CASE STUDY PROCESSED AND PACKAGED MILK INDUSTRY IN PAKISTAN (IN CONTEXT OF ENGRO FOODS)

COURSE: STRATEGIC MANAGEMENT

ASSIGNMENT # 1 SUBMITTED TO: SIR FAISAL QURESHI GROUP MEMBERS: SARA GHAFFAR (17397) MEHWISH NAEEM (16614) YAMNA KHALID (17377) SHUMAILA ABBASI (17859) BURHAN-UD-DIN (21905) SAMIA SHAHID (16546)

Q1- Evaluate the dominant economic traits of the processed and packaged milk industry in Pakistan? Pakistan is the fifth largest producer of milk with industry volume comprising different dairy products reached at US$26 billion in urban and rural areas on the increasing population and domestic local consumption, a research report said. Market Size & Growth: According to Tetra Pak index the consumption of milk in 2008 was reached at 258 billion liters & was projected to be reached at 282 billion liters in 2012. The total growth of processed and packaged milk reached at 58%. Number of Rivals: Currently there are more than 25 dairy processing plants but Nestle is one of the biggest rivals/competitor for Engro. Scope of Competitive Rivalry: Nestle and Engro is the biggest rival and both of these firms are currently competing at National level. Product Innovation: In the processed milk industry packaging and skimmed milk can be consider as the product innovation. Supply/Demand Conditions: required. To meet up supply conditions backward integrations is

Vertical Integration: It will give a positive impact on Supply/Demand conditions and will play a vital role to cut down the cost. Economies of Scale: Its important for industry since the processed milk is processed on large scale to reduce the cost. Firm success depends on how bigger the market share companies captured. At the initial stage its necessary to have some learning or experienced about the process.

Q2: Apply the Five Forces model of competition to analyze the overall attractiveness of the processed and packaged milk industry in Pakistan:

Overall Industry attractiveness

Fa ctors Entry Ba rri ers Exi t Ba rri ers Ri va l ry a mong exi s ti ng fi rms Power of buyers Power of s uppl i ers Threa t of s ubs ti utes Unfa vora bl e Neutra l Fa vora bl e

Q3: What are the drivers of change in the processed and packaged milk industry of Pakistan? How are these drivers likely to affect the industry in the future? New research from Tetra Pak forecasts that flavored milk consumption will grow at more than double the rate of white milk globally between 2012 and 2015. Consumers are increasingly turning to tasty, nutritious and conveniently packaged flavored milk as an alternative to other beverages, creating opportunities for dairies to improve profitability. Pakistan Dairy Development Company registered as a limited company, generally known as Dairy Pakistan it is a platform for representation of milkman who keep animals and supply fresh milk directly to urban families usually on a contract. This platform consists of representation and policy support from the Government, Industry and the farmer groups whereby core leadership is provided by the private sector by virtue of their expertise and policy support from the Government, Industry and the farmer groups whereby core leadership is provided by the private sector by virtue of their expertise The White Revolution It envisions the dairy sector as serving an engine of economic growth for the country and taking the responsibility to drive the development of the socioeconomic landscape of rural Pakistan. Economy of scale is so large that rivals firms need to market their products in many cities to gain enough volume to cut down the cost. Product Innovation is necessary so that buyers get more attract towards the product in terms of packaging and at some extent the thickness of milk. Market Innovation: To aware the buyer about the process and the technologies which are used for processed milk. Changes In cost is necessary to compete with the rivals cause if the rivals apply the backward or vertical integration it will affect the cost, it will change the dynamics of the country.

Q4: Create EFAS for Engro foods:

External Factors Analysis Summary EFAS
External Strategic Factors Opportunities Social responsibility Profitability Growth rate Demand in domestic and international markets Relationship with Vertical Market Threats Substitute product Competition from Others in Market Position of Supporting Brand Products The White Revolution Total Weighted Score Weight Rating Weighted Score Comments

0.1 0.15 0.2 0.1

3 4 4 4

0.3 0.6 0.8 0.4

4-a 4-b 4-c 4-d

0.05

0.05

4-e

0.1 0.15 0.1 0.05 1

4 4 1 3

0.4 0.6 0.1 0.15 3.4

4-f 4-g 4-h 4-i

4-a: Integrated farming and livestock development 4-b: Continuous profit increase in dairy and juices 4-c: Dairy and juices making rapid progress In the UHT milk market, Engro Foods has grown exponentially in the past seven years and is now the market leader. Growth for the company is now coming from conversion of consumers to UHT milk from the open (non Tetra Pack) milk. 4-d: Increasing demand locally and internationally 4-e: Partnering with Tetra Pak Pakistan and strong relationship with local farmers 4-f: The threat of substitute is always there in the food industry. Companies usually focus on niche area in which they have competitive advantage. In food industry there is more competition in the food industry so, threat of substitute in food industry is more. 4-g: Numerous big brands competing in the same market

4-h: Supporting brand products in the marketing mix have dwindling revenue 4-i: Government initiative to increase package milk demand locally and internationally

Sources: www.tetrapack.com www.engrofoods.com