Report of case study no 1.

Submitted By: NOMAN EJAZ (18977) SHAFIQ UR REHMAN (18724) MUHAMMAD SUFIYAN (13224) MUHAMMAD YAMEEN (18905) QASIM ABBASI (18658) AYYAN HASSAN (18849) SYED FAIZAN SHAKIR (17459)

Submitted To:Mr Faisal Qureshi. Dated: 13-03-2015 Question 1:

Evaluate the Dominant Economic Traits of the Tea Industry in Pakistan.Answer:The evaluation of the dominant economic traits of the tea industry in Pakistan can be considered on the basis of following criteriaMarket size:Pakistan is the 3rd largest importer of tea in the world with a huge demand pattern of tea. In the tea industry of Pakistan the leadership is enjoyed by Unilever Pakistan with a market share of almost 54% which is followed by Tapal with a figure of 28% and subsequently Tetley and other brands owing 4% and 14% respectively of the market shareGrowth Rate:The industry of tea in Pakistan is assumed to be at its maturity phase as the addition and innovation in the industry are static which is one of the key indicators of the maturity phase of the industry. In order to gain more of market share the companies have to come up with innovative ideas constantly whereas the channels of variety in this industry are much narrow.On the other hand the green tea industry is at its growth stage as the demand for the commodity is rising with the raise in the level of awareness of people about the health issues and benefits of green tea and hygiene issues. Green tea industry is assumed to have a potential to gain a large market share in future

Scope of Competitive Rivalry:Tea companies are competing all over Pakistan on the basis of regional areas and social class fragmentation. The leader of the market i.e. Lipton is a multinational company but tries to keep its self in the image light of being a Pakistani company in order to capture more of the market share or least retain the present market share. Whereas Tapal is a locally manufactured tea brand and so do it mix well in the culture of the nation and appears to be more of a Pakistani brand than the Lipton and even the product portfolio of Tapal shows the name selection is done on the basis of the culture differentiation in Pakistan for e.g. Maizban and Tez Dum

Number of Rivals:The rivals in the tea industry are of two types

Whereas the market of branded and unbranded tea manufacturers is as following

Among the branded tea manufacturer the leading position is owned by Unilever Pakistan by holding a market share of 54% which is followed by Tapal with 28% and remaining is the market share held by many small companies like Tetley, Alpha, and Kohinoor etc.

Buyer Need And Requirement:There is no dramatic change in the buyer need and requirement as the move of tea bag was big and it changed the product perception in the views of the buyer as the tea bag is assumed to be more hygienic by many of the usersProduction Capacity:The production capacity is not an issue to be considered beside the issue is of for whom to produce as the demand of the product in the market is static and every company is holding its share in market and there is no dramatic change in the demand expansion so the only way to increase the demand and so do the production is to grab the market share of any other company which is not easy in an industry at its maturity stage. The loose ends in the industry in the current situation is the green tea segment which is required to be served and Tapal have fair chances to grab this opportunity in case it works well with its strategy formulation.

Pace of Technology Change:Technological advancement dont have any significant impact on the industry as compared to other external factors but the advent of tea bags has changed the consumption patter of the product and have expanded the demand for tea in the market

Degree of Product Differentiation:The degree of product differentiation in the tea industry is low because of the high competition and same requirement expectation and consumption need of the customer irrelevant of their geographical or social class relevance.

Product Innovation:Tea industry aims to have an innovative thinking that matters to their clients. Branded tea industry continue innovating new tastes like iced tea, green tea and others with the help of market scan to pin point what the customers actually needVertical Integration:The demand is so static in tea industry and the market share race is so tough that there is no existence of vertical integration in the tea industry of Pakistan

Economies of Scale:The reason Lipton being the leader of the industry is the economies of scale as the company Lipton is assumed to be the first company in the whole world that offered tea to the local consumer at an affordable price. Tapal on the other hand enjoys its economies of scale but they are assumed to be lesser than the LiptonQuestion 2:Apply the Five Forces Model of Competition to analyze the overall attractiveness of the Tea Industry in Pakistan.Answer:The intensity of competition in the tea industry of Pakistan is fairly high. There are few established names like Lipton and Kohinoor in the market. Now Tetley has also been introduced in the market so Tapal is competing with all of these and also with the unbranded loose tea. Application of the five forces model will analyze more the situation and explain it better

Threats of New Entrants:Threat of new entrants is high. This is evident by the immense growth in the industry and government policies are also encouraging new Tea houses to emerge on the scene. The taxes on import of tea are reduced thereby decreasing the cost of production. It can be taken as positive sign by a prospect player.Initially it was thought that no company would survive against the giants of unilever but since Tapal people have started thinking that local brands can do well and new players might decide to come into this market

Threat of Substitute:In this case tea will always remain an integral part of our culture. Having said that there is low switching cost associated with the tradeoff of substitute. In case of tea substitute is coffee even cold drinks in some case. It can easily be assumed that the demand for tea is nothing but increasing. Currently majority of the consumer have not developed the taste for coffee so it cannot be seen as potential threat. Change in the pattern can be observed because consumer are shifting from normal tea to green tea but again the broad category of the product remains the same

Bargain Power of Buyer:The bargaining power of buyer is low because of the high demand. Although due to increased competition prices remain competitive but buyers have little or no bargaining power. In case of tea an element of brand loyalty is also associated so a consumer would want to use a same brand which gives in his bargaining power. Also with tea people prefer quality over price

Bargaining Power of Suppliers:Bargaining power of supplier is high because there are few suppliers of tea. The reason why there are few is because there is a specific taste of tea that consumer like so the manufacturers are forced to choose from few options. In Pakistan tea is imported majorly from Kenya and Sri Lanka so the suppliers are at power to influence the price due to the limited availability of the raw tea. In Pakistan recent plantation of tea farms may favor the local manufacturers and foreign suppliers may find a reduction in their bargaining power

Competitive Rivalry:The competitive rivalry of Tapal with other brands is not much beside the war of market share between Tapal and the leading market share company Unilever which have more than 50% of the market share but due to a low product differentiation its hard for the company to grab the share of other company besides being indulge in the aggressive marketing strategy and encountering at price war

Overall Industry Attractiveness

FactorsUnfavorableNeutralFavorable

Entry barriers

Bargain power of buyer

Bargain power of suppliers

Threats of substitute

Question 3:

Create an IFAS EFAS for Tapal.Answer:

Comments:

1. Tapal is trying to reduce its cost of production by means of importing cheap tea leaves from India and Sri Lanka and hence competing with the industry giant Lipton2. Finding new markets by means of expanding in UAE and finding those regions globally where the Pakistani nationals are settled3. Tea bag consumption is an opportunity as being a promoter of tea bag and extensive advertise of tea bag of Tapal can increase the market share of the company4. The northern areas and the rural areas of Pakistan are dominated by the unbranded tea where Tapal can market its product and can increase its market share as well as untapped demand will raise the revenue of the company

External Factors Analysis Summary

External Strategic FactorsWeightRankingWeighted ScoreComments

Opportunities

Reducing Input cost 0.130.31

Finding New Markets to Export0.0540.22

Tea plantation 0.251

Tea bag consumption0.0530.153

Targeting areas dominated by unbranded tea0.120.24

Threats

India intending to penetrate in Pakistani Tea Market0.130.3

Substitute0.251

Stagnation of market and demand0.0550.25

Low product differentiation0.0540.2

Low switching cost 0.140.4

Total Weighted Score1.00

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