A REPORT ON INDUSTRIAL VISIT TO

SURYA NEPAL PRIVATE LTD.

Simara, Nepal
ON

25TH JANUARY 2016

UNDER THE SUPPORT OF

Submitted To :
Mr. Suman Poudel

Mentor :

Submitted By :

Mr. Sushil Bhattarai

Group A BBA B
ABCS

ACKNOWLEDGEMENT

I have gained a lot of knowledge during industrial visit at Surya Nepal

Private Ltd. I would like to express my gratitude to all those who gave me the
possibility to complete this project. I want to thank Boston International College
for giving me the great opportunity to commence this industrial visit.
I am grateful to Mr. Anand Bahadhur Chand the principal of our college
for giving us this exposure. I would extent my gratitude to Mr. (Working as a
. in Surya Nepal Private Ltd, Simara). Under the guidance of Mr.., I have
completed this Industrial Visit . I have no words to acknowledge the valuable
time & support that I have received for them.

I also thank Mr. .. Controller HR at .. for paying their

kind support, guidance and cooperation for the successful completion of this
study at SNPL.

CONTENTS
Sr. No.

Title

Page No.

1.

Acknowledgement

ii

2.

Overview of the Company

3.

History of the company

4.

Background of the study

5.

Introduction of Surya Nepal Pvt Ltd

6.

Mission & Vision

4.

Major Products and Services

5.

Capital Structure

6.

Awards and Recognitions

7.

CSR

8.

Objective of the study

ii

10

Scanning of the Environment

12

10.

Competitive Analysis: Porters

Five Force model

19

11.

SWOT Analysis

21

12.

Value Chain Analysis

26

13.

Overview Analysis

27

14.

Summary and Recommendation

30

15.

Bibliography

31

9.

List of Figure
1.

Environment Scanning

18

2.

Porters five Force model 22

22

3.

SWOT Analysis 25

25

iii

Overview of The Company

Brief Overview of SNPL.

Founded
Founders
Headquarter
Area Served
Key People
Industry
Products
Operating Income
Net Income
Total Assets
Total Employees
Websites

:1986 AD
:Nepali Investor and British-American Tobbaco
:Kathmandu
:All over the Nepal and abroad
:
:Simara and Tanahu
:Cigarette, Garment, Safety Match and Agarbatti
:
:
:
:
:www.snpl.com.np

HISTORY OF THE SNPL

Established with a Vision of "Growth through Quality and Excellent". Surya
Nepal Pvt. Ltd. formally known as (Surya Tobacco Company) is in its 29th
years of operation since 1987. Surya Nepal Private Limited (SNPL) is an IndoNepal-UK joint venture, which is one of the largest private sector enterprises in
Nepal and a subsidiary of ITC Limited, India. The balance shares are held by
17 Nepalese individuals & Corporate shareholders and British American
Tobacco (Investment) Limited, UK. It has its factory in Simara, with the head
office established in Kathmandu.
SNPL are currently engaged in the business of Cigarettes, Safety Matches and
Readymade Garments in Nepal with a total turnover of over US $175 million.
SNPL has given a new era to the domestic cigarette market. The company
initially started its production with two brands of cigarette, Naulo and Bijuli of
which Naulo was later dropped. At present the brand under its wings are
Surya, Shikhar, Khukuri, Bijuli and chautari each of which has their own
brand extensions. Surya in the highest selling brand in Nepal at the premium
segment where as Khukuri at general segment brand.

1.1 BACKGROUND OF THE STUDY

A complete report is based on an industrial visit organized by Boston

International College, Bharatpur-10, Chitwan especially for students of BBA
and BBA-BI 1st Semester. In order to enhance their practical stimulation and
providing first hand exposure to them having an overview on the activities
related to production and logistic carried by Surya Nepal private limited,
Simara.
Boston International College had organized an industrial visits on Jan 25th
2016 to Surya Nepal located in industrial sector of patalya-simira corridor
almost 90 km from Boston International College for the students of BBA/BBABI
The visits was organized with prior permission and guidance of Mr. Honorable
Principal Anand Bahadur Chand.
Mr Sushil Bhattarai and Mr Suman Poudel were the coordinators for this
whole industrial visit. We started travelling from the college campus at 9.30 am
via our college bus on 24 January 2016 along with our coordinators faculties.
We reached to the Surya Nepal premises at Simara with in 3 hour. Our
industrial visit started by meeting Ashok bahadur gurung, a security guard at
entrance point. Mr. Gurung was working on that organization for 20 years. He
on the other hand rooted us to Mr. Sharma at operation room. Mr. Sharma
who is working for Surya Nepal as incharge since 5 years. Who had completed
his MBA from Manipal in the year 2011 and got placed in Surya Nepal.
The project has tried to explore the various aspects of macro, task and internal
environment, which are providing various strength, weakness, opportunities
and threats. Apart from that, the study also deals with the various strategies
being used by SNPL to deal with the dynamic environment.

1.1

Introduction of Surya Nepal Pvt. Ltd.

Surya Nepal Private Ltd. was established in 1986 with a Vision of "Growth
through Quality and Excellent". It is formally known as Surya Tobacco Company.
It is a joint venture between British American Tobacco (BAT) holding 2%, ITC
Limited with 59% and Nepalese entrepreneurs holding 39% shares. It has its
factory in Simara, with the head office located in Kathmandu.
.
SNPL has over 70% to 75% of the total market share of the cigarette industry in
Nepal in terms of value. In the premium segment it commands about 95% of the
total market share. In the high segment sales is about 82% to 85% while in the
lower segment it's about 60%. In terms of brands and sales, its brands are the
most sellable brands in Nepal. SNPL has the largest and strongest distribution
network coverage among all the FMCG companies in Nepal, covering all over
Nepal. 75000 retailers are served through 6000 secondary wholesalers and 60
whole distributors.
Our lines of business
SNPLs commitment to its corporate vision enduring value for all stakeholders
has been uncompromising through the years and is reflected in every product,
process and service provided by the company.
The company has been recipient of prestigious FNCCI National Excellence
Award for being the best managed corporation in Nepal. The company is also
the recipient of various national safety and environmental awards and our
factory is ISO -9001:2000 certified.
The company logo stands for our ethos and the beliefs we hold true as a
company. It reflects our passion for quality and excellence and our compelling
vision to create enduring value for all our stakeholders.

The mountain stands for our deep roots in Nepal, and connotes a sense of
solidity and permanence, symbolic of our position as the nation's foremost
professionally managed company. The rising sun stands for leadership as well

as our passion for excellence. It encapsulates the pioneering spirit that inspires
us to create and innovate products that adhere to the highest international
standards as well as create enduring value for our stakeholders. The sun also
represents the optimism that we feel for the future, and our deep conviction
that, by generating employment, earning foreign exchange and through our
various CSR efforts, help create a better, brighter tomorrow for everyone.
Core Values of Surya Nepal Private Limited
Nation Orientation
We are aware of our responsibility to generate economic value for the nation. In
pursuit of our goals, we will make no compromise in complying with applicable
laws and regulations at all levels.
Trusteeship
1. As professional managers, we are conscious that SNPL has been given to us
in trust by all our stakeholders. We will actualize stakeholder value and
interest on a long-term sustainable basis.
2. Highest standard of Corporate Governance Absolute Integrity.
Excellence
We do what is right, do it well and win. We go the extra mile and seek
superiority in all that we undertake.
Customer Focus
We are always customer-focused and will always strive to surpass customer
expectations in terms of value, product quality and satisfaction.
Respect for People
1. We are result-focused, setting high performance standards for ourselves as
individuals and teams.
2. We will always respect and value people and uphold human dignity.
3. We acknowledge that every individual brings a different perspective and
capability to the team and that a strong team is driven by the variety of
perspectives within it.

Innovation
We will constantly pursue newer and better processes, products, services and
management practices.
Corporate Governance
The operations of Surya Nepal Private Limited are governed by its Corporate
Governance Policy.

Vision & Mission

Mission

To create sustainable competitive advantage for the buyers by providing a

superior sourcing solution.
To provide a superior smoking experience to all smokers of our brands as
well as consumers of other tobacco products.

Vision

To be an internationally bench-marked multi-business corporation in

Nepal, delighting global and domestic customer with a proud Made in
Nepal label and accounting for the 2% of countrys GDP.
To be a partner in national building and create enduring value for all
stakeholder.

Objectives
To enhance the quality of cigarettes
To be a market leader in cigarette industry of Nepal.
To expand the business and increase the profitability.

1.2

Major products and services

The business includes manufacturing and marketing of cigarettes and

readymade garments in Nepal as well as exports of ready-made garments with a
total turnover of over US $100 million.
i.
Cigarette
The various cigarette products of Surya Nepal are:
Surya Classic
Surya Luxury Kings
Surya Lights
Shikhar
Shikhar Lights
Khukuri Filter
Bijuli and
Chautari
These cater to a wide spectrum of consumer tastes and preferences. It has
superior internationally benchmarked quality, strategic and consistent
positioning. The largest distribution networks of Surya Nepal in the country
comprise over 5,000 wholesalers, and over 85,000 retailers. These contribute
towards making Surya Nepal one of the most efficient and effective marketing
companies in Nepal. Today, it is the key player in the cigarette tobacco
production in the country.

ii.

Leaf Tobacco

Agriculture forms a major part of Nepal's Economy and is a source of

employment for 66% of the country's population. Agriculture accounts for
about 39% of the country's GDP. As per the World Bank Report in 2010,
25.16% of Nepalese live below the poverty line. Tobacco has the potential to
improve lot of agricultural wage workers who traditionally form one of the
poorest households in the country. Tobacco is the worlds most widely
cultivated cash crops and it generates more revenues than other cash crops
like sugarcane in Nepal. The Farmers who choose tobacco farming in Nepal do
so because the crop grows even in poor soils and in difficult agro climatic
conditions besides fetching stable prices. Farmers can earn good yield from

very small plots of tobacco, enabling them to put tobacco earnings into growing
other staple crops.
iii.
Garment
The various garment products of SNPL are:
John Players
Springwood
Surya Nepals garments division is the first facility operating on 100% automated
cutting for yarn-dyed fabric in the entire SAARC region. After the success of the
John Players range of branded men's wear, the company now introduces the
Springwood range of branded men's wear.
John Players
Surya Nepal Private Limited launched the fashionable and youthful men's
apparel brand, John Players, in October 2004. John Players is designed
keeping in mind the fashion preference of today's youth and the most
contemporary trends. The brand stands for style, charisma and attitude and
brings them into your wardrobe with its vibrant yet relaxed collection. John
Players knows the pulse of the youth and offers clothing for the discerning
youth. John Players has everything that appeals to the new generation. The
brand is currently available in its Exclusive branded outlets and high end
multi-brand outlets across the country. John Players now enjoys high
recognition from both consumers and in the fashion industry.
John Players provides a complete wardrobe solution for the fashion and quality
conscious male in Nepal. The range includes formal, casual and party wear
shirts, formal and casual trousers, chinos and trousers, sweat shirts, trendy
tees, jackets, 100% pure merino wool sweaters and blazers. Also available are
trendy denims.
Symbolizing attitude, fashion, vibrancy, the youth has embraced denims, not
just as a clothing option but as a mark of lifestyle. Within the apparel segment,
the Denim category is one of the fastest growing. This is evident in the metros
as well as rest of the country.The brand has been strengthened with an
enhanced range with the incorporation of multiple fits - Regular, Slim and
Skinny.

Springwood
After the success of the John Players range of branded men's wear, the
company introduced the SPRINGWOOD range of branded men's wear.
SPRINGWOOD addresses the needs of quality and price conscious readymade
men's apparel consumers in the country, who otherwise have a limited choice
in terms of low quality imported garments. This segment is a huge opportunity
area for the company, which is being tapped by offering consumers a proud
"Made in Nepal" brand with a 100% quality guarantee and at prices that are
surprisingly affordable. This strategy is in line with the Corporate Vision of
delighting domestic customers with a proud "Made in Nepal" label.
Springwood as a brand stems from our core values of customer focus,
innovation and excellence. Launch of this brand has contributed towards
boosting economic activity in Nepal and in growing the Nepali garment industry
by substituting low quality imports. The SPRINGWOOD brand proposition is to
offer quality products with a wide range of vibrant colors in checks, stripes,
solids and patterns inspired by the colors of nature, with good fits made from
high quality fabrics.
iv.

Safety Matches

SNPL markets Safety matches sourced from independent vendors. The Safety
Matches business leverages the core strengths of SNPL in sales and
distribution, brand building, supply chain management in offering Nepalese
consumers high quality safety matches.
Our Tir Safety matches effectively address the need for a quality product in
this industry and has successfully created a place for itself in the hugely
competitive market.
v.

Agarbatti

The objective behind the companys plan to enter the agarbatti business is to
create employment opportunities in Nepal amongst the weaker section of
society. It is expected that SNPLs strong distribution network would aid in
penetration of the market and enable capture of a reasonable share of the
market.
Research reveals that 65% of consumers do not exhibit any specific brand
loyalty thereby providing a space in the market to build brand equity. SNPLs

access to ITCs Mangaldeep brand, product portfolio and technical knowledge

will be a competitive advantage.

1.3

Capital Structure

The capital structure of SNPL is as follows:

Heading
Amount (Rs.)
Authorized capital
65,000,000
Issued capital, subscribed & paid
20,160,000
up
Capital share of the shareholders can be summarized as
Shareholders
Share (%)
British American Tobacco (BAT)
2%
ITC
59%
1.4 Award and Achievements
1. Certificates of appreciation from Inland tax department in the topic of
highest tax payer for the fiscal year 2068/69
2. Det Norske VERITAS Management system certificate for quality
management for Surya Nepal private limited in garment sector ISO 90012000 in 2008-10-19
3. Det Norske VERITAS Management system certificate for quality
management for Surya Nepal private limited manufacturing of cigarette
ISO 9001-2000 in 2007-10-18
4. Det Norske VERITAS Management system certificate for quality
management for Surya Nepal private limited garment sector ISO 90012000 in 2008-10-19 social accountability 8000:2001 manufacturing of
cigarette and filter rods 2009-12-25 the certificate is valid for the
following product or service range
1.5 CORPORATE SOCIAL RESPONSIBILITY
SNPL has a great optimism for the future and a deep conviction that by
generating employment, earning foreign exchange and though sincere effort to
promote health, education, rural empowerment, sport and business. Beside
business SNPL is also active in social development activities through various

initiatives like Surya Nepal susasthya, Surya Nepal prakriti and Surya Nepal
khel pryatan.
In addition to its commitment to its quality goods, Surya Nepal fulfills its soul
responsibility too. It denotes regularity to hospital and health services and also
participates. In states and patronizes several social, sports, cultural and
cultural activities e.g. Shikhar sangh and Surya art exhibition to promote
artistes. The company is actively involved in forestation drives providing free
plant for a greener Nepal. Vocational training regular, regular rural health
camp, literacy program and building educational infrastructure have improved
the life thousands of villagers.
It is providing donation to various school for their development and betterment.
It is also providing school scholarship for 52 orphans in st. Xavier's. It supplies
uniform and pay fee for them. The company has donated ambulance to various
hospitals and has donated the medical equipment s to teaching hospital. As a
part of social responsibility, it is totally against the use of child labor it follows
the code and conduct laid down by UN regarding child labor, pollution control
and etc,
In time of natural calamities SNPL has contribute generously toward relief for
disaster victims. Sport sponsorship is a special SNPL interest event like Surya
golf, Khukuri motorcycle rally, Khukuri karate, Khukuri inter cup football
championship have given local sports talent a chance to participate in
international class tournament. In particular Khukuri long term and increasing
involvement with football has resulted in promoting the sport at both local and
international levels. To encourage a wider awareness and participation in
sports. SNPL has sponsored live international telecasts of events like the
Olympics the world cup football and the Asian cup football.

1.6 OBJECTIVE OF THE STUDY

The basic objective of the study is to determine various environment forces that
affect the business decision of the SNPL, how they are facing with these forces.
Beside these the study also aims to reveal the following thing:
To assess the nature of the environment for all the business in the Nepal.
To identify the key forces in the external environment that is affecting the
overall cigarette industry.

10

 To determine the competitive forces in the cigarette industry.

To identify the competitive position of the SNPL in the cigarette industry.
To determine the opportunity and challenges faced by the SNPL.
To determine the key forces of internal environment for SNPL.
To identified the strength and weakness of SNPL.

11

Section 2
Analysis of Environment
2.1Environment Scanning
Environmental scanning is the acquisition and use of information about events,
trends, and relationships in an organization's internal as well as external
environment, the knowledge of which would assist management in planning the
organization's future course of action. Following are the components of
environment scanning.
2.1.1 Assessment of Internal Environment
Since, Surya Nepal came into operation in 1986 as a tobacco industry
(manufacturing and distribution) and diversified into Garments in 2004 (now
permanently closed) and Safety Matches in 2007, It has been planning to
manufacture fast moving consumer goods (FMCG), like noodles, biscuits and
others. Likewise, it has already decided to establish new manufacturing plant in
Tanahun district.
The internal environment analysis seeks to identify the strengths and weakness
in business. Factors those are internal to the business, some of which can be
easily changed or improved upon are:
1.
Human Resource
2.

Finance

3.

Technology

4.

Raw Material Source

5.

Brand Image

Human Resource
Surya Nepal philosophy affirms the Company's belief that people are its major
assets, and that together they will sustain Surya Nepal as an institution with
vitality and perpetuity.
Respect for People: It is result focused, sets high performance standards,
respects and value people and uphold humanness and human dignity. It believes
in acknowledge that every individual brings different perspectives and
capabilities to the team.

Capability Building: It conducts capability building programs as

Recruitment /Induction of new entrants

12

Exposure to skills/operatives on new technology & best work practices

Introduction of quality circle/SGA/5-S.
Productivity /Quality month
Attendance award

Communication: To enhance the communication inside organization, it follows:

One to one interaction with employees
Daily cross functional team meeting
News bulletin Surya Kiran
Training & Development: Under the training and development programs, it
includes:
Competency mapping & training as per gap identified.
Training on Product knowledge to new entrant.
Training on SGA/5-S through expert
Outbound training program for all employees
Employee Engagement:
Children painting
Women empowerment through vocational training (Sewing, candlle
making
at Surya Niwas.
Training on vermi composting for household waste management at Surya
Niwas.
Stress management through Yoga classes
Fitness club at Surya Niwas.

Finance:
The SNPL depends upon various financial institutions like commercial banks,
development banks, finance companies, insurance companies, capital market
institutions etc for supply of funds and insurance companies. The major
suppliers of funds to SNPL are Nabil bank ltd, Standard Chartered bank ltd.
SNPL has taken insurance policy from National Insurance Company, Oriental
insurance company and Himalayan General Insurance Company.
Technology:
SNPL uses statistical analytical tools and enhances process capability through
NV study/Cp & Cpk. It uses highly specialized and automated plant and
machinery for the production of cigarettes. It relies on both the capital intensive
and labor intensive technologies but it focuses more on automation/online
monitoring system to avert human intervention. It believes in culture of building

13

continual improvement through encouragement of innovation/creativity. It

timely update technology to leverage Quality/Productivity/Energy saving.
In past it used to depend upon technician wise tool boxes which were pretty
difficult to locate but now-a-days, it uses centralized shadow board which are
easy to locate.
Raw Materials
The tobacco is homegrown in the terai region for i.e. in Bara, Parsa, Sarlahi,
Dang and Chitwan which has the weather- wet, hot and humid and topography
plains, suitable for the cultivation of tobacco. The raw materials for making
cigarettes for SNPL are imported from the Virginia on regular basis which are of
the best quality.
Suppliers
Suppliers are individual or organizations who supply inputs and resources to
the business organizations. Supplier environment that influence the business
activities are cost availability and continuity of supply of raw material needed in
the production. cost and availability of finance, energy, human resources and
cost availability and the existence of sources and means for supply of plants and
machinery, spare parts and after sale service and the existence of substitute
materials, bargaining power of suppliers and infrastructural support for the
availability of different factors of production. The major supplier of raw material
(tobacco) in SNPL is India. The simple packaging is done in Dhankuta whereas
the sophisticated packing is done in third countries and the cigarette paper used
for this packaging is also of the foreign countries where the packaging is done.
2.1.2 Assessment of External Environment
General Environment affects the organization and its task environment. It is also
called the remote environment. It is composed of a set of forces that are outside
the organization's operating system for this we separate external environment in
two heading:
2.1.2.1Task Environment: Task environment is the types of External
environment that affect the performance of Business organization directly, it
comprise the following factors:
Customers
Suppliers
Shareholders
Environmentalist
Government agencies
Competitors
Media

14

2.1.2.2 General Environment: General environment is the types of External

environment that affect the performance of business organization indirectly, it
comprise the following factors:
Political factors
Economic factors
Social cultural factors
Technological factors
Demographic factors

Political Environment
Political factors define the legal and regularity parameters within which firms
must operate. The direction and stability of the political factors are a major
consideration for managers for formulating company strategy. The SNPL has also
been affected by the political factors of Nepal. The political factors have
determined the following constraints in the smooth functioning of the SNPL.

The political instability in Nepal has also affected the SNPL.

The government of Nepal has placed different tax regulation on the
cigarettes sales in Nepal.
The cigarettes are not allowed to be advertised in the electronic media
like television and radio. They lead to lower coverage towards the
consumers of its products.
The government decision regarding the tax rate, interest rate, minimum
wage legislation affects the pricing policy of the company.
The government awareness programs on injuries caused due to smoking
of cigarettes has also been problem for SNPL.

Economic environment
Economic factors concern the nature and direction in which the firm operates.
Because the consumption patterns are affected by the relative affluence of
various market segments, each firm must consider economic trends in the
segments that affect its industry. The economic factors affect on the SPNL are as
follow:
The existing market rate affects the pricing policy and the economy of the
SPNL.
The inflation rate and recession also affect the company.
The level of disposal income of the costumers also affects the company
growth and strategy formulation
The propensities of the people to spend on cigarettes also affect the
economic decision of the company.

15

The import duties are high in Nepal which restricts the company from
importing more and it tern affect the economy of the SNPL.

Social Environment
Social factors that affect a firm involve the belief, values, attitudes, opinion and
lifestyle of persons in the firm's external environment as developed from cultural,
ecological, demographical, and educational and ethical conditioning. Social,
cultural, demographic and environmental changes have a major affect upon all
products, services, markets and customers. The social forces are more or less
dynamic. The SNPL is also affected by the social changes and the factors. The
social factors that have placed constraint on the SNPL are as:
As cigarette is not assumed as a favorable product by the society, there is
hesitance to talk about it and consume it.
The smoking in Nepal has not yet been so freely adopted and the people
often hide while smoking.
Company's social and moral ethics are also causing promotional
difficulties for its sales i.e. as good corporate citizens; the company doesn't
prefer smoking to the citizen below 18 years.
Due to the demographic changes in the population most of people use
cheaper brands for which the market for premium brands is very low in
terms of value.
There are some businessmen who do not like to make profit from selling
cigarettes brands which destroy the company opportunity of creating the
new market.
Women smoking cigarettes in Nepal are also not accepted by the society
hence the SNPL has the disadvantages of creating new consumers.

Technological Environment
The technological factors involve the technological changes that help to avoid
obsolescence and promote innovation. The technological factors suggest the
adoption of creative technology that creates the possibilities for new products,
for improvement in the existing products or in manufacturing and marketing
techniques. The SNPL is also one the organization in Nepal that adapts and uses
the latest technology for marketing and manufacturing the product. The SNPL
invest lots of amount on the R&D activities to find out the customers needs and
preferences and also determines the latest and possible technology to make the
product. The SNPL has been launching new products in regular interval of time
to satisfy the different customer's requirement. The brands like Surya light,
Shikhar light and menthol are the outcome of the creative technological wok of
the SNPL. The SNPL has adopted all the latest technology for the smooth
functioning of its business. From marketing to finance, from manufacturing to
distribution the SNPL has all the latest technology use. The SNPL also have the

16

linkage of its Kathmandu head office with its Simra factory. The order placed in
the Kathmandu office are directly send to the Simra factory for the dispatch due
the networking between the factory and the office.
Legal Environment
Laws protect business firms from unfair means. On the one hand, this helps to
protect the copy right, patent right and other issues. Legislative framework thus
creates both opportunities and threats for business. However, in case of tobacco
companies i.e. Surya Nepal, government has prohibited for advertisement on
public media. Government of Nepal, Ministry of Health and Population, has given
high priority to promotive health services by specifying education and
information about the dangerous of smoking.
The National Health Education, Information and Communication Centre,
Ministry of Health and Population, has drafted The Smoking (Prohibition &
Control) Act, 2058.
In order to reduce the consumption of tobacco products the National Health
Education Information and Communication sector (NHEICC) has been carrying
out several anti-tobacco mass media activities. These activities have been
reducing the domestic market.
Legal action against tobacco:
Excise tax on tobacco products: Tobacco products are levied excise tax for
two reasons. One is to raise revenue and the other is to discourage
consumption.
Health warning: Requirement of putting warning labels on tobaccoproduct packaging and advertising as "Smoking is injurious to health".
Health tax on tobacco products: Two paisa per stick of cigarette from July
15, 1994.
Mass information: The NHEICC, MoHP is primarily responsible for anti
tobacco IEC activities. It produces print, audio and audiovisual materials
with the objective of educating the audience about the harmful effects of
tobacco use.
Every year on 31st May World No-Tobacco Day is observed.
Ban on smoking in public places
Ban on advertising and promotion of tobacco products since 14 December
1998
The Smoking (Prohibition & Control) Act, 2058 (2001/02)
Likewise, international pressure on tobacco control is raising with the
initiation of WHO, and other NGOs/INGOs. Prohibition of all forms of
advertisement, promotion and sponsorship is growing worldwide. These

17

shows, the Surya Nepal Company Limited have to face with so many
threats in the future.
Environmental Analysis
Evidence indicates irreparable environmental damage from tobacco agriculture,
particularly when associated with the deforestation necessary to increase
farmland for tobacco growth and cure tobacco plants.
Environmental degradation also results from the tobacco plant leaching
nutrients from the soil, as well as pollution from pesticides and fertilizers. The
manufacturing of tobacco products also produces an immense amount of waste.
Tobacco Company produces millions of kilograms of chemical waste and
manufacturing waste which litters in streets and waterways.
Hence, from the environmental view, Tobacco industry is taken as a cost to
government rather than income source.

Perfect Blends Pvt. Ltd

Nepal Tobacco Company
Gorkha Lahari Pvt. Ltd
Political
Instability
Strike in terai
Indo-Nepal
bilateral
agreement and
Chine Nepal
bilateral
agreement.

Nepal
Government,
WHO and
Smoking act
and Law

Employees
Physical environment
Board of directors
Culture
Restaurant, High
Way Hotel, Retail
outlets and
India, Nepal and
Grocery Shop
Third Country

Smoking is treated bad habbit, anti-smoking

public awareness programme, Tradition of
Hukka, Surpa, Chilimey and Bidi
Fig 2.1 Environment Scanning

18

2.2 Competitive Analysis: Porters Five Force Model

Five- forces model is developed by Michel Porter, a Harvard professor.
According to him successful manager do more than simply react to the
environment. Porters five forces model of competitive analysis is a widely used
approach for developing strategies in industries. The intensity of the
competition among firm varies widely across industries. The five forces in the
cigarette industry are:
Rivalry among existing firms
Rivalry among competing firms is usually the most powerful of the five
competitive forces in terms of capital, sales, distribution channel and quality.
The strategies pursued by one firm can be successful only if they provide
competitive advantage over the strategies pursued by rival firms. The rivalry
among the cigarette industry in Nepal is very high. There are major competitors
of SNPL in the cigarettes industry in Nepal. They are:
Janakpur Cigarette Factory: A government owned company producing Yak,
Gaida, Deaurali and Laliguras (Laliguras was later discontinued).
Nepal Tobacco Company: backed up by GTC (Golden Tobacco Company), India
producing Gorkha, Nepal Gold Flake and Shangri-la, Yeti etc.
Perfect Blends Pvt. Ltd - A new entrant in the market is an initiative of
Chaudhary Group of industries with brand like Gaurav, Sahasi & Pine.
Seti Cigarette Factory has a technical tie up with PMI who is the major
distributors for Marlboro and L & M.
Gorkha Lahari Pvt. Ltd: The Company manufactures different brands of plain as
well as filter cigarettes. About 20% market share is covered by this company and
brands are available all over Nepal. Nepal Gold Flake and Sahara filter are the
main brands of the company and others brands are: Bahar Special plain, Bigul
plain, Brown filter kings, Gorkha filter, Style filter, Winner filter and Action kings.
SNPL has to compete with above companies in the market. The strategies
adopted by SNPL include retaliatory countermoves, such as lowering prices,
enchasing quality, adding new products and increasing advertising. The SNPL
has been the strongest cigarette company of Nepal.
In terms of sales, capital, distribution channel and quality. Rivalry among
competing firms is usually the most powerful of the five competitive forces. The

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strategies pursued by one firm can be successful only to the extent that they
provide competitive advantage over the strategies pursued by reveal firms. The
rivalry among the cigarettes industry in Nepal in high. There are five players in
the cigarettes industry in Nepal. They are:
Potential entry of new competitors
When a new firm easily enter into a particular industry, the intensity of
competitiveness increases. The potential entry of the new firm in the cigarettes
industry of Nepal is low because of the following reason.

The capital requirement to establish a cigarette company is very high.

The government rules and regulation regarding opening a new cigarette
company is very tough and time consuming.
The new firm need to be well equipped and should be able to compete with
the SNPL quality and its strong distribution network.
The consumers of the cigarettes do not switch to new brand easily.
The country infrastructure and political instability also restrict the
investor to launch a new cigarettes firm.
The new firm might not have the access of the required raw material and
might also lack the required experience.

Potential development of substitute product

In many industries, firms are in close competition with producers of substitute
products in other industries. In the cigarettes industries of Nepal the SNPL has
also got to compete with the substitute products of its brands. The substitute
products for the SNPL brands are the products like Khaini, Gutka and Chewing
gum. The presence of substitute product has put a ceiling on the price that can
be charged before consumers will switch to the substitute product. The market
share of the substitute products of the cigarettes is not very high. SNPL has not
yet got to work hard to kill the substitute product because the substitute product
has not yet captured the market and is also not able to attract the consumers of
the cigarettes.

Bargaining power of suppliers

The bargaining power of the suppliers affects the intensity of the competition in
an industry, especially when there are few suppliers who sell too many, when
substitute product are not easily available of the switching cost of raw material

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is costly. The bargaining power of the SNPL is high in the cigarettes industry
because of the following reason.
SNPL has a huge distribution network all over Nepal.
The demand for the SNPL brands is very high
The quality and taste of the SNPL brands are of international class with
low and reasonable price.
The SNPL has its products extension to satisfy consumer off different need
and preferences.
The organization selling the SNPL brands earn high amount of profit from
the SNPL brands.
The SNPL has been able to deliver its product to the distributors and
wholesalers as and when required.
Bargaining power of buyers
When the customers are concentrated or large, or buys in volume, their
bargaining power represents a major force affecting the intensity of competition
in an industry. The bargaining power of the buyers of the SNPL brands is
medium because of the following reasons:
Buyers purchase large proportions of the SNPL products also earn profit
in same proportion.
Alternatives suppliers available but do not have the strong market demand
and has also not been able to attract the customers.
The competitors of SNPL brands are growing rapidly and are trying to cover
the market of SNPL.
The changing the supplier from SNPL to other company cost very little for
the buyers.

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Capital is too high,

Rigid government law
Consumer loyalty
Lack of network and
equipment
Access to raw material

Nepal Tobacco Company

Gorkha Lahari Pvt Ltd
Perfect Blend Pvt. Ltd

Demand of SNPL is high

International quality with low
price
Huge distribution network.
Product based on consumer
preference.

Ability to purchase,
Profit margin of distributer,
Customer preference and
loyalty, Lack of substitute

Other alternative of cigarette

like khaini, Gutka, Bidi and
Chewing Gum

Fig2.2: Porters five forces model of competitive analysis

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2.3 SWOT Analysis of SNPL

SWOT analysis is an exercise in which managers identify the organizational
strength (S), and weakness (W) and environmental opportunities (O) and threat
(T). Once the organization has identified its resources, its need to find out which
of its resource are valuable and represent the strength and weakness for the
organization.
Strengths:
Old Company being the nation's one of the oldest company in this field. It is
producer of the most popular brands of cigarettes in Nepal. Its popularity in the
market has helped it gain the largest share in the market.
Brand Loyalty
As earlier mentioned about its market leadership, its quality has increased its
popularity is a tremendous consent which has boosted its brand loyalty to the
greatest event in Nepal. Smoker of other brands may shift to its products but it's
rarely seen that its consumers shift to other products. Habits die hard, like many
of the consumers had said that they have health problems with switching brand
too.
Price
It is seen that generally cigarette's price rise with time and quality. Satisfied
consumers can pay higher prices to the product. Surya is though gradually
changing its prices but the sales is still growing as it has the products for all the
segments of the market.
Few competitors
This Company is the market leader. However some of the competitor of its brands
is JCF (YAK) and NCF (MARLBORO).
Innovation
SPNL constantly pursue newer and better processes, products, services and
management practices. It will help the company to grab better and larger number
of customers in the market.
Weaknesses:
Distribution
Distribution plays important role in the sales of products like cigarettes. Huge
the distribution channel lead to higher sales. So the company must have a great
distribution channel. The retailers of Surya receive the products from the whole

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sellers or the daily sales service. Though they are doing their work properly, there
are creating constraints that are affecting the distributions. These can be
overcome only by using wide distribution channel as well as effective daily sales
services.
Opportunities
Launch of new brands
Surya has a great market share in the cigarette segment it can easily introduce
new brands in the market according to the changing trends.

New filter brands

Since the people are becoming more health conscious and the increasing
preference of filtered cigarettes, Surya can also launch different new quality
cigarettes like cigar and international brands in the market.
Premium
Since it is the producer of the most sellable FMCG product in Nepal, it has high
chance to earn premium in the products as well as other new segments against
its brand images.
Huge capital
It is a joint venture company of Nepal and India, it has huge capital capacity
which can be very helpful in grabbing market opportunity.
Threats
Monetary and Fiscal Policy
With the change in tax slabs every year, each brand is placed under different tax
slabs according to the cigarettes. So the prices of the brands are liable to increase
and change every year. This might result the consumers to switch into cheaper
brands or even quit smoking.
Competitors
Currently, the company enjoyed monopolistic leadership in the market,
competing only with foreign brands. But due to the government's policy of
liberalization and encouragement in the private participation during the 80's new
company started coming into the market.
WHO
WHO has been working hard in increasing awareness to consumers about health

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hazard associated with cigarette smoking habits. This has decreased in the
number of smokers to a large extent.
Employee resistance
Employees resistance and various trade unions activities can impose severe
threat to SPNL. For e.g. - the employees of SPNL stood on hunger strike after the
official shut down of garment factory of SPNL.

Strengths:
Old company
Brand Loyal
Few competitor
Low price
Innovation
Experience man power
Establishment of new plant

Internal Factor
Weaknesses:
No proper supply chain
Shutdown of Surya garment due
to unfulfilled of employee
demand

Opportunities
Increase in purchasing power of
buyers
New filters brands
Premium
Huge capital
Shutdown of rival, Janakpur
cigarette Industry

Threats:
Monetary and fiscal policy
Competitor
WHO
Employee resistance
Political instability

External Factor
Fig 2.3: SWOT analysis of Surya Nepal Private Limited

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2.4 VALUE CHAIN ANALYSIS

The term value chain describes a way of looking at a business as a chain of
activities that transforms input into outputs that customer value. Customer's
value derives from three basis sources: activities that differentiate the product,
activates that lower its cost activities that meet the customer's need quickly.
The value chain for customer of SNPL is created by the combined activates of
the four departments they are marketing, finance, technical and leaf
departments. The company is headed b the president/ managing director. The
vice presidents of four departments report to the president.

2.4.1. THE LEAF DEPARTMENT

The leaf department is a type of backward integration of the company. It has a
national leaf manager who has four officials reporting to him. This department
takes care of the cultivation of tobacco. The tobacco is homegrown in the terai
region for i.e. in Bara, Parsa, Sarlahi, Dang and Chitwan which has the
weather- wet, hot and humid and topography plains, suitable for the
cultivation of tobacco.

2.4.2. THE TECHNICAL DEPARTMENT

It is also known as the production department has a vice- President to whom
the primary and secondary department managers report. The primary dept is
mainly involved with processing and blending the raw material to be used ads
fillers in cigarette. In the secondary department the raw material is given its
final from i.e. cigarette sticks and packed to be sold in the market. There are
two types packaging, the sift cup pack e.g. used for Shikhar and the Hinge Lid
hard pack used for Surya Luxury kings and lights. The cigarettes are packed in
10s and 20s. These ready to be sold products are then handled by the
marketing department.

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2.5 Overview analysis of SNPL

2.5 COMPETITIVE ADVANTAGE OF SNPL (KEY SUCCESS FACTORS)
SNPL is the market leader in the cigarette industry of Nepal due to its efficient
distribution network, cost effectiveness, innovation, research, technology etc,
which provides the best working environment and make the company more
competitive upon its competitors.
The major competitive advantages of SNPL are:
2.5.1. BACKUP FROM ITC LIMITED IN PRODUCT DEVELOPMENT, MATERIAL
PURCHASE AND DESIGNING
ITC limited, India is the biggest manufacture of cigarette in India and also owns
59% of the total shares of the organization. So being the parent company, ITC
provides backup support to the organization in various fields like development
of new product, purchase and supply of raw material as well as other
necessities and also assists in designing the new techniques for the
development and marketing of its products.
2.5.2 NATIONAL WIDE DISTRIBUTION NETWORK
The huge distribution network of SNPL is an advantage for the organization to
beat its competitors. SNPL has its distribution in all over Nepal through 60
distributors, 6000 wholesalers and 75000 retailers which the widest supply
chain of any product yet found in the country. The distribution network of
other competitors is not huge or not so wide which makes lower an availability
of their brands while most of the brands of SNPL are found in all 75 districts.
2.5.3. HIGH MARKET SHARE
The huge market share of SNPL is one of the major competitive advantages of
the company SNPL cover about 75% of the total market share in terms of value
and 61% in terms of volume alone. This data represents the strong position of
the organization over its competitors either they are national or international.
2.5.4. USE OF BEST TECHNOLOGY
The technology used by SNPL is the best technology used in the production of
cigarettes in the company. This makes the production and quality both more
advances and better in comparison to its competitors.

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2.6 STRATEGY ADOPTED BY SNPL

Strategies are the means by which the long term objective will be achieved.
Business strategies may include geographic expansion, diversification,
acquisition, product development, market penetration, retrenchment,
liquidation and joint ventures.
2.6.1. GENERIC STRATEGY PERSUED BY SNPL
Strategy must be based on the core idea about how the firms can best compete
in the market place. The popular term for this core idea is the generic strategy.
The generic strategies help to overcome the five forces of industry analysis and
achieve competitive advantage. The generic strategies are cost leadership,
differentiation and focus.
2.6.1.1 PRODUCT DIFFERENTIATION
Product differentiation refers to creating a product or services are unique and
valued. Strategies dependent on differentiation are designed to appeal to
customer with a special sensitivity for a particular product attribute. The
reason that shows the SNPL has adopted this strategy is as follows.
SNPL has huge and strong distribution channel than its competitors.
Huge investigation in the R & D activities to find out the customer taste and
requirement and launch product accordingly.
The joint venture with Indian Tobacco Company and British America tobacco
has helped it to manufacture product of intentional class in Nepal
2.6.1.2. FOCUS
The SNPL has adopted this strategy as it has targeted different category of
people with different products. The SNPL has launched different product to
attract different level of customer. It has product like Bujili and Khukuri
targeted for economy group and products like Surya classic, Surya luxury
kings and Surya light target at people at premium segment. The brand like
Shikhar is targeted to the youth above 20 and below 25.
2.6.2. GRAND STRATEGIES PERSUED BY SNPL
Grand strategies, often called master or business strategies provide basic
direction for strategies actions. They are the basis of coordinated and sustained
efforts directed toward achieving long term objective. The grand strategy can be

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defined as a comprehensive general approach that guides a firm's a major

action. The Grand strategies of SNPL are:
2.6.2.1. PRODUCT DEVELOPMENT
The SNPL has been expending huge amount of capital on R & D to find out the
customer taste and requirements. SNPL is totally consumer focused and
making continuous effort on improving the quality of its product in the market.
The SNPL has launched many products form the time of its establishment. The
SNPL had only four brands under its belt at the period of establishment they
were Surya luxury kings, Shikhar filter kings, Khukuri and Chautari. Since
then SNPL has adopted product development strategy and launched product
like Surya light, Shikhar light, Shikhar Menthol and so on.
2.6.2.2. MARKET DEVELOPMENT
SNPL has been stimulating the consumers to move to the higher premium
brands like Surya & Shikhar from Khukuri and Bujili. The SNPL generates
more profits from premium brands than lower segments brands. The SNPL is
using huge promotional tools and advertising techniques to find new market
and consumers for its existing products category. Its brand cover more than
75% of the total cigarettes market in Nepal and the percentage is increasingly
rapidly.
2.6.2.3. INNOVATION
Innovation is all about improving and creating a new product in the existing
market place. The SNPL has making innovation regarding the new taste of the
cigarettes. The brands like Shikhar Menthol, Shikhar lights and Surya classic
are the result of the innovation. The SNPL has also discontinued products like
Chautari from the market after launching new product namely Bujili. The SNPL
is still making an effort to effort new product for the market place to surprise
the consumer of cigarettes with new taste of cigarette.
2.6.2.4. CONGLOMERATE STRATEGY
Conglomerate strategy means acquiring a business because it represents the
most promising investment opportunity available the principal concern and
often the sole concern of the acquiring firm is the profit pattern of the venture.
The SNPL has adopted this strategy by acquiring the distribution of "JOHN
PLAYER" solely over the Nepal. By moving to the business of readymade
garment the SNPL has show that SNPL is investing its fund in the most
promising business available.

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Section 3:
Summary and Conclusions
3.1 Summary
SNPL is the number one cigarettes manufacturing and selling company in Nepal.
The SNPL is totally consumer focused and manufactures cigarettes according to
the need and want of its customer. It has different brands with different taste
and quality under its belt. The SNPL has gained the competitive advantage over
its competitors because of its brands extension like Surya light, Shikhar lights,
and mini packets. It has also different brands for price sensitive costumers.
Brands like Surya are for the higher segment customer where as Khukuri and
Bijuli are for people of the low segment. The joint venture with ITC Ltd. India and
BAT has also helped SNPL gained the competitive superiority.
Garments produced by Surya Nepal under the brand name of John Players and
Springwood were of premier quality and were being exported to foreign countries
including different countries of Europe and domestic market as well. But recently
Surya Nepal choose to shut down their production unit which resulted in
unemployment. Around 700 employees were affected by the shutdown and was
a threat to Nepalese economy as a whole. Even though it appears as if the
production was closed because of the labor problem in the factor but from our
study we found that this shutdown was not due to the labor problems, they
choose to shut their production so that they could concentrate on FMCG
business.
3.2 Suggested Strategies
It should conduct due analysis before starting its operation in FMCG products
so that unwanted shut down could be avoided.
It must develop its talent management and knowledge management strategy
in order to retain, enhance the knowledge and expertise of staffs and reduce
staffs strikes and resistance.
It must concern about the labor issues, and their rights as stated by Ministry
of Labor and Transportation.
It may be logical to diversify the products rather than depending upon only
tobacco. This is well known fact that tobacco industry has so many pressures
from society though it is profitable sector.
Try to delight its tobacco customers with variety of flavor.
It should develop a healthy labor relationship and co-operate with them in
order to establish favorable working climate and do promote a participative
culture.

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Reference: WWW.Snpl.com.np

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