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 Pakistans 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 companys marketing; non marketing
and managements capability is given which tells us about the companys internal strengths and
weaknesses.

Then comes the most important portion of the companys operations, which is the strategic
management. A comprehensive detail is provided about the companys 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.

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.

1
Business Strategy

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.

2
Business Strategy

PORTER five Forces Model:

Low Threat of new

entrants

Somewhat High power of Somewhat Low power of the

the Supplier suppliers buyer

Rivalry among the firms is high

Moderate threat of the

substitutes

(For detailed PORTER Analysis see annexure)

3
Business Strategy

PEST Analysis

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 governments 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

4
Business Strategy

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.

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.)

5
Business Strategy

Age Structure:

Age Structure % of Total Population

Up to 14 Years 36.7 %
15 - 64 Years 59.1 %
Above 65 4.1 %

Key Indicators:

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 by providing just a single product.
Organizations have to be diversified to according to changing demands of the customers and trends.

6
Business Strategy

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 peoples 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.

As a majority of the countrys 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 Mitchells play a different strategy as far as region Lahore is concerned but on

7
Business Strategy

the other side business in Karachi remains stale and on the same level of graph thorough out the whole
year thus Mitchells 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:

8
Business Strategy

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.

9
Business Strategy

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.

Inbound Operations Outbound Marketing & Service

logistics 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 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.

10
Business Strategy

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 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.

11
Business Strategy

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 doesnt 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 Companys marketing analysis is concerned regarding soft drink juices the
company is delivering what the customers exactly want from it. The companys strategic
planning is exactly in accordance with the mission and goal of the company.

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.

12
Business Strategy

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.

13
Business Strategy

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.

14
Business Strategy

Value-Chain Activity Yes/No How Does Shezan Create Value for the Customer
Primary:
Inbound Logistics Yes Shezan has its own fruit farms for raw material
Operations Yes Shezan is the largest food processing unit 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
development Yes automation of the plant and machinery is the top priority
employees work with the senior worker to get the
HRM Yes experience
General Supportive participation from management at all levels of
administration Yes the co.

15
Business Strategy

Interdependency of Value chain of Shezan:

Inbound Logistics Outboun Tech. Genera

Operation d Mkt Procuremen Developmen HR l
s Logistics &Sale Service t t M Admin.

Inbound Logistics

Operations
Outbound
Logistics

Mkt&Sale

Service

Procurement
Tech.developmen
t

HRM

General Admin.

Interdependencies = No Interdependencies =

16
Business Strategy

Is It Is It Few Difficult to
Resource/Activity Valuable Rare substitute? 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, concentrates and juices.
Today Shezan is the largest food processing unit having developed and installed the capacity to

17
Business Strategy

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) Shezans
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 considerable savings in power bills. Internal cash generation and bank borrowing
have met the capital expenditure bill in full.

18
Business Strategy

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
Shezans is operating with 18 executive staff members along with a big sales and labor force.

R & D DEPARTMENT

The success of Shezans 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 its most important asset, management skills are being
constantly updated by sending executives on training courses and study tours, both at home and
abroad.

EFE Matrix:
Results: The EFE total of 3.07 shows that Shezan is in good position to handle the external
factors 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)

19
Business Strategy

IE Matrix

Total IFE

3.0 2.0

4 i ii iii

3.0Total
EFE iv v vi
2.0

vii viii ix

1.0

Score of IFE=2.32

Score of EFE=3.07

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

20
 Business Strategy

Strategic Group Map

Price
Nestle
High

Haleeb
Nurpur
Shezan

Low

Low High

Product Range
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.

Shezans 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

21
Business Strategy

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 local as well as export needs. Shezan has the highest production
capacity as compared to its competitors.

22
Business Strategy

CPM MATRIX FOR SHEZAN

Competitive Profile Matrix

Shezan Nestle Haleeb Nurpur

Critical Success
Factors weight Rating Score Rating Score Rating Score Rating 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 2.25
1 3.05 3.40 2.4

23
Business Strategy

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.

24
Business Strategy

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 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.

25
Business Strategy

Industry Life Cycle

Industry
Shezan

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.

Reference: Interview with Mr. Fayyaz, Assistant Manager Marketing, Shezan

26
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:

Our company wants to serve with the best quality in juices in Pakistan as in
foreign countries to gain customer loyalty.

27
Business Strategy

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

28
 Business Strategy

Competency Tree of Shezan

Juices Ketchup Jams Vegetables (Cans) Pickles (in Salt Ispaghol

vinegar)
Squashe Sauce Chutney Jellies Marmalades Fruits (Cans) Pickles (in
s s oil)

Juices Sauces Jams Pickles Salt Ispaghol

Twist, Mango Ketchup Jams Pickles

Juice

Rich Taste Superior Quality

29
Business Strategy

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.

Raw Material Manufacturing Distributor

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.

30
Business Strategy

Shezans 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 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:

Squashes

Ketchup Juices

Vinegar Chutney

Pickles (in oil) Ispaghol

Pickles
Salt
(in vinegar)

Vegetables Fruits
(can) (can)

31
Business Strategy

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.

Carbonated
Drink

Energy
Drink

New Flavors of
Twist

32
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 Change Moderate, Piecemeal, Undramatic
Pace of Change Gradual, Steady, Constant

The Magnitude of Change:

Scope of change:

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.

33
Business Strategy

Amplitude of change:

Evolutionary change needs gradual development out of present situation by the means of moderate
steps. The amplitude of change should be low.

Scope of Change
Broad Narrow

Revolutionary Change Focused Radical Change

High
Amplitude of Change

Comprehensive Evolutionary Change

Low
Moderate Change

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.

34
Business Strategy

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 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)

35
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%

36
Business Strategy

Leverage Ratio
3

2.5

2
Series1
1.5
Series2
1 Series3

0.5

0
2009 2008 2007

Activity Ratio
3

2.5

1.5 Series1
Series2
1

0.5

0
2009 2008 2007

37
Business Strategy

Growth Ratio
20.00%

10.00%

0.00%
2009 2008 2007
Series1
-10.00%
Series2
-20.00%

-30.00%

-40.00%

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:

38
Business Strategy

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:

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.

39
 Business Strategy

Our Analysis:

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 Shezans 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 cant they check the quality of their raw material before
dispatching it to the production plant. They are not sharing information and thats 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 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.

40
Business Strategy

And even those retailers who are keeping the shezans 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. Thats 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, thats why they have to face
these problems.

41
 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 thats 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 products in the markets and shops is increased and their existing
customers do not switch to other brands.

42
Business Strategy

Conclusion

As according to what we observed from the Shezans 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.

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

43
Business Strategy

Annexure:

44
Business Strategy

External Factor Analysis

External Factors Weight Rating Weighted Comments

Score

Opportunities

Value of dollar in world markets

0.06 2 0.12 Make good 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
customer
Attitude towards product quality 0.08 4 0.32 satisfaction

For health
Social program 0.05 3 0.15 conscious people

Number of high school and college Highly growing

graduates by geographic area 0.08 2 0.16 segment
Waste management 0.08 4 0.32 CSR
Follow rules
properly to get
Import export regulations 0.08 2 0.16 exemptions

45
Business Strategy

THREATS

Rising price of
Inflation rate 0.08 1 0.08 sugar
Turnover rate can
be effect because
Unemployment trends 0.08 1 0.08 of unemployment

Price fluctuations 0.08 3 0.24 Market situation

Insatiability of
Tax rates 0.05 2 0.1 govt. policy
May increase
Oil & gas regulatory authority (ogra) transportation
price review 0.06 2 0.12 cost
Water pollution 0.06 2 0.12 Effect our position
Total 1.00 3.07

46
 Business Strategy

Internal Factor Analysis

Internal Factors Weight Rating Weighted Comments

Score
Strengths
Experienced
marketing and
Qualified Staff 0.05 4 0.15 finance staff

Strong
advertisement
budget up to
Advertisement 0.02 3 0.02 150 Million
Every year
increase
targeting more
Increasing Inventory turnover rates 0.06 3 0.18 customer

ISO certification Major strength

0.08 4 0.32

Best quality
Better Product Quality 0.06 3 0.18 product
Very strong
maintained
Strong Financial Position 0.09 4 0.18 earning
More shares than
Increase market share 0.05 3 0.15 its competitors

Listed company
easily rise its
Public listed company 0.06 3 0.12 capital
Almost half of the
Global operation 0.08 4 0.16 total revenue by

47
 Business Strategy

exporting

Weaknesses
Needs to build up
Lack of company outlet or stores 0.04 2 0.08 new stores

No up dated
No Online business 0.05 1 0.05 information
Shezan is
Lack of innovation 0.08 2 0.16 market 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 slightly
Price Competitiveness 0.05 1 0.05 high
Total 1.00 2.32

48
 Business Strategy
STRENGTHS(S) WEAKNESS (W)

Shezan offer high quality

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

OPPERTUNITIES (O)
SO Strategies WO Strategies
There are a lot of untapped
Extensive marketing
markets in different areas of
Pakistan. Market development campaign.
The concentric diversification (S1,O1) (W1,O1)
in different juices products.
Product development
Backward integration can use
in juice products (S4,O5)
It can become multinational
and can target different
market of different countries.
Usage rate of juices is
increasing

THREATS (T) ST Strategies WT Strategies

There is strong competition in food Positioning as quality Increase budget on

products market. product among packaging &
Different strategies adopted by
consumer.(S1,T1) promotional activities
competitors Nestle in juices
products Acquiring the local (W1,T1)
New product advancement by competitors(S5,T3)
different competitors.
Business Strategy

Grand Strategy Matrix of Shezan

Business Strategy
SIX YEAR REVIEW OF SHEZAN
AT A GLANCE

Year Year Year Year Year Year

2005 2006 2007 2008 2009 2010
Rupees in thousand
Income
Sales 1367763 1798005 2174894 2468572 2728709 3528134
other operating income 11737 18608 13240 19880 20155 19448
1379473 1816613 2122134 2488452 2748864 3547542

Expenditure

cost of sale 910769 1237566 1489845 1691443 1974446 2591790

distribution cost 248430 332889 357549 447191 443862 681905
Finance cost 4112 8942 12940 8104 6542 17950
Other Operating expenses 40391 50786 70145 73317 71995 90718
and share of loss 1203702 1630183 1930489 2220055 2496845 3382363

Profit before Taxation 175771 186430 257655 268397 160570 165219

Taxation 72134 70302 116981 107195 58099 58474
Profit after Taxation 103637 116128 140674 161202 102471 106745

paid-up capital 50000 50000 50000 60000 60000 60000

Reserves & inappropriate profit 428894 490022 575696 676898 719171 790116
Unrealized gain/loss -250 50 -284 -200 -1351 -1978
remeasurement of investment
available for sale

Share holder equity 478644 540072 625412 736698 777820 848138

breakup value per share in rupee 95.73 108.01 104.24 122.92 129.63 141.36
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
Business Strategy
SALES

4000000
3500000
3000000
2500000
2000000 Year
1500000
Sales
1000000
500000
0
2005 2006 2007 2008 2009 2010

PROFITS

180000
160000
140000
120000
100000
Year
80000
60000 Profit
40000
20000
0
2005 2006 2007 2008 2009 2010
Business Strategy
EXPENDITURE

800000
700000
600000
500000
400000 Year
300000 Expenditure
200000
100000
0
2005 2006 2007 2008 2009 2010
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.

Current ration

1.98

1.96

1.94
Series1
1.92

1.9

1.88
2009 2008 2007

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

Business Strategy

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 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.

Quick Ratio
0.455

0.45

0.445

0.44

0.435 Series1

0.43

0.425

0.42
2009 2008 2007

Cash Ratio:
The cash ratio is an indication of the firms 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.
Business Strategy

Cash Ratio
0.455

0.45

0.445

0.44

0.435 Series1

0.43

0.425

0.42
2009 2008 2007

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

Net Working Capital Ratio

0.455

0.45

0.445

0.44

0.435 Series1

0.43

0.425

0.42
2009 2008 2007

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 companys performance is better.
Business Strategy

Debt to total asset ratio

0.455

0.45

0.445

0.44

0.435 Series1

0.43

0.425

0.42
2009 2008 2007

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

Debt to equity ratio

9.8
9.6
9.4
9.2
9
Series1
8.8
8.6
8.4
8.2
2009 2008 2007

Long term debt to equity ratio:

Business Strategy

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

Long term debt to equity ratio

1.8
1.79
1.78
1.77
1.76
1.75 Series1
1.74
1.73
1.72
1.71
2009 2008 2007

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

Business Strategy

Equity Mulitiplier
16.00%
14.00%
12.00%
10.00%
8.00%
Series1
6.00%
4.00%
2.00%
0.00%
2009 2008 2007

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.
Business Strategy

Inventory Turnover
16.00%
14.00%
12.00%
10.00%
8.00%
Series1
6.00%
4.00%
2.00%
0.00%
2009 2008 2007

Days Sales in Inventory ratio:

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.
Business Strategy

Days Sales in Inventory Ratio

16.00%
14.00%
12.00%
10.00%
8.00%
Series1
6.00%
4.00%
2.00%
0.00%
2009 2008 2007

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

Fixed Assets Turnover

16.00%
14.00%
12.00%
10.00%
8.00%
Series1
6.00%
4.00%
2.00%
0.00%
2009 2008 2007
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.

Total Assets Turnover

16.00%
14.00%
12.00%
10.00%
8.00%
Series1
6.00%
4.00%
2.00%
0.00%
2009 2008 2007

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%

Business Strategy

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.

Gross Profit Margin

16.00%
14.00%
12.00%
10.00%
8.00%
Series1
6.00%
4.00%
2.00%
0.00%
2009 2008 2007

Operating Profit Margin:

It tells the profitability without concern for taxes and interest.

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.
Business Strategy

Operating Profit Margin

16.00%
14.00%
12.00%
10.00%
8.00%
Series1
6.00%
4.00%
2.00%
0.00%
2009 2008 2007

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.

Net Profit Margin

16.00%
14.00%
12.00%
10.00%
8.00%
Series1
6.00%
4.00%
2.00%
0.00%
2009 2008 2007
Business Strategy

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.

Return on Assets
16.00%
14.00%
12.00%
10.00%
8.00%
Series1
6.00%
4.00%
2.00%
0.00%
2009 2008 2007

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%
Business Strategy

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.

Return on Equity
16.00%
14.00%
12.00%
10.00%
8.00%
Series1
6.00%
4.00%
2.00%
0.00%
2009 2008 2007

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.
Business Strategy

Earning Per Share

30

25

20

15
Series1
10

0
2009 2008 2007

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%

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

Sales Growth
16.00%
14.00%
12.00%
10.00%
8.00%
Series1
6.00%
4.00%
2.00%
0.00%
2009 2008 2007

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.

Net Income Growth

0
2009 2008 2007
-5

-10

-15

-20 Series1

-25

-30

-35

-40
Business Strategy
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/