Business Strategy

Executive Summary:

Shezan was established in 1964. Since then it has continued to provide quality
products to its customers with products and packaging innovations. Shezan is one
of the Pakistan’s best companies in bottle juices. The company is trying their level
best to differentiate themselves from other local companies and trying to win the
competition in juice industry by adopting the modern trends and technologies in
both operational fields as well as in marketing of their products.

This project report covers the broad area of impacts of controllable and
uncontrollable variables in remote environment for the company, like economic
boom or slump, segmentation on the basis of cultural likings and disliking of the
consumers along with the social set up and their purchase behavior, food laws,
taxation, import duties and the technological advancements. This report also
provides the information how these variables pose threats and offer opportunities
for the company and how the company should neutralize threats and exploits
opportunities.

An important part of this project report comprises the market situation in which
Shezan is competing. Market acceptability of its products and the upcoming trends
regarding to juices and drinks are also discussed. Detailed information about
competitors like Nestle which is also the market leader and Haleeb, and how they
are affecting the company is also provided. An overview of distribution system and
criteria of Shezan in case of juices. A brief description of the company’s marketing;
non marketing and management’s capability is given which tells us about the
company’s internal strengths and weaknesses.

Then comes the most important portion of the company’s operations, which is the
strategic management. A comprehensive detail is provided about the company’s
strategies devised to maintain and develop the product line (juices), strategies to
set and quote the prices, their distribution patterns and logistics. The image Shezan
wants to develop in the minds of their customer and the extent to which they are
succeeded through their promotional campaigns is explained in this report.
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An additional portion of this report including the SWOT analysis, twos matrix, CPM,
Grand Strategy Matrix, BCG Matrix and detailed financial analysis explain the
strategic position of the company.
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Introduction

The company was incorporated in 1964 as a Private Limited Company, with the
main objective to set up an industrial undertaking for manufacturing of juices,
squashes, sherbets, jams, pickles and preserves from fruits and vegetables. Shezan
International Limited was conceived as a joint venture by the Shahnawaz Group of
Pakistan and Alliance Industrial Development Corporation of U.S.A.

The agricultural background of the Pakistani sponsors induced them to establish this
agro-based industry. Taking advantage of abundance of fruits available in Pakistan
and the advanced technology provided by the American partners, Shezan became a
pioneer in the field of converting fruits into pulps, concentrates and juices.

Today Shezan is the largest food processing unit having developed and installed the
capacity to meet the country's local as well as export needs. In 1971, Shahnawaz
group purchased all the shares of Alliance Industrial Development Corporation. The
company has since shown sustained growth in both domestic and export fields. In
1980-1981 a separate unit was installed in Karachi which now caters for Karachi,
Sindh and export demand.

A new bottle filling plant was set in 1983 in the Lahore unit, increasing the capacity
fivefold. An independent Tetra Brick plant was commissioned in 1987 making the
unit leading manufacturers with the comprehensive range of production in the fruit
processing field in Pakistan.

In the year 1990 it was decided to install a juice factory at the Hattar industrial
estate in North West Frontier Province of Pakistan. In order to take advantage of the
government incentive new wholly owned subsidiary of Shezan International Limited
was incorporated as Hattar Fruit Products Limited which was later merged into the
parent company. Complete bottling plant locally manufactured along with four lines
of Tetra Pak was installed, three are filling 250 ml juices and one line is for 1000 ml
packs. In all respects the subsidiary is now a complete unit and is manufacturing
the complete range of Shezan products except for pickles and canned products.
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PEST Analysis
PORTER five Forces Model:

Low Threat of
new entrants

Somewhat High Somewhat Low

power of the power of the buyer
Supplier suppliers

Rivalry among the

firms is high

Moderate threat
of the substitutes

(For detailed PORTER Analysis see

annexure)
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Political or legal forces:

If government imposes heavy taxes on the industry then it badly effects the
industry growth. The taxes are imposed from government side and it varies from
industry to industry. Currently juice industry has 16 % sales tax on it.

Labor laws:

Labor laws also effect the industry and government keep on revising the laws
related to labor force e.g. laws related to child labor and forced labor. Government
recently increases the minimum salaries of an employee to Rs. 7000. These laws
directly affect the industry.

Environmental protection laws:

Environmental protection laws also affect the industry. By law industries must treat
their wasted water and must not pollute the environment through smoke. All the
industries are to abide these laws.

Political instability:

The government’s stability plays a great role for any industry. In Pakistan,
government faces a lot of difficulties from terrorism, clash with Supreme Court and
other political issues like corruption and Swiss bank accounts. These all activities
effect badly on the industries and no one is ready to invest in the country. Recently
the electricity shortage problem, caused due to mismanagement and negligence of
government also created lot of problems to the operations of the industry.

Economic forces:

Inflation rate:

Now in Pakistan, the inflation rate is about 13.6 %. So if there is increase in inflation
rate than increase in prices of juices is obvious.
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Economic Growth Rate:

Economic growth rate of the country is 4.3% (2009 est.).

Social Factors:

Health consciousness:

Today people are more health conscious. As the awareness in people is rising they
are becoming more and more health conscious.

Demographic trends:

In Pakistan the population growth rate is 1.589 % and population is 184,404,791

(July 2010 est.)
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Age Structure:

Age % of Total
Structure Population

Up to 14 Years 36.7 %
Key 15 - 64 59.1 %

Indicators: Years

Above 65 4.1 %
Population:
184,404,791 (July 2010 est.)

Growth rate: 1.589% (2010 est.)

Birth rate: 25.3 births/1,000 population (2010 est.)

Death rate: 7.06 deaths/1,000 population (July 2010 est.)

Lifestyle Changes:

The lifestyle of people keeps on changing so it is very important to stay update with
those changes, it is very important to take the advantage and to attain and retain
the customers. Consumer adopts the trends of changing environment and because
of modernity as well as globalization. People are aware about each and every thing
happening around them.

Technological Forces:

New products:

Businesses are focusing on concentric and conglomerate diversification because in

present era it is not possible for any organization to exist in the market for long run
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by providing just a single product. Organizations have to be diversified to according

to changing demands of the customers and trends.

Product Innovation:

Product innovation is becoming more necessary for the organization because of the
globalization; people are becoming aware about the changes being taking place
around them and in order to respond them organizations have to focus on product
innovation by introducing new flavors or changes in packaging etc.

Productivity Improvement through New Technology:

Automation and new technology does not matter a lot but it does contribute
towards the productivity and improvement. It reduces labor cost and increase the
production level. New juice manufacturing and packing machines are on their way
to enter in the market, number of local suppliers and international suppliers
available with the advance and cost cutting techniques.

Market Analysis:

Currently in Pakistan, there are 24 fruit juice/pulp processing units and a number of
small units in the informal sector are working. The present installed capacity is
estimated around 400,000 metric tons per annum with a demand for juices growing
at a combined annual growth rate of 27 %. The fruit juice industry reported sales of
8.52 billion Rupees in year 2008.

Pakistani people drink approximately 2,500,000 liters juices per month and per day
it becomes 83330 liters.

The market of juices is growing as because the consumption of juices is growing

every year and expected to increase continually due to people’s changing lifestyle
and more health consciousness, they prefer juice, especially natural juice on other
soft drinks.

The market for Squashes in Pakistan is mainly influenced by branded competitors in

this specific product category. These competitors have firm distribution channels.
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As a majority of the country’s population is in lower-lower to lower-middle class, this

is the reason that people are more price conscious and secondly the also look for
the convenience of products due to this reason there is a demand shift observed in
the squash industry. The demand of Squashes is now limited only for few months in
major areas of country. The Business of Squashes in Lahore is at its peak between
May and November So Mitchell’s play a different strategy as far as region Lahore is
concerned but on the other side business in Karachi remains stale and on the same
level of graph thorough out the whole year thus Mitchell’s imply different strategy in
terms of Karachi. The reason of this limited demand according to the market
analysis is because that you cannot relate squashes with different occasions for
example the way red syrup Jam-i-Sheerin and Rooh Afzah are relating themselves to
Ramadan and Muharam, another big reason of the limited demand of the Squashes
is because of its usage which is limited up to a thirst quenching drink but red syrup
can be utilized in many ways apart from drinking such as toping, used in milk etc

McGahan Framework:
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According to this framework the juice industry falls in progressive change quadrant.
It is so because these days industry is facing evolutionary change and neither core
assets nor core activities face imminent threat of obsolescence. Change is occurring
in the industry as people are more health conscious these days and tends to buy
energy drinks or natural juices or nectar juices. This change is slow and within the
framework of the industry.
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VALUE CHAIN ANALYSIS

Value chain analysis is widely used to determine where cost improvements
could be made or value creation improved. This process involves the analysis
of all the activities starting from the raw material provisions to the
distribution of final product. That is why it is necessary to understand the
complete procedure of production and distribution.

ORGANIZATION VALUE CHAIN

All these activities are broadly categorized into two main heads, which are
Primary activities and Support activities.

Primary Activities:
The primary activities of the organization are grouped into five main areas:

Inbound logistics, operations, outbound logistics, marketing and sales &

services.

Service
Inbound
Outbound
Operations
Marketing &
logistics
Sale

Inbound Logistics:

Shezan has its own fruit farms for raw material. The raw material coming for
the production of juice reaches Shezan Juices in one to three days. However
the raw material related to packaging takes more lead time and it is planned
according to the lead time so that it is also received in time. The raw
material is then inspected and if the quality of raw material is not up to the
standards then it is rejected. If the raw material is in good quality then it is
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stored in the warehouse. The raw material is ordered in such a quantity that
it is enough for one week of production , because the juice production is a
continuous process and totally depends on the demand , therefore the raw
materials directly depends on the demand of the juices.

If the raw material is stored for more days, the quality of raw material starts
to decrease and therefore they have to keep small inventory of their raw
material in order to maintain the quality. Some of the delays are done in
receiving the raw material from the suppliers. It causes some delay in the
whole supply chain. It is sometimes due to late delivery, rejection of raw
material due to poor quality, due to unavailability of space in the warehouse
and most importantly moving the raw material in the warehouse and taking
it out of it.

Production:

The raw material is moved to the production area. First of all, the material is
sent to the boiler so that the pulp can be formed which is used to make the
final product. Then it is sent to the plate heat exchanger where the
temperature of the pulp is cooled down. When the temperature is cooled
down, the material is stored in the pulp storage tank. Then according to the
type of juice, the pulp is sent to the juice mixing tank where sugar, food
color, citric acid and other preservatives are added to make a certain
flavored product. Then this product is mixed thoroughly and sent to the
packaging line for packaging.

Packaging:

The juice is packed into different sizes like one liter pack, 300 ml packs, in
250 ml bottles. After the packaging, labeling is done on the bottles and then
they are packed according to the orders of distributors. Bottles are placed in
the plastic crates while the juice packs are packed in boxes. After the
packaging the finished product is stored in the cold storage so that the
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quality of juice is not reduced. The delay also occurs from moving the final
product from cold storage to the distributors.

Out bound logistic:

In Shezan Company the activities that include in outbound logistics are, they
establish their sale and distributive offices in big cities like, Lahore, Multan,
and Faisalabad etc. The final product is moved from cold storage and sent to
the distributors. Most of the delays in the overall supply chain occurs here. In
Lahore city, Shezan juices are distributing their product on their own. While
for the other cities they have hired different distributors. For distribution in
Lahore city, the salesmen reach the cold storage and the final product is
loaded on their transportation. They distribute the products to the retailers.

The distributors in Faisalabad, Multan who use their own warehouses for the
storage of Shezan juices and they have the distribution rights in their own
city. The problems arise when these distributors give the product to small
distributors for distribution. Due to this factor, the prices of the product
increase and the product reaches more time in reaching to the retail shops.
When the product doesn’t gets on the retail shops in time then Shezan has to
bear stock out cost.

Marketing & Sale:

As marketing is defined as the identifying the needs, wants and demands of

the customers and delivering the customer value and customer satisfaction,
it has a great impact on the success of any business.

As far as Shezan Company’s marketing analysis is concerned regarding soft

drink juices the company is delivering what the customers exactly want from
it. The company’s strategic planning is exactly in accordance with the
mission and goal of the company.
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As far as sales is concern, there is an export and marketing department,

who control and monitors the activities of regional sales offices of the
company that are situated in Lahore, Faisalabad and Multan. These regional
sales offices are responsible for effective distribution of the products of the
company. The marketing department is responsible for the marketing and
promotion of new and existing products of the company.
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Promotion:
Shezan using the following processes of distributions and they are using
these processes by following their plans:

• Billboards
• Televisions
• Radio
• Newspaper
• Broachers
• Internet
• User trials
• Free gifts
They are using the well fame people to advertise their products and give a
huge amount of the income for the earth quick victims and also provide the
discount benefit for the bulk buyers and they are providing free sample to
advertise their products.

Services:

The nature of the products not requires any significant level of services for
the customers. However, there is a formal system for taking corrective
actions upon the complaints of the customers. Proper feedback is given to
the customers who have any complaint regarding the quality of the Shezan
products.

Support Activities:
The support activities can be divided into four groups, which are
procurement, technology development, human resource management and
infrastructure.
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Procurement:
Shezan has its own fruit farms for raw material. The raw material coming for
the production of juice reaches Shezan Juices in one to three days. So the
planning and stores department is sufficiently performing the activity of
procurement with the collaboration of departments.

Technology development:
R&D and Process development researches are very important in food
groceries industry in Pakistan. So in the company value chain, this thing
should be emphasized much, rather it has a big contribution in total value
addition. The Shezan's working on the technology development on
continuous basis. The most advance and automation of the plant and
machinery is the top priority of the Shezan's fruit farms limited.

Human resources management:

Human resource management involves the training and development of
workers and employees in order to increase their productivity and efficiency.
For this purpose company make their employees to work with the senior
worker to get the experience, apart from this on-the job training, they have
separate training program for new employees. The company has good
planning, quality control systems and future orientation, which although
does contribute directly in value addition and increase the effectiveness of
whole process.
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Value-Chain Yes/ How Does Shezan Create Value for the

Activity No Customer
Primary:
Inbound Logistics Yes Shezan has its own fruit farms for raw material
Shezan is the largest food processing unit
Operations Yes having
Outbound
Logistics No
Marketing and
Sale Yes delivering what the customers exactly want
Service Yes Proper feedback is given to the customers
Support:
Procurement Yes Shezan has its own fruit farms for raw material
Technology automation of the plant and machinery is the
development Yes top priority
employees work with the senior worker to get
HRM Yes the experience
General Supportive participation from management at
administration Yes all levels of the co.
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Interdependency of Value chain of Shezan:

Inbound Outbou Gene

Logistics nd Tech. ral
Operati Logisti Mkt Servi Procure Develop HR Admi
ons cs &Sale ce ment ment M n.
Inbound
Logistics ∙ ↑ ↑ ∙ ∙ ↑ ∙ ∙ ↑
Operations ↑ ∙ ↑ ∙ ∙ ↑ ↑ ∙ ↑
Outbound
Logistics ↑ ↑ ∙ ∙ ↑ ∙ ↑ ∙ ↑
Mkt&Sale ∙ ∙ ∙ ∙ ↑ ∙ ↑ ∙ ↑
Service ∙ ∙ ↑ ↑ ∙ ∙ ∙ ↑ ↑
Procurement ↑ ↑ ∙ ∙ ∙ ∙ ∙ ∙ ↑
Tech.develop
ment ∙ ∙ ∙ ↑ ↑ ∙ ∙ ∙ ↑
HRM ∙ ∙ ∙ ↑ ↑ ∙ ∙ ∙ ↑
General
Admin. ∙ ∙ ∙ ↑ ↑ ∙ ↑ ↑ ∙

Interdependencies =
↑ No Interdependencies = ∙
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Is It Few
Resource/Ac Valuabl Is It substitute Difficult to
tivity e Rare ? Make
Inbound
Logistics Yes Yes Yes Yes
Operations Yes No No No
Outbound
Logistics No No No No
Marketing &
Sale Yes No No No
Service Yes No No No
Procurement Yes Yes Yes Yes
Technology Yes No Yes Yes
HRM Yes No No No
General
admin. Yes No No No

Resources of company and Competitive advantage due to

these resources:
Shezan is strong brand name with its loyal customers. Shezan, to be known
as leader of quality products in the region, initially launched only three
flavors of squashes which were (mango, orange and lemon). But in current
market it has 6 flavors (orange, mango, mix fruit, lemon and lemon barley,
pomegranate). Shezan was available in 735 ml. glass bottle but now it is also
available in pet bottle of 830 ml.

Complete backward integration in case of this company since it is the only

company that has its own fruit forms due to this Shezan is able to get fresh
fruits for their juices that increase the quality having low price as compare to
the other competitors. Taking advantage of abundance of fruits available in
Pakistan and the advanced technology provided by the American partners,
Shezan became a pioneer in the field of converting fruits into pulps,
Business Strategy

concentrates and juices. Today Shezan is the largest food processing unit
having developed and installed the capacity to meet the country's local as
well as export needs. A new bottle filling plant was set in 1983 in the Lahore
unit, increasing the capacity fivefold. An independent Tetra Brick plant was
commissioned in 1987 making the unit leading manufacturers with the
comprehensive range of production in the fruit processing field in Pakistan.

Company is getting edge with twist juices having different flavors. There is
60% natural pulp of fruits and only 40% acids are used in the manufacturing
of Twist Juices while regular juices are composed of only 15% fruit pulp and
85% acids. Twist juices is the product that is introduced in tetra pack
packaging with Pull Tab feature first time in Pakistan. Comprising of a blend
of different fruit juices (mango, apple, pineapple, fruit punch, strawberry,
raspberry) Shezan’s Twist juices opened the doors to a whole new worlds of
possibilities. Available in easy to drink slim packaging, Twist juices are a
must have in every household. These prove to be very refreshing to your
body in the hot days enriched with different healthy vitamins.

SALES TEAM:

The national market, particularly in the major cities was saturated with the imported
foodstuff. Although foreign fruit preserves, sauces and drinks were visible on the
shelves of the largest stores. It would appear that much of this merchandise
continues to be brought into the country through unofficial channels without
payment of imported duties. Despite these unhelpful conditions Shezan were able
to achieve a significant increase of over 10% in the sales of juices and soft drinks,
and succeeded at the same time in recording a marginal growth in our traditional
beverages business.

CAPITAL:

In the beginning they have invested around Rs.30 million in putting up modern
automated facility in the form of machinery. They purchased a new standby
generator in January 2005 at a cost of Rs. 14 million this should result in
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considerable savings in power bills. Internal cash generation and bank borrowing
have met the capital expenditure bill in full.

HUMAN RESOURCE

Human Resource has also the pivotal importance for the company. Management
and employee skills are constantly being updated through training courses and
study tours both at home and abroad. Currently Shezan’s is operating with 18
executive staff members along with a big sales and labor force.

R & D DEPARTMENT

The success of Shezan’s products, and the taste that has been winning consumers'
hearts for generations, is the result of the Company's ongoing investment in and
emphasis on quality control, reinforced by research and development (R & D). Both
sections closely coordinate with the Marketing and Exports Office in Lahore where
product concepts are initiated and passed on to the R & D section for formulation.
Once the R&D section has prepared samples of new products, the Marketing
Division carefully carries out product evaluation.

QUALITY CONTROL & TRAINING

Along with R & D, the Quality Control section ensures that all our products live up to
the consumers' high expectations. From selection of the finest fruits, to processing
and packaging, quality control plays a key role in keeping a vigilant and unrelenting
eye on every step of the process. The Quality Control staff, with a main up-to-date
laboratory, two line-control labs, ensures that there is no deficiency in quality
standards during production.

As the Company considers its employees it’s most important asset, management
skills are being constantly updated by sending executives on training courses and
study tours, both at home and abroad.
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EFE Matrix:
Results: The EFE total of 3.07 shows that Shezan is in good position to
handle the external factor’s impact on the company. (See annexure)

IFE Matrix:
Results: The IFE total 2.32 shows that Shezan needs to improve itself in its
strengths and try to eliminate its weaknesses. (See annexure)

IE Matrix

Total IFE

3.0 2.0

i ii iii

iv v vi

vii viii ix

3.0Total EFE 2.0

1.0

Score of IFE=2.32

Score of EFE=3.07
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Results:

IE Matrix of Shezan is telling us that the company is in “Grow and Build”

quadrant.

IE strategies:

Grow and Build

• Backward, forward, horizontal integration
• Market Penetration
• Market Development
• Product Development

Strategic Group Map

Price
Nestle
High

Low

Low High

Product
Range
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Haleeb
Nurpur
Shezan

We took two variables, brand awareness and quality, to draw strategic group map
of Shezan. To us, nestle is the current market leader in the juice industry and
Shezan follows it in this segment as Shezan lacks in advertisement and relatively
lower in financial position. Haleeb and Nurpur cover middle and lower middle class
of the society and low in brand image and quality.

Shezan’s Competitive Strategy

Initially Shezan launched only three flavors of squashes which were (mango,
orange and lemon). But in current market it has 6 flavors (orange, mango, mix fruit,
lemon and lemon barley, pomegranate). Shezan was available in 735 ml. glass
bottle but now it is available in pet bottle of 830 ml, complete backward integration
in case of this company since it is the only company that has its own sugar mill as
well in the name of Shahtaj Sugar Mills, Mandi-bahauddin. Shezan has the most
developed distribution channels network and therefore it has an advantage of
reaching maximum customers throughout Pakistan with the help of small retailers
as well as larger retailers. Shezan owns 60% of shelf space in all of the almost
16,000 outlets of Utility Stores Shezan is involved in advertisements and low cost
promotional campaigns which makes it a very generic brand name in the mind of
consumers when they are out shopping for squashes. Shezan is the largest food
processing unit having developed and installed the capacity to meet the country's
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local as well as export needs. Shezan has the highest production capacity as
compared to its competitors.
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CPM MATRIX FOR SHEZAN

Competitive Profile
Matrix
Nurpu
Shezan Nestle Haleeb r
Critical
Success weigh Ratin
Factors t Rating Score Rating Score Rating Score g Score
Advertising 0.2 3 0.6 4 0.8 2 0.4 1 0.2

Product quality 0.15 4 0.6 3 0.45 2 0.3 2 0.3

Price competitiveness 0.1 2 0.2 3 0.3 3 0.3 3 0.3

Management 0.1 3 0.3 4 0.4 3 0.3 3 0.3

Financial position 0.1 4 0.4 4 0.4 3 0.3 2 0.2

Customer loyalty 0.1 2 0.2 2 0.2 2 0.3 3 0.3

Global expansion 0.15 3 0.45 3 0.45 2 0.3 3 0.45

Market share 0.1 3 0.3 4 0.4 2 0.2 2 0.2

Total 1 3.05 3.40 2.4 2.25

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CPM MATRIX FOR SHEZAN

In the CPM the industry average take as 3.50, so the Nestle performing is the best
as compared to their competitors in juices.

Shezan is at second place. It deals in nectar juices, flavored juices and targets the
lower income group of the population and its all sales is due to customer loyalty.

Haleeb lunched its juices few years ago but their performance is good and it is in
third number in field of juices due to their pure and nectar juices with high quality
and reasonable prices.

NurPur, being an unknown brand falls at number four.

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Sr. Company Generic Strategy

#
1 Shezan Differentiation

2 Nestle Differentiation focus

3 Haleeb Cost Leadership

4 Nurpur Cost Focus

As know that nestle is using differentiation focus strategy as it focuses on its

research and development to identify new niches in the market and to enter in
them. Nestle selects a segment do research and develop strategy to enter that
market through differentiated product. Nestle achieve competitive advantage by
dedicating itself to these segments exclusively. The essence of focus is the
exploitation of a particular market niche that is different from the rest of the
industry. Nestle might expect narrow focus itself (“being different”) is simply not
sufficient for above average performance. Nestle focuses differentiation strategy to
improve competitive position. But there are some disadvantages if this strategy is
not properly used. As if we select the niche with too much rivals it will be easier for
the competition to imitate it easily in a shorter span of time as if nestle launches
some new product Shezan immediately follows it and hence nestle loses its
competitive advantage. Shezan uses the research and development of nestle and
captures its share from the market. But it shows that Shezan is following the Nestle.
This is a weakness in itself because it shows that Shezan has the potential to
become market leader but they do not try to do so.

The strategy of Shezan gives advantage as there are number of suppliers in the
market that supply material to the industry. But Shezan gets its raw material from
its on farms to get the advantage over its competitors and to reduce the suppliers
bargaining power (Backward integration). Shezan provides the same product as its
competitors are providing, as bargaining power of buyer is low and many
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substitutes are available in the market with slight differentiation which do not
makes difference so Shezan captures the market share of the competitors. Shezan
competes its competitors like nestle and Haleeb is discussed in the above
paragraph.

Shezan
Industry Industry Life Cycle

To us the juice industry is at growth stage as new research and development is

taking place and people are getting more conscious about their health these days.
People tend to buy natural juices rather than buying carbonated drinks. Shezan is
also at growth stage by following the Nestle.
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Reference: Interview with Mr. Fayyaz, Assistant Manager Marketing, Shezan

Business Strategy

Mission statement:

“Our mission is to provide the highest quality fruit and vegetable

related juices and products to retail and food services customers.
We will accomplish this by maintaining a tradition of pride in our
products, growth through innovation, integrity in the
management of our business and commitment to team
management and quality improvement process.”

Market Oriented Mission:

We are committed to supply our customers with the finest, high-

quality products and to lead the industry in ….

Product Oriented Mission:

Our mission is to set up an industrial undertaking for the

manufacturing of juices i-e

• Sweet and Sour

• Fresh and refreshing
• Rich in vitamins

Setting company objectives and goals;

Long-term Objectives

As our company produces variety of juices with competitive

market prices to make market stable for long period of time and
company has expanded its production capacity and exports. For
long term objective company set units in different cities for the
comprehensive range of production in the fruit processing field in
Pakistan.

Loyalty:
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Our company wants to serve with the best quality in juices in

Pakistan as in foreign countries to gain customer loyalty.

Customer preference;

Our company also considers the customer preferences their

likeness and dislike ness and will always consider the customer
needs with the passage of time i-e taste, different packaging sizes
(100ml, 250 ml, and 500 ml)

Marketing objectives:

• Maintain positive, steady growth in each quarter

• Experience a growth in new customers who are turned into
long-term customers.
• Realize an increase in occupancy in each subsequent year

Financial objectives:

• A double digit growth rate for each coming year

• Reduce the variable cost
• Continue to decrease the fixed cost
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Competency Tree of Shezan

Ispaghol
Sauces
Squashe
Fruits
Ketchup
Marmalade
Juices
Chutney
Jams
Salt
Jellies
Pickles
Pickles
Vegetables
Twist,
Ispagho
Sal
Sauce(Cans)
Pickle
Juice
Jam (in
Ketchu(in
Pickle
JamMango
Superior
ts Rich
vinegar)
loil)
s(Cans)
Juice
p
s s

Quality
Taste
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Corporate Level Strategy:

Shezan uses related diversification strategy to grow its business. Shezan is owned
by Shahnawaz group of industries. Shezan buys sugar from the shahtaj sugar mill,
owned by Shahnawaz group. Shezan have its own fruit farms to fulfill its needs.
Shezan also have its own cod storage to store the raw materials. These all related
diversifications provide Shezan an edge over its competitors. Shezan creates value
for its customers by providing quality and rich in taste products. It has centralized
organizational structure; all the operations are controlled by the Lahore central
office. The related diversification provides Shezan to create its core competency
over its competitors. The brand manager at Shezan told that they focus on R & D
and quality assurance to maintain their taste and high quality.

Backward
Integration

Benefits of Related Diversification:

The benefit of related diversification that gave Shezan a competitive edge is its
pooled negotiation power that it achieves through bulk buying for its different
products as sugar is major ingredient of its most products. It also provides Shezan
with secure supply of raw materials. Simplified procurement and administrative
procedures helps Shezan in eliminating the need to deal with various suppliers and
distributors. This gave Shezan with a chance to focus on new business opportunities
and as a result Shezan, in few years launched few new products e.g. energy drink,
carbonated drink, new flavors in Shezan twist, Ispaghol, salt etc.

Shezan’s Business Portfolio:

Shezan is a customer oriented organization so it is manufacturing the

products for every kind of consumers. Shezan have a very rich brand
Business Strategy

portfolio with national and international brands. In order to provide their

customers the wide range of products Shezan is using every kind of
management strategies.

One of the core competencies of Shezan is their variety of products; they

are using branding strategies in order to compete with rivals of the
products, multi branding, brand extension and line extension. The wide
range of products of Shezan is a major contribution towards the success of
the company. The current portfolio of Shezan is as follows:

Change in Business Portfolio:

As we know that the change process t Shezan is evolutionary, so it keeps on adding

new flavors to its businesses. Recently it introduced three new products in past few
years; it is because company uses growth strategy to enhance its business and also
it believes on evolutionary change.
Business Strategy

Change process in Shezan:

As it is said that,

“Change is the only constant in our life.”

It is very important for any business to keep on changing itself according to the
need of the environment and keep improving itself accordingly. In Shezan, if it is
surviving in the industry, it means it is adopting change in it. We analyzed that
Shezan follows a continuous change process rather than discontinuous change
process. It is observed that after every two to three years Shezan launches a new
product according the need of the market to keep innovating itself. Shezan
launched Ispaghol and salt about five to six years back. After that it launched
Shezan twist in the market. After one year it added two new flavors to Shezan twist.
Shezan launched its energy drink with the name of “Speed” about two years back.
In last year it launched its carbonated drinks with flavors of apple, lemon and cola.
These all things shows that it keeps on adopting the change according to the need
and market trends.

After all the above analysis we concluded that Shezan is adopting the continuous
change strategy because it is more helpful in long term because discontinuous,
dramatic change works only for short time. The research and development
department of Shezan is very strong and keep eye on the market trends and adapt
change as it is required. It means that Shezan apt evolutionary change process.

Emphasis On Continuous Change

Perspective
Magnitude of Moderate, Piecemeal,
Change Undramatic

Pace of Change Gradual, Steady, Constant

The Magnitude of Change:

Scope of change:
Business Strategy

In continuous change perspective, the high number of piecemeal adjustments

needed to be done, with broader scope of change, the scope of each individual
change may be narrow.

Amplitude of change:

Evolutionary
Scope of Change
change
needs Broad Narrow
gradual
A
m
pl Revolutionary Focused Radical
Hig
it Change Change
h
u
d
e
of
C Comprehensive Evolutionary
Lo
h Moderate Change Change
w
a
n ⃝
g
e
development out of present situation by the means of moderate steps. The
amplitude of change should be low.
Business Strategy

We have seen that Shezan has gone under evolutionary change with narrow scope
of change in short term but low amplitude of change, thus seeking evolutionary
change.

The pace of change:

We have seen that the tempo of change demands a constant rate of change without
interruption at steady pace. The timing of change is also very important because it
is very important to keep on changing as it is needed rather than taking a giant leap
at once. Here in Shezan we observed that the pace of change is at steady pace and
in time.

Steps taken to increase core competency:

Shezan is very keen to focus on its core competency. It has a good

research and development department to conduct continuous research in
new product development as well as focuses on changing market trends in
Business Strategy

the industry. The launch of new flavors in Shezan twist juice, launch of
energy drink, launch of carbonated drinks shows that Shezan is taking
steps to keep pace with change on real basis.

Detailed Financial Analysis

Financial ratios are a valuable and easy way to interpret the numbers found in
statements. It can help to answer critical questions such as whether the business is
carrying excess debt or inventory, whether customers are paying according to
terms, whether the operating expenses are too high and whether the company
assets are being used properly to generate income.

When computing financial relationships, a good indication of the company's

financial strengths and weaknesses becomes clear. Examining these ratios over

time provides some insight as to how effectively the business is being operated.

*(For detailed financial analysis see annexure)

Business Strategy

Summary of Financial Analysis

Financial Ratios 2009 2008 2007

leverage ratios

Debt to total asset ratio 0.43 0.44 0.45

Debt to equity ratio: 9.6 9.5 8.75

Long term debt to equity ratio: 0.77 0.86 1.15

Activity Ratios

Inventory turnover: 2.61 2.45 2.43

Total Asset Turnover: 2.01 1.89 1.49

Profitability Ratios

Gross Profit Margin : 28.38% 32.29% 31.49%

Operating Profit Margin 5.88% 10.87% 12.44%

Net Profit Margin: 3.75% 6.53% 6.46%

Return on Asset: 7.57% 12.32% 12.56%

Return on Equity: 13.17% 21.88% 22.49%

Earnings Per Share: 17.08 26.87 28.13

Growth Ratios

Sales Growth: 10.54% 13.50% 14.01%

Net Income Growth: -36.43% -14.59% -18.58%

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The Du Pont Analysis:

Net profit margin = net income / sales

2009= 102471 / 2728709= 3.75%

Total Asset Turnover = sales / total asset

2009 = 2728709/ 1354385 = 2.01 times

Equity multiplier = Total Assets / Total Equity

2009=1354385 / 777820 = 1.74 times

ROE=Profit margin * Total Asset Turnover * Equity Multiplier

= 3.75% * 2.01 *1.74

= 13.11%

This 13.11% ROE is exactly what we had before.

The Du Pont identity tells us that ROE is affected by three things:

1. Operating efficiency (as measured by profit margin)

2. Asset use efficiency (as measured by total asset turnover)
3. Financial leverage (as measured by the equity multiplier)

Financial Conclusion:
Business Strategy

The conclusion of the financial position of the Shezan Company is not good as we
have seen that the sales are increasing from 2008 – 2009 but the profits of the
company is decreasing because the company net profit growth goes negatively.
And we have also seen the decrease in the profitability, liquidity, cash and other
ratios of the company. Some of the ratios are increasing but not much effected. This
shows that the company sales are increasing but there are some other factors
involved in it which affect the company negatively. The company overall financial
position is decreasing. We have seen the increase in the average inventory sales
period, average collection period. The company return on assets and return on
equity also decreases. We have seen the increase in the total assets turnover which
shows positive impact on the business. But if we overall look at the financial
position of the company then we say that the financial position of the company is
bad. In simple words we can say that the company is not going in right direction.

Six Year Review at a Glance

According to Six Year Review at a Glance analysis (see annexure) we find that
Shezan Company made continues sales increase in last 5 years because of new
product development. According to interviewee before 2005 company had not
growth infect company gone for diversification. But the acceptance of the new
product in the market Shezan establish again and sale grownup another time.
Interviewee said that we follow the market trend and develop the product according
to market demand. Sales are goes high because of comparatively good quality and
taste. Since 2005 to 2010 sales are in growth as per graph (see annexure) but on
other hand 2005 to 2008 the profit margin was increasing and on 2009 and 2010
profit margin went down. The main reason for that is the increasing of expenditure.
Another big reason is electricity failure in Pakistan. Company bears a hedge cost for
standby guarantor and other over head charges. Distribution cost increases every
year and also increases procurement and supply cost because of increase in fuel
prices.

Our Analysis:
 Business Strategy

After analyzing the whole data and information provided to us we have seen that
Shezan is in growth phase and it is responding to its external environment
accordingly. It has adopted those strategies that are needed in this phase. They are
growing and facing a change process with steady pace. It is very important for an
organization to respond to its external environment accordingly, Shezan has some
problems that need to be focused. As competition in the market is rising day by
day, these days one has to be on your feet all the time. We analyzed grand strategy
matrix and TOWS matrix, suggests some strategies that are being used by the
Shezan. W also found in Shezan’s BCG matrix (See annexure for TOWS, Grand
Strategy, BCG) that it has bottle juice as star, packet juice as cash cow, pickles at
dogs’ quadrant and jams and pickles are at question mark. Shezan needs to be
focus on them. We found some problems with their lower end of supply chain, they
are lacking in the integration of the different departments. The gap analysis is
discussed as below.

GAP Analysis:

Some of the problems that we have observed in their distribution are:

• Their overall Distribution is not properly integrated. They are not sharing
information with each other. The logic behind identifying this problem is that they
have their own farms and they are getting most of their raw material for the
production from their own suppliers. And sometime when the raw material is
reached at the warehouse for storage, the quality of fruits is not up to the standard
and therefore they have to reject the supply.

The point is, if they have their own supplier why can’t they check the quality of their
raw material before dispatching it to the production plant. They are not sharing
information and that’s why when the supply is rejected, they have to face loss of
time and their production has to face lack of raw material.

• Second problem we observed in their Distribution is their distribution channel. The

main problem in their distribution channel is that they are not able to provide the
delivery on time. Due to this reason the retailers have to face out of stock, and in
Business Strategy

return the customers purchase the substitute product of another brand. Due to this
problem, retailers prefer to have other brands on their shelves rather than keeping
Shezan juice on it.

And even those retailers who are keeping the shezan’s product on their shelves,
they are not keeping more stock as compare to other brands. According to the
retailers, when they order for the supply of Shezan juices, the distribution vans are
late most of the times in delivery the product. So the customers either return back
or most of the times they switch their brand and then they do not demand for
Shezan Juice.

Some of their sales vans are on contract basis and they work for Shezan only in the
summer season when the demand is high. That’s why when they are called to pick
up the supply from the cold storage, they do not come on time and after picking the
product they are late in delivering the products to the retailers. Because they have
no long term relations with the sales vans, that’s why they have to face these
problems.
 Business Strategy

Suggestions

• First of all they have to improve their overall supply chain. They have main
problems in their supplying side and the distribution channel. The problem of their
raw material can be solved if they start inspecting their raw material for pulp
formation at the farm before dispatching the supply. And they should use better
trucks in which the quality of the fruits is not damaged. And when they temporary
store their raw material in the warehouse, they must not store it for a long time and
they should keep it in a dry and safe place.

• They should reduce their inventory of fruits to a minimum level and move towards
the just in time supplies. In this way they will be able to save the time which is
wasted after rejection of raw material due to poor quality or poor handling or poor
storage. Their major delays in their supply chain are at the raw material incoming
and in cold storage waiting for distribution.

• They should make their relations with the salesman on long term basis, and not on
short term contract basis. Because then they are hired for short term, they do not
give the productivity which is needed in the full demand season. They are not able
to deliver on time and that’s why they lose their next orders from retailers. They
should make long term relations with their salesmen and they should be trained
well so that they can deliver the products on time.

• And for other distributers like in Faisalabad and Multan, they have to discourage
them to not give the product to smaller distributors for distribution. Because in this
way they are facing two main problems, one is that it takes more time for the
product to reach to the retail shop and secondly when the product is reaching the
retailer after passing through two distribution channels , the price of their product is
increased as compare to Lahore city. When the customers have to pay more for the
same product, they will start switching to other brands.

• Right now, they have a centralized distribution center in Lahore. They are
distributing the products from the production plant facility. They should focus on
primary and secondary distribution centers so that the On Shelf Availability of their
Business Strategy

products in the markets and shops is increased and their existing customers do not
switch to other brands.
Business Strategy

Conclusion

As according to what we observed from the Shezan’s Strategies we have found that
Shezan is sometimes proactive and some time it adopts reactive approach. Shezan
is very much conscious and careful about its sales and about the customer
satisfaction level and since 1964 they tried to maintain a same graph of satisfaction
level and give customer a quality, fresh farm products direct from their own farms.
Shezan is very much concerned about its SWOT analysis and keeping a closer eye
on every action it can take for the better of its products.

Every SBU has its own strategies to make and to implement and here at SBU level
business strategy focus more narrowly on their own products. The MD plays an
important and central role for the strategic planning to be more effective not just as
a MD but also as a strategic thinker and corporate culture leader.

Shezan’s management deals with developing a marketing mix to serve a designated

market. Their main focus is on the strategies at SBU level where Shezan make their
strategies considering three forces:

• Customer
• Competition
• Corporation

And in addition to this internal and external factors also play an important role to
develop strategy.

Shezan is concerned about the external information pertains on social, economic,

political and technological trends and product/market environment. The information
is analyzed to identify the SBU’s strengths and weaknesses, which together with
competition and customer define the objective of SBU.

Shezan is also very concerned about the Corporate Appraisal and for this they keep
a closer interact with all the groups of corporate publics having a stake in the
organization. In this context Shezan is very much concerned about the Financial
Business Strategy

Position of the company. And they evaluate this factor very closely for the further
decision making of their products.
Business Strategy
Business Strategy

Annexure:
Business Strategy

External Factor Analysis

External Factors Weig Ratin Weighted Comments

ht g Score

Opportunities

Value of dollar in world markets

Make good
0.06 2 0.12 profits

Minimal effect
if company is
Stock market trends 0.08 2 0.16 growing

Good facility to
Social security program 0.08 3 0.24 employees

To get more
Attitude towards product customer
quality 0.08 4 0.32 satisfaction

For health
conscious
Social program 0.05 3 0.15 people

Number of high school and

college graduates by Highly growing
geographic area 0.08 2 0.16 segment

Waste management 0.08 4 0.32 CSR

Business Strategy

Follow rules
properly to get
Import export regulations 0.08 2 0.16 exemptions
Business Strategy

THREATS

Rising price of
Inflation rate 0.08 1 0.08 sugar

Turnover rate
can be effect
because of
Unemployment trends 0.08 1 0.08 unemployment

Market
Price fluctuations 0.08 3 0.24 situation

Insatiability of
Tax rates 0.05 2 0.1 govt. policy

May increase
Oil & gas regulatory authority transportation
(ogra) price review 0.06 2 0.12 cost

Effect our
Water pollution 0.06 2 0.12 position

Total 1.00 3.07

 Business Strategy

Internal Factor Analysis

Internal Factors Weig Ratin Weight Comments

ht g ed
Score
Strengths

Experienced
marketing and
Qualified Staff 0.05 4 0.15 finance staff

Strong
advertiseme
nt budget up
Advertisement 0.02 3 0.02 to 150 Million

Every year
increase
targeting
more
Increasing Inventory turnover rates 0.06 3 0.18 customer

Major
ISO certification 0.08 4 0.32 strength

Best quality
Better Product Quality 0.06 3 0.18 product

Very strong
maintained
Strong Financial Position 0.09 4 0.18 earning

Increase market share 0.05 3 0.15 More shares

than its
 Business Strategy

competitors

Listed
company
easily rise its
Public listed company 0.06 3 0.12 capital

Almost half of
the total
revenue by
Global operation 0.08 4 0.16 exporting

Weaknesses

0.0 Needs to build

Lack of company outlet or stores 0.04 2 8 up new stores

No up dated
No Online business 0.05 1 0.05 information

Shezan is
market
Lack of innovation 0.08 2 0.16 follower

Low variety Limited

product
0.09 2 0.18 range

Low employee moral Low

incremental
0.07 2 0.14 benefits

Lack in
management
Inefficient distribution management 0.07 2 0.14 procedure

Price is
Price Competitiveness 0.05 1 0.05 slightly high
 Business Strategy

Total 1.00 2.32

Business Strategy
 Business Strategy

STRENGTHS(S) WEAKNESS (W)

• Shezan offer high quality

TOWS products especially pure • Less promotional
juices in market. activities for its juice
• Shezan is one of the products.
Matrix largest FMCG Company. • Lack of innovation.
• Management team of • Shezan Company has
Shezan Shezan Company is very very high prices in
strong and educated. pure juices.
• Shezan have strong • No online Business
positioning in customer • Inefficient
mind. Distribution
• Shezan have large
distribution network all
over the Pakistan.

SO Strategies WO Strategies

OPPERTUNITIES (O) • Extensive

marketing
• There are a lot of
campaign.
untapped markets in
different areas of • Market
Pakistan.
development
• The concentric
diversification in (S1,O1)
different juices products. • Product
• Backward integration can
development (S4,O5)
use in juice products
• It can become multinational and can
target different market of different countries.

ST Strategies WT Strategies

• Positioning as quality • Increase budget on

product among packaging &
consumer.(S1,T1) promotional activities
• Acquiring the local (W1,T1)
competitors(S5,T3)
•• Usage rate of juices is
increasing

THREATS (T)

• There is strong competition in food products market.

Business Strategy
• Different strategies adopted by competitors Nestle in
juices products
• New product advancement by different competitors.
Business Strategy

SIX YEAR REVIEW OF

SHEZAN AT A GLANCE

Grand Strategy Matrix

of Shezan
Year
2005
Year
2006
Year
2007
Year
2008
Year
2009
Year
2010
Rupees in thousand
Income
Sales 13677 17980 21748 24685 27287 35281
63 05 94 72 09 34
other operating 11737 18608 13240 19880 20155
income 19448
1379 1816 2122 2488 2748 3547
473 613 134 452 864 542

Expenditure

cost of sale 91076 12375 14898 16914 19744 25917

9 66 45 43 46 90
distribution cost 24843 33288 35754 44719 44386 68190
0 9 9 1 2 5
Finance cost 4112 8942 12940 8104 6542 17950
Other Operating expenses 40391 50786 70145 73317 71995 90718
and share of loss 1203 1630 1930 2220 2496 3382
702 183 489 055 845 363

Profit before 17577 18643 25765 26839 16057 16521

Taxation 1 0 5 7 0 9
11698 10719
Taxation 72134 70302 1 5 58099 58474
Profit after 1036 1161 1406 1612 1024 1067
Taxation 37 28 74 02 71 45

paid-up capital 50000 50000 50000 60000 60000 60000

Reserves & inappropriate 42889 49002 57569 67689 71917 79011
profit 4 2 6 8 1 6
Unrealized
gain/loss -250 50 -284 -200 -1351 -1978
remeasurement of
investment
available for sale

Share holder equity 47864 54007 62541 73669 77782 84813

Business Strategy

4 2 2 8 0 8

breakup value per share in 108.0 104.2 122.9 129.6 141.3

rupee 95.73 1 4 2 3 6
Earnings per share in
rupees 20.73 23.23 23.45 26.87 17.08 17.79
Cash distribution per share
in rupees 7.5 11 11 10 10
Bonus per Share 0 0 0 20% 0 0

SALES

PROFITS
Business Strategy

EXPENDITURE
Business Strategy

•
Business Strategy

BCG Matrix of Shezan

Business Strategy

Liquidity ratios

Current Ratio:
The current ratio is an excellent diagnostic tool as it measures whether or not your
business has enough resources to pay its bills over the next 12 months. The formula
is:

Current ratio = Current assets/Current liabilities

2009= 1043406/530603= 1.97 times

2008= 1002615/ 519497= 1.93 times

2007=836031/437654=1.91 times

The current ratio of the Shezan Company is good it shows that the Shezan
company has the more current assets in order to meet its short term bills. It shows
the positive impact on the company but if we compare it with the previous year
then we have found the increase of 0.04 times in the company current asset which
is good for the company.

Quick Ratio:
The quick ratio, sometimes called the acid-test, is a more stringent test of liquidity
than the current ratio. This is because it removes inventory from the equation.
Inventory is the least liquid of all the current assets. A business has to find a buyer
if it wants to liquidate inventory, or turn it into cash.

Quick ratio = Current Assets - Inventory/Current Liabilities

2009= 1043406- 755711/ 530603= 0.54 times

2008= 1002615- 689438/ 519497 = 0.60times

2007=836031-610903/437654=0.62 times

The quick ratio of the company is decreasing in 2009 as compared to 2008. The
decrease in the quick ratio is not good for the Shezan Company it shows bad impact
on the company. But in 2009 we have seen from the ratio that the company does
Business Strategy

not need to rely on their inventory to meet their short term liabilities. And this
shows a positive impact on the company if it does not lose more.

Cash Ratio:
The cash ratio is an indication of the firm’s ability to pay off its current liabilities if
some immediate payment is demanded.

Cash ratio = cash / current liabilities

2009= 70844/ 530603 = 0.13 times

2008= 84042/ 519497 = 0.16times

2007=108186/437654=0.24 times

The cash ratio also decreases in 2009 as compared to 2008 which means that the
company does not have much cash to meet their short term obligations. So, the
company has to rely on the other current assets in order to meet their short term
obligations. This will affect the company negatively. Because if some immediate
payment is demanded then the company does not have the cash to meet this.

Net Working Capital Ratio:

A measure of both a company's efficiency audits short-term financial health. The

working capital ratio is calculated as:

2009= 1043406 – 530603 = 512803

2008=1002615 –519497 = 483118
2007=836031-437654 = 398377

As in both years the working capital is positive which shows that the company has
the ability to pay off its short term liabilities. As we have seen that the working
capital increases in 2009 which affect the company positively. On other hand the
positive working capital shows that the company will continue its operations and
has sufficient balance to meet upcoming operational expenses. And this affects the
company positively.
Business Strategy

Leverage ratios

Debt to total asset ratio:

It is the percentage of total funds provided by creditors.

Debt to total asset ratio = Total debt / total asset

2009= 576565/ 1354385 = 0.43times

2008= 571355/ 1308055= 0.44times

2007=494935/1120347= 0.45 times

If it is between 0.5 to 0.6 then it is efficient and best for the company but if it is
more than the 0.6 then it is risky and if it is below the 0.5 then it is inefficient. So in
this company the result in 2009 is 0.43 and in 2008 the result is 0.44 then we can
say that the company’s performance is better.

Debt to equity ratio:

It is percentage of total funds provided by creditors versus by owners.

Debt to equity ratio = total debt / total stock holders equity

2009 =576565 / 60000 = 9.6times

2008 = 571355/ 60000=9.5 times

2007=437654/50000=8.75 times

Long term debt to equity ratio:

Long term debt to equity ratio = long term debt / total stockholders equity

2009= 45962/ 60000= 0.77times

2008= 51858/ 60000= 0.86times

2007=57281/50000=1.15 times
Business Strategy

Equity Multiplier:
It is the ratio of the total assets to the total equity. It tells us about how much the
company has assets for the equity. It can be calculated as:

Equity multiplier = Total Assets / Total Equity

2009=1354385 / 777820 = 1.74 times

2008 = 1308055/ 736700= 1.78 times

2007= 1120347/625412=1.79 times

Activity ratios

Inventory turnover:
It tells about whether a firm holds excessive stocks of inventories and weather a
firm are slowly selling its inventories compared the industry average.

Inventory turnover = CGS / Inventory

2009 = 1974446 / 755711 = 2.61 times

2008 = 1691443/ 689438= 2.45 times

2007= 1489845/610903=2.43 times

If it is above the previous year then it is best for the company so in this company
the ratio is above the previous year so we can say the company is going well.

Days Sales in Inventory ratio:

Business Strategy

The days’ sales in inventory tells you the average number of days that it took to sell
the average inventory held during the specified one-year period

Days Sales in Inventory = 365 days / Inventory turnover

2009= 365 / 2.61= 140 days

2008= 365 /2.45 = 149 days

2007=365/2.43=150 days

This shows that the company takes 149 days to sell the average inventory in 2008
and it increases to 140 days in 2009 to sell the average inventory held during the
specified one year period. This decrease in the average number of days shows that
company is doing its operations well.

Fixed Assets Turnover:

A financial ratio of net sales to fixed assets. The fixed-asset turnover ratio measures
a company's ability to generate net sales from fixed-asset investments

Fixed assets turnover = Net sale / Net Fixed Assets

2009= 2728709/ 310979= 8.77 times

2008= 2468572 / 305440= 8.08 times

2007=2174894/284316=7.65 times
Business Strategy

Total Asset Turnover:

It tells about the sales productive and plan and equipment utilization.

Total fixed asset = sales / total asset

2009 = 2728709/ 1354385 = 2.01 times

2008 = 2468572 / 1308055= 1.89 times

2009= 2174894/1120347= 1.94 times

So if the result is more than 1 then it is healthy for the company and if the result is
below the 1 then the company is weak and inefficient so in this company the result
is more than 1 in both years so we can say the company is efficient and healthy.

Profitability ratios
Gross Profit Margin:
It tells about the total margin available to cover operating expenses and yield a
profit.

Gross profit margin = Gross Profit / sales

2009 = 774408/ 2728709= 28.38 %

2008 = 797009 / 2468572= 32.29 %

2007= 685049/2174894= 31.49%

If it more than the previous year then it is best and healthy for the company. But for
this company we have seen that it is increasing in 2009 as compared to 2008 which
means that the company is performing well. And the impact of increase in the Gross
profit margin will positively affect the company.

Operating Profit Margin:

It tells the profitability without concern for taxes and interest.
Business Strategy

Operating profit margin = EBIT / Sales

2009 = 160570/ 2728709 = 5.88 %

2008 = 268397/ 2468572 = 10.87 %

2007= 270595/2174894= 12.44%

It is not better than the previous so the company is not in good position.

Net Profit Margin:

Net profit margin = net income / sales

2009= 102471 / 2728709= 3.75%

2008 = 161202 / 2468572 = 6.53%

2007= 140674/217489=6.46%

It tells the after tax profit per Rs. of sales. It is better than the previous so the
company is in performing well.

Return on Asset:
Return on asset = net income / total asset

2009 = 102471 / 1354385 = 7.57 %

2008 = 161202 / 1308055= 12.32%

2007=140674/1120347=12.56%

It tells after tax profit per dollar of asset and also called ROI. It is not better than the
previous so the company is not healthy and performing efficiently.
Business Strategy

Return on Equity:
Return on equity = net income / total stock holders’ equity

2009 = 102471/ 777820= 13.17 %

2008 = 161202 / 736698 = 21.88%

2007=140674/625412=22.49%

It tells after tax profits per dollar of stockholders investment in the firm. We have
seen a much increase in it. So it will show good impact on the company. This shows
that the company is performing well.

Earnings per Share:

Earnings per share = net income / number of share of common stock outstanding

2009 = 17.08

2008 = 26.87

2007=28.13

It tells the earning available to the owners of common stock. It decrease in 2009
and it shows that the company is doing its operations not well.

Growth ratios

Sales Growth:
Sales growth = current sales – previous sales / previous sales

2009 = 2728709 –2468572 / 2468572 = 10.54 %

2008 = 2468572 - 2174894 / 2174894= 13.50 %

2007=2174894-1798005/1798005=14.01%
Business Strategy

It tells the firms growth in sales. It is below than the previous year so it is bad for
the company.

Net Income Growth:

Net income growth = current N.I – previous N.I / previous N.I

2009 = 102471- 161202 / 161202= -36.43%

2008 = 161202 – 140674 / 140674 = -14.59%

2007=140674-116128/116128=-18.58%

It tells the firm growth rate in profits .so the profit growth rate is not better than the
previous year so the company is not going in good direction.
Business Strategy

References:

www.scribd.com

www.shezan.info

http://www.indexmundi.com/pakistan/

http://downloadsoftwarestore.com/program/screenshot/46344

http://blog.accountingcoach.com/days-sales-in-inventory/