Professional Documents
Culture Documents
STRATEGIC MANAGEMENT
TERM PROJECT
SUBMITTED TO:
MR.JAVAID AHMED
COMPANY
SHAN FOOD (PVT) LTD
GROUP MEMBERS
Letter of Acknowledgement
Institute of Business Management
Korangi Creek, Karachi-75190, Pakistan
UAN (9221)111-002-004, Fax: (9221) 509-0968
Http://www.iobm.edu.pk
Dear Reader,
This report has been a great learning experience as it provided us with the opportunity to help
apply the concepts been taught throughout the semester.
We would like to take this opportunity to thank our instructor Mr. Javaid Ahmed who made this
report possible by providing his unconditional guidance and cooperation throughout the
semester.
We would also like to thank our family and friends who were always there to support us.
Without them and so many other things this report would not have been possible.
Sincerely,
Letter of Transmittal
Institute of Business Management
Korangi Creek, Karachi-75190, Pakistan
UAN (9221)111-002-004, Fax: (9221) 509-0968
Http://www.iobm.edu.pk
Dear Sir,
This is the term report of Strategic Management course which was assigned to us by you.
The objective of this report is the Strategic analysis of Shan Food’s in Pakistan.
The report has been completed after the perpetual hard work, determination and devotion of past
few weeks.
If you have any additional questions, we would be pleased to answer them.
Sincerely yours,
IIN
NTTR
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EEXXTTEERRNNAALL AANNAALLYYSSIISS ..................................................................................................................22
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ORRCCEESS M
MOODDEELL ...................................................................................................22
THREAT OF NEW ENTRANTS ..................................................................................................................................2
INTERPRETATION ...................................................................................................................................................3
PEST ON THREAT OF NEW ENTRANTS ..................................................................................................................3
BARGAINING POWER OF BUYERS .........................................................................................................................4
INTERPRETATION ...................................................................................................................................................5
PEST ON BARGAINING POWER OF BUYERS ..........................................................................................................5
THREAT OF SUBSTITUTES .....................................................................................................................................6
INTERPRETATION ...................................................................................................................................................6
PEST ON THREAT OF SUBSTITUTES ......................................................................................................................6
BARGAINING POWER OF SUPPLIERS ....................................................................................................................7
INTERPRETATION ...................................................................................................................................................8
PEST ON BARGAINING POWER OF SUPPLIERS ....................................................................................................8
DETERMINANTS OF RIVALRY AMONG EXISTING COMPETITION ................................................................ 9
INTERPRETATION ...................................................................................................................................................9
PEST ON DETERMINANTS OF RIVALRY AMONG EXISTING COMPETITION ............................................... 10
OVERALL INDUSTRY RATING ............................................................................................................................... 11
COMPANY SPECIFIC ACTIONS ............................................................................................................................. 11
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INTERPRETATION ................................................................................................................................................. 12
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PRIMARY ACTIVITIES ............................................................................................................................................ 16
DISTRIBUTION ....................................................................................................................................................... 17
MARKETING AND SALES ....................................................................................................................................... 18
ADVERTISING AND SALES PROMOTION.............................................................................................................. 18
SUPPORT ACTIVITIES ........................................................................................................................................... 19
PRODUCT RESEARCH AND DEVELOPMENT ....................................................................................................... 19
PROCUREMENT .................................................................................................................................................... 20
HUMAN RESOURCES DEPARTMENT .......................................................................................................... 20
TECHNOLOGY DEVELOPMENT ............................................................................................................................ 20
FUTURE .................................................................................................................................................................. 21
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OMMPPEETTEENNCCIIEESS ...............................................................................................................2211
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INTERPRETATION ................................................................................................................................................. 24
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INTRODUCTION
Shan Foods initially started its operations in a single room, in the house of its present owner andCEO
Sikandar Sultan. The initial concept of Shan masala was to provide the people of Pakistanwith a
quality Brand in masala industry. Its initial customers were family members, friends, closerelatives and
other known people. As time passed new and complete strangers started come for the Shan masala. This
was the time when real production started at Shan. It was established in1981 in the servant quarter of Mr.
SikandarSultan‟s house. The route from a one room company to a multinational firm is slow but successful. It
took Shan Foods 25 years to be, what it is today. A Shan food was initially marketed in 1983, two years after it
was founded, and that was the official launch of Shan Foods in Pakistan. Shan stated its exports in 1984
in which they had tremendous success.
The company is at area of 100,000sp. Ft. and is equipped with the latest and state of the art laboratories
which testes and analyzes each product right from the ingredient to the finish stage. Shan offers a great
range of products to its customers. Shan Foods sells over 70 different types of spices and also sells over 70
different types of Mixed and ready recipes in 9 different heads.
The company has 374 distributors within Pakistan and 60 distributors across 45 countries.
Shan has won many awards for providing superior quality products to its consumers globally.
On May24th, 2010 Shan Foods won one the most significant awards in the culinary industry, ‘The
Superior Taste’ award given by iTQi International Taste and Quality Institute, Brussels and became the only
food company in Pakistan to ever achieve this landmark.
They believe they have a unique and comprehensive brand portfolio, which has become an important
face of their consumers’ daily lives. They have the industry’s leading resources and assets through their
extensive R&D network. This enables them to translate the consumer insights swiftly into successful
commercialized products; thus leveraging the rapid progress in science and technology.
EXTERNAL ANALYSIS
8. Does the newcomer have any problems in obtaining the necessary skilled
people, materials or supplies?
9. Are there any licenses, insurance or qualifications that are difficult to obtain?
10. Can the newcomer expect strong retaliation on entering the market?
INTERPRETATION
The above filled questions for the threat of new entrant shows there are more “yes” than “no” which means
that industry is less attractive for the new competitors. There are following reasons for that such as:
For competing on the same scale with existing player of the industry such as national and Shan
new entrant would need to have huge capital investment for setting up huge production facility and
that would ultimately going to have huge amount of fixed cost.
Brands and distribution channel play a significant role in the industry. Majority of the customers
are brand conscious although they will not going to incur any cost in switching cost in
changing company but still there is very huge customer base which is loyal to brand of their
choice
Previously there was very few licensing and certifications required but now this
requirement has also gone up. Some of the many licensing and certification which a competitor
would require to run its operations locally and internationally are EHS, ISO HASSCP 22000,
SANHA, BVQI.
POLITICAL FACTORS
All the existing players and the new comers are suppose to follow the companies’ ordinance 1984. Apart
from that there is not much governmental or legal restriction while entering or existing the industry in
Pakistan. But when we see the exports market then there are certain requirement and legal binding
especially in term of packaging and quality of the ingredients and these vary from country to country.
ECONOMIC FACTORS
After the economic meltdown Pakistani economy is unable to recover and continuously facing decline. But
at the same time the industry is experiencing steady growth which very much affected by the high
inflation and especially the food inflation in Pakistan. The new entrant would have to face high cost of
capital but the worse economic conditions would not allow it to generate the desired level of ROI.
SOCIAL FACTORS
Social norm and values of Pakistan are changing though not rapidly but they are . In the case of new
entrants when we see the societal factors such as how many households prefer to buy spices and
masala mix then in this case the results are positive.
TECHNOLOGICAL FACTORS
Technological factors are in the favor of the new entrants because it has reduced the role of skill labor
and errors in the process. But at the same time this has also made life difficult for some because not all
of the new entrants have the capital investment to purchase those technologies which are now
becoming essential for the survival in the industry
INTERPRETATION
Bargaining power of the buyers in the industry is indifferent at the moment with the help of above
questions but it is inclining towards high buyer power in the future. The main reason for this is that large
buyers or key accounts in the industry are increasing day by day. Also the small buyers do not have to pay any
switching cost and new entrant has made lot of options available to them as well. But in present the good
sign for the industry is that a huge chunk of customer is brand loyal and they are not price sensitive
either.
POLITICAL FACTOR
The role of governmental or customer bodies was not there in the past but now it exist although at
the level where it should have been but the role is increasing. This increase of the customer bodies’ role is
positively working towards the bargaining power of the buyers.
ECONOMIC FACTOR
One of the major issues with Pakistan’s economy is food inflation. Currently neither government
nor customer group are not active when it comes to control or bargain the issue of increase in price.
SOCIAL FACTOR
Huge number of customers is becoming aware of their rights as customers so this is also increasing
the bargaining power of the buyer
TECHNOLOGICAL FACTORS
Does not have any significant impact on the bargaining power of the buyer
THREAT OF SUBSTITUTES
INTERPRETATION
Threat of substitute is very low because customers do not have any real substitute available of spice and
readymade masala mixes. One of the real substitutes of the spices and readymade masala mixes is ready
to eat meals and some of the competitors have tested that as well but they didn’t get the good response
from the customers.
POLITICAL FACTOR
ECONOMIC FACTOR
Economic factors usually don’t have any significant impact on substitutes but major problem which any
real or unreal substitute has to face is the increasing inflation which has reduced the purchasing power of the
consumers. So if the substitute would cost more than spice and masala mix then they would have to face
hard time in the industry.
SOCIAL FACTOR
Social value of Pakistan are very strong when it comes to food and people prefer to have home cooked food
so any substitute (such as ready to eat meal) which would try to replace the home cooked food will have to
face tough time in rural and urban areas.
TECHNOLOGICAL FACTOR
Technological changes don’t have any significant impact on the availability of the substitute.
INTERPRETATION
The bargaining power of the supplier in the industry is on the lower side because most of the raw material
which suppliers supply are commodities and also with them companies have long term contracts such as
in the case of packaging Shan food has 10 years contract with “packages”. Also companies don’t
have to pay huge amount of switching cost while switching supplier. But at the same time long term
relation with suppliers are also very important especially farmer because if they sell their crop to
someone else in the industry then you would have to face higher price in importing those raw materials.
POLITICAL FACTOR
Bargaining power of supplier is positively affected by the restriction imposed by government on certain item
from certain countries such as companies cant import raw spices directly from india.
ECONOMIC FACTOR
Economic factor also increasing the bargaining power of the supplier because if company will going to buy
from international suppliers then the exchange fluctuate a lot these days and that will going to increase the
cost.
SOCIAL FACTOR
Social trend don’t have any significant impact on the bargaining power of the supplier
TECHNOLOGICAL FACTOR
Technological advancement has reduce a bit bargaining power of supplier as companies can access
many international suppliers over the internet and they can find out the alternate ways of import which can
reduce cost of the company as well.
2. The fixed costs of the business are a relatively low portion of total costs.
3. There are significant product differences and brand identities between the
competitors.
4. The competitors are diversified rather than specialized.
5. It would not be hard to get out of this business because there are no
specialized skills and facilities or long-term contract commitments, etc.
6. My customers would incur significant costs in switching to a competitor.
INTERPRETATION
The rivalry among the existing competitors is very high because of many reasons such as follows:
Almost all the players of the industry are having very big production plants which not only require
huge capital investment but at the same time it increase their fixed cost as well
None of the company is diversified in the industry which leads to increase in rivalry because all
of them want to earn more from the existing pie of the industry
Exist barriers are also very high because companies have invested heavily in the infra structure
as well they are in legal binding with many suppliers and customers.
POLITICAL FACTOR
Political factor doesn’t have any role in the rivalry amongst the exiting players except the anti- trust law.
ECONOMIC FACTOR
Market is not growing at the expected because of worse economic condition and this has negative
effects on the economic factors. Due to inflation companies are unable to increase the prices as much as they
wanted and the same time they wanted to reduce the cost so that they can spend those resources for other
purposes such as marketing and distribution so that they can increase their sales.
SOCIAL FACTOR
Customers are very much aware with the traditional marketing and its gimmick. So companies have to think
creative so that they can attract more customers to increase their share and sales.
TECHNOLOGICAL FACTOR
Technological advancement is playing a positive role for the companies in the industries as companies
can create competitive edge over others but for that their research and development will be the
key.
In the porter five forces model there are two forces which are unfavorable for industry such as bargaining
power of buyers and rivalry among competitors. The main reason for this is that buyers are becoming
much more aware about their rights and about the products. At the same time rivalry among the existing
players of the industry is increasing mainly because of low fixed cost due to which more often players in the
industry indulged in the price wars.
Increase in rivalry among the existing players of the industry can be tackled by the change in
the processes which can reduce cost and this can be done through technological
advancement in its systems, so that errors can be reduced and efficiency can be improved.
Another thing which need to done is that majority of the customers are not price sensitive, so
for them company need to come up with such activities which increases their loyalty and
attractiveness towards brand so that Shan foods can exploit it.
EFE
KEY EXTERNAL FACTORS Weight Rating Weighted Score Comments
OPPORTUNITIES
Growth potential in Rural 0.1 3 0.3 Untapped market in rural
areas areas
Increasing Growth Rate Of 0.1 3 0.3 Population in Urban areas
Urban Pakistan growing faster than in rural
areas
Fast Lifestyle in Pakistan (less 0.1 2 0.2 Increasing trend in working-
available time for cooking) women ratio in Pakistan
Quality raw material is 0.15 3 0.45 High quality Raw Materials are
available grown locally specifically
chilies.
Untapped Asian 0.1 2 0.2 Opportunity to grow in global
Communities Living Aboard market by catering Asian
communities
THREATS
High Domestic Inflation 0.08 2 0.16 Inflation impacting cost of raw
Rates material and buying power
of consumer
Agriculture marketing 0.1 3 0.3 Inefficient agricultural
mechanism of the country system causing frequent
supply shortages
Emerging national/ 0.07 3 0.21 Shan, Habib and others
International competitors increases competition.
Private/ Local Brands 0.1 3 0.3 Metro and Macro private brand
taking market share.
Low Price Competition From 0.1 3 0.3 Local retailers provide low
Loose/ Open Spices cost loose spices
Total 1 2.72
INTERPRETATION
The Total Weighted Score of 2.72 in the External Factor Evaluation (EFE) Matrix denotes that Shan Foods is
responding well to the existing opportunities and threats in spices Industry. In other words, the
strategy Shan foods is implementing, is taking advantage of the existing opportunities and minimizing the potential
opposing effects of external threats in an appropriate way better than competitors in the industry.
S.No. Key Success Weight Shan Foods National Foods Un-orgz. sector
Factors Scor Wt. Score Wt. Score Wt.
e Score Score Score
1 Brand 0.15 3 0.45 2 0.3 2 0.3
2 Distribution 0.15 2 0.3 4 0.6 2 0.3
3 Quality 0.1 3 0.3 3 0.3 2 0.2
4 Taste 0.15 3 0.45 3 0.45 2 0.3
5 Financial 0.05 3 0.3 3 0.3 1 0.1
Position
6 Technology 0.1 4 0.4 3 0.2 1 0.1
According to the competitive profile matrix of the Spices industry in Pakistan, the industry is headed by National
Foods as being the leader in Pakistan with the score of 3.2 and unorganized sector with 1.5, whereas Shan foods is
a stronger than unorganized sector. There are few things which we can see in the above analysis such as follows:
Areas where competitors are better than Shan foods:
There are few areas where competitors are better than Shan. First area is the distribution because national
foods has a much better score in this field from Shan because it has a very strong distribution in central region and
also it do have fair amount distribution in Karachi and Sindh region. Second is
national’s diversified range of product which allowed it to attract wide range of customers and also
leverage its one brand’s equity to another brands.
Areas where Shan foods is better than competitors:
There are few areas where Shan foods are better than its competitors. First is its brand which is having much more
equity than its competitors in the market. Second is their technology which is helping Shan to go for automation in
their process to gain efficiency. And last but not the least in its pricing which is better than its competitors.
The right proposition of spices on the basis of quantity that will be cooked makes the Shan spices different from
the competition. They have the best technology available to increase the probability of freshness of spices for the
longer time period. This actually helped them to maintain the taste in their recipes.
QUALITY
It is another key factor for the company to differentiate your product from the competition. Higher quality helps
the brand to make a stronger relationship between the brand and the target audience which ultimately helps the
brand to increase the market share and brand equity.
DISTRIBUTION
Shan is mostly restricted to Karachi, Hyderabad and other areas of Sindh. This has made Shan Foods to concentrate
on these areas and increase their influence. National foods have diversified it into many product categories and
this has enabled them to create much bigger distribution network all over the country.
Access to quality distribution is the key to success in this industry. Shan has to work on it in order to capture the
market chunk from other regions of Pakistan.
BRAND
A product from a known source means Brand is something through which people associate their self. Having a
strong brand enable companies to charge premium and sell its product in the global markets.
PRICE
Price is important in this industry as companies with un established brands are competing on prices and are attracting
substantial portion of market. Further more competition between Shan Foods and National Foods is very
intense and they offer products at comparable prices. Any move to change prices is aggressively answered.
TECHNOLOGY
Technology is another factor that helps companies differentiates themselves from their competition. Shan Foods
takes this factor very seriously and keeps on introducing new technology. They have the best available
technology in Pakistan related to their market.
DIVERSIFICATION
Diversification in food industry helps any company to utilize its resources in efficient way. Company with multiple
products can market its whole range through single channel. Shan Food is a diversified company and markets
more than 110 products. Most of the products are sold to consumers through General stores and department
stores. These products are carried by single distributor in a particular area which adds in profit for both company
and distributor.
FINANCIAL POSITION
Strong financial health enables any company to grab opportunity whenever it presents itself. They are not listed in
the stock exchange. Shan foods whole company finances are based upon shariah.
GLOBAL EXPANSION
Impact of globalization is huge for the industry. They have increased their reach to all over the world. Changing
trends help they better understand the consumers.
INTERNAL ANALYSIS
PRIMARY ACTIVITIES
PURCHASE OF SUPPLIES
Shan foods directly buy the raw material from its suppliers and growers. A Shan food has a strong policy while
purchasing the raw materials. Each and every ingredient is carefully selected with no compromise in quality and they
are very strict in this regard. If they don’t find the quality they are looking for a particular variant, they will stop
producing it until they find the best quality that fits their standards. This affects the demand of variant but they are not
concerned as quality is their first choice.
OPERATIONS
The suppliers are in the close proximity of the plants, therefore, the transportation costs are low because the
raw material is pre-ordered whenever production has to be started. The quality control procedures are effective
and efficient. The quality of the products is assured at every level. The plant, machinery and offices, all are in healthy
condition and according to the standards. It is also ensured that no artificial flavor is added to single spice like salt,
coriander etc. All the masalas from “Biryani masala” to “Sindhi Biryani masala” are made according to the taste of
the specific target audience.
Quality Operations of raw material includes the following tests:
Chemical testing
Physical tests
Microbiological, and
(Organoleptical) evaluation of ingredients and products
Procure and source best quality and competitively priced ingredients from global and local
markets.
Enhanced productivities by reduction in online rework and rejection
Enrichment of employee thinking capacity through continuous Quality Training program
Reduction in waste
Removal of process hands-offs
Drive an improvement-based quality culture through ISO9001 certification
International recognition ITQi Award
Ensuring the safety of consumer health by adopting world’s recognized Food Safety
Management System FSMS-22000 and HACCP principles.
Ensuring the compliance of HALAL requirements and recognition By SANHA certification
DISTRIBUTION
They do not own any distribution channels and pursue outsourcing. Their target market is whole Pakistan so
they ensure presence of Shan masala on almost every retail outlet all over Pakistan. They
have warehouses located at Karachi, Lahore, Multan, Gujranwala and Rawalpindi. These ware houses are used
not only to keep finished goods for onward delivery to their distributors but are also used for keeping the raw
material in case of bulk quantity purchase.
There are only a handful of locations where Shan foods provide the products itself which include Metro, Makro,
Hyperstar and a couple more. Their distribution partners include NPD and Urooj where 80% of the distribution is
controlled by NPD Pvt. Ltd. which handles the process matching the international standards.
The estimated marketing budget of Shan is around Rs.100 million for both ATL and BTL activities in the year 2009.
The company’s marketing activities are designed near Ramadan, Eid or a new product launch mostly. The breakdown
for the budgeting is 80% for ATL activities and 20% for BTL activities.
Shan foods has a unique advertising approach; the management does not advertise as a ritual and can be termed as
quite conservative when it comes to using mass media for promoting itself. Their communication never shows
people performing; only product is displayed in the advertisements. It does not believe in advertising rigorously. The
advertising is done mostly seasonally, however it does conduct certain BTL and promotional campaigns and
activities.
As the Advertising has limited role to promote Shan Brand, the sales team is the biggest asset of Shan foods. The
Sales team is highly motivated to go the extra mile to provide Shan all over Pakistan. However, National is
leading in North of Pakistan and Shan is leading in South.
The estimated marketing budget of Shan is around Rs.100 million for both ATL and BTL activities in the year 2009.
The company’s marketing activities are designed near Ramadan, Eid or a new product launch mostly. The breakdown
for the budgeting is 80% for ATL activities and 20% for BTL activities.
Shan foods has a unique advertising approach; the management does not advertise as a ritual and can be termed as
quite conservative when it comes to using mass media for promoting itself. Their
communication never shows people performing; only product is displayed in the advertisements. It does not believe in
advertising rigorously. The advertising is done mostly seasonally, however it does conduct certain BTL and
promotional campaigns and activities.
SUPPORT ACTIVITIES
The industry is not subject to rapid technological changes as it is not a hi-tech industry. However automatic
plants are bought to increase the efficiency of the company to fulfill the demand within a short time period.
Shan Foods has a strong R&D department, works in close liaison with production department to ensure quality and
its improvement.
For a company to prosper and grow, it must keep evolving itself to the changing needs of today’s consumer and
market in general. New and advanced automatic plants have been installed by Shan Foods to increase the
efficiency of production and quality. Shan foods always believes in continuous evolution of its product portfolio,
therefore the Research and Development is constantly looking for innovations within the product category and
how it can produce new products that meets the customers’ demand. They are relentlessly look for a win-win
situation for both the company and the customer.
Recently Shan foods launched a successful range of products named as Shan Oriental. The Marketing Manager of
Shan Foods, Ms. Asma Aman said, “Shan has revolutionized the cooking tradition by offering recipe secrets that make
cooking easier and taste “Just perfect!” As spice blending experts, we take pride in taking our consumers on a
journey to enjoy sumptuous food cuisines from across the globe. Now Shan Foods offers a full range of Oriental
Recipes to give our customers food-treats they will fall in love with”.
PROCUREMENT
Procurement is being done with a very simple manner which is that they make a contract with farmers at the time of
sawing of the crops. For edible oil they have a contract with an Italian company from which they import oil.
Like others they also put great effort to get the best talent and provide benefits to them in the best possible
manner. They believe that in Shan Foods, employees are the key ingredients for the success and growth of the
company and hence the Human Resource department plays a vital role in aligning the organizational strategy
with the employee’s’ goals.
Recruitment drive takes place in all the major universities of the country, the fresh talent is passed through a
series a tests and interviews which judge their mental abilities, intellectual level, decision making ability and the
sound knowledge of his/her area of expertise.
Shan Foods is commits itself in providing market competitive remuneration to all its employees.
They strongly believe in a performance driven work culture that promotes competencies and skills that drives the
organization towards success and growth and simultaneously aligning the organizational goals with the objectives of
its employees.
They have designed a ‘Shan Centre for Excellence’, where Training Sessions are conducted for
development of Technical and Managerial Competencies. Every HR project is linked with the overall strategy of
the organization and every step helps to achieve vision, which is to be a Global Food Brand.
TECHNOLOGY DEVELOPMENT
With the development of MIS (Management Information Systems) during the last few years in the company,
Shan has immensely been helped by it to become a well-organized and one of the most advanced companies in
its industry. The usage of cutting edge technologies like Microsoft, Oracle and Linux has helped Shan in the day to
day transactions. Mr. Sikander Sultan, CEO Shan foods says that
technology has helped Shan foods to become as big as it is today which started from a Single room in 1981.
Visualizing the future of IT industry, team has decided for business diversification and setting-up new venture of IT
company named as Armtech Business Solutions (Private) Limited.
Since formulation, by leveraging highly flexible business processes, a seamless global delivery network and a deep
domain-expertise, ABS delivers a better “return on outsourcing.” ABS is among the fastest growing IT services
companies to organize around key industry verticals and horizontals. This enables ABS to establish extremely close
partner-ships that foster continuous operational improvements and better bottom-line results.
FUTURE
It is worth mentioning here that because people in the rural areas do not prefer packaged spices and give
preference to their own home made ones, as a result of this Shan has not been able to penetrate well in those
areas.
Diversifying into new products should be the future aim of Shan. The competitors; National and Mehran have a whole
range of products from Spices to Ketchup. Shan foods, with such a strong brand, can easily launch the new products
in which cater to the needs of the customers. Delve desserts is one of the example.
CORE COMPETENCIES
The Research and Development team at Shan Foods is constantly involved in creating products that cater to the
emerging and changing needs of the consumers.
Research and development at Shan Foods strive to uncover new horizons which serve as the perfect solution for
its consumers.
PRODUCT INNOVATION
Great efforts are put into development of new products which are economically beneficial and of superior
quality pursuing its commitment of providing the best-of-the-best products for its consumers.
PROCUREMENT
The selection of raw material is in fact one of the biggest success factor for Shan. One may not have heard any
complaints about the quality of Shan foods in the market. The purchasing of the spices is done on regular bases
but each time the importance of the quality is kept in mind. You can find a shortage of a particular variant of
Shan in the market, not because of the production problem but because the quality standards that Shan has set,
does not match with the ingredients, so Shan foods wait for the best quality of raw material and stop making that
variant.
STRENGTHS
Innovation is the word which is very much associated with shan foods when we talk about the spices
industry of Pakistan because shan is the company which is not afraid to try out new and innovative product
in the market. Their innovation is deriving by their strong research and development department which
work dedicatedly for the betterment of the company in the shape of new products and improving the
existing ones.
Commitment is the another strength of shan food because it’s the company which is focused on their job and
give their 100% on the task assigned regardless of the results and they have very strong timeline for each
of their task to perform.
Shan foods have its own taste which makes it different from its competitors and the reason for that they have
highly advanced automated process which mixes its spices in each packet which allows shan to maintain
its taste.
HR department of shan foods is implementing training programs very rigorously so that they can enrich
the thinking capacity of the employees so that they can compete in the competitive global arena.
IT department of shan foods is amongst the most efficient department of the company. This assisted
shan food in various ways but IBS is the one software which allowed shan to compete well in the market
Supplier and farmer play a vital role in the shan’s industry. That is the main reason due to which shan has very
much focused on having good relations with its supplier of raw material such as packaging, printing and
etc and also with farmer with the help of strategic contracts.
WEAKNESSES
Shan food is the company which is 100% equity financed due to which company some time face limitations
when it plans for the larger expansion. Because it is the shariah compliance company due to which
they are against taking loans on interest from bank. So that is main reason they finance all their from
complete equity.
Shan food does not have a distribution channel in the central region of Pakistan due to which it is unable to
generate revenue from the very big population.
Shan food is using very few medium in marketing and communication. They are very much focused on
ATL but in that as well they have very strict internal policy for advertisement. Also they are very
conservative in their approach in using new marketing approach.
A Shan food is having strict credit policy for its customers. It has approx 80% of the sales on cash basis
and remaining in the credit basis. This practice is hindering their progress in those markets where big
buyers are available but they want to have some good credit policy
IFE
Key External Factors Weight Rating Weighted Score
STRENGTHS
Innovation & R&D 0.15 3 0.45
WEAKNESSES
Limited expansion due to 0.15 2 0.3
complete equity financing
Total 1 2.5
INTERPRETATION
The Total Weighted Score of 2.5 in the internal Factor Evaluation (IFE) Matrix denotes that Shan Foods is scoring on
an average score. In other words, shan foods has lot of room available to implement good strategy to improve its
IFE score. It can do by utilizing its strength properly and reduce its weaknesses as
much as it can. Shan can utilize its technology advancement to the distribution and sales team so that they can
penetrate in the market and also by relaxing its credit policy.
TWOS MATRIX
STRENGTHS WEAKNESSES
1. Innovation & R&D
2. Commitment and Timeline
3. Quality and Taste
Management
4. Enriching employee 1. Limited expansion due to
thinking capacity. complete equity financing
5. implementation of IBS 2. Weak distribution in Punjab
through in house IT side.
infrastructure 3. Limited approach towards
6. strategic relations with marketing communication.
suppliers and farmer 4. Tough Credit Policy
SPACE MATRIX
FINANCIAL STRENGTH RATINGS
Return on Investment 5
Days sales outstanding 4
Private limited company 2
Inventory turnover 4
15
INDUSTRY STRENGTH
-4
Inefficiency in agricultural production
Food inflation -4
Energy Crisis -6
Strict trade policy -3
Price elasticity of demand -2
-19.0
COMPETITIVE ADVANTAGE
Market Share -2
Product quality -1
Customer loyalty -2
R&D and Technology Implementation -1
Control over supplier and distributor -3
-9
CONCLUSION
y-axis
x- axis
(2.4, 0.4)
CA IS
Defensive Competitive
ES
The calculation of the space matrix of shan foods is showing that it is existing in the aggressive quadrent which is the
most competitive quadrant. Because here the market is growing which is attracting more companies to jump in the
market and also allowing the existing player to penetrate more? So here there are few things which shan foods need
to do such as follows:
I-E Matrix
Medium IV V VI
The EFE 2.0 to 2.99
Total
Weighted
Score
Low VII VIII IX
1.0 to 1.99
INTERPRETATION
Shan foods IE matrix score fall in the division 5 which suggest having hold and maintaining strategy. For
holding and maintain the current position in the industry the best suited strategies would product
development and market penetration.
Quadrant II Quadrant I
Weak Strong
Competitive Competitive
Position Position
Slow Market
Growth
INTERPRETATION
According to grand strategy matrix shan food lies in the first quadrant. It has a competitive position in the market by
enjoying a big share of the market. Also is has strong brand recognition which is allowing it to grow In the rapidly
growing market. Shan foods has the opportunity to utilize its brand to leverage itself while doing market expansion
and market penetration. Shan foods also have a very unique taste and quality which differentiate itself from all of
its competitors which include both branded and unbranded. Shan food also utilizing its resources very efficiently
such as their IT department through that it has developed it own business processing software.
QSPM MATRIX
STRATEGIC ALTERNATIVES
Weigh Penetrate Market Related
Key Internal Factors
t into central expansion Diversification
and northern with flexible (ready to eat
regions credit policy meals)
Opportunities AS TAS AS TAS AS TAS
Growth potential in central and northern regions 0.20 2 0.40 3 0.60 2 0.40
Fast Lifestyle (less available time for cooking) 0.10 3 0.30 2 0.30 3 0.30
Quality Raw Materials Available in the country. 0.15 4 0.60 2 0.30 3 0.45
Untapped Asian Communities Living Aboard 0.10 3 0.30 4 0.40 1 0.10
Threats
High Domestic Inflation Rates 0.15 2 0.30 3 0.45 3 0.45
Emerging National and International Competition 0.10 3 0.30 2 0.20 1 0.10
Private/ Local Brands 0.10 2 0.20 2 0.20 1 0.10
Low Price Competition From Loose/ Open Spices 0.10 1 0.10 2 0.20 1 0.10
1.00
Strengths
Innovation & R&D 0.15 4 0.60 1 0.15 2 0.20
Commitment and Timeline 0.05 3 0.15 3 0.15 3 0.15
Quality and Taste Management 0.10 4 0.40 - - 3 0.30
Enriching employee thinking capacity. 0.05 3 0.15 4 0.20 3 0.15
implementation of IBS through in house IT 2 0.20
0.10 3 0.30 3 0.30
infrastructure
strategic relations with suppliers and farmer 0.15 3 0.45 3 0.45 2 0.30
Weaknesses
Limited expansion due to complete equity 3 0.30
0.10 3 0.30 1 0.10
financing
Weak distribution in Punjab side. 0.15 4 0.60 3 0.45 2 0.30
Limited approach towards marketing 1 0.08
0.08 2 0.16 2 0.16
communication.
Tough Credit Policy 0.07 3 0.21 4 0.28 1 0.07
Sum Total Attractiveness Score 1.00 5.82 4.89 4.05
GENERIC STRATEGIES
Shan food is currently doing a combination of differentiation and focus. In that they are targeting both type of
audiences such as they are not very narrowly scoped but at the same time company is targeting for a mass market as
well. The main emphasis of the company is to remain differentiated and focused through its product innovations
which is allowing company to retain loyal customers as well as this uniqueness allowing shan to establish itself
in the international market as well.
At the same time national, one of the biggest competitors is having differentiation strategy for the broad market.
Although they are also very much trying to be unique through product innovation but they are re-active in its
approach and also they have very big range of products which put them in a position to do so. The unorganized
sector is mainly focused on cost leadership strategy because they are the one which one competes with the brands
only on price so that is why they try to be cost leader.
The proposed generic strategy for shan food is to become cost leader. Scope of shan foods is very well set because
in all other areas either the market is very narrow or the competition is very high. So there is no need to change scope.
Because their change in generic strategy will allow shan foods to eliminate all cost leakages which will eventually
save a money and also this will provide the flexibility to the company to penetrate into the new markets by
spending and focusing more on their marketing and distribution for the central region of Pakistan.
This strategy will also going to challenge the position of national food in the central because currently they are
having very good market share in the central region but when with the help of cost leadership generic strategy shan
would be in a position to spend more on distribution and communication in the central region which would
threaten the competition.
PROS
Cost leadership will allow the company to have more cash in hand which it can eventually utilize for the penetration in
the central region. For penetration in the central region it will have to spend more on distribution.
For reducing cost on the first place shan would have to make strategic partnership or contracts with farmers and
suppliers which will lead to cost reduction. After that it can increase its distribution network in Punjab by making
contract with a renowned distribution company which can handle shan distribution in this region.
COMMODITIES
All the raw material which is shan food is using are more or less can be categorized as commodities. So all the players
in the industry are only left with their strategy and costing procedures and if shan is able to achieve cost leadership
then it would be having edge over others especially when price of raw materials get high and profit starts
shrinking.
CONS
Whenever the cost leadership is practiced in any organization so the first cost which is being reduced is the budget of
research and development.
Cost leadership will also make management think to reduce its pace on product development and that will
eventually lead to reduce in test marketing of the new product. In other words this will bring company in
stagnant position as far as product development is concern.
Create:
Create a new market of diet products .Shan foods has a range of traditional desserts which can further be expanded
into diet products. The brand Delve is a dedicated non-traditional dessert brand. It can also introduce new variants of
diet products. There has not been any company who has launched in this category. As the trend of diet products
are growing in Pakistan, Shan should capture the market by entering into it.
Raise:
Shan foods will really have to raise the bar of marketing and communications because it is one of the factors that is
limiting the brand to grow. The promotional strategy of Shan foods is, by far, one of the most conservative in nature
which is preventing itself to reach mass audience. The competition is communicating its products through all the
marketing channels available, however Shan foods is on the same track from the first day. It has to reconsider the
mindset and adopt to the changes with the environment in order to better compete in the market.
Reduce:
Shan food is the company which is 100% equity financed due to which company sometimes face limitations
when it plans for the larger expansion. Because it is the Shariah compliance company due to which they are against
taking loans on interest from bank. So it is the main reason they finance all the expenses from complete equity. They
will have to reduce this method of equity financing by keeping a balance between the equity and debt ratio to expand
and meet the growing requirements effectively.
Eliminate:
Due to the strict quality control system and policy, the raw material is very carefully selected for each and every
product. There are a few products whose raw material is not easily available and which require high Research
and Development from the process of purchasing of raw material to the finished product. This increases the cost of
making the product. Even though the market for that particular product is less, Shan food is still manufacturing
the product. So, in all it is taking huge costs to manufacture it and yet have a very small market of buyers. These
variants should be eliminated. They are the cost drivers for the company.
LEADERSHIP
Executing a strategic shift, particularly fast and with limited resources is difficult. The leadership at Shan will have to
play a pivotal role in winning the employees trust throughout this process of change. The best devised strategy is
tested throughout its implementation but Shan’s leadership will truly prove itself when the energies and the beliefs of
the critical masses create movement aligned with this process of change.