Management and Marketing Practices at Engro Foods Limited

Submitted to: Mr. Mirza Sardar Hussain Submitted On: 12-01-2011 Submitted By: Muhammad Waqas Abid Soleja Muhammad Haisam Jehangir Kaleem

Contents
Background ..................................................................................................................................... 3 Sales and Marketing practices Across Nations ............................................................................... 4 Sales and marketing practices- Pakistani perspective ..................................................................... 5 Engro Foods Limited An in depth study ...................................................................................... 6 Conclusion .................................................................................................................................... 10 Bibliography ................................................................................................................................. 12

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Abstract
The purpose of this report was to increase our knowledge about the management and marketing practices at Engro foods Limited, also comparing their practices with other countries. We also identified the possible reasons for engros success, apart from this the report focuses on the organizational structure of Engro Foods and how they have incorporated the hofstedes values in their organization. The data comprises of both primary and secondary data, interviews were conducted from Mr. Babar Sultan VP Engro Foods and Mr.Ghazali RSM Omore ice cream. Secondary Data was gathered from multiple sources. This report will hopefully help all the students understand Engro Foods better as an organization keeping in light the factors that we have discussed

Background
Engro Foods Limited (EFL) was established in the year 2004 as part of a diversification process at Engro Corp. EFL formally launched its first product, Olpers milk in March 2006 and since then it has never looked back, within a short span of four years it has successfully launched Olwel, Tarang Omore, Olfrute and Owsum. To ensure high quality standards, Engro foods have invested heavily in its processing and production facilities. At present it has two state-of-the-art processing units in Sukkur and Sahiwal, along with an ice cream production facility in Sahiwal. Engro foods vision is to pursue growth opportunities provided by the country and its own competitive edge. EFL positions itself to leverage its corporate social responsibility initiatives and work closely with rural communities to promote integrated farming and livestock development. EFLs vision: "Our vision is to become a fast expanding mega foods company. To achieve our vision, the company will initially focus on dairy by investing a substantial amount in plant, milk collection capability and marketing. We are making concrete efforts to expand in and beyond Pakistan; through strategic international alliances, to eventually become global."

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Sales and Marketing practices Across Nations American Practices Traditionally, American marketing had focused on the traditional family and its values, but owing to demographic and psychographic shifts that have shortened the family unit, marketing has changed its focus to increased quality of life, moral standards, balancing family and work, health, and personal meaning. As a result, American selling and marketing practices have recently suffered from the stigmatic allegations of Puffery and Advocacy. The American "inyour-face" marketing, which treats people everywhere as perpetual consumers, drives U.S. free market materialism at the expense of local traditions and values, and seeks to "McDonald-ize" the entire globe (Johansson, 2004). German Marketing Practices Marketing activity in Germany is usually personalized to appeal to the consumer as well as build the distribution chain for the product. The marketing strategy in Germany flows directly from key insights into consumers. The German marketing plan is more focused on attaining a market share instead of market domination. Moreover, the basis for competition is limited to quality and service. Japanese Marketing Practices Product quality is a major component of the marketing mix in Japan. The Japanese have developed exacting product quality, durability, and reliability standards for most products. This is due to the relatively high cost of most consumer products. Consumers in Japan generally pay much more for the same item than do American consumers. Moreover, the Japanese selling process is human intensive rather than product intensive, service intensive rather than technically intensive. At the point of sale, Japanese consumers rely heavily on well-informed sales personnel with their courteous and accommodating personal service. Face-to-face contact is essential in Japan and if a personal relationship has not been established, the Japanese buyer will often express skepticism about the seller's claims. Chinese Marketing Practices The Chinese marketing mix does not put great emphasis on the price element and it is considered rather sage not to compete on price alone. Chinese are very competitive and trade secrets are guarded both jealously and aggressively (www.asianmarketingmanagement.com). While marketing in China, success calls for more than developing a good product, pricing it correctly and making it available to the target customers. Therefore it is essential for companies to communicate the real value offered by the product to its customers. Indian Marketing Practices Page 4

With the entry of MNCs in India, a new concept of marketing has gained momentum, especially in the field of consumer goods. The Internet services are playing a key role in global marketing system to reach out consumer goods direct from the producers to the consumers. The idea behind the system is to eliminate middlemen between the manufacturers and the consumers and to provide maximum assistance to consumers in getting standard goods at competitive prices. It does not insist on traditional sales practices adopted by Indian manufacturers of supplying their products through agents and dealers. Its sole motive is to change the habit of consumers by going for top class products in the world at cheaper and competitive prices (Singh, 2009). Sales and marketing practices- Pakistani perspective Retailing is one of the fastest growing businesses in Pakistan for the past few years not only in terms of volume but also in management and marketing practices. Almost in every major city of Pakistan moderate malls emerging which are providing services in light of international standards, these malls are further enhancing the overall environment and scope of retailing in the country. Over the past few years promotional and production activities of local manufacturers have drastically improved, especially by FMCG organizations such as National, Tapal, Shezan etc. There has also been exceptional improvement in advertisement campaign both on ground and through the use of electronic and print media. Pakistan has great potential in the dairy sector and if everything goes according to plan, it is possible that Pakistan could be the market leader by 2020. . Marketing challenges faced by the local dairy sector include existing knowledge gap, poor milk collection infrastructure and legal framework on land availability.

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Engro Foods Limited An in depth study Engro Foods with reference to the local business environment has a considerably relaxed structure, where various teams are organized constituting members from different functional departments for specific tasks. However, the top management formulates the business philosophy and business ethics that are shared and communicated to all organizational members through the middle management. The Organizational Structure The organizational structure at Engro cannot be categorized as being completely horizontal. It is hierarchical in nature with the Management Board being at the top followed by the Management Committee; comprising of Managing Directors and Functional Directors. The senior directors report to the managing directors. The top management at Engro sets the strategies and goals that the business aims to achieve. The top management is then followed by the middle management; comprising of various middlelevel managers for different functional departments. These managers are responsible for overseeing the day to day operations of the business and are involved in the implementation of various decisions taken by the top management. The lower level managers are then responsible for running the business on a daily basis. Reward System at Engro Foods: The three types of reward systems at Engro are: 1. Business rewards, 2. Departmental rewards and 3. Individual rewards. The business and departmental rewards are team based and manifested in the form of annual bonuses and are shared equally depending on the collective performance of the business unit as a whole. Whereas, Individual rewards are meant for individual objective achievement such as a particular sales target. Sales and Marketing Practices at Engro Engro Foods has established itself as a force to reckon with in the growing FMCG industry of Pakistan on the basis of a formidable marketing strategy. The marketing team at Engro Foods consists of leading marketing professionals of the industry, who are graduates of top business schools of Pakistan. The marketing department ensures that from product need identification to product development, launch and post-launch; all strategic decisions are made based on authentic information and research. Identifying the target markets, effectively communicating to them and Page 6

building the image of the brands as well as the Company, is the job of the professionals running the marketing at Engro Foods. Marketing Research Marketing research is the systematic gathering, processing, reporting and application of knowledge specific to the various marketing related concerns. Different companies around the world offer different models such as of Share of Voice, Consumer Health Indicators, BMI indices and develop international designs which are often referred by Engro Foods. One such company is A.C Nielson that carried out the marketing research for ENGRO foods when the idea of the Engro Group of companies diversifying into a new market was introduced. Engro, uses the Sales KPI of retail audit developed by AC Nielsen on a continuous basis. Since the Pakistani market is fragmented in nature, it does not permit Engro to completely incorporate the international model. Therefore Engro modifies and adapts to it according to its own indigenous environment. Apart from AC Neilson, other research partners include JWT Asiatic, Saatchi and Saatchi, Mindshare and MARS marketing The usual process of carrying out research at Engro Foods is such that researchers start off with secondary data that is available. Subsequently, they resort to primary data through the use of different techniques starting with Survey Research to understand the peoples beliefs, preferences and core needs that can be satisfied by introducing additional products or improving upon existing ones. The researchers also conduct observational research to observe the people in different settings. This helps them to identify in-store opportunities and shelf-space that can be used. They often employ the method of shadowing. They also conduct Focus groups where they interviewed a diverse set of people to explore ideas about the brand and what more they want in the food sector to be available to people. Once all the information has been collected, it is further analyzed to extract findings from the data. The researchers use different types of statistical methods such as frequency distribution, the number of people buying the brand, average and measures of dispersions for major variables. They also apply some decision models for additional findings. After the analysis of data researchers present the findings to the decision makers who pass the final verdict. For instance, due to the positive responses of consumers, the decision makers decided to go ahead with the idea of introducing more product lines to the food Olpers brand. It can be fathomed that successful marketing research helps the marketers to understand the customers needs that are still unfulfilled. Selling Function at Engro Foods The sales of Engro foods products are divided into : 1. Primary Sales Page 7

2. Secondary Sales Primary Sales refers to the sales of the batches of products by the manufacturer to the distributors. Secondary Sales refers to the sales by the distributors to the retailers from where the goods are eventually sold to the ultimate consumer. So Engro Foods is following the traditional channel of distribution that involves some intermediaries between the transfer from producer to the consumer. Sales related targets originate at the grass roots level through the use of sales force composites that involve salespeople providing forecasts pertaining to their territories. However, this method is held under eventual scrutiny by the functional head of the sales department who would then bridge any gap and investigate further to make the projections more realistic. Distribution and Logistics For the sake of transportation of the finished goods right from the Engro Foods maintained warehouses that are situated right next to the facility uptil the distributors, a fleet of trucks is maintained by Engro Foods themselves while part of the transportation has also been outsourced, employing a tactic known as third party logistics. A third-party logistics provider is a firm that provides outsourced or "third party" logistics services to companies for part, or sometimes all of their supply chain management function. Third party logistics providers typically specialize in integrated warehousing and transportation services that can be scaled and customized to customers needs based on market conditions and the demands and delivery service requirements for their products and materials As far as the responsibility for distributing the goods is concerned, the outreach of the Engro Foods and the third party logistics is limited to the distributors only. Engro Foods has almost 200 distrbutors all over Pakistan. Some of the distributors deal with larger areas and larger orders while others are the smaller ones. For the larger orders, the finished goods are transported directly to the distributors agreed upon point of delivery while for the smaller distributors, goods are also being delivered and deposited in warehousing facilities maintained by Engro Foods in some important locations all over Pakistan, and it is from there that the smaller orders for the distributors are processed and either delivered or picked by the distributors themselves. The network of distributors is very extensive and extends all the way to Afghanistan.

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Application of Hofstedes Values

Uncertainty avoidance: At Engro Foods, the strategy formulation and implementation process is largely structured but with some level of built-in flexibility. According to Mr. Babur Sultan, Director VP EFL: Flexibility and Structure are two separate things, by flexibility I mean the absence of any rigidity as a rule. For instance, if the team has formulated a particular business plan, the overall objectives may be fixed but the course of action to attain those goals will be largely flexible and determined by the team in accordance with time, market dynamics, and the competitive situation. Therefore, while ranking Engro Foods on uncertainty avoidance, it ranks low on this Hofstedes cultural dimension. The management is encouraged to make quick decisions as per the situation demands whilst maintaining clear focus on the ultimate goal. Masculinity/Femininity One of the core values of EFL is to provide maximum consumer value. Engro Foods is a customer centric organization. Their prime mission is to work for the sake of customer delight and they believe that the material benefits come along with it. Personal development of the workforce is among their top priorities. Hence, Engro Foods rates high on femininity and lower on masculinity reflecting their focus on caring for others and quality in vision and mission. Power Distance Training programs at Engro Foods are usually administered across hierarchical levels with staff from various departments and designations in attendance together; however, some programs are specifically designed to fulfill the unique requirements of the personnel depending upon the management level. However, the presence of hierarchical organization structure is indicative of a medium to high power distance as accepted by the lower levels of management. Individualism/Collectivism Engro Foods being a Pakistani organization ranks moderately on the Collectivist attribute of the Hofstedes dimension. They focus on the well being of their employees and personnel development and believe that their strength lies in working with each other for the synergy effect. On the other hand, the combination of individual and group rewards and collective determination of targets and goals further ascertain the presence of moderate level of Individualism at Engro.

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Long-term orientation Engro-Foods has a medium to long-term orientation which is evident in their planning strategy. They develop long-term plans called stack plans for the next five years in question and construct business plans on an annual basis. The stack plan is reviewed in the tenth or eleventh month each year where the predicted performance levels are compared with actual results achieved. Then changes are made in the stack plans according to the actual results achieved to make the plan more realistic and attainable. For example in October 20010 the stack plan for the year 20010-11 will be reviewed. The plan will then be refined and altered and another year will be added to the stack plan as the first year of the five-year plan will come to an end.

Conclusion
This study can help us conclude that Engro Foods has achieved great success in the industry using best management practices. They have incorporated work friendly environment within a very efficient managerial structure. Engro has been successful in maintaining a successful balance between global management practices and the local culture. Their success can also be attributed to rigorous research and customer oriented marketing practices.

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Interviews Conducted Mr. Babar Sultan VP Engro Foods Contact: 0308-8205001

Mr. Ghazali RSM Omore Icecream Contact: 0300-2007268

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Bibliography (n.d.). Retrieved from www.asianmarketingmanagement.com. Johansson, J. K. (2004). In Your Face: How American Marketing Excess Fuels Anti Americanism. Amazon Books. Singh, D. N. (2009). Changing Concept of Marketing in India.

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