.06

Qualified Work force 0.01 3 0.03

R & D 0.05 4 0.2

Business without Interest 0.02 3 0.06

Exporting 0.06 4 0.24

WEAKNESSES

Local Company 0.05 1 0.05

Centralized Decisions 0.09 2 0.18

No Sales on Credit 0.06 2 0.12

High Price 0.05 2 0.1

Uncertain Economic & Political Conditions

0.03 1 0.03

Market Demand 0.05 2 0.1

Striker Terms And Conditions 0.03 1 0.03

Promotion 0.05 2 0.1

Total 1 2.83

EXTERNAL FACTOR ANALYSISFor Engrofoods

Key Strategic Factors Weight Rating Weighted Score

OPPORTUNITIES

Raw Material Availability 0.1 4 0.4

Improving Economy 0.08 3 0.24

Population growth rate. 0.07 2 0.14

High urbanization rate. 0.07 3 0.21

Engro Bottle 0.04 1 0.04

High literacy rate 0.06 2 0.12

Joint Ventures 0.06 3 0.18

THREATS

New Entrants 0.08 3 0.24

Changing Season 0.05 2 0.1

Sales Tax 0.06 3 0.18

Suppliers 0.07 3 0.21

Economic Conditions 0.05 2 0.1

Price Sensitive People 0.06 2 0.12

Gawala Milk 0.1 4 0.4

Small Target Market 0.05 2 0.1

Total 1 2.78

Competitive Profile Matrix (CPM)For food industry

Critical Success Factors Weight

OLPERS NESTLE HALEEB

Rating Score Rating Score Rating Score

1 Research & Development 0.08 3 0.24 3 0.24 4 0.32

2 Advertisement 0.09 3 0.24 4 0.36 3 0.27

3 Financial Position 0.09 3 0.27 3 0.27 3 0.27

4 Market Share 0.07 2 0.14 4 0.28 3 0.21

5 Product Quality 0.08 3 0.24 3 0.24 3 0.24

6 Price Competitiveness 0.11 3 0.33 3 0.33 2 0.22

7 Management 0.10 3 0.30 4 0.40 3 0.30

8 Global Expansion 0.08 3 0.24 4 0.32 3 0.24

9 Customer service 0.06 3 0.18 3 0.18 2 0.12

10Sales And Distribution

Network 0.09 3 0.27 4 0.36 3 0.27

11 Production Capacity 0.07 2 0.14 3 0.21 4 0.28

12 Alliances 0.08 3 0.24 4 0.32 3 0.24

Total 1.0 2.76 3.51 2.98

SPACE MATRIX STRATEGIC MANAGEMENT METHOD

The SPACE matrix is a management tool used to analyze a company. It is used to determine what type of a strategy a company should undertake. The Strategic Position & Action Evaluation matrix or short a SPACE matrix is a strategic management tool that focuses on strategy formulation especially as related to the competitive position of an organization. The SPACE matrix can be used as a basis for other analyses, such as the SWOT analysis, BCG matrix model, industry analysis, or assessing strategic alternatives (IE matrix). The SPACE matrix calculates the importance of each of these dimensions and places them on a Cartesian graph with X and Y coordinates.

The following are a few model technical assumptions:- By definition, the CA and IS values in the SPACE matrix are plotted on

the X axis.-CA values can range from -1 to -6.- IS values can take +1 to +6?

-The FS and ES dimensions of the model are plotted on the Y axis.- ES values can be between -1 and -6.- FS values range from +1 to +6.

Engrofoods factors for SPACE MATRIX

Internal Strength Position External Strength Position

Competitive Advantage(CA) Industry Strength(IS)

Axix X

(Worst -6,Best -1)

-1 Product Quality-1 Product Life Cycle-3 Market Share-2 Brand and imageAverage Score = -1.75

(Worst +6,Best +1)

+5 Barriers to entry+4 Growth Potential+4 Access to Financing+6 ConsolidationAverage Score = 4.75

Total X-Axis score: 3.00

Financial Strength(FS) Environment Strength(ES)

Axis Y

(Worst +6,Best +1)+5 ROA+5 Leverage+4 Leverage

+6 Cash FlowAverage Score = 5

(Worst -6,Best -1)

-2 Inflation -1 Technology-2 Demand Elasticity-4 TaxationAverage Score = -2.5

Total Y-Axis score: 2.75

SPACE Matrix for Engrofood

Conclusion

This particular SPACE matrix tells us that our

company should pursue an aggressive strategy. Our company has a strong competitive position it the market with rapid growth. It needs to use its internal strengths to develop a market penetration and market development strategy. This can include product development, integration with other companies, acquisition of competitors, and so on.

BCG Matrix Model

The BCG matrix or also called BCG model relates to marketing. The BCG model is a well-known portfolio management tool used in product life cycle theory. BCG matrix is often used to prioritize which products within company product mix get more funding and attention.

The BCG matrix model is a portfolio planning model developed by Bruce Henderson of the Boston Consulting Group in the early 1970's.

The BCG model is based on classification of products (and implicitly also company business units) into four categories based on combinations of market growth and market share relative to the largest competitor.

Division wise data for Engrofoods BCG Matrix

Division Revenues Percent Revenues Profits Percent ProfitsPercent Market

ValuePercent Growth

Rate

Olper’s

$4500

49.90% $2000 41.62% 60 +8

Olwell TVC

$2550

24.87% $1500 31.21% 25 -6

Tarang

$3200

31.21% $1305 27.18% 35 +4

Total = $10250 100% 4805 100% ---- ----

BCG Matrix for Engro food

Relative Market Share Position

Internal External (IE)Matrix

The Internal-External (IE) matrix is another strategic management tool used to analyze working conditions and strategic position of a business. The Internal External Matrix or short IE matrix is based on an analysis of internal and external business factors which are combined into one suggestive model.

The IE matrix is a continuation of the EFE matrix and IFE matrix models.

Score from the EFE matrix -2.75- this score is plotted on the y-axisScore from the IFE matrix -2.83- plotted on the x-axisAs blue lines indicateConclusionThis IE matrix for Engrofoods tells us that our company should hold and maintain its position. The company should pursue strategies focused on increasing market penetration and product development

Grand Strategy Matrix.

For Engrofoods

ConclusionThe grand strategic Matrix for EFL is show that it lies in the first quadrant which recommend that for EFL continued concentration on the current Market (market penetration and market development) and products development) is an appropriate strategy.

QSPM OF Engrofoods

Based on strategies in the stage 1 (IFE, EFE) and stage 2 (BCG, SPACE, IE), company executives determined that Engrofoods needs to pursue an aggressive strategy aimed at development of new products and further penetration of the market. They also identified that this strategy can be executed in two ways. One strategy is acquiring a competing company. The other strategy is to expand internally. They are now asking which option is the better one.

(Attractiveness Score: 1 = not acceptable; 2 = possibly acceptable; 3 = probably acceptable; 4 = most acceptable; 0 = not relevant)

Q & A